GREAT, YOU’RE NAMED TRUSTEE! NOW HIRE COUNSEL AND DISCLOSE ANYTHING THAT MAY FALL INTO THE ESTATE!
Your old friend has named you trustee of his estate, a great honor. But with great power comes great responsibility. A simple purview of the California Probate Code raises an expansive list of duties. A trustee has a duty to “administer the trust according to the trust instrument ....” Cal. Prob. Code § 16000. A trustee has a duty to “see that the trust property is designated as property of the trust.” Cal. Prob. Code § 16009, subd. (b). A trustee also has ”a duty to take reasonable steps to enforce claims that are part of the trust property.” Cal. Prob. Code § 16010. And, above all, the trustee has a duty to administer the trust “solely in the interest of the beneficiaries,” dealing “impartially … taking into account any differing interests of the beneficiaries”, and “not to use or deal with trust property for the trustee’s own profit …. Cal. Prob. Code §§§ 16002(a), 16003, 16004(a). That is why it is so critical that a trustee fully disclose what is trust property, including any property that may have a colorable claim to being trust property.
What is trust property? For a trial court, it is any property that the settlor intended to be included in the trust. It is the policy of the State of California to give effect to the intent of the settlor in interpreting trust documents. See, e.g., Wells Fargo Bank v. Marshall, (1993) 20 Cal. App.4th 447, 452-453. The Court of Appeal upholds that property can be treated as trust property even though it is not formally titled as such. If beneficiaries ask about a property or it is listed on Schedule A, disclose it and explain why or why not it was included. In Estate of Heggstad (1993) 16 Cal. App. 4th 943, the Court of Appeal held that real property described with specificity in a trust schedule was trust property, even though the it was not formally titled to the trust. In Kucker v. Kucker (2010) 192 Cal. App. 4th 90, the Court of Appeal recognized shares of stock as trust property, even though they had not been described with specificity; a general assignment of the settlor’s personal property that did not specifically identify the shares was deemed sufficient to establish the intent of the settlor that the shares be property of the trust. In Estate of Howard(Jan. 10, 2012, B228046, B228047) [non pub. opn.], the Court of Appeal held that a written declaration in a trust schedule was sufficient to establish the settlor’s intent that a bank account was a trust asset, even though the bank did not receive a letter directly transfer of the account to a trust.
In each of the above cases cases, the court looked beyond the formality of title to the property and determined that the property in question was part of the settlor’s trust. Trust me, a disgruntled beneficiary can come back with sworn testimony that challenges your decisions. A failure to faithfully honor your expansive duties as a trustee could result in extensive damages. California courts permit an expedited way for beneficiaries to seek legal redress via petitions under Sections 850 and 17200 of the Probate Code.