Note:  The California Supreme Court has granted review of this decision.

In 2002, Bill Giraldin established a revocable trust, naming himself as beneficiary during his lifetime, one of his sons, Tim, as trustee, and his wife and their nine children as beneficiaries upon his death.  Shortly thereafter, Bill and Tim began the process of investing almost $4 million in a business partly owned by Tim and his twin brother.  The investment became worthless.  Following Bill’s death, several of his children sued Tim for breach of fiduciary duty, alleging failure to diversify,  failure to deal impartially with beneficiaries, failure to preserve trust property, and failure to prevent Bill from making unwise investments.
The trial court found against Tim and surcharged him approximately $4.5 million.  The Court of Appeal reversed, finding that the siblings lacked standing to assert their claims against Tim (an argument initially only hinted at in the appellate briefs).  Probate Code section 15800(d) provides that where a trust is revocable and the person holding the power to revoke is competent, a trustee’s duties are owed to the person holding the power to revoke.  In this case, the Court held, Tim’s duties were owed only to Bill.  The Court rejected the siblings’ argument, and the decision in Evangelho v. Presto (1998) 67 Cal App. 4th 615 on which the argument was based, that the remainder beneficiaries develop standing while the trust is revocable which ripens when the trust becomes irrevocable.  That theory in Evanghelo was based in part on Probate Code section 16069, which provides that a trustee is not required to account to a beneficiary in the case of a revocable trust which is still revocable.  The Giraldin Court, however, found that this provision supported its conclusion, because it states that the trustee is not required to report “for  the period when the trust may be revoked,” not during that period.  “[W]hat Probate Code section 16069 does is confirm that the trustee of a revocable trust need not answer to the trust beneficiaries, at all, for his alleged acts or omissions in the period in which the trust remained revocable.”
The decision emphasizes that it was Bill who made the investment decision. “The trustee’s duty to act in accordance with the settlor’s instructions takes precedence over some abstract statutory obligation to do something different” and precludes, the Court concluded, the duties posited by the siblings which were all duties they claimed were owed to them.
Estate of Giraldin (4th Dist. September 26, 2011) 2011 DJDAR 14642.  The decision is not yet final.