The first post in the series defines the nature and role of a trustee, and the nature of the fiduciary relationship.
In our above example (and revisiting the definition of "trustee"), the successor trustee is holding interest to the property and assets of the settlor at the settlors' request. Assuming the settlors are deceased, this successor trustee is then managing these assets for the benefit of a third party--the beneficiary (perhaps the children of the settlors). Given the fact the trustee has unfettered access to the trust assets, as well as a significant amount of discretion, the law focuses quite a bit on the role and responsibilities of the trustee in order to protect the intent of the settlors and the interest of the beneficiaries. The fiduciary nature of this relationship (between trustee and beneficiary) is integral to trust administration.
The definition of a "fiduciary relationship" is a relationship where the fiduciary (in this case, the trustee) is required to act for the benefit of another person (the beneficiary) on all matters within the scope of their relationship (the trust and trust assets) and is owed to the other, duties of good faith, trust, confidence, and candor, and must exercise a high standard of care in managing the subject (trust) property. Other, more common fiduciary relationships, exist between doctors and patients, lawyers and clients, business partners
California law has long recognized that trusts describe a fiduciary “relationship” between the person holding legal title to property for the benefit of another and the beneficiary. Every trustee has one mission—to protect the beneficiary. In this relationship, the benefits belong to the beneficiary and the burdens to the trustee. The Trustee has a duty to administer the trust according to its terms, a duty to account for trust assets and, a duty of confidentiality, a duty of loyalty, and a duty of impartiality.
The standard of care to which the trustee is held will determine whether the trustee has adequately carried out his or her duties. Failing to meet any duty owed to the beneficiary gives rise to a breach of trust and potential liability for the trustee. Some commentators have suggested that the appropriate standard of care is implied in each of the duties owed by the trustee to the beneficiary. The better analysis first establishes the appropriate standard of care arising out of the particular relationship between trustee and beneficiary, against which the discharge of trustee’s duties is to be measured.
The trustee must maintain a minimum standard of care in discharging his or her duties. The distinction between standard of care and duties is often ignored in analysis of breaches of trust. A trustee’s standard of care is not static but varies depending on the level of expertise the trustee brings to the office. Expert trustees are held to a higher standard than nonexpert trustees. See Prob C §16014 (discussed in §2.51). Proper analysis starts with recognition of the relationship between trustee and beneficiary, subject to permissible, variant terms of the trust instrument. See Prob C §16040(b). On the prudent investor standard of care, see §2.52.
The discharge of a particular duty by a lay trustee lacking any particular expertise may meet the basic standard of care under Prob C §16040(a) (discussed in §2.50), but may be inadequate if the trustee brings to office a particular expertise or the trust instrument requires enhanced performance. In the latter variant, the intent of the settlor is a primary factor in determining the applicable standard of care.