A living trust allows someone to leave property to beneficiaries and to care for the person while he is alive. Living trusts are rarely made public, compared to wills that are filed with courts in the probate process. The trustee has authority to manage the trust property. The person making the trust can name himself as trustee while he's alive. The successor trustee can then be the person who will deliver the property when the person dies.
The trustee has the following fiduciary duties: (1) duty of care, (2) duty to diversify, (3) duty to act impartially between beneficiaries.
A trustee is in a fiduciary relationship to the trust and its beneficiaries. The trustee must comply with the prudent investor rule to exercise the degree of care, skill and prudence that would be exercised by a reasonably prudent person in managing his own property or business. The trustee has a duty to take reasonable steps to preserve trust property, and make the property productive in furtherance of the trust purpose.
In making and implementing investment decisions, the trustee has a duty to diversify the investments. This requires balancing assets among investments. If the trustee invests "all" trust assets in one investment, the trustee likely breaches his duty to diversify the trust assets.
Where a trust has life and remainder beneficiaries, the trustee has a duty not to choose investments that favor one type of beneficiary over another.
If you have any questions with regard to estate planning, please contact our office at 1-800-303-2964. Rinne Legal is located at 1990 North California Blvd., Walnut Creek, California 94596, with additional offices in Fairfield, Oakland, and Sacramento. Rinne Legal offers free initial consultations.
