Obtaining Consent of Beneficiary

Sometimes trustees are concerned that their proposed actions are permissible by the trust, but remain afraid to act because of the fear that a beneficiary will, with  the benefit of hindsight, hold them liable for one reason or another, including some unforeseeable change (e.g. holding on to stocks or homes with the hope they will rise in value when they don’t or selling too early in  good market).

In order to reduce the potential for liability, California law allows a trustee to obtain the consent of the beneficiary prior to acting to ensure that the trustee’s actions will not be second guessed later by way of a lawsuit.  While the law does not state that consent is required to be in writing, it is highly highly highly recommended that it be in some form of writing signed by the person giving consent.

Obtaining consent is the simplest and easiest way to minimize trustee liability and should be used for any act of significance.  If the beneficiary does not consent, then there are other more formal methods of reducing or eliminating trustee liability.

The California law on beneficiaries consent is primarily found in Probate Code 16463, which is as follows:

§ 16463. Consent of beneficiary to relieve trustee of liability for breach of trust
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(a)  Except as provided in subdivisions (b) and (c), a beneficiary may not hold the trustee liable for an act or omission of the trustee as a breach of trust if the beneficiary consented to the act or omission before or at the time of the act or omission.

(b)  The consent of the beneficiary does not preclude the beneficiary from holding the trustee liable for a breach of trust in any of the following circumstances:
(1)  Where the beneficiary was under an incapacity at the time of the consent or of the act or omission.
(2)  Where the beneficiary at the time consent was given did not know of his or her rights and of the material facts (A) that the trustee knew or should have known and (B) that the trustee did not reasonably believe that the beneficiary knew.
(3)  Where the consent of the beneficiary was induced by improper conduct of the trustee.

(c)  Where the trustee has an interest in the transaction adverse to the interest of the beneficiary, the consent of the beneficiary does not preclude the beneficiary from holding the trustee liable for a breach of trust under any of the circumstances described in subdivision (b) or where the transaction to which the beneficiary consented was not fair and reasonable to the beneficiary.