Estate planning clients typically have a great deal of concerns about their responsibilities as a trustee of their living trust. Where the acting trustee is likewise the creator or “grantor” of the trust, the trustee usually has plenary power to act on behalf of the trust and might amend or perhaps revoke the trust in its entirety.
When a grantor passes away or becomes unable to administer their trust, a successor trustee generally takes over these commitments. It is after this point, when a follower trustee starts to administer the living trust, that questions frequently emerge with regard to the trustee’s responsibilities.
For one of the most part, a trustee administers a living trust by its composed terms, which express the grantor’s intent. See Cal. Probate Code 16000, 21101 and 21102. Nevertheless, this can be much more complex than it sounds. California courts are quicker permitting parties to present outdoors evidence of a grantor’s intentions, even where the language used in the trust is clear and unambiguous. The impact of this trend is that grantors need to be much more cautious to consider whether their living trust explains their intentions exactly, and then take the extra action of considering whether there suffices other proof to show what their intentions are with regard to the administration of their trust assets.
Trustee’s Requirement of Care
A trustee’s legal requirement of care is a developing area of law. In general, California courts translate a trustee’s standard to be very high. However, a grantor might limit or expand a trustee’s obligations through the language included in the trust instrument itself. Section 16040 of the California Probate Code sets out the general standard of trustee care:
(a) The trustee shall administer the trust with sensible care, ability, and caution under the situations then dominating that a prudent person acting in a like capability would use in the conduct of an enterprise of like character and with like objectives to achieve the functions of the trust as determined from the trust instrument.
(b) The settlor might expand or restrict the standard supplied in subdivision (a) by express provisions in the trust instrument. A
(c) This section does not apply to investment and management functions governed by the Uniform Prudent Financier Act, article 2.5 (beginning with Section 16045).
Where a trustee has unique skills, he/she is needed to utilize those abilities with respect to administering a trust. Cal. Probate Code 16014. In addition, a trustee might not hand over responsibilities that the trustee can fairly be expected to perform. In practice, it is not unusual for trustees to delegate some duties. See Cal. Probate Code 16001(a), 16012, 16052, and 16247. Some of the obligations that a trustee might delegate are financial investment, tax, legal and accounting services, which are kinds of services most trustees would not be expected to perform. A trustee should still act wisely in picking which agents to use, and must continue to manage those representatives. They might not simply delegate jobs to others and ignore it.
Other Trustee Duties
In numerous situations, a trustee will have a responsibility to provide an accounting and other details to the named beneficiaries of a living trust. See Cal. Probate Code 16060-61.5, 16061.7, 16062, and 16064. As one might anticipate, a trustee likewise has a duty of privacy. A trustee might need to reveal some details in order to administer the living trust. Possibly most notably, a trustee should not put his or her interests above those of the trust or the recipients, and must avoid disputes of interest with the trust and the beneficiaries. This can be an especially complicated commitment to satisfy for many trustees given that they are frequently not only a trustee, but likewise among numerous beneficiaries named in the living trust. Unless the trust shows otherwise, such a trustee needs to not favor a specific beneficiary or class of beneficiaries and avoid even the appearance of a conflict of interest.
A living trust will generally include some language which offers the trustee discretionary powers– the power to utilize his/her own finest judgment in particular circumstances. Take care here. Even if a trust offers a trustee with sole, outright or uncontrolled discretion, California courts generally still require trustees to act within the recognized requirements of care and not in bad faith or with neglect to the express functions of the living trust. See Cal. Probate Code 16080-81.
With regard to investing trust assets, a trustee needs to make decisions which are in the very best interest of the recipients, subject to any restrictions attended to in the trust. A trustee’s authority to handle financial investments should be set out in the trust instrument itself. Where the declaration of trust is quiet or ambiguous, financial investment authority is also obtained by statute, case law and the circumstances of each circumstance. See Cal. Probate Code 16200(a) and (b) and 16047. Generally, a trustee has the commitment to invest trust properties as a “sensible investor”, which is set out in the California Uniform Prudent Financier Act (the “Act”), unless the trust attends to a higher or lower standard of care:
(a) Except as supplied in subdivision (b), a trustee who invests and handles trust assets owes a responsibility to the recipients of
(b) The settlor might broaden or restrict the prudent financier rule by express arrangements in the trust instrument. A trustee is not
Cal. Probate Code 16045 through 16054.
For trustees who are managing investment possessions, it is critical to carefully review the language of the Act for guidance and consult from an experienced estate planning lawyer if they do not totally comprehend their obligations.
Remember that the law changes frequently. You must consult with an appropriate expert if you have questions about a particular situation. Provided here are some of the typical responsibilities of trustees administering a living trust. An experienced estate planning attorney can discuss your specific needs.