In the last newsletter I discussed the trustee’s duty of loyalty to the beneficiaries of the trust. This time I will delve further into that topic. The duty of loyalty includes the duty to deal impartially with all beneficiaries. This can be especially challenging if there are many beneficiaries each with different wants and needs. It is further complicated when the trustee is also a beneficiary. Above all, the terms of the trust dictate how the trustee must proceed with regard to the beneficiaries. When the trust documents are not explicit the trustee must use their best judgment to perform his job.
When the wishes of and needs of the beneficiaries conflict, the trustee must make difficult decisions. This is not a situation where the majority rules. He owes a duty to the minority beneficiaries as well. For example, many beneficiaries might be young and want an aggressive stock portfolio while there might be a few older beneficiaries who prefer a more conservative approach. There may be beneficiaries who earn an income for life from the trust assets but there others who will become beneficiaries after that lifetime is over. The trustee owes an equal duty to all of these beneficiaries.
The trustee also cannot allow one beneficiary to use trust property, such as a car or house, without providing a similar benefit to other beneficiaries. This duty can become particularly complicated if family dynamics create a toxic atmosphere. Trustees must proceed carefully. It is important that they keep careful records and communicate clearly and fairly with all parties involved. It is a good idea for trustees to obtain the advice of a professional. Contact Lindsay Leonard at Santa Barbara Estate Services can provide guidance to those with questions about a trust or trusteeship.
