A well-executed estate plan is one of the most important legacies you can leave upon your death. It not only helps carry out your wishes; it makes it much easier for your surviving family members to handle your assets and debts. One aspect of many individuals’ estate plans is the trust – a legal entity into which assets may be placed and managed by a trustee for the benefit of a third party. Although you can act as your own trustee during your life, your successor trustee will take over upon your death. Knowing the obligations of a trustee can help you select a responsible individual who can serve in this role, Loew Law Group, PLC assists clients who are in the process of planning their estates. We can work with you to draft your trust.
What is a trust?
A trust is a legal instrument by which one person, the trustee, holds title to property for the benefit of another person, the beneficiary. The individual who creates the trust and puts property into it is known as the settlor or trustor. The settlor, trustee, and beneficiary can be different people, or one single person. An individual can create a trust and put property into it, can designated him- or herself as the trustee, and can use the property for his or her own benefit.
The trustee is the person or people who hold title to the property that has been put into the trust. His or her job is to manage the property that is in the trust for the benefit of the beneficiaries. They do this by following the instructions of the settlor as represented in the trust document.
Why Have a Trust?
There are many benefits to having a trust. Your California trust and estate planning attorney can determine which type of trust is best for you. In general, trusts can accomplish these and other objectives:
- Reduce estate taxes for married couples
- Help pass and preserve wealth efficiently and privately to heirs
- Preserve assets for heirs and charities
- Gain control over the way your assets are distributed
What powers does a trustee have?
The trust document is responsible for outlining the powers and obligations of the trustee. The trustee, therefore, has any powers designated to him or her in the trust, unless they conflict with state or federal law or a court order. The goal is to collect, preserve, manage, and protect the assets in the trust. To that end, some of the typical powers a trustee has include:
- Making distributions and payments to beneficiaries in accordance with the trust document
- Insuring the property
- Selling assets
- Making responsible investments
- Making reasonable repairs to trust property
- Paying bills, expenses, and administrative costs
What are the duties of the trustee?
Considering the powers of the trustee above, there are numerous duties required of this individual as well. Generally, the trustee acts as a fiduciary, which is someone entrusted with the responsibility to manage assets. A high burden of good faith and ethical management is imposed on the trustee, and the law requires that this duty be steadfastly observed.
With that in mind, specific duties of the trustee include:
- Following all instructions of the trust document, as long as they are legal
- Acting for the benefit of the beneficiaries (including avoiding conflicts of interest with the beneficiaries or favoring one over another)
- Keeping trust property separate from the trustee’s personal property, or that of another person or entity
- Unless authorized by the trust, never using trust assets for the trustee’s personal gain
- Making financially sound investments with trust property (which takes the interests of the beneficiaries into consideration)
- Managing the trustee’s own responsibilities, and avoid delegating anything to an unsupervised third party
- Being prudent and using discretion when tasked with giving distributions to beneficiaries
- Keeping detailed accounting records and give periodic reports to beneficiaries as required by state law
Other obligations may be specified in the trust instrument, or imposed on the trustee by California law. Your trust and estate planning attorney can discuss these responsibilities with you.
What if the trustee is violating his duties?
As a fiduciary, the trustee is expected to exercise diligence and strict adherence to the obligations imposed on him by law and by the trust document. If the trustee is not doing his or her job, you should speak with a California trust and estate planning attorney. The courts are empowered to remove a trustee and force him or her to repay the beneficiaries for losses to the trust due to mismanagement. While a case is pending, they may be suspended from his or her duties to protect the trust.
Under California law, a trustee can be removed for any of the following reasons:
- Breach of the trust
- Personal insolvency or lack of fitness to administer the trust
- Lack of cooperation between co-trustees that impairs the administration of the trust
- Failure or refusal to take necessary actions
- The trustee’s compensation is excessive under the circumstances
How do I remove a trustee?
If a trust is revocable, the settlor can simply revoke the trust or amend the documents to add a new trustee. It is more difficult to get rid of the trustee if the trust is irrevocable. For this, you will need to get a court involved. Someone with an interest in the trust, such as the beneficiary, must file a petition with the court to request the trustee be removed.
Contact Our San Mateo Trustee Attorney
If you have questions about a trustee’s conduct and whether he or she can be removed, contact us for a consultation. The rules concerning trusts and estates in California are complicated. You can count on the team at Loew Law Group, PLC. We can answer any questions you have and let you know about your legal options.