CALIFORNIA TRUSTEE INVESTMENT AND MANAGEMENT RESPONSIBILITIES (Part 2 of 2)

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This is part two of two discussions about California trustee investment and management responsibilities. This is a complicated topic. Each situation needs to be evaluated on its own. Most likely no two situations are the same. You should consult legal counsel.

Unless the trust states otherwise, the trustee should invest the trust property, preserve it, and make it productive. You can refer to Probate Code §§16000, 16006-16007 and 16046(b).

Unless the trust states otherwise, the trustee should diversify the trust investments unless, under the circumstances, it is prudent not to do so. You can refer to Probate Code §§16046(b) and 16048.

If a trust has two or more beneficiaries, the trustee should deal impartially with them and should act impartially in investing and managing the trust property, taking into account any differing interests of the beneficiaries. You can refer to Probate Code §16003.

Sometimes beneficiaries may have conflicting interests. When two or more income beneficiaries have different personal income tax brackets, generally the trustee should strike a balance between them when determining how much to invest in certain assets. However, the trustee might be allowed to prefer one class of beneficiaries over another if the trust terms direct—this can be a difficult area and cause litigation concerns. You can refer to Probate Code §16000.

Subject to the terms, intent and purposes of the trust, the trustee should follow the Prudent Investor Rule and make the trust property as productive as possible under the circumstances. You can refer to Probate Code §§16007 and 16046. Compliance with the Prudent Investor Rule is determined in light of the facts and circumstances existing at the time of a trustee’s decision or action and not by hindsight. You can refer to Probate Code §16051.

A trustee has the authority to make investment decisions as provided by the intent and wording of the trust, as provided by statute, and as required by the trustee’s legal standards of care, the interests of the beneficiaries, and the Prudent Investor Rule. You can refer to Probate Code §§16200, 16202, 16220-16244, 16040, 16046 and 16047.

Whether the trustee should use the services of a professional investment advisor is another issue to consider. It depends on the facts and circumstances. This topic also gets into prudent delegation of duties and how hiring an investment advisor could help protect the trustee from investment decision liability. This is a topic covered in other discussions. You can refer to Probate Code §16012.

Part one contains the remaining discussion.

Dave Tate, Esq., http://californiaestatetrust.com

 

California’s Statutory Undue Influence

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California Welfare & Institutions Code §15610.70 provides a statutory definition of undue influence. Although §15610.70 falls under California’s Elder Abuse and Dependent Adult Civil Protection Act, pursuant to California Probate Code §86 the §15610.70 definition applies to the entire Probate Code, but also doesn’t replace common law undue influence: “’Undue influence’” has the same meaning as defined in Section 15610.70 of the Welfare and Institutions Code. It is the intent of the Legislature that this section supplement the common law meaning of undue influence without superseding or interfering with the operation of that law.”

It is yet to be seen whether the §15610.70 statutory definition of undue influence is easier to present than the common law body of case law. Consideration should also be given to whether there are per se violation possibilities and instructions.

Welfare and Institutions Code §15610.70 provides:

15610.70.  (a) “Undue influence” means excessive persuasion that causes another person to act or refrain from acting by overcoming that person’s free will and results in inequity. In determining whether a result was produced by undue influence, all of the following shall be considered:

(1) The vulnerability of the victim. Evidence of vulnerability may include, but is not limited to, incapacity, illness, disability, injury, age, education, impaired cognitive function, emotional distress, isolation, or dependency, and whether the influencer knew or should have known of the alleged victim’s vulnerability.

(2) The influencer’s apparent authority. Evidence of apparent authority may include, but is not limited to, status as a fiduciary, family member, care provider, health care professional, legal professional, spiritual adviser, expert, or other qualification.

(3) The actions or tactics used by the influencer. Evidence of actions or tactics used may include, but is not limited to, all of the following:

(A) Controlling necessaries of life, medication, the victim’s interactions with others, access to information, or sleep.

(B) Use of affection, intimidation, or coercion.

(C) Initiation of changes in personal or property rights, use of haste or secrecy in effecting those changes, effecting changes at inappropriate times and places, and claims of expertise in effecting changes.

