Our legal operations continue. We are here for you. Read more

Trust Manager: That's What A Trustee Is Afterall

If you want to understand Trusts, you need to have a solid grasp on the terminology. One of the first things a person needs to understand about Trusts is the difference between a Trustee and a Trust beneficiary. When a Trust is created, it becomes its own legal entity. A Trust can only operate through its Trustee who is the manager of the Trust assets. The Trustee does not necessarily receive Trust assets unless they are also named as a beneficiary. A beneficiary is a person entitled to receive assets from the Trust.

What do trustees do?

The Trustee does what the Trust document tells them to do. The Trustee must follow the Trust terms, follow California Trust law, keep the beneficiaries appraised of the status of the Trust assets, and provide a Trust accounting. Ultimately, the Trustee must make distributions to the beneficiaries if the Trust requires them to do so.

The Trustee cannot do whatever they want with the Trust assets. Unfortunately, Trustees abuse their discretion by misappropriating Trust assets, self-dealing, and refusing to distribute assets to the beneficiaries. Sometimes, Trustees favor one beneficiary over another by letting them live in the Trust property rent-free, for example. Or by giving one beneficiary a more valuable asset than another even though the Trust is supposed to be distributed equally. Or by failing to invest Trust assets properly. There are numerous ways a Trustee can breach their fiduciary duties and cause harm to the Trust beneficiaries.

Beneficiaries, on the other hand, are not entitled to control or manage the Trust assets. Beneficiaries do not have the power and discretion to say how and when Trust assets can be sold. Beneficiaries are merely the recipient of the Trust assets. However, beneficiaries have many rights and they also can assert those rights by filing a petition in Probate Court to force the Trustee to take the appropriate action required of them. Trustees owe fiduciary duties to beneficiaries that can be enforced in court, whereas, beneficiaries owe no duties to Trustees. It is a one-way street of responsibility.

The bottom line is that Trustees hold all the power, but have all the responsibility too. Beneficiaries lack the authority to make decisions, but they hold all the rights. Sometimes Trustee’s abuse that power and that’s when beneficiaries must act to protect their rights in court.