The role of a trustee in California holds responsibilities bound by provisions on a trust instrument. There are several types of trustees with varying roles. Nevertheless, there are a set of duties that cut across all of them. A trustee has a legal duty to act in the best interest of the beneficiaries with transparency and integrity.
If you are looking for a trustee or have been requested to be one, it is essential that you are aware of the roles and responsibilities. In this write up, we aim to focus on understanding what is required of a trustee in California and the importance of fulfilling the articulated trust terms.
Trustee Duties and Responsibilities: Conservatorship
A conservator is a person who is legally bound to act in good faith of the trust. This role includes managing trust property in cases where the trustor is a mentally/physically incapacitated minor or adult. They partake in their duties until the trustor reaches adulthood or gets back in good shape.
A trustee acts on behalf of a beneficiary as articulated in the trust documents. They oversee all financial assets and transactions and ensure any documents acquired while handling their responsibilities are safely kept. They stay accountable by regularly providing the beneficiaries with accurate records and reports.
Hiring A Trustee for Your Trust
Trustworthiness and familiarity with the trust instrument are qualities of a reliable trustee. Trustors often settle for people they have a close relationship with, like family members or caregivers, while others opt for professionals with experience in administering the type of trust in question.
Whether you go for a professional or unprofessional trustee, it is essential that they are fully willing to undertake their role with integrity and cooperate with other parties of the trust. Are they willing to provide answers to queries and give feedback on issues related to the trust? These considerations can assist you in predicting the reliability of a trustee.
How Can a Trustee Comply with California Law?
A trustee should understand and comply with the California Probate Codes. If you are below 18 years old you do not qualify to fill in a trustee spot. You will also be required to demonstrate the competency you intend to offer the trust while managing its property.
Prudence is a key character you should possess as a potential trustee. This way, parties of the trust are assured you will always exercise a high standard of administration, care, and diligence. You should also have record keeping skills and the ability to make profitable investments and financial decisions while acting on the trust.
Duties And Responsibilities That Apply to All Trustees
Duty to Administer According to Trust Terms
A trustee should go through all the articulations in trust documents before commencing their responsibilities. This ensures they administer in a reliable manner. They should also keep up with any rising amendments. If a trustee has difficulty interpreting any section of the terms, they can seek advice from a litigation lawyer. This avoids disputes that may arise from misinterpretation. The trustee should fulfill their obligations under the strict instruction of the trust instrument.
Duty of Undivided Loyalty to the Trust
A trustee should carry out their fiduciary duties in a manner that is loyal to the trust. Any issues related to trust should be diligently handled without bias to oneself. Breaching of the fiduciary duty is considered fraudulent, and the trustee is liable for any lost trust property. Some transactions, like trustee fees, are allowed so long as they are reasonable.
Duty to Offer the Beneficiary Regular Reports and Records
A reliable trustee ensures transparency in handling their responsibilities. They can hire a professional for annual accounting and communicate the aspects of amendments, termination, or court orders to the beneficiaries. Beneficiaries can request accounting through a court order if the trust terms do not articulate mandatory provisions.
Duty to Maintain Equality
If a trust requires equal treatment of all beneficiaries, the trustee should ensure that evenhandedness. Sometimes, the beneficiaries have varying interests. If there are no articulations that are unique to one beneficiary, the trustee should equalize the interests of all beneficiaries.
Duty to Avoid Conflicts of Interest
Conflict of interest can affect the trust terms. They can occur between the trustee and other parties of the trust. Any decisions on financial issues should not be affected by arising strife between the parties. Additionally, the authority of the trustee should not extend to self benefit.
Types of Trustees
The process of choosing a trustee can be a stressful and complex process. While it may seem natural to appoint a close, trustworthy person, opting for a professional trustee is often the wisest choice. This is mainly because they have a better understanding of trust responsibilities and are more experienced. Also, they have a better ability to correctly interpret all the trust terms. Some types of trustees are:
- Individual Trustees – This is where people with a close relationship with the trustor are appointed as trustees. A trustor might find them more trustworthy for the responsibilities due to the familiarity.
- Institutional Trustees – If you are looking for a trustee to manage large assets, settling for a professional trustee can prove a wise move. They take over the management and investment responsibilities as articulated in the trust.
- Independent Trustees – These trustees do not fall under the professional trustee category, rather they are experts in other fields like accounting and investment advice. You can think of them as professionals in private business.
Can Trustees Take Compensation?
Unauthorized compensation to a trustee is not allowed. Nevertheless, it is permitted when unanimously approved by the beneficiaries, articulated in the trust instrument, or authorized through a court order. California Probate Laws should act as guidance on the permitted compensations a trustee can take.
The complexity of trustee duties and responsibilities determines whether the compensation level is reasonable. The trust property value, number of beneficiaries, and location are other compensation parameters. If a trustee is not satisfied with the collaboration of the compensation with their responsibilities, they can seek the court’s consideration on fair compensation. Some factors that determine the tariff calculation are:
- The trustee’s reliability and success in administration
- Time spent performing the trust duties and responsibilities
- How large or small a trust is
- The skills level of the trustee
- The complexity of the trust instrument
Trustees should ensure they get court approval to avoid pre-taking compensation, which is highly discouraged.
Common Challenges Trustees Face When Conducting Duties and Responsibilities
Missing Trust Assets
Information on all the properties owned by a trust is essential when a trustee starts their administration duties. They might not be fully aware of the assets articulated in the trust documents which can lead to confusion on the scope of authority. The trustee should provide funded assets otherwise, it’s a wild goose chase. This is why they should start by identifying and protecting all trust property.
Allegations of a Mismanaged Trust
This is an issue that can cause a trustee stress and court claims if not well investigated. This is where the guidance of an experienced attorney becomes invaluable. If you are approached with a trustee position offer, ensure you seek legal advice before making any final decision. After going through what is expected of you, the direction offered will help you determine whether you are prepared for the trustee’s duties and responsibilities.
Trustees’ responsibilities are complex. For this reason, concerns of mismanagement by beneficiaries are common. Failure to fulfill the fiduciary duty, conflict of interest, or misappropriation of trust funds can trigger these allegations.
If a trustee finds themselves in such a tight spot, they should contact a litigation lawyer immediately. If they are convinced of their reliability in managing the trust and full compliance with the trust terms, all they have to do is provide all supporting documents to a court.
Dead or Incapacitated Beneficiary
In occasions where one of the beneficiaries has passed on or is incapacitated, the trustee might face challenges in their administration. Additionally, it can halt the execution of further trustee duties until the issue is resolved. If the trust instrument does not articulate the cause of action in such an instance, the trustee might have to proceed to probate court with the help of an experienced attorney.
Trust Contests
According to California law, a beneficiary has the right to dispute trust terms that do not serve their best interests. On the same note they are allowed to object to a trustee appointment, and petition for their removal. This is another problem that can cause stress to the trustee and disrupt the administration of the trust. Beneficiaries contesting a trustee should have sufficient proof. Trustees who fall subject to contests should seek legal advice.
Conclusion
Running a trust in California requires familiarity with fiduciary duties and local probate codes. A trustee is an overseer of trust affairs and protects the rights of the beneficiaries as articulated on trust documents. Trustees in California have their rights. That said, it is essential that they understand their authority and how to best use it in the interest of the trust.
If you are considering a trustee role offer or are in need of one, seeking information from an experienced Trust and Estate lawyer will help you make an informed decision. We are happy to assist you with the proper guidance on trustee obligations and how to handle rising trust disputes.
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