(4) The equity of the result. Evidence of the equity of the result may include, but is not limited to, the economic consequences to the victim, any divergence from the victim’s prior intent or course of conduct or dealing, the relationship of the value conveyed to the value of any services or consideration received, or the appropriateness of the change in light of the length and nature of the relationship.

(b) Evidence of an inequitable result, without more, is not sufficient to prove undue influence.

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California Trustee Investment And Management Responsibilities (Part 1 of 2)

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CALIFORNIA TRUSTEE INVESTMENT AND MANAGEMENT RESPONSIBILITIES
(Part 1 of 2)

This is part one of two discussions about California trustee investment and management responsibilities. This is a complicated topic. Each situation needs to be evaluated on its own. Most likely no two situations are the same. You should consult legal counsel.

The trustee has the duty to invest trust property for the benefit of the beneficiaries, subject to restrictions or limitations stated in the trust. The trustee’s investment powers are provided by the terms of the trust. Always read the complete terms of the trust first. If not derived from the trust, the investment powers are also derived by statute, case law and the factual circumstances. You can refer to Probate Code §§16200(a) and (b) and 16047. Generally, the trustee has the duty to make trust assets economically productive.

The trustee is subject to the Uniform Prudent Investor Act, unless the trust provides for a greater or lesser standard of care. You can refer to Probate Code §§16045 through 16054. The trustee should carefully read the trust terms and the Uniform Prudent Investor Act.

A trustee should invest and manage the trust assets as a prudent investor would, by considering the purposes, terms, distribution requirements, and other circumstances of the trust. The trustee should exercise reasonable care, skill, and caution.

A trustee’s investment and management decisions relating to individual assets and courses of action are evaluated in the context of the trust’s portfolio as a whole and as a part of an overall investment strategy reasonably suited to the trust’s risk and return objectives.

Pursuant to Probate Code §16047 the trustee should or may consider such matters as economic conditions, inflation or deflation, tax consequences, the role of each investment or action within the overall trust portfolio, the expected rate of return from income and appreciation, other financial resources of the beneficiaries known to the trustee, needs for liquidity, regularity of income, preservation and appreciation of principal, and asset special value or relationship to the purpose of the trust or the beneficiaries.

The trustee should locate and take possession of the trust assets, and develop an investment strategy suited to the purpose of the trust. You can refer to Probate Code §§16006 and 16049.

Part two contains the remaining discussion and will be posted shortly.

Thanks for reading. Dave Tate, Esq. (San Francisco / California – http://californiaestatetrust.com)

California Co-Trustees Can Create Special Problems

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What if you are a co-trustee and you and your co-trustee don’t agree on significant trust administration decisions, or worse yet, you believe that your co-trustee has breached his or her fiduciary duties?

California Probate Code Section 16013 states that if a trust has more than one trustee, each trustee has a duty to (a) participate in the administration of the trust, and (b) take reasonable steps to prevent a co-trustee from committing a breach of trust or to compel a co-trustee to redress a breach of trust.

In other words, except possibly in a circumstances where the terms of the trust provide otherwise, co- and multiple trustees need to sufficiently get along and make decisions with which they both or all agree as the case might be.  This can be accomplished, of course, but co- and multiple trustee situations also can create challenges and difficulties, and work better when communications are good with proper demeanor.  If you are in a co- or multiple trustee situation you need to act accordingly.

Dave Tate, Esq., San Francisco and California

Video – Conservatorship of G.H. & Psychological Examinations | David W. Tate – San Francisco/California

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This blog is back. Follow the new posts. For the past approx. year I have been posting my trust, estate, conservatorship and elder posts to my other blog, http://tatetalk.com. In the future, I will now be posting again to both blogs. Thank you.

