When Trustees and Beneficiaries Disagree: Common Disputes and How to Avoid Them

Trust Disputes

Trust administration doesn't always run smoothly. Even in families that get along, tensions can rise when money, property, and emotions are involved. Trustees are tasked with managing the trust according to its terms and California law, while beneficiaries want to make sure their inheritance is handled fairly. Sometimes, those interests collide.

At Finlay Law Group, we often see the same disputes arise again and again. Here are the most common ones and how to prevent them from escalating.

1. Delays in Distribution

Beneficiaries often expect to receive their share quickly, but trustees must first pay debts, handle taxes, and confirm assets.

Tip: Trustees must work diligently to administer the trust and get assets out to the beneficiaries (if that's what the trust says to do. If possible, the trustee can make preliminary distributions of trust assets when they know debts and expenses will not exceed that amount.  The beneficiary gets a beneficial enjoyment while the trustee keeps enough to settle trust affairs. Win Win. 

2. Lack of Transparency

A trustee has a duty to keep beneficiaries informed, but sometimes updates are sparse or confusing.  Even an update saying that nothing has happened is better than radio silence. 

Tip: Trustees should share information early, often, and in writing.  Considering an estate sale?  E-mail the beneficiaries before even scheduling.  Want to hire a realtor?  Send them their website.  Selling the house?  Send a notice of proposed action!  Beneficiaries are entitled to clear, accurate information and reports, including a formal accounting in many cases.

3. Disagreements Over Property

Real estate, family heirlooms, or personal property often create friction.

• One beneficiary may want to sell, while another hopes to keep the property.

• Disputes arise over appraisals, valuations, or who gets what, especially when the trustee is a beneficiary and keeps the "good stuff" for themselves. 🚩🚩🚩

Tip: Look first to the trust for what to do.  If not specifically gifted or restricted, the default is usually to sell all trust property.  However, trustees should obtain professional appraisals and, where possible, facilitate buyouts or agreements among beneficiaries to minimize conflict.

4. Questions About Trustee Compensation

Trustees are often entitled to “reasonable compensation,” but beneficiaries may feel the fees are too high.

• Beneficiary concern: “They're paying themselves too much.”

• Trustee concern: “I'm doing a lot of work and deserve to be paid.”

Tip: Transparency is key. Trustees should document time and expenses, and beneficiaries should expect to see this clearly reflected in the accounting.

5. Allegations of Mismanagement

Sometimes beneficiaries accuse trustees of self-dealing, failing to invest prudently, or making decisions that hurt the trust. These claims are serious — and can lead to court involvement.

Tip: Trustees are not expected to be perfect.  However, trustees must always act with loyalty, avoid conflicts of interest, and seek professional advice when needed. More than that, trustees must be able to prove they acted reasonably.  Keep notes, get second (or third) opinions, and keep the beneficiaries informed!

Bottom Line

Trustee–beneficiary disagreements are common, but most can be prevented with good communication, accurate records, and professional guidance.

At Finlay Law Group, we help trustees avoid disputes, and we protect beneficiaries' rights when concerns arise. If you're facing tension over a trust, contact us today to get clarity and peace of mind.

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.