Wednesday, January 16, 2013

Orange County Probate Attorney Cites Responsibilities of a Trustee


The main objective of a trust is to allow for the transfer of property to designated beneficiaries without court administration.  But in the absence of court supervision, it is possible for the person in charge of the trust, called the “trustee,” to act improperly with regards to the trust property. California law outlines the duties of a trustee In the California Probate Law, precisely to prevent the commission of improper conduct.  In broad terms, the duties may seem very obvious; however, the trustee may find himself inadvertently violating his duties. 

Loyalty to the Beneficiaries. The trustee should administer the trust property with the beneficiaries in mind.  Hence, the trustee should not do anything with the trust property that would be detrimental to the beneficiaries.  This duty can be violated in a number of instances including   the trustee buying a trust property, the trustee selling a trust property to a group in which the trustee has an interest or the trustee taking on a loan from the trust property.  Even engaging in a business that competes with a concern owned by the trust constitutes a violation.  California, however, allows the trustor (maker of the trust) to include provisions permitting “self-dealing” for certain cases.   A probate attorney in Orange County can assist trustor’s in drafting a proper Living Trust.

 Safeguarding of the Trust Property.  This duty may seem obvious to everyone concerned.  However, It is possible, that some beneficiaries may feel that other claimants are usurping on the settlor’s property.  These beneficiaries may sue the trustee for breach of duty.  To protect the trustee from too much exposure to the trustor’s property, the trustee may buy an insurance that will indemnify him for any inadvertent errors incurred while overseeing the trust property.  The trustee must be aware of his rights prior to agreeing to be the trustee.  The candidate for trustee can consult an estate planning attorney before he agrees to become the trustee.    

No Conmingling of Properties.  California law explicitly prohibits the conmingling of a trustee’s property with that from the settlor’s. This is precisely to avoid confusion. A trustee, for example, cannot deposit from the trust to an account which holds his personal funds. In drafting the trust, the settlor may include a provision that would override this duty.

Impartiality to all Beneficiaries. This may seem obvious to anyone.  But in reality this can be a thorny issue to the designated trustee.  Generally (and logically), a trustee is one that the settlor (estate owner) trusts and is usually related to.  A man may choose his current wife to be his trustee.  After his death, wife-trustee must treat with impartiality all the beneficiaries:  including her children by her husband – and those from a previous marriage.    

While a Living Trust may be a legal mechanism to avoid probate, a trustor may do well to select his trustee prudently and consult a probate or estate planning attorney in the preparation of this important document.