Manson

*1247 Opinion

L INTRODUCTION

After the death of her husband, Maynard F. Manson, appellant Carol C. Manson became the sole trustee of the Maynard F. Manson and Carol C. Manson Revocable Living Trust (the Trust). 1 In addition to being the trustee and the sole income beneficiary of the Trust, Carol is the president of the Trust’s primary asset, Wave Crest Development, Inc. (Wave Crest), and the chair of Wave Crest’s board of directors. The Trust owns 100 percent of Wave Crest’s shares, which Carol votes. During her administration of the Trust, Carol submitted a trustee’s petition for settlement of first account and report and approval of attorney fees. Respondents, who are Maynard’s four daughters from a prior marriage and remainder beneficiaries of the trust, objected to the petition.

After a court trial, the trial court issued a February 9, 2009 order approving the trustee’s accounting, with two exceptions. One exception is the subject of Carol’s appeal. She contends that the trial court misinterpreted Probate Code section 16350, subdivision (d)(1)(A) 2 when it allocated to principal, rather than income, a $3 million dividend paid by Wave Crest to the Trust. On cross-appeal,…