October 28, 2021

Duty to Follow the Terms of the Trust

A fundamental rule of trust administration is to follow the terms of the trust. The applicable law states "on acceptance of the trust, the trustee has a duty to administer the trust according to the trust instrument and, except to the extent the trust instrument provides otherwise, according to this division." Probate Code §16000. For example, if the trust says to sell the family home, the trustee is obligated to sell the family home. Or if the trust says to distribute a classic car to a nephew, the trustee is obligated to not sell the classic car and give the nephew cash instead. 

A recent unpublished appellate decision discussed a trustee acting in contravention of the trust.

Following the passing of the surviving settlor, the successor trustee filed a petition for approval of her accounting. A beneficiary objected to the accounting regarding the surviving settlor's jewelry. In particular, the accounting failed to list or account for any of the surviving settlor's jewelry. Furthermore, the beneficiary objected to a disbursement for a jewelry appraisal when the successor trustee admitted that the surviving settlor's jewelry had been buried with her.

The trial court's statement of decision, effectively an order or judgment, found that "as Jaime's counsel admitted, the jewelry valued at nearly $30,000 was buried with Ruby. Furthermore, Jaime failed to show that the Trust required the jewelry's burial. The court also accepted Jaime's acknowledgment that the jewelry appraisal was not a proper charge to the Trust. Consequently, the court surcharged Jaime for the value of the jewelry and the cost of the appraisal."

The appellate court did not reverse the foregoing ruling by the trial court. "Jaime fails to demonstrate the trial court abused its discretion. As successor trustee, Jaime had a duty to take reasonable steps to preserve Trust property. (§ 16006.) She violated this duty when she spent Trust assets to appraise jewelry already buried underground. Failing to provide any cogent argument showing the trial court abused its discretion and having admitted to the trial court that the charge for the appraisal was improper, we find this point unsupported."

In short, the trust did not say that the successor trustee should bury the surviving settlor's jewelry with her. For reasons unknown, the successor trustee nevertheless buried the surviving settlor's jewelry with her. The trial court determined this to be a breach of trust and the successor trustee was financially penalized for this, a surcharge.

Jaime v. Lopez, Kern County Superior Court case # BPB-16-002416.