A lot of times when I go through a trust client’s ask “why is that there?” Of course these documents are based on forms and some of the form is “boilerplate” and the same for most clients. Our forms have been tweaked over 30 years of development to have what we think our the crucial elements. Of course we select the right trust form for YOU, we customize the document to fit your wishes precisely, and help get the trust properly funded. However, there is still a “form” or “boilerplate” element to it. That’s reality. Much of the “why is that there” questions come from the trustee’s power section. We want to give the trustee as much power as possible so they can effectively administer the trust. Certainly there are instances where the powers are tweaked and some are eliminated but for most people the basic form works. Though much of it may not apply today it may apply in the future so we generally leave in all the powers. Please remember you shouldn’t be scared by a power because if you don’t trust your trustee implicitly then you should pick a different trustee! Here are a list of powers from one of our trust forms to give you an example along with an excerpt from the California probate code on trustee powers. Let me know of any questions you have. -John
TRUSTEE POWERS OVER THE TRUST ESTATE
In extension, and not in limitation of the powers given by law or other provisions of this instrument, the Trustee under the trust and trust estate created hereunder shall have the following powers with respect to the trust and trust estate and the property thereof, in each case to be exercised from time to time in the discretion of the Trustee and without order or license of court:
A. To retain indefinitely any investments and real property and to invest and reinvest in stocks, shares and obligations of corporations, of unincorporated associations or trusts and of investment companies, or in a common trust fund without giving notice to any beneficiary, or in any other kind of personal or real property, notwithstanding the fact that any or all of the investments made or retained are of a character or size which, but for this express authority, would not be considered proper for the Trustee.
B. To hold, retain, and continue to operate, solely at the risk of the trust estate, any business enterprise the Settlors may transfer to the Trustee, whether organized as a sole proprietorship, partnership or corporation; to become or remain a partner in any such business; to incorporate such business and to hold the stock as an investment of the estate and the trust estate; to employ such officers, managers, employees or agents as the Trustee may deem advisable in the management of such business; to cause the Trustee to take part in the management of such business as director, officer or otherwise; to do and perform all other acts which the Trustee in the Trustee’s discretion may deem necessary or advisable in the operation of such business, without liability of the Trustee for loss from the continuance of such business, such losses, if any, to be chargeable to the trust estate as a whole; and to dissolve, liquidate or sell such business at such time and upon such terms as the Trustee in the Trustee’s discretion deems to be in the best interests of the trust estate. The Trustee shall be entitled to extra compensation for these services commensurate with the time devoted to and the responsibility involved in the continuance and operation or sale of such business;
C. To manage, control, sell, convey, exchange, partition, divide, subdivide, improve, or repair any real property; to grant options and to sell upon deferred payments; to lease for terms within or extending beyond the duration of this trust for any purpose, including exploration for and removal of gas, oil and minerals; to create restrictions, easements and other servitudes relating to any real property; to compromise, arbitrate or otherwise adjust claims in favor of or against the Estate or the trust estate; to institute, compromise and defend actions and proceedings; and to carry such insurance as the Trustee may deem advisable;
D. To invest and reinvest the principal, and income if the Trustee is required to accumulate it, and to purchase or acquire by exchange or otherwise therewith every kind of property, real, personal or mixed, and every kind of investment, specifically including, but not by way of limitation, term demand deposits with any bank or savings and loan association, corporate obligations of every kind, and stock, preferred or common, which men of prudence, discretion and intelligence acquire for their own account; to invest in any common trust fund now or hereafter established by a corporate Trustee or corporate executor;
E. To loan funds or assets belonging to the trust on such terms and conditions as the Trustee deems advisable;
F. To borrow money for any trust purpose upon such terms and conditions as the Trustee may deem proper, and to obligate the trust estate for repayment; to hypothecate the trust estate or any part thereof and to replace, renew and extend any encumbrance thereon, upon such terms, conditions and security as may be determined by the Trustee; to encumber the trust estate or any of its property by mortgage, deed of trust, pledge or otherwise, using such procedure to consummate the transaction as the Trustee may deem advisable;
G. To have, respecting securities, all the rights, powers and privileges of an owner, including the power to pay assessments and other sums deemed by the Trustee to be necessary for the protection of the trust estate; to participate in voting trusts, pooling agreements, foreclosures, reorganizations, consolidations, mergers, and liquidations, and in connection therewith, to deposit securities with and transfer title to any protective or other committee under such terms as the Trustee may deem advisable; to exercise or sell stock subscription or conversion right; to accept and retain as an investment any securities or other property received through the exercise of any of the foregoing powers, regardless of any limitations elsewhere in this instrument relative to investments by the Trustee;
H. To improve or develop, assign, partition, divide or subdivide any properties, real or personal; to construct, alter or repair buildings or structures on real estate; to settle boundary lines and easements and other rights with respect to real estate; to partition and to join with co-owners and others in dealing with real estate in any way;
I. To receive additions to any trust under this instrument by gift or will or otherwise, and to hold and administer the same under the provisions hereof;
J. When dividing or distributing any trust fund, to make such payments division or distribution wholly or partly in kind by allotting and transferring specific securities or other personal or real property or undivided interest therein as a part or the whole of any one or more payments or shares at current values;
K. To open any account or accounts and execute signature cards and other documents on behalf of the trust pursuant to this paragraph; should any savings or other banking accounts be established by the Trustee hereunder, all checks, drafts, withdrawals, and all documents relating thereto, shall be signed by one Co-Trustee and shall not be required to be signed by all acting Co-Trustees; either Co-Trustee shall have the power and authority to place additional persons as signatories on any such bank accounts;
