What are the Duties of a Trustee in California?

TL;DR Summary: Serving as a trustee of a trust is a legal role governed by strict fiduciary duties, timelines, and reporting requirements. Seeking guidance from an experienced trust administration attorney can help you protect yourself, honor the trust creator’s wishes, and keep the peace among beneficiaries.

When someone names you as the trustee of their trust, it’s both an honor and a big responsibility. In California, trustees play a critical role in managing, protecting, and distributing trust assets according to the trust document and state law.

But here’s the thing most people don’t realize: being a trustee isn’t just about handing out inheritances. It’s a legal role governed by strict fiduciary duties, timelines, and reporting requirements. One wrong step can open you up to lawsuits, tax headaches, and even personal liability.

If you’ve just been appointed as a trustee, or if you’re creating your estate plan and want to better understand what you’re asking of someone, this guide will walk you through everything you need to know about a trustee’s duties in California.

What Is a Trustee?

A trustee is the person or entity (such as a professional fiduciary or a bank) appointed to manage and administer a trust. They step into the shoes of the person who created the trust (called the “grantor” or “settlor”) and are legally bound to carry out the trust’s instructions.

In California, trustees have fiduciary duties, meaning they must always act in the best interests of the beneficiaries, even if it conflicts with their own personal interests. These duties are laid out under the California Probate Code and interpreted by decades of court decisions.

The Core Duties of a Trustee in California

Here are the main responsibilities you’ll need to handle if you’re serving as a trustee:

1. Duty to Follow the Trust Document

The trust instrument is your rulebook. Every decision you make, from how to invest trust funds to when to distribute assets, must align with the terms of the trust.

For example, if the trust says a beneficiary only receives their inheritance after turning 30, you cannot distribute those funds early unless the trust grants you explicit instructions to do so.

2. Duty of Loyalty

Your loyalty must be to the beneficiaries, not yourself. This means avoiding any conflicts of interest, like:

• Selling trust property to yourself or a family member
• Favoring one beneficiary over another
• Mixing trust funds with your personal funds

Violating this duty can lead to lawsuits and personal liability.

3. Duty to Act in Good Faith

California law requires trustees to make all decisions honestly, fairly, and prudently. Even if your intentions are good, acting recklessly or without proper care can get you into legal trouble.

4. Duty of Impartiality

If a trust has multiple beneficiaries, you must treat them equally unless the trust specifically says otherwise. You can’t, for example, give one sibling more access to trust property simply because you’re closer to them.

5. Duty to Avoid Commingling Assets

Trust funds and property must be kept separate from your personal assets. That means:

• Opening a separate bank account for the trust
• Keeping detailed financial records
• Ensuring the trust property titles remain in the name of the trust and not your individual name

Failing to do so can create tax problems and expose you to claims of mismanagement.

6. Duty to Make Trust Assets Productive

Trustees aren’t expected to be Wall Street experts, but you are required to manage trust investments responsibly. California follows the “Prudent Investor Rule,” meaning you must:

• Diversify investments
• Balance risk and reward
• Seek professional advice if needed

If you ignore this duty and the trust loses value, beneficiaries could sue you for breaching your fiduciary responsibilities.

7. Duty to Keep Beneficiaries Informed

Transparency is key. In California, trustees must:

• Provide notice to beneficiaries when the trust becomes irrevocable
• Send annual accountings showing income, expenses, and distributions
• Respond promptly to reasonable requests for information

Failing to keep beneficiaries informed is one of the most common reasons trustees end up in court.

8. Duty to File Taxes

Yes, trustees have tax responsibilities too. You may need to:

• Obtain a taxpayer ID number for the trust
• File trust income tax returns
• Provide beneficiaries with K-1 forms when distributions are taxable

Missing tax deadlines or filing incorrectly can cause penalties — for the trust and sometimes for you personally.

Step-by-Step: Administering a Trust in California

Trustee duties aren’t just abstract legal obligations; they involve concrete steps. Here’s a typical roadmap:

Step 1: Gather Trust Documents

Collect the trust document, death certificate (if applicable), and any amendments. Review everything carefully.

