Posted by The Sterling Law Group on February 11th - Estate Administration
A trust is a legal entity that is established under the applicable state law to maintain and preserve property or assets for the sole benefit of beneficiaries designated in the trust. You do not have to be a wealthy person to have or need a trust. Rather, anyone should discuss the possible benefits of a trust with an experienced lawyer.
The person known as the “settlor” creates the Trust. The settlor appoints someone or an entity to administer and manage the trust assets and investments. Including paying taxes and other debts owed by the trust, and making distributions from the trust. This person or entity is known as the “trustee.” A trust can have one more trustee, and under California law, the trustees must comply strictly with requirements to protect the interests of the person creating the trust and its beneficiaries.
In creating a trust, the person creating it must determine whether the trust is to be revocable or irrevocable. If a trust is revocable, it means the person creating it retains the right to revoke the trust. On the other hand, irrevocable trust means that the trust cannot be amended.
Which is appropriate depends on each individual’s facts and circumstances and what the person creating the trust intends to accomplish. We guide our clients to make the right call as to which of these types of trusts they should create. In addition, revocable trusts tend to be more common.
A trust is administered while the person creating it is alive. The creator can serve as the trustee while they are capable.
Trustees have a fiduciary duty to the beneficiaries of the trust, meaning the trustee has the legal duty to act in good faith with honesty. In other words, they will care about the interests of the trust’s beneficiaries as articulated in the trust terms and conditions. The trustee has high legal responsibility. He or she must manage other personal interests with honesty.
The standard of care for trustees in California is defined by the law, which requires that in administering and managing a trust, the trustee shall act with “reasonable care, skill, and caution under the circumstances then prevailing that a prudent person acting in a like capacity would use in the conduct of an enterprise of like character and with like aims to accomplish the purposes of the trust as determined from the trust instrument.”
To clarify, the law imposes specific duties on trustees, which include the following: