A Trustee is the person or persons that manage the Trust property for the benefit of the Beneficiary. The original Trustee is usually the person that establishes the Trust. Married persons are usually co-trustees and may act together or independently. The successor trustee usually takes over after some specific event such as the death of one or both Trustees, or the incapacity of the original Trustee.
What is the difference between a Trustee power, and a Trustee duty? A duty must be performed by the Trustee, and a power is different in that a Trustee has discretion to exercise the power if he or she chooses. California Probate Code section 16202 says: The grant of a power to a trustee, whether by the trust instrument, by statute, or by the court, does not in itself require or permit the exercise of the power. The exercise of a power by a trustee is subject to the trustee’s fiduciary duties.
A Trustee has the powers, without need for court order, that are granted by the Trust document, conferred by statute (unless limited in the Trust document), and the power to perform any act that a trustee would perform for the purposes of the trust under the standard of care provided in Section 16040 or 16047 of the California Probate Code (unless limited in the Trust document).
California Probate Code section 16220 thru 16249 addresses the specific powers of the Trustee and include (but are not limited to) such powers as:
• the power to collect, hold, and retain trust property received from a settlor or any other person
• the power to accept additions to the property of the trust from a settlor or any other person.
• the power to continue or participate in the operation of any business or other enterprise that is part of the trust property and may effect incorporation, dissolution, or other change in the form of the organization of the business or enterprise
• the power to acquire or dispose of property, for cash or on credit, at public or private sale, or by exchange.
For the drafter of a Trust document, confusing a duty with a power can create problems down the road. If the drafter attempts to modify a Trustee duty by conferring a power to the Trustee is a mistake. If a clause says that the Trustee has the power to hold property without diversification and does just that by holding a family held business or property, and that property goes down in value, can the beneficiaries surcharge the Trustee for the loss? A Trustee will be financially liable for losses under certain circumstances, and must therefore take the job of Trustee seriously. Recall Probate Code 16202 stated above that says: The grant of a power to a trustee, whether by the trust instrument, by statute, or by the court, does not in itself require or permit the exercise of the power. The exercise of a power by a trustee is subject to the trustee’s fiduciary duties. The court would need to decide if the Trustee is liable under the circumstances. Care must be taken to avoid situations such as these.
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William Daniel Powell
This document is for informational purposes only. Nothing in this is to be considered legal advice. Nothing in this shall create an attorney/client relationship, nor shall it create a confidential relationship. If you need legal advice (in California), feel free to contact me or someone licensed to practice in your jurisdiction. I assume no liability or responsibility for actions taken, or not taken, as a result of reading this information.
Also, please remember that I speak in generalities in my blog and my website. There are so many different factors that can contribute and completely change the outcome that it would be impractical to discuss all of them here.