Case Summary and Take Away. In an important new case the California Court of Appeal looked at whether a section 998 demand in excess of policy limits was reasonable and in good faith for the purpose of the plaintiff recovering costs following trial in which the plaintiff prevailed. More specifically, the Court evaluated whether in making the excess policy limit 998 demand it was reasonable for plaintiff to believe that the defendant’s insurer might be liable for a judgment in excess of policy limits.

Aguilar v. Gostischef (California Court of Appeal, Second Appellate District, October 11, 2013, Case No. B238853) arises from a January 3, 2004 car accident.

In February and March 2004, plaintiff’s attorney requested defendant’s insurer to provide information about defendant’s policy limits.

In April 2004, plaintiff’s counsel requested defendant’s insurer to provide information about defendant’s policy limits, stating: “My client has asked to know the policy limits so that he can make a policy limits demand and resolve this case and move on with his life. Unfortunately, until and unless we are advised of the limits in coverage, we are not able to make a policy limits demand. He is, however, prepared to do so upon being advised of the limits. [¶] Once again, we entreat you to get permission from your insured to disclose the policy limits, provide them to us in the form of a certified policy and declaration, so that we can then immediately demand policy limits. Please favor us with a reply within the next two weeks.” Defendant’s insurer did not do so.

In August 2004, plaintiff filed suit against Gostischef alleging one cause of action for personal injury.

In October 2004, defendant’s insurer offered to pay the $100,000 policy limit to settle the case, and informed plaintiff’s counsel that defendant lived on social security and had no real property assets. In November 2004, defendant presented plaintiff with a section 998 offer to compromise for $100,000. In February 2005, plaintiff’s counsel wrote to defendant’s insurer stating that the insurer would be liable for an excess judgment because the insurer ignored three attempts to settle the matter within policy limits. In April 2005, plaintiff made a $700,000 section 998 offer. Defendant’s insurer responded that it would settle the case for $100,000.

The case proceeded to trial at which the jurors awarded plaintiff $4,679,314 which was reduced to $2,339,657 for plaintiff’s contributory negligence. Defendant’s insurer obtained a judgment notwithstanding the verdict, which was reversed on appeal, and the trial court reinstated the judgment in plaintiff’s favor. Plaintiff sought costs in the amount of $1,639,451.14. The trial court taxed costs in the amount of $5,903.85, but awarded the remainder.

Arguing against plaintiff’s recovery of costs, defendant in part argued that plaintiff’s $700,000 section 998 offer was not made in good faith because plaintiff was already informed that defendant had only a $100,000 policy limit, defendant lacked the financial means to pay, and there was no reasonable expectation that defendant’s insurer could be liable for the amount of the section 998 offer in light of the $100,000 policy limit.

The Court of Appeal affirmed the cost award. The issue on appeal was whether plaintiff’s $700,000 section 998 offer was reasonable and made in good faith, not whether defendant’s insurer would be liable for the excess judgment.

Summarizing existing law, the Court stated that the purpose of section 998 is to encourage the settlement of litigation without trial. A section 998 offer must be made in good faith to be valid. Good faith requires that the pretrial offer of settlement be realistically reasonable under the circumstances of the particular case. The offer must carry with it some reasonable prospect of acceptance. Whether the offer is reasonable depends upon the information available to the parties as of the date the offer was served. Reasonableness generally is measured, first, by determining whether the offer represents a reasonable prediction of the amount of money, if any, defendant would have to pay plaintiff following a trial, discounted by an appropriate factor for receipt of money by plaintiff before trial, all premised upon information that was known or reasonably should have been known to the defendant, and if an experienced attorney or judge, standing in defendant’s shoes, would place the prediction within a range of reasonably possible results, the prediction is reasonable.

If the offer is found reasonable by the first test, it must then satisfy a second test: whether plaintiff’s information was known or reasonably should have been known to defendant. The section 998 mechanism works only where the offeree has reason to know the offer is a reasonable one. If the offeree has no reason to know the offer is reasonable, then the offeree cannot be expected to accept the offer.

