 |
|
|
Duty of Care
Specified by Trust Document
In this situation, the trust document states that the trustee may use his or her
own judgment regarding investments. Generally, such a statement will be
coupled with a release from liability for the trustee’s decisions, except for
acts resulting from gross negligence or willful misconduct. The trustee
need not abide by the California Uniform Prudent Investor Act. Instead,
the trustee must act with the “reasonable care, skill, and caution under the
circumstances then prevailing that a
prudent person”
would use. Cal. Prob. Code section 16040(a). This allows the trustee
more leeway in making investment decisions, since prudent investors can, and do,
differ in opinion as to what makes a good investment. Trusts frequently
use this standard when the trustee is a family member of the deceased person. |
|
|
|
|
 |
 |
|
Managing Trust Investments
The trustee may need
to manage trust assets to produce income for the benefit of the trust.
For example: If the trust contains an
ongoing business or stockholdings the
trustee may continue operating the business
or retain the stocks. There are several
standards of care that may be used in
managing trust investments. |
| |
Statutory Duty of Care
Under the California Uniform Prudent
Investor Act, the trustee must use a set of
standards when investing trust assets.
(Cal. Prob. Code sections 16002, 16003,
16045-16054).
| The most important include the duty to
diversify investments, to spend only amounts
that are reasonable and appropriate, and to
maintain a well-managed asset portfolio
taking into account a number of economic
factors. An investment professional
can help the trustee meet the burden of this
duty. |
|
|
|
|
