Have you been nominated to act as Trustee of someone’s revocable Trust in Orange County? If so, you have just been handed a big headache. As Trustee you are charged with a mountain of duties and responsibilities. Unfortunately, many people who act as Trustee fail to understand the many duties they have. Instead, they think they can do whatever they like because they are now “in charge.” Or they think they can act the same way as the Trust Settlor acted. Wrong, wrong, wrong!
Don’t believe me? Take a look at California Probate Code sections 16000 through 16105. Add to that the Trustee power sections of 16200 through 16249. While you are at it, might as well study the uniform principal and income act found at sections 16320 through 16375. And then there’s the duties, responsibilities, and powers contained in the Trust document that usually contains 20 to 30 pages of legalese.
Wait you’re not done, now you have to review all the court cases that help to define and interpret these many code sections and Trust provisions. Now you should be ready to start your job as Trustee.
And if you happen to ignore or violate any of these duties and responsibilities, then you will be personally liable for the loss the Trust incurs as a result of your actions (or inactions—you can be held liable for not acting too).
Now how do you feel about acting as Trustee? Nervous (I hope). Being a Trustee is a large, thankless job that often results in accusations of wrongdoing. The best way to proceed as Trustee is to follow a few simple, basic precepts:
- Act reasonably. As Trustee you are required to act as a “reasonable, prudent” person would act. That means making conservative decisions that helps protect the Trust assets.
- Treat all beneficiaries fairly and equally. The biggest mistake individual Trustees make is to favor one beneficiary over another. You have a duty NOT to do that. But more than that, a Court is not likely to hold you liable if you acted fairly and equally.
- Hire professionals to help with taxes and financial investments. There’s no reason to go it alone. You have the right, in most cases, to hire and pay for professionals to help you out of the Trust funds. And it is a benefit to the Trust to do so because it ensures a proper Trust administration.
- Make distributions early and often. If the Trust requires you to distribute assets to the beneficiaries do so as soon as you can. The sooner the beneficiaries receive their money the less you will hear complaints. Of course, you have to keep enough reserve to pay taxes and such.
You can be a great Trustee and have a successful Trust administration experience if you just follow a few simple rules.