Applying those principles, the Court held that plaintiff conveyed to defendant’s insurer a few months after the accident an interest in discussing settlement within policy limits. Defendant’s insurer made no response. In its opening brief on appeal defendant’s insurer acknowledged that as a general rule and subject to qualifications an insurer that refuses a reasonable offer of settlement within policy limits by an injured third-party claimant could be liable to the insured for the resulting judgment without regard to policy limits. The Court held that plaintiff’s counsel’s April 2004, letter may be interpreted as a genuine offer to settle; it was not necessarily a ploy to set up a bad faith case although whether it should be interpreted as genuine or as a ploy was beyond the scope of the appeal as the appeal did not present the question whether defendant’s insurer may be liable to pay the judgment beyond the policy limits.

For the purpose of plaintiff’s section 998 offer and plaintiff’s recovery of costs after trial, defendant’s insurer failed to show that it was unreasonable for plaintiff to believe that defendant’s insurer may be liable for a judgment in excess of policy limits.

The Court held that defendant’s insurer had not demonstrated that plaintiff acted in bad faith under all the circumstances of the case when he made a section 998 offer in excess of the policy limits. An insurer can be liable for an excess judgment absent a formal settlement offer under limited circumstances. Here, there was evidence that defendant’s insurer delayed, “perhaps unreasonably” in disclosing defendant’s policy limit, and that delay may support bad faith liability, citing Boicourt v. Amex Assurance Co. Further, plaintiff’s letter stating that he would settle for policy limits reasonably could be understood as a settlement opportunity (regardless of whether it is ultimately determined to be such). And defendant’s insurer had not shown that plaintiff could have no reasonable expectation of acceptance of his $700,000 offer such that the trial court abused its discretion in finding that plaintiff acted in good faith.

The final step in determining whether the offer was reasonable was to determine the information known to defendant’s insurer. The Court held that the parties’ correspondence showed that plaintiff revealed his position that defendant’s insurer may be liable for an excess judgment well in advance of plaintiff’s section 998 offer. Thus, although defendant’s insurer disputed the excess claim and although defendant’s insurer’s position could ultimately be meritorious, defendant’s insurer had not shown that the trial court abused its discretion in concluding plaintiff acted in good faith in requesting $700,000, which as the trial court noted was less than one-third of the ultimate recovery. The burden is on the party complaining to establish an abuse of discretion. The Court of Appeal affirmed the order awarding costs.

* * * * *

On October 9, 2013, Governor Brown signed new legislation adding a new statutory definition of undue influence at California Welfare & Institutions Code §15610.70 and amending other related statutes. I have copied below at the end of this post the information and wording of the legislation from the following California legislative page: http://leginfo.legislature.ca.gov/faces/billNavClient.xhtml?bill_id=201320140AB140.

I haven’t been following this legislation. And as I haven’t read anything about the intended purpose of the legislation, why it was needed, or what improvement it is intended to accomplish, my below comments about the new law are uninfluenced based on the wording of the statutory changes and the current existing law on undue influence. I have been involved in mental capacity, fraud, and undue influence, and will and trust contest cases for most of my legal career. I also invite you to provide your comments about the new law.

MY THOUGHTS ON THE LEGISLATION

On my initial reading my first thoughts were that the new statutes for the most part primarily follow and codify existing law. And indeed many of the provisions do mirror existing case and common law, and new Probate Code §86 further specifies: “’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.”

The primary changes occur in new California Welfare and Institutions Code §15610.70 which adds or codifies the statutory definition of undue influence, but, as stated at §86, does not supersede the common law meaning which still exists. You can read the actual wording of §15610.70 below yourself. My comments pertain to the changes which don’t necessarily mirror existing case and common law and the possible overall impact of the statue.

Initially, as §15610.70 now presents a statutory definition of undue influence, that definition will be easier to present to a jury as a standard of care. Consideration should also be given to whether there are per se violation possibilities and instructions. Those issues might need to be determined by future court decisions.

