California trust administration does not always go smoothly.
A distribution may keep getting delayed. The trustee may stop providing information. Trust property may be sold for a questionable price, or expenses may appear that don’t make sense.
Not every disagreement means the trustee has breached their duties. But certain California trust administration problems deserve a closer look, especially when they begin affecting the value or timing of your inheritance.
Scott Grossman, a lawyer with The Grossman Law Firm, represents beneficiaries in California involved in legal proceedings over delayed distributions, missing information, self-dealing, financial losses, and other forms of trustee misconduct.
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Key Takeaways
- Trustees in California must follow the trust and carry out their fiduciary obligations.
- Problems with distributions, accountings, investments, property values, or trustee expenses may affect a beneficiary’s inheritance.
- A trustee cannot place their own interests before those of the beneficiaries.
- People who stand to benefit may request the probate court to examine some of the trustee’s actions and require the trustee to carry out his duties.
- A trust administration problem does not automatically amount to a breach. The trust terms and surrounding facts matter.
12 California Trust Administration Problems to Watch For
1. Distributions Keep Getting Delayed
Acting as a trustee takes time, and the trustee may need to pay off debts, pay taxes, sell some of the property, or address other matters before making any distributions.
This can be worrying if delays repeat without a clear reason. Generally, the California Probate Code § 16000 requires a trustee to carry out the trust in accordance with its terms.
2. Trust Property Is Divided Unfairly
Instead of just giving out cash, some trusts require that the property be divided among a number of beneficiaries.
That can create disputes over who receives which asset and how values are calculated. When a trust has multiple beneficiaries, Probate Code § 16003 requires the trustee to deal impartially with them and account for their differing interests.
3. The Trustee Makes Questionable Investment Decisions
The trustees do not guarantee any profit on investments, but it is their duty to manage the assets of the trust carefully and with due care.
Probate Code § 16040 requires reasonable care, skill, and caution in trust administration, and California’s Uniform Prudent Investor Act also governs investment decisions.
4. Nobody Can Explain What Property Belongs to the Trust
People receiving the benefits may find that the property, bank accounts, investments, or other assets were intended to be in the trust but cannot be found.
To find out whether the asset really does belong to the trust, it may be necessary to look over the trust, the deeds, the financial records, the beneficiary designations, and other documents.
5. The Trustee Will Not Provide an Accounting
Missing financial information is one of the most common warning signs beneficiaries encounter.
Probate Code § 16060 requires trustees to keep beneficiaries reasonably informed about the trust and its administration. In many circumstances, § 16062 also requires accountings at least annually, when the trust terminates, and when the trustee changes, subject to statutory exceptions.
A proper accounting can reveal receipts, expenses, assets, liabilities, trustee compensation, and professionals the trustee hires.
6. Trust Assets Appear to Be Undervalued
Property values can directly affect what beneficiaries receive.
A suspiciously low valuation becomes particularly important if trust property is sold to the trustee, a relative, another beneficiary, or someone connected to the trustee.
7. Expenses Are Being Charged Against the Wrong Beneficiary or Share
Trust administration often involves taxes, maintenance expenses, professional fees, and other costs.
How those expenses are allocated affects the amount each beneficiary receives; if one beneficiary seems to be bearing expenses that should have been allocated differently, review the original records.
8. The Trustee Is Benefiting From Trust Property
Self-dealing deserves particular attention.
Probate Code § 16004 generally prohibits a trustee from using trust property for the trustee’s own profit or participating in transactions where the trustee’s interests conflict with a beneficiary’s.
Examples may include transferring property to themselves, using trust funds for personal expenses, or receiving an undisclosed benefit from a transaction.
9. Trustee Compensation Seems Excessive
They may be entitled to some sort of payment.
When the trust does not specify compensation, Probate Code § 15681 provides for reasonable compensation under the circumstances.
When trustee fees appear to be rather high in relation to the work carried out or when the fees are not well documented, beneficiaries should take notice.
10. The Trustee Is Paying Professionals Questionable Fees
California trustees can hire attorneys, accountants, investment advisers, appraisers, and other professionals to assist with administration. Probate Code § 16247 expressly gives trustees that authority.
The concern is not simply that professionals were hired. Problems may arise when expenses appear unnecessary, excessive, undisclosed, or connected to someone close to the trustee.
11. Everyone Disagrees About What the Trust Means
Trust provisions are not always clear.
Disputes may involve who receives property, when distributions should occur, what powers the trustee has, or how to interpret competing provisions. Probate Code § 17200 allows beneficiaries and trustees to ask the probate court to resolve questions about a trust’s internal affairs and interpretation.
12. Someone Wants to Change or Terminate the Trust
A trustee cannot merely alter an irrevocable trust because they think that some other arrangement would be better.
California law provides specific circumstances in which beneficiaries or trustees may petition to modify or terminate a trust. For example, §§ 15403 and 15409 address modification or termination under particular statutory conditions.
When Do Trust Administration Problems Become Trust Litigation?
Just because a trustee makes a decision you disagree with does not mean they breached the trust.
The situation becomes more serious when the trustee violates a legal duty, refuses to provide required information, places personal interests ahead of beneficiaries, improperly withholds distributions, or causes financial harm.
Probate Code § 16420 gives beneficiaries several potential remedies for a breach, including compelling the trustee to act, stopping an improper action, seeking repayment, reducing trustee compensation, removing the trustee, or recovering improperly disposed trust property.
At that point, waiting for the trustee to fix the problem may only prolong the dispute. The Grossman Law Firm can review the trust, the trustee’s conduct, and available records to determine whether court intervention is necessary to protect your inheritance.
FAQ
Can a beneficiary challenge how a trustee is administering a California trust?
Potentially. A beneficiary may petition the probate court under Probate Code § 17200 regarding various issues involving trust administration. The available relief depends on the trust and the specific conduct involved.
Does every error made by a trustee constitute a breach?
No, trustees can make decisions that beneficiaries disagree with without breaching their fiduciary duty. The issue is whether or not the trustee has breached the trust or a legal obligation owed to the beneficiaries.
What steps should I take if it appears that the trust money is missing?
You may be able to find out what happened by obtaining the relevant trust records and accounting information. If the trustee can’t explain the transactions or refuses to provide information, a trust litigation attorney can assess whether legal action is appropriate.
Related Resources
How The Grossman Law Firm Can Help
Trust administration problems matter most when they delay your inheritance or reduce what you should receive.
Attorney Scott Grossman can review the trust, accountings, financial records, property transactions, and communications with the trustee to determine whether the matter is an ordinary administration issue or involves possible trustee misconduct that requires court intervention.
At The Grossman Law Firm, we help beneficiaries and heirs throughout California enforce their rights in probate and trust litigation.
Call (888) 443-6590 or fill out our Get Help Now form to take the next step.
Our Intake Specialists can evaluate your case to assess your situation at no cost to you. We will schedule qualifying cases for a Free Phone Consultation with Attorney Scott Grossman.
Originally Published: Jan 15, 2018