Duties of a Trustee
A trustee of a California revocable trust has many duties but, for most families, does not involve a monumental task that requires any special expertise. Most small trust estates run themselves with little or no involvement required.
However, when the maker of a trust (the “trustor”) becomes incapacitated or dies, then the named “successor trustee” will have to step up to the plate and make sure that s/he complies with numerous trust administration duties.
A quick refresher: The person who establishes a new trust is called the “trustor” (sometimes called the ”settlor”). The person who manages the trust is called the “trustee”. Every trust must have at least one trustor and trustee. Of course, the trust must also name one or more beneficiaries.
The primary job of the trustee is to manage the trust’s assets. The trustee also holds title to the trust’s assets. In a typical family trust, mom and dad will hold all three designations: trustors, trustees, and beneficiaries.
Legal title to their house, for example, would be changed. Instead of holding title as (for example) “mom and dad as joint tenants”, a new deed would be signed and recorded that changes title to: “mom and dad, as co-trustees of the mom and dad revocable trust”.
Mom and dad’s new trust will also name a ”successor trustee”. This is the person that will assume that role when both mom and dad become incapacitated or pass away.
The California Probate Code contains many requirements that a trustee must adhere to. Here’s an overview:
Duty to administer trust. All beneficiaries must be given notice that the successor trustee will be administering the trust. Certain time requirements are triggered when this notice is timely made. This trust administration duty will also include an accounting of trust assets, communicating with beneficiaries, reporting information to the beneficiaries, and ultimately making sure that each beneficiary receives his or her trust property as stated in the trust instrument.
Duty of loyalty. The trustee must act in the best interests of all of the beneficiaries.
Duty to deal impartially with beneficiaries. Sometimes, different beneficiaries have different interests. The trustee must consider those competing interests and act impartially, not favoring one beneficiary over another.
Duty to avoid conflict of interest. The trustee must avoid any conflict of interest and cannot engage in any transaction where a beneficiary could be harmed while the trustee benefits as a result.
Duty to not require a beneficiary to relieve trustee of liability. A trustee cannot hold a beneficiary hostage by refusing to distribute that beneficiary’s interest unless s/he agrees to hold the trustee harmless for any act of wrongdoint the trustee may commit.
Duty not to undertake adverse interest. If a person acts as the trustee of two different trusts, and there are competing interests of the respective beneficiaries, then the trustee must immediately resolve the conflict or resign upon discovery of the conflict.
Duty to take control of and preserve trust property. The trustee must take reasonable steps under the circumstances to take and keep control of and to preserve the trust property.
Duty to make trust property productive. A duty is owed to make the trust property productive under the circumstances and in furtherance of the purposes of the trust.
Duty to keep trust roperty separate and identified. The trustee must keep trust property separate from other property not subject to the trust and to see to it that the trust property is designated as property of the trust.
Duty to enforce claims. The trustee owes a duty to take reasonable steps to enforce claims that are part of the trust property.