Knowing the Limitations to a Trustee’s Discretionary Powers

When you have been named as the beneficiary of a trust in Woodland Hills or another California city, it may not be uncommon for you and any other interested parties to feel frustrated about your apparent lack of control over matters. Given that the assets of the trust may have been significantly designated to benefit you, it is difficult to feel as though you are at the mercy of the trustee’s discretion. Many have come to us here at The Law Offices of Alice A. Salvo questioning exactly how much discretion a trustee has in exercising his or her duties. The answer depends largely on the details of the trust itself.

Section 16080 of the California Probate Code states that, in general, a trustee is not able to exercise his or her discretionary powers without restraint, but rather within reason. While this may seem straightforward, it may open the door to interpretation, particularly if in the trust instrument itself, the settlor uses terms such as “uncontrolled,” “absolute” or “sole” when describing the level of discretion afforded to the trustee.

Typically, a settlor creates a trust for an express purpose. In your case, it may be to provide you with a steady stream of income or to preserve assets until a certain point in time where their value can appreciate. Ultimately, the trustee’s primary role is to fulfill that purpose. Thus, even if the trust instrument does use strong language in describing his or her discretionary powers, a trustee is limited to only doing that which will accomplish the trust’s aims. Plus, the law also mandates that he or she demonstrably act in good faith and in accordance with fiduciary principles. More information on the powers and obligations of a trustee can be found here on our site.