New Welfare and Institutions Code §15610.70(a) provides that the following primary issue areas will be considered when determining if there has been undue influence: (1) the vulnerability of the victim; (2) the influencer’s apparent authority; (3) the actions or tactics used by the influencer; (4) the equity of the result (however, §15610.70(b) provides that evidence of inequitable result alone without more is not sufficient to prove undue influence).

Most of the §15610.70(a)(1) criteria relating to the vulnerability of the victim already exist in current common law. I do note however that the statute includes the victim’s age and education as two of the possible criteria. I would not consider either age or education as evidence of undue influence without more. And I provide additional comments below about the “education” criteria.

I assume that the §15610.70(a)(2) criteria pertaining to the influencer’s apparent authority means the apparent authority that the accused influencer has or had from the victim’s perspective although that might be an issue for determination by future case decisions. I note that the statute includes as evidence of the apparent authority the accused influencer’s status as a fiduciary, family member, care provider, health care professional, legal professional, spiritual adviser, expert, or other qualification. Depending on your perspective, the statute might be viewed as in part pertaining to or targeting professionals and, of course, clergy. The statute doesn’t list CPAs/accountants, financial advisors, bankers or stockbrokers but it does include overflow “expert” and “other qualification” categories. Who, for example, is an “expert”?

Most of the §15610.70(a)(3) criteria relating to the actions or tactics of the accused influencer already exist in common law. I do note however one listed category of action or tactic: the accused influencer’s “claims of expertise” which again could be viewed as in part pertaining to or targeting professionals.

ADDITIONAL POSSIBLE UNCERTAINTIES

Under the statue can an accused influencer be found guilty or liable for undue influence if he or she had no intent to unduly influence and/or can the accused influencer be found guilty or liable for undue influence if he or she did not benefit or wrongfully intend for another person to benefit from the influence? So, for example, what about the situation of an estate planning attorney, a CPA/accountant, a financial advisor, a banker or a stockbroker, influencing a client to do something with the client’s money or assets, but not wrongfully intending or acting? Can the influence, e.g., advice, or even possible negligent advice or actions now possibly constitute undue influence? And if so, will those actions be covered by malpractice coverage without reservation of rights? More issues to be determined by further court decisions.

Dave Tate, Esq. (San Francisco)

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The following is copied and pasted from the California legislative link that I provided above.

Assembly Bill No. 140

CHAPTER 668

An act to add Section 86 to the Probate Code, and to amend Section 15610.30 of, and to add Section 15610.70 to, the Welfare and Institutions Code, relating to undue influence.

[ Approved by Governor October 09, 2013. Filed with Secretary of State October 09, 2013. ]

LEGISLATIVE COUNSEL’S DIGEST

AB 140, Dickinson. Undue influence.

Existing law provides that financial abuse of an elder or dependent adult occurs when, among other instances, a person or entity takes, secretes, appropriates, obtains, or retains, or assists in taking, secreting, appropriating, obtaining, or retaining, real or personal property of an elder or dependent adult by undue influence, as defined.

Existing law makes failing to report, or impeding or inhibiting a report of, among other things, financial abuse of an elder or dependent adult, in violation of certain reporting requirements a misdemeanor. Existing law also makes it a misdemeanor for any caretaker of an elder or dependent adult to violate any provision of law proscribing theft or embezzlement, with respect to the property of that elder or dependent adult.

This bill would change the definition of undue influence to mean excessive persuasion that causes another person to act or refrain from acting by overcoming that person’s free will and results in inequity. The bill would require, in determining whether the result was produced by undue influence, the vulnerability of the victim, the influencer’s apparent authority, the actions or tactics used by the influencer, and the equity of the result to be considered. The bill would specify that an inequitable result, without more, is not sufficient to prove undue influence.

By changing the definition of a crime, this bill would impose a state-mandated local program.

Existing law prohibits the use of undue influence and establishes protections for individuals unable to resist undue influence in various areas of the law, including wills, trusts, and conservatorships.

This bill would define undue influence for those purposes without superseding or interfering with the common law of undue influence.

The California Constitution requires the state to reimburse local agencies and school districts for certain costs mandated by the state. Statutory provisions establish procedures for making that reimbursement. This bill would provide that no reimbursement is required by this act for a specified reason.

