Estate planning clients often have a great deal of concerns about their obligations as a trustee of their living trust. Where the acting trustee is also the creator or “grantor” of the trust, the trustee usually has plenary power to act upon behalf of the trust and may change or even withdraw the rely on its totality.
When a grantor passes away or ends up being not able to administer their trust, a follower trustee usually takes over these obligations. It is after this point, when a follower trustee starts to administer the living trust, that questions typically arise with regard to the trustee’s responsibilities.
For the most part, a trustee administers a living trust by its written terms, which express the grantor’s intent. See Cal. Probate Code 16000, 21101 and 21102. This can be much more complicated than it sounds. California courts are more easily permitting parties to present outdoors proof of a grantor’s intentions, even where the language used in the trust is clear and unambiguous. The result of this trend is that grantors should be even more mindful to consider whether their living trust explains their objectives specifically, and then take the additional action of considering whether there suffices other evidence to show what their objectives are with regard to the administration of their trust assets.
Trustee’s Requirement of Care
A trustee’s legal requirement of care is an evolving location of law. In general, California courts interpret a trustee’s requirement to be really high. Nevertheless, a grantor might limit or expand a trustee’s responsibilities through the language consisted of in the trust instrument itself. Section 16040 of the California Probate Code sets out the general standard of trustee care:
(a) The trustee will administer the trust with reasonable care, ability, and care under the scenarios then prevailing that a sensible person acting in a like capability would utilize in the conduct of an enterprise of like character and with like aims to accomplish the functions of the trust as determined from the trust instrument.
(b) The settlor may expand or restrict the basic provided in subdivision (a) by express provisions in the trust instrument. A
(c) This section does not use to investment and management functions governed by the Uniform Prudent Financier Act, article 2.5 (beginning with Area 16045).
Where a trustee has unique abilities, he/she is required to use 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 reasonably be anticipated to carry out. In practice, it is not uncommon for trustees to hand over some duties. See Cal. Probate Code 16001(a), 16012, 16052, and 16247. Some of the commitments that a trustee might hand over are financial investment, tax, legal and accounting services, which are kinds of services most trustees would not be expected to carry out. However, a trustee needs to still act wisely in choosing which representatives to use, and need to continue to oversee those representatives. They may not merely hand over tasks to others and ignore it.
Other Trustee Duties
In many situations, a trustee will have a responsibility to offer an accounting and other info 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 responsibility of privacy. Nevertheless, a trustee may require to reveal some details in order to administer the living trust. Possibly most notably, a trustee should not put his/her interests above those of the trust or the beneficiaries, and ought to avoid disputes of interest with the trust and the beneficiaries. This can be an especially complicated obligation to meet for many trustees because they are typically not only a trustee, however likewise among several recipients named in the living trust. Unless the trust shows otherwise, such a trustee should not favor a specific recipient or class of recipients and avoid even the look of a dispute of interest.
A living trust will typically consist of some language which offers the trustee discretionary powers– the power to utilize his/her own finest judgment in particular scenarios. Take care here. Even if a trust provides a trustee with sole, outright or unchecked discretion, California courts generally still need trustees to act within the recognized standards of care and not in bad faith or with disregard to the express purposes of the living trust. See Cal. Probate Code 16080-81.
With regard to investing trust possessions, a trustee needs to make decisions which are in the best interest of the beneficiaries, based on any limitations offered in the trust. A trustee’s authority to manage investments ought to be set out in the trust instrument itself. Where the declaration of trust is quiet or unclear, financial investment authority is also obtained by statute, case law and the scenarios of each scenario. See Cal. Probate Code 16200(a) and (b) and 16047. Usually, a trustee has the obligation to invest trust possessions as a “prudent financier”, which is set out in the California Uniform Prudent Investor Act (the “Act”), unless the trust offers a greater or lesser standard of care:
(a) Except as provided in neighborhood (b), a trustee who invests and handles trust possessions owes a responsibility to the beneficiaries of
(b) The settlor might broaden or limit the prudent investor guideline by express provisions in the trust instrument. A trustee is not
Cal. Probate Code 16045 through 16054.
For trustees who are handling investment possessions, it is important to carefully examine the language of the Act for guidance and seek recommendations from an experienced estate planning legal representative if they do not completely comprehend their obligations.
Remember that the law changes frequently. You must seek advice from with a proper expert if you have concerns about a specific situation. Presented here are a few of the common responsibilities of trustees administering a living trust. An educated estate planning attorney can discuss your specific needs.