A Trustee's Duties (How to Keep Yourself Out of Trouble)
A trustee is expected (and required) to follow specific rules. To help guide the trustee, the California Probate Code lists out specific duties that the trustee must follow. Failing to follow these duties can result in costly disputes or even personal liability.
To help stay out of trouble, trustees should first know what's expected of them.
1. Duty of Loyalty
The golden rule: you must act solely in the interest of the beneficiaries. That means no self-dealing, no favoritism, and no using trust property for your personal benefit. Even well-meaning actions can cause problems if they put your interests ahead of the trust.
This duty of loyalty is particularly troublesome when the trustee is also one of several beneficiaries. Even worse, sometimes a trustee has a disproportionately close relationship with one beneficiary or a hostile one with another. In these scenarios, the trustee still must make all decisions for the benefit of all beneficiaries but should take extra steps to eliminate even the appearance of impropriety.
2. Duty Not to Commingle Assets
One of the fastest ways trustees get into trouble is mixing trust money with their own. Always:
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Open a separate trust bank account with the Trust's EIN
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Keep careful records of every deposit and expense
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Never pay trust expenses from your personal account (if possible)
This keeps everything clean and avoids accusations of mismanagement.
3. Duty to Keep Trust Property Productive
You're responsible for making sure trust assets aren't sitting idle. That might mean:
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Placing cash into interest-bearing accounts
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Ensuring investments are diversified and safe
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Renting out or preparing real estate for sale instead of leaving it vacant
Think of it this way: you are getting paid to hold and protect this property. Ensure you are doing everything possible to earn that fee.
4. Duty to Follow the Trust Terms
Even if the beneficiaries (or you) don't like parts of the trust, you can't ignore them. California law requires you to carry out the instructions in the trust document. If something seems unclear, get legal advice before making a decision, not after.
5. Duty to Report and Account
Communication is critical. Trustees must keep beneficiaries informed and, in many cases, provide a formal accounting of all trust assets, income, and expenses.
Failing to keep beneficiaries informed, and especially delaying an accounting, is the most common cause of trust lawsuits.
6. Duty to Not Delegate Reserved Powers
A trustee can (and usually should) hire professionals such as attorneys, accountants, or realtors to help carry out trust business. However, the core decision-making authority cannot be delegated. In other words, you can seek advice, but you can't simply hand off your fiduciary responsibilities to someone else.
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✅ You may hire an accountant to prepare tax filings.
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❌ You may not let someone else make the final decision of whether to distribute assets.
The settlor named you trustee for a reason; so that you would use your best judgment to make critical decisions for the benefit of the beneficiaries. Yes, you should get advice and counsel, but you cannot simply pass off your duties to another person or entity.
Staying Out of Trouble
Most trustee mistakes come down to one of these areas: not communicating, mixing funds, or failing to follow the trust. If you keep good records, stay transparent, and ask for help when you're unsure, you'll not only protect yourself but also earn the beneficiaries' trust.
✅ Bottom line: Being a trustee is manageable if you understand your duties and take them seriously.
At Finlay Law Group, we strive to make what are often life's most stressful moments less stressful by providing caring, individualized, and responsive service in trust administration, probate, and estate planning. If you've been named trustee, contact us today for guidance that helps you do the job right and stay out of trouble.
Disclaimer: The above information is intended for information purposes alone and is not intended as legal advice. Please consult with counsel before taking any steps in reliance on any of the information contained herein.