The Rights of Heirs in California in a Revocable Family Trust

In a trust situation, the heirs who stand to receive money from the trust are known as "beneficiaries." The California Probate Code sets certain requirements for trustees in their dealings with the trust beneficiaries. Those with questions about their rights in a specific trust should seek professional advice.

Beneficiary's Role

Once a trust has been created, the assets legally belong to the trustee. The trustee has the right to deal with the assets as he sees fit, so long as he distributes those assets to the beneficiary as described in the trust document. Because the beneficiary is the one who has the right to the enjoyment of the assets, he holds what is known as "equitable title" in the trust assets. The beneficiary has no right to control the assets before the trustee distributes them, only to receive the assets and profit reaped from the assets.

Trustee Loyalty

As the name suggests, a trustee's role is one of trust. Therefore, the California Probate Code imposes fiduciary duties on the trustee, to ensure that the trustee deals with the trust assets, and with the beneficiaries, in the most irreproachable manner. The trustee has a duty of absolute loyalty to the beneficiary. In a trust with multiple beneficiaries, the trustee must act loyally (and impartially) toward all beneficiaries. The duty of loyalty to the beneficiary also prohibits the trustee from overstepping his role by using the trust assets for his own benefit, or from being the trustee for another entity if that trusteeship creates a conflict of interest. The trustee cannot profit from the trust. Trustees also have a duty of confidentiality, to release no information on the trust or on the beneficiaries.

Accounting Requirements

In order to protect the beneficiary's rights, the Probate Code imposes strict accounting requirements on the trustee. Among other requirements, the trustee must earmark, or keep trust property absolutely separate from his own. He may not mingle accounts. The Code also demands that the trustee keep the beneficiaries informed about the status of the trust and its assets. In practice, this information duty usually translates into a duty to account to the beneficiaries for his dealings with the trust. If a beneficiary asks for such an accounting, the trustee must deliver a full report within a reasonable time frame.

Management of Assets

Unless the trust document says otherwise, trustees generally have fairly broad discretion in the manner in which they invest the trust assets. However, all California trustees have a duty to invest the assets prudently, and make them grow at a reasonable rate. The Probate Code enumerates several factors for a trustee to use in deciding whether his investment actions are prudent. Among other considerations, these factors include economic conditions, tax consequences, the need for liquidity, and an asset's role in the general purpose of the trust.

References

• "Wills, Trusts and Estates (Seventh Edition)"; Jesse Dukeminier, Robert H. Sitkoff, James M. Lindgren and Stanley M. Johanson; 2005
• CA Legislative Info: California Probate Code, Part 4 - Trust Admininstration
• DavidTate.us: A Summary of Trustee Responsibilities, Beneficiary Rights, and Elder Law (California)