L. To buy, sell and trade in securities of any nature on margin, or otherwise, including options, commodities and short sales and for such purpose may maintain and operate brokerage accounts with brokers;
M. If at any time the costs of administration of this trust (or any share thereof) are of such an amount in relation to the then principal and undistributed income of this trust (or any share thereof) that the Trustee deems it advisable to distribute the then principal and undistributed income of this trust (or any share thereof) to the then living income beneficiary or beneficiaries, the Trustee may do so. Such a distribution on behalf of a beneficiary under a disability, in the Trustee’s sole discretion may be made to the guardian of the person of such beneficiary, or to the parent of such beneficiary, if such beneficiary is a minor, or may be applied by the Trustee for such beneficiary’s benefit;
N. Upon any division of the trust estate into separate shares or trusts and upon any distribution, the Trustee may apportion and allocate the assets of the trust estate in cash or in kind, or partly in cash and partly in kind, or in undivided interests, in such manner as the Trustee in the Trustee’s discretion deems advisable. The Trustee may sell such property as the Trustee deems necessary to make such division or distribution. After any division of the trust estate, the Trustee may make joint investments with funds from some or all of the several shares or trusts; provided, however, that nothing herein contained shall give the Trustee any authority to change or alter as between beneficiaries the total value of such beneficiary’s trust estate;
O. Upon the death of any beneficiary, any estate, inheritance, succession or other death taxes, duties, charges or assessments, together with interest, penalties, costs, Trustee’s compensation and attorney’s fees, which shall become due by reason of the inclusion of the trust estate or any interest therein in the estate of such deceased beneficiary for such tax purposes, may be paid by the Trustee from the trust estate, unless other adequate provision shall have been made therefore. Any such payments shall be charged to the principal of the share of the trust estate or the separate trust so included. The Trustee may make any such payments directly to a personal representative or other fiduciary, and the Trustee may rely upon a written statement from such fiduciary as to the amount and propriety of such taxes, interest, penalties and other costs, and shall be under no duty to see to the application of any funds so paid;
P. The interest of any beneficiary in the principal or income of a trust estate shall not be pledged, assigned, hypothecated or in any way alienated by any beneficiary prior to its actual receipt by the beneficiary, and such interest shall be immune from seizure or control of creditors of such beneficiary or of creditors of any spouse of any married beneficiary or of creditors of others, and neither the income nor the principal of a trust estate shall be subject to attachment, garnishment, or claims, through bankruptcy or otherwise, nor be subject to judgment of any court or proceedings in aid of execution thereon. Should the Trustee so desire, the Trustee may as a condition precedent, withhold payments of principal or interest under this trust until personal order for payment is given or personal receipt furnished by each such beneficiary as to his or her share. The Trustee may, however, deposit in any bank designated in writing by a beneficiary, to his or her credit, income or principal payable to such beneficiary. Nothing contained in this paragraph shall be construed as restricting in any way the exercise of any power of appointment granted hereunder;
Q. The Trustee may apply payments for the benefit of any beneficiary or may make payments to any beneficiary under disability to the guardian or conservator of the beneficiary, or to the natural parent of any beneficiary who is a minor. Sums necessary for support and education may be paid directly to minor beneficiaries who, in the judgment of the Trustee, have attained sufficient age and discretion to render it probable that the money will be properly expended;
R. Until a corporate Trustee shall receive in its trust department where this trust is being administered written notice, or until an individual Trustee shall personally receive written notice, of any birth, marriage, death, or other event upon which the right to payments from this trust may depend, the Trustee shall incur no liability to persons whose interest may have been affected by that event for disbursements made in good faith;
S. Income accrued or in the hands of the Trustee for payment to an income beneficiary at the termination of his or her interest or estate under this trust shall go to the beneficiaries entitled to the next succeeding interest in the proportions in which they take such interest. The Trustee shall not be required to prorate taxes and other current expenses to the date of termination; and
T. Unless otherwise specifically provided herein, the Trustee in the Trustee’s discretion may determine what is principal or income and what shall be charged or credited to either, and the Trustee may rely upon the statement of the paying corporation as to whether dividends are paid from profits or earnings or are a return of capital or a distribution of assets, and as to any other fact relevant hereunder concerning the source or character of dividends or distributions of corporate assets. Except insofar as the Trustee shall exercise the discretion herein conferred, and except as otherwise provided in this instrument, matters relating to principal and income shall be governed by the provisions of the trust law of the State of California, Division 9 of the California Probate Code, from time to time existing; provided, however, that the powers herein conferred upon the Trustee shall not in any event be construed as allowing an individual noncorporate Trustee to exercise the Trustee’s discretion except in a fiduciary capacity.
CALIFORNIA CODES PROBATE CODE SECTION 16200-16203
16200. A trustee has the following powers without the need to
obtain court authorization:
(a) The powers conferred by the trust instrument.
(b) Except as limited in the trust instrument, the powers
conferred by statute.
(c) Except as limited in the trust instrument, the power to
perform any act that a trustee would perform for the purposes of the
trust under the standard of care provided in Section 16040 or 16047.
16201. This chapter does not affect the power of a court to relieve
a trustee from restrictions on the exercise of powers under the
16202. The grant of a power to a trustee, whether by the trust
instrument, by statute, or by the court, does not in itself require
or permit the exercise of the power. The exercise of a power by a
trustee is subject to the trustee’s fiduciary duties.
16203. An instrument that incorporates the powers provided in
former Section 1120.2 (repealed by Chapter 820 of the Statutes of
1986) shall be deemed to refer to the powers provided in Article 2
(commencing with Section 16220). For this purpose, the trustee’s
powers under former Section 1120.2 are not diminished and the trustee
is not required to obtain court approval for exercise of a power for
which court approval was not required by former law.