Bay Area Estate And Tax Planning Law Firm

An introduction to the responsibilities of California trustees

by | May 20, 2021 | Probate And Estate Administration |

Legal duties of trustees are complex.

A trust is a legal entity created to hold and preserve assets for the benefit of designated beneficiaries. The creator of a trust, called the settlor, appoints a trustee to administer and manage the trust assets and investments, pay taxes and trust debts, and make distributions for the benefit of beneficiaries. Trusts may be revocable or irrevocable, and created either during the creator’s lifetime or to come into existence at death.

Trustee standard of care

Trustees have significant legal responsibilities and are held to a high standard of care. Broadly, a trustee is a fiduciary with fiduciary duties, meaning that he or she has the legal duty to act in good faith with integrity, honesty and in the interests of beneficiaries as articulated by the terms of the trust.

California law defines the trustee’s standard of care. During trust administration, the trustee shall act with “reasonable care, skill, and caution under the circumstances then prevailing that a prudent person acting in a like capacity would use in the conduct of an enterprise of like character and with like aims to accomplish the purposes of the trust as determined from the trust instrument.”

Examples of specific duties California statute imposes on trustees:

  • A trustee must follow the terms of the trust instrument.
  • A trustee must administer the trust “solely in the interest of the beneficiaries.”
  • If there are multiple beneficiaries, the trustee must deal with them impartially and keep in mind any unique needs or interests any one of them may have.
  • A trustee may only use trust assets for trust purposes and never for the trustee’s own profit.
  • A trustee may not engage in a transaction in which his or her own personal interest is adverse to a trust beneficiary.
  • A trustee may not condition a valid beneficiary trust payment on the beneficiary relieving the trustee of liability.
  • A trustee may not become trustee of another trust that is “adverse in its nature to the interest of the beneficiary of the first trust.”
  • A trustee must reasonably act to control and preserve trust assets.
  • A trustee must “make the trust property productive.”
  • A trustee must not comingle trust property with outside assets and must clearly label trust property.
  • A trustee has the duty to reasonably enforce claims of the trust and defend against legal actions that could harm the trust financially.
  • A trustee should perform duties that he or she should reasonably be required to fulfill, except that it may be prudent to engage a specialist for “investment and management functions.”
  • And others

Trustees and beneficiaries

Trustees have fiduciary responsibilities toward trust beneficiaries. For example, the trustee must treat beneficiaries fairly and comply with trust provisions benefitting beneficiaries. Beneficiaries have the legal right to detailed information about the trust’s terms, assets, income, expenses and liabilities.

Anyone who is the beneficiary of a trust in California who feels that the trustee has not adequately fulfilled his or her legal responsibilities should speak with an attorney about potential legal remedies. For example, it may be appropriate to ask the court to review the trustee’s actions or even to seek to remove the trustee from his or her position. However, sometimes it may be possible to resolve problems between a beneficiary and trustee through negotiation.

Likewise, California trustees should seek legal advice and guidance to understand his or her legal duties and for help in trust administration.

The lawyers at the Law Offices of Connie Yi, PC, with offices throughout the Bay Area, California, area, represent trust beneficiaries, trustees and people creating trusts.