Step 2: Notify Beneficiaries

California Probate Code §16061.7 requires trustees to send a formal notice to beneficiaries within 60 days of the grantor’s death. This gives beneficiaries the opportunity to contest the trust if they choose.

Step 3: Inventory Trust Assets

Make a detailed list of everything in the trust, including:

• Real estate
• Bank accounts
• Investments
• Personal property
• Business interests

Get appraisals when necessary, especially for real estate or valuable collectibles.

Step 4: Pay Debts and Expenses

Trusts often need to cover:

• Funeral costs
• Outstanding debts
• Taxes
• Legal and accounting fees

These must generally be paid before distributing inheritances.

Step 5: Manage and Protect Assets

Until everything is distributed, the trustee is responsible for safeguarding trust assets. This could include:

• Maintaining insurance
• Securing property
• Managing rental income
• Avoiding risky investments

Step 6: Make Distributions

Once debts, expenses, and taxes are handled, you can distribute assets according to the trust’s instructions. This might involve:

• Transferring real estate titles
• Writing checks to beneficiaries
• Retaining funds in trust for minor beneficiaries

Step 7: Close the Trust

After distributions are complete, you’ll typically file a final accounting, obtain beneficiary approvals, and formally close the trust.

Common Trustee Pitfalls (and How to Avoid Them)

Being a trustee is a legal minefield if you don’t know what to watch out for. Here are some of the most common mistakes:

• Failing to communicate: Silence breeds distrust among beneficiaries.
  
• Self-dealing: Even if you think you’re helping, any transaction benefiting you personally can raise red flags.
  
• Neglecting deadlines: Missing California’s strict notice and tax deadlines can cause serious legal issues.
  
• Skipping professional advice: Trustees aren’t expected to know everything, but they are expected to hire help when needed.

When Should You Hire a Trust Administration Attorney

Administering a revocable trust is complex, and mistakes can be costly. At Goff Legal, we regularly help trustees:

• Understand their fiduciary duties
• Prepare legally compliant notices and accountings
• Handle beneficiary disputes
• Navigate tax reporting and deadlines
• Avoid personal liability

Whether you’ve just been named trustee or you’re knee-deep in trust administration, you don’t have to figure this out alone. By understanding your duties, avoiding common mistakes, and getting the right professional guidance, you can protect yourself, honor the trust creator’s wishes, and keep the peace among beneficiaries.

Why Choose Goff Legal

At Goff Legal, we’re more than just experienced trust administration attorneys; we’re your partners in navigating complicated trust administration. As a woman-owned boutique law firm, we focus exclusively on estate planning and trust administration. We’ve helped hundreds of trustees successfully carry out their duties while avoiding legal pitfalls.

If you’ve been named a trustee in California and aren’t sure where to start, we’re here to help. Contact Goff Legal today to schedule your free discovery call and get expert guidance on administering a trust with confidence.

FAQs:

Can I get paid for serving as a trustee in California?

Yes. California law allows trustees to receive “reasonable compensation” for their work unless the trust specifically says otherwise. The amount often depends on the trust’s size and complexity, and sometimes beneficiaries must approve it.

How long does trust administration usually take in California?

It depends on the trust’s complexity, but for a straightforward trust, it typically takes 12 to 18 months. Some trusts can be administered more quickly, especially if the beneficiaries are all in agreement. Complications like real estate sales, tax issues, or beneficiary disputes can extend the timeline.

Do I need to file anything with the probate court if there’s a trust?

Usually, nothing beyond lodging the original will with the court. Avoiding probate is one of the main benefits of a trust. However, if there are disputes, creditor claims, or unclear trust terms, you may still need to file certain petitions or seek court approval for specific actions.

What happens if I make a mistake as a trustee?

Trustees can be held personally liable for losses caused by mismanagement, missed deadlines, or breaching fiduciary duties. The best way to protect yourself is to:

• Keep detailed and accurate records
• Stay transparent
• Work with an experienced estate planning attorney

Can I decline to serve as trustee after being named?

Absolutely. You are not required to serve, even if named in the trust. To avoid future liability, you’ll need to formally decline in writing and sometimes notify beneficiaries before taking any trustee actions.