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Considersations On Finding A Trustee Has Acted Dishonestly

Generally if the grantor decides to give their trustee the power of absolute discretion the trustee will most likely be less subject to review. Of course, no matter how much power a trustee has, they are always subject to a judicial review and can be overruled or removed as trustee by the court.

California law supports that a court will not interfere with trustee's discretion unless they have shown to be acting dishonestly or improperly while performing their fiduciary duty. The court may apply a test of 6 methods to determine whether a trustee has acted unreasonably.

The court may consider 1) the intended breadth of the trustee's discretion under the trust; 2) the purpose of the trust; 3) the nature of the power at issue; 4) the existence of an external standard by which the trustee's reasonableness may be judged against; 5) the motives of the trustee in exercising for failing to exercise that power, and 6) whether the trustee has any interests that conflict with the beneficiaries.

If you've been granted absolute power as trustee be aware that this does not give you authorization to act dishonestly. You will be upheld to your fiduciary responsibilities regardless. And you can be removed, denied compensation, and be held liable for punitive damages.

If you are a grantor deciding on the right amount of discretion to grant, or if you are the trustee already granted this power, please consult with a professional Estate Administration Attorney. It's best to do so if you have any questions regarding your role and how to execute it honestly with the best interest of the beneficiaries in mind.

*This blog entry was not written by an Attorney and should not be constituted as professional legal advice.