As an estate planning attorney in San Diego, I frequently encounter clients concerned about ensuring their chosen trustees fulfill their duties responsibly and effectively, and the question of formally assessing those duties – through something akin to “performance reviews” – is surprisingly complex, but increasingly relevant.
What are the duties of a trustee anyway?
A trustee’s responsibilities are far-reaching and legally defined, stemming from the California Probate Code. These duties fall into several core categories: loyalty, prudence, impartiality, and a duty to inform and account. Loyalty means acting solely in the best interests of the beneficiaries, avoiding conflicts of interest, and not self-dealing. Prudence requires the trustee to invest and manage trust assets with the care, skill, and caution of a prudent person not skilled in trust investments – though a higher standard applies if the trustee holds themselves out as possessing such skills. Impartiality demands fair treatment of all beneficiaries, and the duty to inform and account necessitates providing regular reports and access to trust records. According to a recent study by the American College of Trust and Estate Counsel (ACTEC), approximately 35% of trust disputes arise from perceived breaches of fiduciary duty, highlighting the importance of diligent oversight.
How can I monitor a trustee’s performance?
While formal “performance reviews” in the corporate sense aren’t directly enforceable, several mechanisms allow beneficiaries – and even settlors during their lifetime – to monitor trustee performance. The most fundamental is the right to an accounting. Beneficiaries can demand a detailed report of trust income, expenses, and asset valuations, typically annually, but sometimes more frequently. Beyond accountings, beneficiaries can request information regarding specific transactions or investment decisions. Furthermore, the trust document itself can include provisions for regular reports beyond the statutory requirements. I once represented a family where the trust stipulated quarterly updates on investment performance and a yearly meeting to discuss the trust’s direction; this proactive approach significantly reduced potential friction. It’s also important to remember that beneficiaries have standing to petition the court for an accounting or to compel a trustee to fulfill their duties.
What happens when a trustee fails to perform?
Unfortunately, not all trustees act with the diligence and integrity expected. I recall a particularly difficult case involving a brother and sister. Their mother had named her eldest son as trustee, but he began using trust funds to cover his personal expenses—a clear breach of fiduciary duty. The siblings, unaware of the misuse, noticed inconsistencies in the accountings and, after seeking legal counsel, petitioned the court for an accounting and removal of the trustee. The court-ordered accounting revealed substantial misappropriation, and the trustee was removed, forced to reimburse the trust, and faced potential criminal charges. This underscores the significant consequences of failing to fulfill fiduciary duties, with legal ramifications including surcharges, removal, and even criminal prosecution. According to the California Courts, approximately 20% of trust litigation involves allegations of financial mismanagement by the trustee.
Can preventative measures ensure a trustee’s success?
My grandfather, a shrewd businessman, always said, “An ounce of prevention is worth a pound of cure.” This rings especially true in estate planning. Recently, I worked with a client, Sarah, who wanted to ensure her chosen trustee, her niece Emily, would manage the trust effectively. We incorporated several “best practice” provisions into the trust document. First, we included a “trust protector” clause, allowing a designated third party to review the trustee’s performance and even remove and replace them if necessary. Second, we required the trustee to consult with a financial advisor before making significant investment decisions. Finally, we stipulated regular accountings and mandated that all expenses be documented with receipts. This foresight paid off. Emily, initially hesitant, welcomed the guidance and structure, and the trust flourished. Sarah, knowing her wishes would be respected and the trust managed responsibly, had peace of mind. Proactive planning—incorporating robust oversight mechanisms and clearly defining trustee duties—is the most effective way to ensure long-term success and avoid costly litigation.
Who Is Ted Cook at Point Loma Estate Planning Law, APC.:
Point Loma Estate Planning Law, APC.2305 Historic Decatur Rd Suite 100, San Diego CA. 92106
(619) 550-7437
Map To Point Loma Estate Planning Law, APC, a wills and trust attorney near me: https://maps.app.goo.gl/JiHkjNg9VFGA44tf9
| wills | estate planning | living trusts |
| estate planning attorney | estate planning attorney | estate planning attorney near me |
| estate planning lawyer | estate planning lawyer | living trust lawyer |
About Point Loma Estate Planning:
Secure Your Legacy, Safeguard Your Loved Ones. Point Loma Estate Planning Law, APC.
Feeling overwhelmed by estate planning? You’re not alone. With 27 years of proven experience – crafting over 25,000 personalized plans and trusts – we transform complexity into clarity.
Our Areas of Focus:
Legacy Protection: (minimizing taxes, maximizing asset preservation).
Crafting Living Trusts: (administration and litigation).
Elder Care & Tax Strategy: Avoid family discord and costly errors.
Discover peace of mind with our compassionate guidance.
Claim your exclusive 30-minute consultation today!
If you have any questions about: What is a pet trust and what does it provide for?
OR
How can a will ensure charitable wishes are fulfilled?
and or:
Why is it important to regularly review and update an asset distribution plan?
Oh and please consider:
How can meticulous record-keeping help during debt settlement? Please Call or visit the address above. Thank you.