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By: Scott Grossman on September 15th, 2016

Interpreting the Terms of a Trust Can Be Challenging, But Trustees Must Get it Right

When a loved one dies and you are appointed successor trustee, it is your duty to step in and administer the trust. Doing so requires that you fulfill certain duties and obligations applicable to all trustees. One such requirement is that you administer the trust in accordance with the terms. Unfortunately, doing so is not always a clear and straightforward process. Trustees must use caution and ensure that they fully understand their obligations before proceeding.

Five Guidelines for Administering a Trust in Accordance With its Terms

How should a trustee go about administering a trust in accordance with the terms? The following is an overview:

  1. Look first at the written rules contained within the trust itself. Most trusts will provide detailed guidance regarding the rules for administration. These written instructions are designed to express the intent of the person who created the trust.
  2. Review the court orders, if any, which pertain to your particular trust administration. It goes without saying that any order by the court must carefully follow through.
  3. Carefully review all applicable statutes that pertain to the administration of the trust. You must closely follow these rules of law in order to ensure proper administration. Trustees should pay particular attention to the California Probate Code.
  4. Research any relevant court opinions that apply to other trust administration cases that are similar to the facts and circumstances surrounding your administration. These Court opinions may be applicable to the decisions that you must make as you fulfill your duties and obligations as trustee.
  5. Consider the intent of the person who created the trust. Often, a trust will include a direction that must follow with the intent of the person creating the trust, as in the trust itself. This usually means that evidence cannot be used outside the plain meaning of the words used in the trust to determine what that intent means. An exception may apply if the language used in the trust is ambiguous. However, Courts are increasingly allowing outside evidence of the creator of the trust’s intention. This can even be in cases where the language in the trust is clear. Trustees must be aware of this fact and always consider the trust creator’s intent when carrying out their obligations.

When fulfilling your duties as trustee, you must use caution whenever the trust does not clearly express what the creator of the trust wanted to happen during the administration process. In these cases, you should look outside the terms of the trust, the rules of law and the court, and the court opinions when consider whether evidence exists to prove what the creator of the trust intended. In addition, trustees should consider filing a petition with the court for instructions on how to proceed. The Court will then issue an order telling the trustee what to do. Failing to involve the court during ambiguous situations could potentially open up a trustee to liability.

As a trustee, you have many duties and obligations that lay before you. It is important to gain a full understanding of these responsibilities in order to properly carry out your responsibilities. Fortunately, you do not have to try to educate yourself on this highly technical process without guidance from an experienced professional. Among many other offerings available on our website, we encourage you to check out our free guide, Understand What to Expect During a California Estate Administration. This guide provides an easy to understand overview of trust and probate administration in California. It is helpful as you begin the process of carrying out your loved one’s wishes and settling their affairs.

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