DIGEST KEY

Vote: MAJORITY Appropriation: NO Fiscal Committee: YES Local Program: YES

________________________________________

BILL TEXT

THE PEOPLE OF THE STATE OF CALIFORNIA DO ENACT AS FOLLOWS:

SECTION 1.

Section 86 is added to the Probate Code, to read:

86.

“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.

SEC. 2.

Section 15610.30 of the Welfare and Institutions Code is amended to read:

15610.30.

(a) “Financial abuse” of an elder or dependent adult occurs when a person or entity does any of the following:

(1) Takes, secretes, appropriates, obtains, or retains real or personal property of an elder or dependent adult for a wrongful use or with intent to defraud, or both.

(2) Assists in taking, secreting, appropriating, obtaining, or retaining real or personal property of an elder or dependent adult for a wrongful use or with intent to defraud, or both.

(3) Takes, secretes, appropriates, obtains, or retains, or assists in taking, secreting, appropriating, obtaining, or retaining, real or personal property of an elder or dependent adult by undue influence, as defined in Section 15610.70.

(b) A person or entity shall be deemed to have taken, secreted, appropriated, obtained, or retained property for a wrongful use if, among other things, the person or entity takes, secretes, appropriates, obtains, or retains the property and the person or entity knew or should have known that this conduct is likely to be harmful to the elder or dependent adult.

(c) For purposes of this section, a person or entity takes, secretes, appropriates, obtains, or retains real or personal property when an elder or dependent adult is deprived of any property right, including by means of an agreement, donative transfer, or testamentary bequest, regardless of whether the property is held directly or by a representative of an elder or dependent adult.

(d) For purposes of this section, “representative” means a person or entity that is either of the following:

(1) A conservator, trustee, or other representative of the estate of an elder or dependent adult.

(2) An attorney-in-fact of an elder or dependent adult who acts within the authority of the power of attorney.

SEC. 3.

Section 15610.70 is added to the Welfare and Institutions Code, to read:

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.

SEC. 4.

No reimbursement is required by this act pursuant to Section 6 of Article XIII B of the California Constitution because the only costs that may be incurred by a local agency or school district will be incurred because this act creates a new crime or infraction, eliminates a crime or infraction, or changes the penalty for a crime or infraction, within the meaning of Section 17556 of the Government Code, or changes the definition of a crime within the meaning of Section 6 of Article XIII B of the California Constitution.

* * * * * * *

California Corporations Code §709 allows any shareholder or any person who claims to have been denied the right to vote to file a petition in the appropriate California Superior Court to determine the validity of any election or appointment of any director of a California corporation or, of any foreign (non-California) corporation if the election was held or the appointment was made in California. Section 709 provides for a summary proceeding.

Pursuant to §709, in pertinent part, upon the filing of the complaint, and before any further proceedings are had, the court shall enter an order fixing a date for the hearing, which shall be within five days unless for good cause shown a later date is fixed, and requiring notice of the date for the hearing and a copy of the complaint to be served, and the court may make such further requirements as to notice as appear to be proper under the circumstances.

Section 709 further provides that court may determine the person entitled to the office of director or may order a new election to be held or appointment to be made, may determine the validity, effectiveness and construction of voting agreements and voting trusts, the validity of the issuance of shares and the right of persons to vote and may direct such other relief as may be just and proper.

Morrical v. Rogers (California Court of Appeal, First Appellate District, Case No. A137011, October 10, 2013) involved a dispute and litigation between the shareholders of a group of family corporations. The Court of Appeal for the First Appellate District held that challenges under §709 are allowed not only on the grounds of breach of fiduciary duty and conflict of interest (a corporate shareholder challenged an election of corporate directors based on the alleged violation of §310 governing corporate transactions with companies in which one or more corporate directors have a material financial interest) but also that the plain language of §709 restricts only standing to bring an action – it says nothing about the grounds on which persons with standing may challenge the validity of an election – §709 does not restrict the grounds on which the validity of an election can be challenged.

