Trusts and Estates

Tubbs v. Berkowitz

Cite as G056951
Filed April 7, 2020, Fourth District, Div. Three

By Matt Owens
Withers Bergman LLP
www.withersworldwide.com

Headnote: Powers of Appointment – Trustee as Donee

Summary: A trustee who is also the donee of a general power of appointment over the trust assets may exercise that power in his own favor without liability because as donee he holds the power in a nonfiduciary capacity.

Berkowitz and his wife created a trust that, upon the death of the first spouse, would be divided between the revocable surviving spouse’s trust and the irrevocable marital trust.  Following his wife’s death, Berkowitz, as trustee, proposed an allocation of trust assets between the two sub-trusts that drew an objection from his daughter, Tubbs, one of the remainder beneficiaries of the marital trust.  After that dispute arose, Berkowitz exercised the general power of appointment the trust gave him over the marital trust assets and transferred all those assets to himself.  Tubbs filed a petition challenging her father’s exercise of the power of appointment in his favor.  Tubbs contended Berkowitz breached his fiduciary duties as trustee of the marital trust by transferring the assets to himself, effectively divesting the remainder beneficiaries of their interest in that irrevocable trust.  In a motion for summary judgment, Berkowitz contended he exercised the power of appointment in a nonfiduciary capacity as donee, in accordance with the terms of the trust.  The probate court granted Berkowitz’s motion and Tubbs appealed.

The court of appeal affirmed.  The power of appointment enabled Berkowitz, the donee, to act in a nonfiduciary capacity.  Once Berkowitz, as donee, exercised his power of appointment, Berkowitz, as trustee, had no discretion under the terms of the trust to decline to transfer the trust assets as directed.  Berkowitz could not have breached any fiduciary duties by taking action that was expressly authorized by the marital trust. 

http://www.courts.ca.gov/opinions/documents/G056951.PDF

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