Trust LitigationTrustee Duties

Trustee Self-Dealing in California: 4 Examples & What Beneficiaries Can Do

By April 20, 2026No Comments
trustee self-dealing

Table of Contents

Key Takeaways

  • In California, trustees owe strict fiduciary duties to beneficiaries. This includes a duty of loyalty.
  • Trustee self-dealing occurs when a trustee benefits personally at the expense of the trust or its beneficiaries.
  • Common examples of a breach include: taking assets, misusing funds, altering terms for personal gain, or purchasing trust property at below-market value.
  • Under the California Probate Code, self-dealing is often a clear breach of trustee conduct.
  • Beneficiaries have the right to challenge these actions and seek court intervention.

What Is Trustee Self-Dealing Under California Law?

Trustee self-dealing in California generally refers to situations where a trustee takes actions that benefit themselves rather than the beneficiaries.
Under California Probate Code section 16002, a trustee has a duty of loyalty. That duty requires the trustee to administer the trust solely in the beneficiaries’ interests. When a trustee puts their own financial interests first, they violate their duty.
Attorney Scott Grossman at The Grossman Law Firm frequently represents beneficiaries who believe a trustee’s actions have moved beyond poor management to a breach of fiduciary duty.
Self-dealing is often direct and measurable, but beneficiaries may lack timely access to information needed to confirm such conduct.

Four Common Examples of Trustee Self-Dealing

The following examples frequently arise in California trust administrations.

1. Taking or Redirecting Trust Assets

One of the clearest forms of self-dealing is when a trustee takes trust assets for personal use.
This could involve cash withdrawals, transfers of funds to personal accounts, or use of trust property without authorization. The asset does not need to be large. Any unauthorized benefit can raise concerns.
If a trustee takes an asset without permission or in violation of the trust’s terms, that conduct may constitute a breach.

2. Changing Terms or Compensation for Personal Benefit

A trustee does not have the authority to modify the trust for their own advantage.
Issues arise when a trustee attempts to increase their compensation or interpret provisions in a way that results in a higher personal benefit. While trustees are entitled to reasonable compensation under California law, that compensation must be justified and consistent with the terms of the trust.
Unilateral changes that benefit the trustee are often challenged in court.

3. Misusing or Wasting Trust Funds

Self-dealing can also occur when a trustee spends trust money primarily to benefit themselves.
This may involve paying for unnecessary services, directing trust funds to businesses controlled by the trustee, or using trust assets for personal expenses. Even if claimed as administrative, the key question is whether the trust actually benefited.
Excessive or unjustified spending may constitute a breach of fiduciary duty.

4. Buying Trust Property Below Market Value

Another common issue is when a trustee purchases trust property for less than fair market value.
For example, a trustee may sell a trust-owned home or asset to themselves or a related party at a discounted price. California law closely scrutinizes these transactions and often presumes them invalid unless the trustee can justify them.
Even the appearance of a conflict can be enough to trigger litigation.

Why Self-Dealing Often Leads to Trust Litigation

Self-dealing claims are among the most serious issues in California trust litigation.
Courts have broad authority to address these situations. Depending on the facts, a court may:
  • Order the trustee to return assets.
  • Impose a financial surcharge.
  • Remove the trustee.
  • Void transactions that were not fair to the trust.
Because trustees control key information, these cases often begin with limited transparency. Delays in providing an accounting or explanations can increase concerns over time.

Do You Suspect Self-Dealing

If you believe a trustee is acting in their own interest, early action matters.
Begin by collecting available information, such as the trust document, financial statements, and communications with the trustee. Even partial records can help identify concerning patterns.
California law gives beneficiaries the right to request information and accountings. If the trustee does not respond, court intervention may be necessary.
In many cases, these disputes evolve into trust litigation when informal requests are ignored or incomplete.
If you are facing this situation, contact The Grossman Law Firm for assistance with trust litigation.

FAQ

What is considered trustee self-dealing in California?

Self-dealing is when a trustee uses trust assets or their position to benefit themselves rather than the beneficiaries. This is in direct violation of their duty of loyalty.

Is self-dealing illegal?

Self-dealing is typically presumed to be a breach. Most self-dealing transactions are prohibited unless they are expressly authorized by the trust or approved by the court.

What are the consequences of self-dealing?

A trustee may be required to return assets, pay damages, or be removed. Courts can also unwind transactions that were not fair to the trust.

How The Grossman Law Firm Can Help

Attorney Scott Grossman has helped beneficiaries and heirs throughout California enforce their rights in probate and trust litigation.
If you suspect a trustee is engaging in self-dealing, The Grossman Law Firm can evaluate your situation and advise on available legal options. Prompt action is often necessary to preserve financial records and protect the trust.
Call (888) 443-6590 or fill out our Get Help Now form. Our Intake Specialists can evaluate your case at no cost to you. Qualifying cases will be scheduled for a Free Phone Consultation with Attorney Scott Grossman.
Originally Published: February 5, 2018