LEGAL DUTIES OF THE TRUSTEE
Review Chapter Seven in your textbook covering Fiduciary Duties and take a look
at the duties I’ve outlined below based on the California Probate Code.
A successor trustee has a duty to administer the trust according to the trust instrument and
sections of the California Probate Code (sections 16000, et seq.). Some of those duties include:
1. Duty of Loyalty. A trustee has a duty to administer the trust solely in the interest of the
beneficiaries (Prob. C. sec. 16002). A trustee has a duty to deal impartially with two or
more beneficiaries, particularly in investing and managing the trust property, taking into
account any differing interests of the beneficiaries (Prob. C. sec. 16003)
2. Conflicts of Interest. “The trustee has a duty not to use or deal with trust property for the
trustee’s own profit or for any other purpose unconnected with the trust, nor to take part
in any transaction in which the trustee has an interest adverse to the beneficiary.” (Prob.
C. sec. 16004).
3. Productivity of Trust Property. The trustee must make trust property productive, unless
otherwise directed by the trust instrument (Prob. C. sec. 16007).
4. Separation of Property. The trustee must keep trust property separate from other property
not subject to the trust, including his own property (Prob. C. sec. 16009).
5. The trustee must take reasonable steps to enforce claims of the trust and defend actions
that may result in a loss to the trust (Prob. C. sec. 16010-16011).
6. Standard of Care. “The trustee shall administer the trust 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” (Prob. C.
sec. 16040).
7. Investments. The trustee shall exercise reasonable care, skill, and caution. The trustee
shall consider the following in investing and managing trust assets: a) general economic
conditions, b) the possible effect of inflation or deflation, c) the expected tax
consequences, d) the expected total return from income and the appreciation of capital, e)
other resources of the beneficiaries known to the trustee (Prob. C. sec. 16047). “In
making and implementing investment decisions, the trustee has a duty to diversify the
investments of the trust. . .” (Prob. C. sec. 16048).
8. Duty to Inform. The trustee must keep the beneficiaries reasonably informed of the trust
and its administration (Prob. C. sec. 16060).