Naming the person in your living trust and will to carry out your wishes can be challenging sometimes. What follows are California guidelines to help make choices so that if the people you have in mind can perform each of these duties and responsibilities then you can be confident you’ve made the right decision. As your fiduciary, the trustee and executor must be able to comply with these various duties when exercising their powers:
- Duty of Loyalty to the Trust and Beneficiaries
- Duty of Confidentiality regarding Trust Affairs
- Duty to Defend Against Adverse Claims and Enforce Claims on the Trust’s Behalf
- Duty to Treat Beneficiaries with Impartiality
- Duty Not to Delegate Acts Involving Discretion and Judgment
- Duty to Invest with Proper Diversification and Asset Allocation
- Duty to Account in Writing from Time to Time
- Duty to Avoid Conflict of Interest and to Act Without Personal Gain
- Duty to Segregate Trust Property and not Commingle Personal Funds
- Duty to Communicate and Furnish Information to Beneficiaries
Your California trustee and executor should be able to comply with state and federal tax laws. Your trustee and executor should be able to maintain proper books and records, provide the proper form of annual and other trust accountings, know how and when to distribute trust assets to beneficiaries, decide who receives a copy of the will and trust, and what professionals to hire to help with these fiduciary duties. The administrative powers of the trustee should be taken seriously by your nominee since the exercise of them allow the trustee to carry out your wishes accurately and faithfully. Those powers apply to how discretionary decisions and other elections are made, the way trust property is purchased, held and disposed of, and the types of permissible investments the trustee can make. Following restatements and uniform acts pertaining to the common law of trusts must also be understood by your trustee so as to avoid being removed, forced to resign, surcharged and otherwise challenged by your beneficiaries.
Do you want to pay compensation to your trustee and executor who has to carry out your wishes and comply with these and other fiduciary duties? How do you want to determine the amount of compensation: as a percentage of the assets under management, as a flat fee, at an hourly rate? Is compensation to be paid every two weeks, monthly, quarterly or at least once a year? If your trustee is also a beneficiary, paying compensation is treated as taxable income while getting the money as part of the beneficiary’s distribution from a trust is not taxable income; so you may not want compensation paid if it’s taxable.
By the time your last dollar is distributed from your living trust and will, how old will your trustee and executor be? Did you nominate someone who is young enough to be around during the entire lifetime of the trust estate? Should you consider naming someone younger who might be able to serve for the entire term?
To discuss this further, call Mitchell A. Port for your free phone consultation at (310) 559-5259.