SECTIONS 16080-16082 - California Statutes

PROBATE CODE

SECTION 16080-16082

16080. Except as provided in Section 16081, a discretionary power
conferred upon a trustee is not left to the trustee's arbitrary
discretion, but shall be exercised reasonably.

16081. (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.
(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.

16082. Except as otherwise specifically provided in the trust
instrument, a person who holds a power to appoint or distribute
income or principal to or for the benefit of others, either as an
individual or as trustee, may not use the power to discharge the
legal obligations of the person holding the power.