Trustee’s Duties & Obligations In California: What You Need to Know

As a beneficiary to a trust, often the trust is managed by someone else: a trustee. This could be a third party, a family member, or even a professional. For each type of trustee, there is still a risk of improper management. By understanding your rights and trustee’s duties in California, you can protect yourself from self-dealing, mismanagement, and negligence.

Gain a deeper understanding of a trustee’s responsibilities and obligations to beneficiaries, and reach out to a credible trust lawyer in Orange County if you believe your rights have been breached.

Trustee’s Duties & Obligations In California

In California, trustees have several duties and obligations to beneficiaries, all aimed at ensuring the trust is managed responsibly and in the beneficiaries’ best interests. These trustee obligations to beneficiaries include a fiduciary duty to manage trust assets prudently, with impartiality, and while avoiding conflicts of interest.

Trustees must administer the trust solely in the beneficiaries’ interest, avoiding self-dealing or conflicts of interest. They are expected to manage trust assets with care, make sound investment decisions, diversify assets, and maintain accurate records.

1. Duty to Administer the Trust, According to Its Terms

To start, according to California Probate Code 16000, a trustee undertakes the Duty to Administer the trust according to its terms, or instructions. For the most part, trustees only need to read the trust and its amendments to understand their duties and responsibilities. Oftentimes, conflict arises when a trustee interprets the settlor’s instructions differently than intended – in cases like these, it’s about what the trust maker actually said, rather than what they intended to say.

2. Duty to Account to the Beneficiaries

Trustees are obliged to carry out accounting for the trust’s beneficiaries. This can be done annually, when there is a change in the trustee, upon termination of the trust, or when ordered to do so by the court. While not all beneficiaries are entitled to an accounting, the court may still force the trustee to deliver it anyways.

3. Duty to Furnish Information to Beneficiaries

This is among the most common complaints from beneficiaries. A trustee can often fail to or refuse to release any information about the trust. Since the trustee maintains the duty to inform beneficiaries of a trust and its administration, this is a breach of responsibility. An example is when a trust maker passes away, rendering their revocable trust irrevocable (no longer able to be changed). The trustee is then required to notify beneficiaries and provide a copy of the irrevocable trust’s terms, to any beneficiary who requests it.

Related Article: Is a Trustee Not Communicating with Beneficiaries? Here’s What to Do

4. Duty of Confidentiality

Since a trust is designed to be a private tool for family asset management, it’s largely confidential. If a trustee breaches the confidentiality of a trust, they could be subject to full liability.

5. Duty of Loyalty

The Duty of Loyalty lays the foundation for the rest of the trustee’s duties, trust. In line with California Probate Code 16002(a), it requests that trustees remain loyal to their beneficiaries, and only act in their best interests to avoid conflicts of interest such as self-dealing. This is commonly seen with family members who are beneficiaries themselves, but appointed as trustees, allowing them to harm another beneficiary’s interests for their own gain, if they so choose.

6. Duty to Invest & Make Trust Property Productive

Lastly, the trustee holds the duty of making trust properties productive. In simpler terms, this means that investments, acquisitions, and sales of the trust’s assets must be made prudently and sensibly. Outlandish investments and uninformed property sales, for example, are clear breaches of this fiduciary duty. It’s important to note that accurate tax planning for the trust and its beneficiaries are included in this obligation.

7. Duty of Prudence

Trustees are expected to manage trust assets with the same care and skill that a prudent person would use when managing their own assets. This includes making sound investment decisions, diversifying assets, and keeping accurate records. Trustees must also take all steps to enforce claims and defend against claims against the trust.

8. Duty Regarding Impartiality

If a trust has multiple beneficiaries, the trustee has a duty to act impartially in managing and investing trust property. This means considering the differing interests of each beneficiary and making decisions that are fair and reasonable to all parties involved.

9. Duty Not to Engage in Self-Dealing

Trustees are prohibited from using trust property for their own profit or engaging in transactions where they have an interest adverse to the beneficiary. This prevents trustees from taking advantage of their position for personal gain.

10. Restrictions on Enforcing Claims Against Trust Property

A trustee cannot enforce any claim against the trust property if they purchased that claim after or in contemplation of becoming a trustee. However, the court may allow the trustee to be reimbursed from trust property for the amount they paid for the claim in good faith.

11. Limitations on Requiring Beneficiaries to Relieve Trustee of Liability

Trustees cannot demand that a beneficiary release them from liability as a condition for making a distribution or payment that is required by the trust instrument. This protects beneficiaries from undue pressure and ensures they receive what they are entitled to.

12. Duty Not to Act as Trustee of Adverse Trust

A trustee has a duty not to knowingly become a trustee of another trust that has conflicting interests with the beneficiaries of the first trust. If such a conflict arises, the trustee must eliminate it or resign from one of the trusts.

13. Duty to Take Control of and Preserve Trust Property

Trustees are responsible for taking reasonable steps to gain and maintain control of the trust property. They must also take actions to preserve the property and protect it from damage or loss.

14. Duty to Keep Trust Property Separate and Designated

Trustees must keep trust property separate from their own property and ensure that it is clearly designated as property of the trust. This helps to maintain clear records and prevent commingling of assets.

15. Duty to Enforce Claims and Defend Actions

Trustees have a duty to take reasonable steps to enforce any valid claims that are part of the trust property. They must also defend against any actions that could result in a loss to the trust.

16. Duty Not to Delegate Inappropriately

Trustees should not delegate tasks that they can reasonably perform themselves, nor should they transfer the office of trustee or delegate the entire administration of the trust to another person or co-trustee. However, this does not apply to investment and management functions under certain circumstances.

17. Duties of Co-Trustees

If a trust has more than one trustee, each trustee has a duty to participate in the administration of the trust. They must also take reasonable steps to prevent a co-trustee from breaching the trust or to compel them to correct a breach if it occurs.

18. Duty to Apply Trustee’s Skills

Trustees are expected to use their full range of skills when administering the trust. If the settlor chose the trustee based on their representation of having special skills, the trustee will be held to that higher standard.

Gokal Law Group: Guarding Your Trust

With a new understanding of trustee duties in California, you’ll know when it’s necessary to seek proper legal action, effectively protecting your trust assets. If you suspect that your trustee has been acting in their own interests, won’t deliver accounting, or isn’t delivering information pertaining to the trust, it could be time to contact an Orange County trust attorney.

Gokal Law Group is a family firm that treats our clients as if they’re our own flesh and blood. We fight for our clients as we would our own children, sisters, brothers, and parents. We are our clients’ warriors, fighting to bring them justice and ultimately right the wrongs they have endured.

Each attorney has a specific practice area for which they are tried, tested, and battle-ready. Each has vast years of experience in their practice area, providing them the knowledge, skills, and vision to fight and win.