Dave Tate, Esq. (San Francisco)

Please click on the following link for an annual audit committee self-evaluation form that you can use – I hope you find it useful, Audit Committee Annual Self-Evaluation Form David Tate Esq 10112013.

Dave Tate, Esq.

More law, risk, governance, busines and people updates from around the net, click here for Tate Talk – Law, Risk, Governance, Business and People | Scoop.it.

Dave Tate, Esq.

An article from MoFo – important new requirements for California consumer product manufacturers, Toxics in Consumer Products: California Implements Safer Consumer Product Regulations.

Dave Tate, Esq.

Here’s an interesting read about efforts to keep healthcare costs under control, Health care CEOs outline cost-cutting steps – The Boston Globe.

Dave Tate, Esq.

The following is a link to an article about the leaking of Josh Freeman’s medical records, all of which should be preventable or very significantly preventable as it isn’t always possible to eliminate all risk, Leaking of Josh Freeman’s medical records damages players’ relations with NFL. Obviously an investigation and damage control are in process. I recommend that the NFL, all teams and the Players Union get together and come to agreement on processes and procedures for how player’s medical and other private records are stored and protected from improper disclosure. There are plenty of professionals who can be retained to develop and monitor the processes and procedures.

Dave Tate, Esq. (San Francisco)

California is the poster state for Obamacare (the Patient Protection and Affordable Care Act (“ACA”)). The majority of the California Legislature and Governor also made the decision for California to run its own insurance exchanges. So . . . the implementation and management of the Act will be interesting to watch. For the most part I’m going to avoid political discussions. I’m assuming that the Act will be implemented unless or until it or parts of it are delayed, amended or rescinded. Primarily my discussions will be legal, financial/accounting, risk/uncertainty management, and governance based.

Let’s get this discussion out-of-the-way: is it a tax or not? Justice Roberts opined that the ACA is valid as a tax although Congress stated its intent that it not be a tax – query: as statutes are interpreted in accord with legislative intent, and whereas a law certainly can be found invalid if it fits or falls into a category or purpose that specifically was not intended by the enacting Legislature, can a Court find a law to be valid if the law fits a category or purpose that specifically was not intended by the enacting Legislature?

If the Act is a tax, then there is almost no limitation on the ability of the federal government to tax: simply legislate that people must do something, charge them if they don’t comply, and have the penalty collected through the IRS.

But there is also another follow-up question: if the ACA penalty for not purchasing or being covered by health insurance of the type that is mandated by the ACA is a tax, is it a lawful tax? I used to do taxes, but it has been a while, and I acknowledge that I have not researched the following comments. I do recall that not all taxes are lawful. For example, the Supreme Court determined long ago that a federal income tax is lawful. So generally a tax directly related to and based on income is lawful. And it is my understanding that generally a tax directly related to and based on property value (such as a real property or vehicle property tax) also is lawful. But the ACA penalty is not directly based on your income or property value. It is a penalty (or call it a tax if you like) that arises from your failure to do something, i.e., your failure to have or to purchase the government mandated insurance policy coverage. While the penalty is calculated at the greater of a fixed amount ($95 for 2014 and then increasing) or a percent of your taxable income (1% for 2014 and then increasing to 2% and 2.5% in later years), the fact or event of your failure to have or to purchase the ACA mandated insurance policy coverage is not directly or even indirectly related to the fixed penalty amount or to your taxable income amount or to a percentage of your taxable income amount. The penalty being the greater of the fixed amount or a percent of your taxable income is merely a convenient way to determine the amount of the penalty tax; however, otherwise the fixed amount and the percent of your taxable income have no direct or rational basis or tie to your failure to have or to purchase the ACA mandated insurance policy coverage. And that my friends I am not sure is a legally valid tax or income tax or property tax.