Proposed Jury Instruction – Probate Conservatorship

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In my September 8, 2013, blog post I wrote that there are no California judicial council jury instructions for standard Probate Code conservatorships, which I find somewhat amazing considering the issues and freedoms that are involved in conservatorship actions. So . . . based on statutory and case law . . . below is one attempt at a proposed jury instruction on a petition for conservatorship (note, the following proposed jury instruction only is on the issue whether the petition for conservatorship should or should not be granted and is not for an LPS conservatorship – there are also several other issues that would need to be evaluated and determined if the conservatorship is in fact granted, and in all cases the burden of proof and jury trial possibilities should be evaluated on a case by case and issue by issue basis).

Dave Tate, Esq. (San Francisco)

Proposed Jury Instruction – Probate Conservatorship

There exists a rebuttable presumption affecting the burden of proof that all people including [proposed conservatee] have the capacity to make decisions and to be responsible for their acts and decisions.

The fact that [person who filed the petition for conservatorship] has filed a petition claiming that [proposed conservatee] should be conserved is not evidence that this claim is true.

Clear and convincing evidence is evidence of such high probability, based on evidence so clear as to leave no substantial doubt and sufficiently strong to command the unhesitating assent of every reasonable mind.

The petition of [person who filed the petition for conservatorship] for the conservatorship of the person/estate of [proposed conservatee] must be denied unless [person who filed the petition for conservatorship] proves each of the following by clear and convincing evidence:

1. That [proposed conservatee] has a deficit in mental function as established by the evidence of the actions or inactions of [proposed conservatee] not based on a mere diagnosis of a mental or physical disorder;

2. That the evidence of the deficit in mental function is more than isolated incidents of negligence or improvidence;

3. That the deficit in mental function significantly impairs [proposed conservatee’s] ability to understand and appreciate the consequences of his/her actions and make decisions;

4. That as a direct result and cause of the deficit in mental function [proposed conservatee] is substantially unable to provide properly for his/her personal needs for physical health, food, clothing, or shelter [for conservatorship of the person];

5. That as a direct result and cause of the deficit in mental function [proposed conservatee] is substantially unable to manage his/her own financial resources or resist fraud or undue influence [for conservatorship of the estate];

6. That the granting of the conservatorship is the least restrictive alternative means available for the protection of the [proposed conservatee]; and

7. There is no means of third party assistance that is available as an alternative to the conservatorship.

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Guardian ad litems, conservators, and possibly trustees and attorneys . . . quasi-judicial immunity and litigation privilege protections

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McClintock v. West (California Court of Appeal, Fourth Appellate District, Case No. G046483, September 9, 2013)

I’m not going to discuss the facts and holding in McClintock v. West in detail; however, the case and the citations in the case could be important to court appointed or approved fiduciaries (guardian ad litems, conservators, and possibly trustees and attorneys) if they are sued for breach of duty or malpractice.  McClintock v. West holds that a guardian ad litem appointed by the court (and subject to court review) enjoys the advantages and defenses of quasi-judicial immunity and the litigation privilege. McClintock v. West also discusses in dicta, with case citations, that the same or similar protections may also be enjoyed by other court appointed or approved fiduciaries including conservators and possibly trustees and attorneys. McClintock v. West is a good defense case to keep in mind.

Dave Tate, Esq. (San Francisco)

Conservatorship Jury Instructions – There Are No Judicial Council Instructions

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In California there are proposed standard Judicial Council Civil Jury Instructions for LPS or Lanterman-Petris-Short Act conservatorships for people who are alleged to be gravely disabled due to a mental disorder/impairment or chronic alcoholism, but there are no Judicial Council proposed standard civil jury instructions for regular (non-LPS) civil conservatorships, which I have found to be at the very least surprising. A conservatorship is a court-ordered limitation or restriction on the conservatee’s liberties and decision making. As a feature in future blog posts I will be discussing specific conservatorship jury instructions.

California Probate Code §1800 importantly provides:

Section 1800.  It is the intent of the [California] Legislature in enacting this chapter [Part 3. Conservatorship – Chapter 1. Establishment of Conservatorship] to do the following:

(a) Protect the rights of persons who are placed under conservatorship.

(b) Provide that an assessment of the needs of the person is performed in order to determine the appropriateness and extent of a conservatorship and to set goals for increasing the conservatee’s functional abilities to whatever extent possible.

