Management of trustee and beneficiary disputes and their resolution involve many variables. California trust beneficiaries have been given many tools which protect them against malfeasance by trustees.
California fiduciaries are held to a standard of care. Trust documents often describe the standard of care of the trustee, but where they fail to specify the care, California law states that the trustee is held to a reasonable trustee standard. At the same time, where the trustee has special skills, the courts can expect the trustee to use his special skills in managing the assets of the trust. Trustees who invest the trust's assets are held to a prudent person standard in California unless the trust specifically relieves them of that specific standard.
For example, the trust may specify that the trustee may hold a property vacant for a period of time after the death of the settlor.
Additionally, at times managing expectations of the beneficiaries where one child may live in the property of the parent can be a simple task, if done when the parent is alive and competent. Litigation can occur where the parent has left no specific instructions before death and one child lives in the property of the parent and refuses to pay rent. This can also be simply provided in the trust instrument to prevent future disputes.
What can a successor trustee do to manage the disputes among a successor trustee and beneficiaries where the trust does not provide for specific instructions on disputed actions?
1. Give Notice of Proposed Action. For example, a trustee who seeks to charge a beneficiary rent during the period of administration, but before distribution should give Notice of Proposed Action to determine the level of potential disputs.
2. Give Notice of Proposed Inaction. California law allows a trustee to give Notice of Inaction where the trustee seeks not to take action on a particular issue.
3. Seek pre-litigation mediation. Trustees and beneficiaries who may not agree on certain issues, such as sales price, sale date and distribution date can often prevent future disputes when parties realize the cost of litigation and want to act timely to prevent harm in a declining market. There are many times in a declining market where the beneficiaries do not recognize market value as a result of a failure in communication and an early agreement regarding sales price and sales timing.
4. Obtain instructions from the court. Before a trustee takes action, he or she can seek instructions from the court. This can be an especially useful tool where the trustee expects disputes regarding the manner of distribution or trustee's compensation.
5. Present a settlement agreement early. Settlement agreements which involve specific actions of the trustee can be drafted quickly and prevent future disputes on single issue disputes. Once entered, the trustee and beneficiaries can limit the scope of the settlement, but agree on its enforcement and admissibility in the event there is a future disagreement on that issue. A settlement agreement can be presented before mediation or during mediation and often protects all parties from significant legal fees which can be expended during litigation.
Mina N. Sirkin is a Trust and Estate Litigation Attorney in Los Angeles, California. Ms. Sirkin is a Board Certified Specialist Attorney in Estate Planning, Probate and Trust Law by the Board of Legal Specialization of the State Bar of California. For consultation appointments, contact Karen Reyes at 818-340-4479. http://SirkinLaw.com/attorneys.html
