How to determine intent of the settlor in a Trust

Under both California law and common law, the trustee is under a duty to administer the trust according to its terms. Prob C §16000. See Penny v Wilson (2004) 123 CA4th 596 (failure to administer trust according to its terms rendered acts of trustee nonbinding). See also Stanton v Wells Fargo Bank & Union Trust Co. (1957) 150 CA2d 763; 3 Scott & Ascher on Trusts §16.4.1 (5th ed 2007).

In general, the trustee need look only at the written trust document and properly executed amendments to determine the precise terms of the trust. The decree of distribution defines and limits the powers of a trustee of a testamentary trust. Shipley v Jordan (1929) 206 C 439; Kaiser v Gibson (1968) 264 CA2d 319. See also Meyer v Meyer (2008) 162 CA4th 983 (no-contest clause that was not included in decrees of distribution did not apply to testamentary trust).

However, the trustee must not comply with any term that is contrary to public policy. See Prob C §15203 (illegal trust purpose); Prob C §15642 (grounds for removal of trustee); Prob C §15687 (limitations on trustee compensation for legal services); Prob C §16060 (duty to inform); Prob C §16061 (duty to report); Prob C §16061.5 (duty to provide terms of trust); Prob C §16061.7 (duty to provide notice); Prob C §16062 (duty to account); Prob C §16461 (limitations on certain trustee liability).

Both living and testamentary trust instruments must be interpreted according to the intention of the settlor as expressed in the instrument. Prob C §21102(a). See Newman v Wells Fargo Bank (1996) 14 C4th 126; Thomas v Gustafson (2006) 141 CA4th 34. In construing a trust document, the guiding principle must be the intention of the settlor as expressed. “Not, What did he intend to say? but, What did he intend by what he did say? must be the test.” Kropp v Sterling Sav. & Loan Ass’n (1970) 9 CA3d 1033, 1044, quoting Title Ins. & Trust Co. v Duffill (1923) 191 C 629, 642. See §2.3 on extrinsic evidence.

Except as modified by “the settlor and all beneficiaries” (Prob C §15404) or by court order (Prob C §§15403, 15408, 15409, 17200(b)(13)), the purposes declared at the trust’s creation must be followed by the trustee. Prob C §16000. Once a trust becomes irrevocable, it is almost impossible, even with the settlor’s consent, to modify the trust without court approval because of the probability that “all beneficiaries” will include minor, unborn, and unascertained beneficiaries. See Prob C §24(c).

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