The Chilina Law Firm is an estate planning law firm.  This means that the estate planning attorneys of the Chilina Law Firm are able to assist clients with developing an estate plan (creating the documents for a trust, will, durable power of attorney, medical directive, etc.), or making changes or revisions to estate planning documents if a client already has an estate plan.  Additionally, we also assist clients who are trustees of a trust through the process called trust administration.  Trust administration involves the trustee following the terms of the trust and California law, and making sure all assets of the trust are collected and properly maintained or invested or preserved, payment of debts of the deceased settlors (a settlor being the person(s) who created the trust), and that the remaining trust assets are distributed to the trust beneficiaries, again, per the terms of the trust.  Stated that like, trust administration seems simple enough but for many reasons which we will not go into here, trust administration can be a complex process.  But here are a few of the main duties that a trustee of a trust owes to trust beneficiaries during trust administration.

Generally speaking, a trustee owes a duty of loyalty and a duty of impartiality to the beneficiaries of a trust.  The trustee of a trust is considered by law to be a fiduciary, so the trustee must act and administer the trust under a high standard of care.

So, a trustee must administer the trust according to the terms of the trust.  This means that, in general, the trustee must read the trust and know and understand what are the rules and procedures and directions that are contained in the trust language.  Failure of the trustee to adhere to the terms of the trust can render the trustee’s acts as non-binding or the trustee can even be removed by a Court of law.

The trustee of a Trust owes a duty to furnish or provide information about the trust to the beneficiaries.  This means that, in general, at the beginning of trust administration, the trustee must provide notices and copies of the relevant pages of the trust and communicate how the trustee plans to administer the trust.  It also requires the trustee throughout trust administration to not only periodically keep the trust beneficiaries informed of the trust administration process, typically reported to the beneficiaries through a report of information by trustee) but also account, in most cases unless an accounting is not required or is waived, for the assets of the trust and report such accounting to the trust beneficiaries.

Interestingly enough, there is a duty by the trustee to not disclose information to a third person regarding trust administration when the trustee should know that such disclosure would be detrimental to a beneficiary’s interest.

In most cases, the trustee has the duty as a fiduciary to personally perform the tasks associated with trust administration.  Having said that, it is possible in some cases for a trustee to rely on other professionals, e.g., Accountant, CPA, Attorney, Financial Advisor, Insurance agent, etc., to assist the trustee with trust administration.  For example, it would be okay for the trustee of a trust to hire an investment advisor to provide guidance on investments and hold stocks and bonds of the trust on account but it is not proper for the trustee of the trust to delegate decisions about investments solely to the investment advisor as such decision must be made and authorized by the trustee, only.

We noted above that the trustee of a trust owes to the trust beneficiaries a duty of loyalty.  A duty of loyalty requires the trustee to administer the trust solely in the interest of the trust beneficiaries.  This seems simple but it is actually a complicated item.  For example, this means that a trustee must administer the trust in a fashion that is impartial or neutral to all beneficiaries.  Meaning, a trustee cannot act to prefer one beneficiary over the others.  A duty of loyalty also means that the trustee must avoid complex rules of conflicts of interest, avoid self-dealing, avoid competing interests, etc.  Failure to do so may result in removal of the trustee and even being held accountable for damages done to the trust as well as trust beneficiaries.

The above-noted duties are just a few of the many duties that a trustee owes in their fiduciary capacity to the beneficiaries of a trust.  Anyone considering being named as a trustee of a trust or who has been named as a trustee of a trust should contact a competent estate planning attorney such as an estate planning attorney with the Chilina Law Firm for further information.

Authored by Greg Chilina and Co-Authored by Karen Chilina

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