The Roles, Responsibilities, and Duties of Parties to a Trust

A Trust involves three roles: (1) the Grantor (also known as the “Settlor,” “Trustor,” or “Trust-Maker”) who establishes the trust, (2) the Trustee (also known as the “Trust Manager”) who is given the responsibility to manage the assets of the trust in accordance with its instructions, and (3) the Beneficiary who receives beneficial enjoyment of the trust’s assets under provisions and circumstances as set forth in the instrument.  

With respect to a “Revocable Living Trust” which is used as a will and power of attorney substitute in basic estate planning, the same person (or married couple) will often occupy all three roles at the beginning.  The purpose of such a trust is to allow the Grantor to maintain control over the trust assets while he or she is living and has capacity, but to have a contingency plan in place in the event of the Grantor’s incapacity or death.  After such an occurrence, the roles of the Trustees and Beneficiaries will change in order to create an efficient adjustment to the new circumstances and to allow the Grantor’s intent to be carried out in a variety of circumstances.

In other situations, each role will be occupied by a different person.  A Grantor might want to make a gift to a Beneficiary for estate planning purposes but might not want the Beneficiary to have direct control over the asset due to the Beneficiary’s young age, financial irresponsibility, or special needs.  Under these circumstances, the Grantor entrusts the management and control over the assets of the trust in the Trustee who has a legal obligation administer the trust in accordance with the Grantor’s intent for the benefit of the Beneficiary.  

One of the longest sections in the California Probate Code outlines the duties of the Trustee in carrying out the terms of a trust as established by the Grantor for the benefit of the Beneficiary.  These duties include, but are not limited to, the following:

1)    Duty to Administer Trust Governed by Instrument (Section 16000).
2)    Duty of Loyalty to Beneficiaries (Section 16002).
3)    Duty to Deal Impartially with Beneficiaries (Section 16003).
4)    Duty to Avoid Conflicts of Interest (Section 16004).
5)    Duty to Control and Preserve Trust Property (Section 16006).
6)    Duty to Segregate and Identify Trust Property (Section 16009).
7)    Duty to Avoid Improper Delegation and Supervise Performance of Delegated Matter (Section 16012).
8)    Duty to prudently manage and invest the assets of the trust (Sections 16046, 16047, and 16048).

The Trustee also has another category of duties that relate to the Beneficiary’s right to certain information regarding the trust.  These duties include, but are not limited to, the following:

1)    Duty to Inform Beneficiaries (Section 16060).
2)    Duty to Provide Terms of Trust at Beneficiary’s Request (Section 16060.7).
3)    Duty to Report at Beneficiary’s Request (Section 16061).
4)    Duty to Provide Notification of Events (Section 16061.7).
5)    Duty to Account to Beneficiaries (Section 16062).

If there is a dispute between a Trustee and a Beneficiary over the Trustee’s exercise of authority and/or management of the trust, such dispute may be resolved by court action under Sections 17000 through 17457.  In essence, the Beneficiary may enforce the terms of the trust by compelling the Trustee to carry out its duties by petitioning the probate court for judicial relief.  Additionally, if a Trustee is uncertain about how to properly carry out its duties, the Trustee may petition the probate court for instructions on how to proceed.

Most trusts are drafted with the intent to avoid court action, though court action might be necessary to enforce the terms of a trust in the event of a disagreement between the Trustee and the Beneficiary over the interpretation or management of a trust.  

KRASA LAW, Inc. is located at 704-D Forest Avenue, Pacific Grove, California 93950 and Kyle may be reached at 831-920-0205.

Disclaimer: This article is for general information only.  Reading this article does not establish an attorney/client relationship.  Before acting on any of the information provided in this article, you should consult a competent attorney who is licensed to practice law in your community.