Estate Planning: Landmark decision makes incapacity trustee accountable to death beneficiaries

img-estate-planning_0By Dennis Fordham | Lake County News

As a rule, a trustee who follows the written instructions of a settlor of a revocable trust is not liable to the future death beneficiaries after the settlor’s death.

Now, California’s Supreme Court has decided that the death beneficiaries may hold the trustee responsible for any breach of trust while the settlor was alive (Estate of Giraldin, No. S197694, Dec. 20, 2012).

What does this mean?

This decision means that any successor trustee serving in place of a settlor who resigned or was replaced due to incapacity faces a dilemma.

On the one hand the trustee’s duty is to manage the trust assets solely for the benefit of the incapacitated settlor while he or she is then still alive. That is, while the settlor is alive the trustee owes no duty to the future (death) beneficiaries because their rights only come into existence when the settlor dies.

On the other hand, however, once the settlor dies the death beneficiaries may then sue the incapacity trustee for alleged breaches of trust that affected the settlor while alive.


If you’d like to discuss estate planning/asset protection, contact Laura Bianchi, Director RLG’s Estate Planning/Asset Protection Department.,

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February 2013