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This is part four of a five-part series on the most common errors and issues that arise in the administration of a trust upon the death or disability of a trustors.
Treating Beneficiaries Equally
As a trustee, if there are multiple beneficiaries, you are required to treat all beneficiaries equally. Probate Code section 16003 states, “If a trust has two or more beneficiaries, the trustee has a duty to deal impartially with them and shall act impartially in investing and managing trust property, taking into account any differing interest of the beneficiaries.”
A conflict may arise with the statutory requirement to treat all beneficiaries equally when dealing with real or personal property with sentimental value. For example, let’s consider a trust where there are multiple beneficiaries, and the trustee also is a beneficiary. Now you have the potential conflict of interest where it can be alleged that what is best for the trustee as beneficiary may not be best for one or more of the other beneficiaries. What about when one beneficiary wants the trustee to make certain decisions to which other beneficiaries object? These “objectionable” decisions a trustee makes often are tied to real property or objects with sentimental attachment. How is a trustee supposed to balance multiple competing interests without violating their legal obligations? By communicating with the beneficiaries and acting with complete transparency.
Transparency is usually the best answer and attempting to reach a consensus on the action can be the best remedy. However, if a resolution cannot be reached or the trustee is worried about liability, the trustee can always file a Petition for Instructions with the court seeking permission and requesting court instruction on how to act. This helps insulate the trustee from liability.
More often than not, a trustee is trying to act impartially and for the best interest of all parties, but sometimes there is a perceived or real bias against a particular beneficiary. Maybe the beneficiary is the black sheep of the family, the favored/spoiled child, or the absentee child, and the trustee and other beneficiaries are upset about the assets that individual is to receive. Those feelings or that perception does not change your legal obligation to treat all beneficiaries equally. You cannot let past grievances or issues color the administration of the trust, otherwise you may be in breach of your obligations as trustee.
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The information provided herein does not, and is not intended to, constitute legal advice; instead all information, content, and materials are for general informational purposes only. Neither this website nor this post are intended to create an attorney-client relationship.
If you need assistance in the administration of a trust, are concerned that you are not being treated equally by the trustee, or have questions about how a trust should be administered, please give Victor Herrera or our estate planning team a call at (805) 546-8785. They can help walk you through the process of administering a trust and help teach you how to avoid common pitfalls.
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