Trusts
Fiduciary duty is the obligation to act in someone else’s best interest. A fiduciary duty arises when someone places their trust and confidence in another person, with the knowledge of that person. Common relationships that beget fiduciary duty include many business and business-adjacent contexts, including corporations, partnerships, real estate, clergy, and trusts and estates. When you are named a trustee, you have a fiduciary duty to the trust’s beneficiaries that you must fulfill.
Duties of a fiduciary
In California, a trustee is given distinct duties under Division 9, Part 4 of the state’s Probate Code. The fiduciary duty arises when you agree to be designated as a trustee. The major responsibilities of a trustee include:
- Administering the trust in accordance with the trust instrument (i.e., the written document creating the trust)
- Following written instructions given to the trustee in the case of a revocable trust created by the initiator of the trust
- Administering the trust solely in the interest of the beneficiaries
- Handling multiple beneficiaries with impartiality, even when the beneficiaries have different interests
- Not using the trust’s property for the trustee’s own profit or benefit
- Not requiring beneficiaries to waive the trustee’s liability
- Not knowingly becoming a trustee to any additional trusts that may be counter to the first trust’s beneficiaries’ interests
- Taking reasonable steps to maintain control of and preserve the trust’s property
Breach of fiduciary duties
If someone else has placed their trust and confidence in you, you are legally forbidden from acting in any way that is detrimental to the beneficiary’s best interest. In such a situation, you must exercise honesty and integrity rather than acting in your own best interest at the expense of the other party. If you fail to act in the other party’s best interest, you may have committed a breach of fiduciary duty, which opens the door to legal action against you.
The best way to avoid this is to maintain open and honest communication with the other party, thus avoiding a breach. However, if you have been accused of a breach, it is in your best interest to contact an experienced trusts and estates attorney to evaluate the situation.
Consult an experienced California trusts and estates attorney
Whether you are a trustee, beneficiary, executor, or administrator, The Law Offices of Daniel Leahy in Oakland is prepared to handle your trust and estate legal issues. Call (510) 985-4151 or contact us online to schedule a free consultation.
News
I’m often asked about who has the standing to bring financial elder abuse actions. Under Code of Civil Procedure §367, “[e]very action must be prosecuted in the name of the real party in interest, except as otherwise provided by statute.” If a person who lacks standing files an elder abuse claim, the claim may be subject to dismissal.
Oftentimes financial elder abuse cases raise complicated questions about who has standing to bring the cause of action. For example, the disputed property is often held in a trust. Other time’s the elder has died and the rules governing the survival of actions complicate issues.
When trust property is involved, it is the trustee who is the real party in interest with standing to bring an action. Saks v Damon Raike & Co. (1992) 7 CA4th 419. But oftentimes it is the successor trustee who is the perpetrator of the elder abuse and, of course, it does not make sense to sit around and wait for this person to bring an action against themselves. In these situations, courts will allow a beneficiary or even an “interested person” to bring an elder abuse action.
News
Settlors frequently choose successor co-trustees to act after they are no longer able to administer their own trusts. Rather than picking one of their kids to serve as sole successor trustee when they die or become incapacitated, Mom and Dad often appoint two or more of their children to act together as successor co-trustees.
Having more than one child serve as co-trustee can be fine if the co-trustees get along well and are good communicators, but this scenario often turns into a disaster.
In California, unlike most states, co-trustees must make administration decisions by unanimous consent. If there are three co-trustees, all must consent with respect to the various details of trust administration, such as hiring a real estate agent to list/sell trust property or engaging an accountant to produce accountings and tax returns. This is because the default rule in California is that co-trustees must act unanimously. Probate Code § 15620.
Often reasonable people can disagree, and absent any special language in drafted in the trust, the administration of a trust with co-trustees that disagree with one another can bring the administration of the trust to a standstill. Despite this disadvantage, many parents feel like they would display too much favoritism by only nominating a single child to be their successor trustee. As in many areas of law, the selection of one or multiple successor trustees does not yield an unassailable answer. There are pros and cons to each side of the argument and it is my goal to help all of my clients understand the consequences of these important decisions.