(c) Provide that the health and psychosocial needs of the proposed conservatee are met.

(d) Provide that community-based services are used to the greatest extent in order to allow the conservatee to remain as independent and in the least restrictive setting as possible.

(e) Provide that the periodic review of the conservatorship by the court investigator shall consider the best interests of the conservatee.

(f) Ensure that the conservatee’s basic needs for physical health, food, clothing, and shelter are met.

(g) Provide for the proper management and protection of the conservatee’s real and personal property.

Dave Tate, Esq. (San Francisco)
Trust, estate, conservatorship and elder litigation and administrations; civil, business, real estate, injury, product liability, public entity, healthcare, and professional liability litigation; dispute resolution and mediator; D&O, boards and committees, risk management and governance.

Senior Care Assessment – Video Interview Discussion with Mercedes Roses

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The following is a link to a video interview discussion with Mercedes Roses about senior care assessment. Enjoy – I hope you find it helpful.

Dave Tate, Esq. (San Francisco)
Trust, estate, conservatorship and elder litigation and administrations; civil, business, real estate, injury, product liability, public entity and professional liability litigation; dispute resolution and mediator; risk management, D&O, boards and committees, and governance.

An Important Case For Everyone Involved In Conservatorship And Care Issues – Conservatorship of Maria B. – Burden Of Proof On A Fundamental Right

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The Conservatorship of Maria B. is an important new conservatorship case on several different issues. Conservatorship of the Person and Estate of Maria B., from the California Court of Appeal, Fourth Appellate District, Case Number G047889, July 31, 2013.

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Maria is a developmentally disabled adult. Maria’s doctors recommended a hysterectomy and oophorectomy to treat Maria’s condition. Maria’s mother is the limited conservator who filed a petition with the court for an order authorizing the surgery. The court in part discussed different burdens of proof and which one applied in this circumstance. In pertinent part the court held that since the surgery would impact a fundamental right, i.e., Maria’s ability to bear children, on her petition for court authorization to have the surgery performed, as conservator Maria’s mother had to satisfy a clear and convincing burden of proof.

The court held that the default standard is the preponderance of the evidence, but that courts nonetheless apply the heightened clear and convincing evidence standard in a variety of cases when important or fundamental rights are at stake.

The court concluded that the clear and convincing evidence standard was required because the surgery would have a substantial and irreversible impact on Maria’s fundamental opportunity to bear children.

Specifically the court held that the conservator of Maria must present clear and convincing evidence to show that the surgery is medically necessary under section 2357 because the medical treatment impacts a fundamental right.

The court clarified that the clear and convincing standard is the exception rather than the norm under section 2357 but left the determination of the appropriate burden to be made on a case by case basis.

You might also be aware that the standard burden of proof for the establishment of a conservatorship also is clear and convincing evidence and a proposed conservatee has the right to have a petition for conservatorship determined by a jury.

The court in Maria B. discussed different burdens of proof:

The preponderance of the evidence burden is essentially more likely than not.

The beyond a reasonable doubt burden is designed to exclude as nearly as possible the likelihood of an erroneous judgment and imposes almost the entire risk of error upon the party bearing the burden of proof.

The clear and convincing burden is an intermediate standard that increases the burden on the party seeking relief requiring a finding of high probability, based on evidence so clear as to leave no substantial doubt and sufficiently strong to command the unhesitating assent of every reasonable mind.

The court did not describe or attempt to list the universe of fundamental rights that could arise in conservatorship cases. Those issues will undoubtedly arise in other cases. It was also not an issue in the case whether or not Maria was entitled to a jury trial on the petition for authorization to have the surgery performed which would have a substantial and irreversible impact on Maria’s fundamental opportunity or right to bear children.

Issues and holdings in Maria B. clearly will be important in other conservatorship and care-related cases.

Dave Tate, Esq. (San Francisco)
Trust, estate, conservatorship and elder litigation and administrations; civil, business, real estate, injury, product liability, public entity and professional liability litigation; dispute resolution and mediator; risk management, D&O, boards and committees, and governance.