Moving on, the following is the link to the Covered California website (the website for the California ACA insurance exchange), http://www.coveredca.com/. See also, Centers for Medicare and Medicaid Services, Department of Health & Human Services regulations page, healthcare.gov, and the Department of Health & Human Services generally. As the ACA and the insurance exchanges were enacted and mandated or required by Congress and the President, and in California the Legislature and the Governor decided that California would run its own insurance exchanges, I would expect that by clicking on the Covered California website a person in California should be able to obtain ALL, and I mean ALL, of the information that person needs to make his or her health insurance decisions. But you will note that the information on Covered California is significantly general and incomplete. I can only hope that the people to designed the Covered California website realize that it is inadequate. People won’t be happy if they now have to go to the individual insurance companies to obtain the complete information that they need for the mandated health insurance coverage. Covered California should truly be a one stop shop. Unfortunately that will be a big task, but why should each individual consumer now be required to waste their time tracking down and discovering the information? And watch out folks if/when the IRS has to start charging and going after people who don’t comply.

I actually did read the majority of the original legislation several years ago at the time that it was enacted – it was clear then that the legislation lacked its significant detail, but left major decision making such as on coverage for panels of people to decide later – which raises an interesting question: how is it legal or prudent for Congress to pass legislation that doesn’t contain the detail and information that it must contain for Congress to first determine whether to enact the legislation? Boards of public companies certainly cannot operate and satisfy their duties in that manner without risk of possible liability. The original legislation was approximately 2,500 pages and in excess of 15,000 additional pages of regulations have already been passed or proposed, and yet more regulations are in the pipeline. A current test of legislator knowledge about the details of the ACA might be in order going forward.

I recommend that the Covered California website provide complete information about the four “C’s” for each insurer and plan that California has admitted to California’s exchange, with actual copies of the policies posted. That includes: (1) Coverage (in complete detail, what care and procedures are covered); (2) Cost (for all insurers, plans and situations); (3) Care (for all insurers, plans and situations what doctors, hospitals, clinics, etc.); and (4) Complaints (what you can do if you have a coverage, cost or care complaint or dispute).

For example, Covered California broadly states that the following items are covered:

• Ambulatory patient services. You can then also open a box which has the following additional information: Medical care provided without need of admission to a health care facility. This includes a range of medical procedures and treatments such as such as blood tests, X-rays, vaccinations, nebulizing and even monthly well-baby checkups by pediatricians. There are no boxes with additional information for the nine below listed care areas.
• Emergency services
• Hospitalization
• Maternity and newborn care
• Mental health and substance use disorder services, including behavioral health treatment
• Prescription drugs
• Rehabilitative and habilitative services and devices
• Laboratory services
• Preventive and wellness services and chronic disease management
• Pediatric services, including dental and vision care

Even with the box of additional information for the Ambulatory Patient Services, the information provided does not come close to containing the detail of coverage that someone would need to make an informed determination about which insurer or plan to select.

That’s it for now. This blog post is already way too long, but more to follow. And remember, let’s also encourage governmental entities to book and publicly disclose their unfunded future liabilities based on reasonable assumptions and estimates that are supportable.

Dave Tate, Esq.

Trustee Investment and Management Duties (California)

Trustee investment and management duties can be difficult to ascertain and decide. As you can see from the below discussion, a trustee’s investment and management duties are important and absolute but how a trustee goes about satisfying those duties depends on many different factors and variables.

A 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. 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 must 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 must 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.

Probate Code §16047 requires the trustee to 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 has a duty to 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.

Unless the trust states otherwise, the trustee has a duty to invest trust property, preserve it, and make it productive. You can refer to Probate Code §§1600, 16006-16007 and 16046(b).

Unless the trust states otherwise, the trustee has a duty to 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.

The trustee must consider the interests and needs of all beneficiaries, income and remainder, when making investment decisions. You can refer to Probate Code §16003.

The beneficiaries may have conflicting interests. When two or more income beneficiaries have different personal income tax brackets, generally the trustee may 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 depending on the intent of the trust or 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 and intent of the trust, the trustee has a duty to make the trust property as productive as reasonably possible under the circumstances. You can refer to Probate Code §§16007 and 16046(b). Under the Uniform Prudent Investor Act, an asset may be productive either by producing income or by appreciating in value.

A trustee has the authority to make investment decisions as provided by the intent 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 and 16047.