Duties of a Trustee

When individuals seek to create a living trust in California, they must think carefully about whom to include. After all, one’s trustee takes on an enormous responsibility for the client and must remain faithful to their fiduciary duty in all dealings.

California trustees have many legal duties, including how the Trust is managed and the assets distributed. The trustee’s decisions are vital because they can dictate circumstances during the beneficiary’s life and after they pass.

While numerous duties go along with successfully managing a trust, there are several fundamental responsibilities that all trustees must obey. While trustees must be familiar with these duties, beneficiaries must also understand the nature of these tasks to make the right choice in a trustee.

In this important read for potential and current trustees and beneficiaries, we will review a California trustee’s most important responsibilities and duties.

• Duty to Keep Assets Separate

Many trustees manage different types of assets. Still, a problem occurs when they commingle the property of the Trust with their assets or property.

For example, if a trustee deposits money from a trust account into their bank account, or vice-versa, the trustee violates their duty.

Commingling is offensive because it risks the trustee’s property and is a serious violation of fiduciary duty.

Suppose a trustee commingles money or assets. In that case, they may be removed, fined, and/or have their trustee payments confiscated.

In short, trustees must be diligent about keeping all of the trustee’s property separate from their own.

• Duty Not to Delegate

Trustees have a singular focus: to maintain and manage the trustee’s property, whatever that property is.

Trustees can hire professionals to help them, including CPAs, financial advisors, attorneys, and more. Still, they cannot delegate authority to another individual.

This important distinction means that trustees, for example, can employ a bookkeeper to assist them in their duties. Still, they cannot delegate what the bookkeeper can and should do.

Additionally, when trustees act works together as co-trustees, they are both equally responsible for violations of fiduciary duties. This rule is true even if only one trustee commits a breach.

Trustees must be prudent when hiring professionals to help them based on these rules. When an individual works with a trustee, they must be aware of the nature of the trustee’s actions and cognizant of their behavior.

• Duty of Loyalty

The trustee’s duty of loyalty in California may appear simple, but it is one of the most important duties.

Simply put, the trustee has to act on behalf of the beneficiary and in their best interests. When a trust is considered revocable, the creator of the Trust is also a beneficiary. Therefore, the creator, or “grantor,” is also an “initial trustee.”

If the creator cannot carry out their duties anymore, the trustee who has been named successor takes ownership of the Trust. The successor must therefore be loyal to the grantor first and then to the additional beneficiaries.

The trustee’s duties are passed to the beneficiaries when the creator passes away.

These exchanges involve trust and loyalty, two of the most focal ingredients in the relationship between a trustee and a beneficiary.

• Duty to Defend or Enforce Claims

When trustees agree to oversee and manage any type of Trust, they also acquiesce to defend it against negative claims. In turn, the trustee promises to support or enforce claims that aid the Trust, for example, in adding property.

Both defending and supporting claims can be expensive, and trustees are not expected to defend or enforce every claim.

Therefore, one of the duties of a trustee is to figure out which claims warrant support or defense by the Trust. In this case, consulting with a skilled attorney is useful since all actions taken by the trustee cost the trust money

• Duty of Impartiality

Trustees must pledge to be impartial when communicating with beneficiaries. Since beneficiaries depend on trustees and expect them to willingly fulfill their fiduciary duties, their impartiality in all affairs is mandatory.

For example, a trustee regards one beneficiary differently than another. This preferential treatment throws off the level of Trust among the parties and violates the trustee’s duty.

Trustees must ensure that their decisions work positively for all beneficiaries’ interests. Sometimes, this impartiality duty can present a challenge if a trustee is also a beneficiary. For example, this overlap often occurs in family trusts. In this case, we recommend contacting a qualified lawyer to ensure that the family’s relationships are not disrupted or compromised.

• Duty of Disclosure of Information

Trustees, when appointed, are legally required to inform their beneficiaries about the state of several things, including:

• The trust administration
• The income of the Trust
• Any expenses of the Trust
• The state of the Trust’s assets
• The state of the trustee’s vital decisions as related to the distribution and control of assets

Many trustees who do not employ attorneys violate this duty. Additionally, when trustees fail to report on the status of these details, many beneficiaries hire lawyers to force the issue.

Therefore, all trustees should be aware that they must provide all requested information within 60 days of a request by the beneficiary. Trustees must also provide a Notification of Trustee and a copy of the Trust following certain events, as requested.

This duty can be challenging for trustees, so having an attorney help can make an enormous difference.

• Duty to Avoid Conflicts of Interest

Conflicts of interest, in any form, can plague trusts. Often, beneficiaries contact attorneys to deal with this volatile issue, so it is best to avoid it whenever possible.

Trustees must evade conflicts of interest that disrupt their control of the Trust or interfere with any of their obligations.

Likewise, when personal problems befall the trustee, they cannot bring them into their decision-making process regarding the Trust. So, for example, if the trustee is not getting along with the beneficiary or a personal investment goes awry, they mustn’t let these problems cloud their judgment.

Even more importantly, a trustee cannot engage in self-dealing. Trustees who seek to find personal benefit in their positions and therefore dishonor the beneficiary are penalized. Trustees who disregard their fiduciary duty usually do not last very long.

Questions About the Duties of a Trustee in California? Contact Nakase Wade

We hope this list has helped provide insight into a trustee’s duties in California. Our experienced California attorneys have many years of experience guiding clients through difficult decisions. Trustees often turn to us for clear, measured advice and well-reasoned counsel when they have questions. We offer free consultations, so contact our offices today.