California Probate Code 16081 – (a) Subject to the additional requirements of subdivisions (b), …
(a) Subject to the additional requirements of subdivisions (b), (c), and (d), if a trust instrument confers “absolute,” “sole,” or “uncontrolled” discretion on a trustee, the trustee shall act in accordance with fiduciary principles and shall not act in bad faith or in disregard of the purposes of the trust.
(b) Notwithstanding the use of terms like “absolute,” “sole,” or “uncontrolled” by a settlor or a testator, a person who is a beneficiary of a trust that permits the person, either individually or as trustee or cotrustee, to make discretionary distributions of income or principal to or for the benefit of himself or herself pursuant to a standard, shall exercise that power reasonably and in accordance with the standard.
Terms Used In California Probate Code 16081
- Attorney-in-fact: A person who, acting as an agent, is given written authorization by another person to transact business for him (her) out of court.
- Beneficiary: means a person to whom a donative transfer of property is made or that person's successor in interest, and:
California Probate Code 24
- Beneficiary: A person who is entitled to receive the benefits or proceeds of a will, trust, insurance policy, retirement plan, annuity, or other contract. Source: OCC
- Guardian: A person legally empowered and charged with the duty of taking care of and managing the property of another person who because of age, intellect, or health, is incapable of managing his (her) own affairs.
- Instrument: means a will, a document establishing or modifying a trust, a deed, or any other writing that designates a beneficiary or makes a donative transfer of property. See California Probate Code 45
- Irrevocable trust: A trust arrangement that cannot be revoked, rescinded, or repealed by the grantor.
- Jurisdiction: (1) The legal authority of a court to hear and decide a case. Concurrent jurisdiction exists when two courts have simultaneous responsibility for the same case. (2) The geographic area over which the court has authority to decide cases.
- Marital deduction: The deduction(s) that can be taken in the determination of gift and estate tax liabilities because of the existence of a marriage or marital relationship.
- Person: means an individual, corporation, government or governmental subdivision or agency, business trust, estate, trust, partnership, limited liability company, association, or other entity. See California Probate Code 56
- Power of attorney: A written instrument which authorizes one person to act as another's agent or attorney. The power of attorney may be for a definite, specific act, or it may be general in nature. The terms of the written power of attorney may specify when it will expire. If not, the power of attorney usually expires when the person granting it dies. Source: OCC
- Remainder: An interest in property that takes effect in the future at a specified time or after the occurrence of some event, such as the death of a life tenant.
- Revocable trust: A trust agreement that can be canceled, rescinded, revoked, or repealed by the grantor (person who establishes the trust).
- Spouse: includes domestic partner, as defined in Section 37 of this code, as required by §. See California Probate Code 72
- Testator: A male person who leaves a will at death.
- Trust: includes the following:
California Probate Code 82
- Trustee: includes an original, additional, or successor trustee, whether or not appointed or confirmed by a court. See California Probate Code 84
- Trustee: A person or institution holding and administering property in trust.
- Will: includes codicil and any testamentary instrument which merely appoints an executor or revokes or revises another will. See California Probate Code 88
(c) Unless a settlor or a testator clearly indicates that a broader power is intended by express reference to this subdivision, a person who is a beneficiary of a trust that permits the person, as trustee or cotrustee, to make discretionary distributions of income or principal to or for the benefit of himself or herself may exercise that power in his or her favor only for his or her health, education, support, or maintenance within the meaning of Sections 2041 and 2514 of the Internal Revenue Code. Notwithstanding the foregoing and the provisions of Section 15620, if a power to make discretionary distributions of income or principal is conferred upon two or more trustees, the power may be exercised by any trustee who is not a current permissible beneficiary of that power ; and provided further that if there is no trustee who is not a current permissible beneficiary of that power, any party in interest may apply to a court of competent jurisdiction to appoint a trustee who is not a current permissible beneficiary of that power, and the power may be exercised by the trustee appointed by the court.
(d) Subdivision (c) does not apply to either of the following:
(1) Any power held by the settlor of a revocable or amendable trust.
(2) Any power held by a settlor’s spouse or a testator’s spouse who is the trustee of a trust for which a marital deduction, as defined in Section 21520, has been allowed.
(e) Subdivision (c) applies to any of the following:
(1) Any trust executed on or after January 1, 1997.
(2) Any testamentary trust created under a will executed on or after January 1, 1997.
(3) Any irrevocable trust created under a document executed before January 1, 1997, or any revocable trust executed before that date if the settlor was incapacitated as of that date, unless all parties in interest elect affirmatively not to be subject to the application of subdivision (c) through a written instrument delivered to the trustee. That election shall be made on or before the latest of January 1, 1998, three years after the date on which the trust became irrevocable, or, in the case of a revocable trust where the settlor was incapacitated, three years after the date on which the settlor became incapacitated.
(f) Notwithstanding the foregoing, the provisions of subdivision (c) neither create a new cause of action nor impair an existing cause of action that, in either case, relates to any power limited by subdivision (c) that was exercised before January 1, 1997.
(g) For purposes of this section, the term “party in interest” means any of the following persons:
(1) If the trust is revocable and the settlor is incapacitated, the settlor’s legal representative under applicable law, or the settlor’s attorney-in-fact under a durable power of attorney that is sufficient to grant the authority required under subdivision (c) or (e), as applicable.
(2) If the trust is irrevocable, each trustee, each beneficiary then entitled or authorized to receive income distributions from the trust, or each remainder beneficiary who would be entitled to receive notice of a trust proceeding under Section 15804. Any beneficiary who lacks legal capacity may be represented by the beneficiary’s legal representative, attorney-in-fact under a durable power of attorney that is sufficient to grant the authority required under subdivision (c) or (e), as applicable, or in the absence of a legal representative or attorney-in-fact, a guardian ad litem appointed for that purpose.
(Amended by Stats. 1996, Ch. 410, Sec. 1. Effective January 1, 1997.)