TrustTrust LitigationTrustee Duties

Trustee Self-Dealing and Breach of Fiduciary Duty in California

By January 21, 2026No Comments
Self-Dealing trustee

Table of Contents

Key Takeaways

  • Under the California Probate Code, self-dealing is a serious breach of fiduciary duty.
  • California law requires trustees to act in the beneficiaries’ best interests at all times.
  • Importantly, a trustee does not need malicious intent to violate the law.
  • Beneficiaries may recover damages and seek the removal of a trustee in a California probate court.
  • Taking early legal action often limits financial damage and strengthens your case.

What Self-Dealing Means Under California Law

Under California law, a trustee serves as a fiduciary. This means the trustee must manage trust assets with care, honesty, and loyalty, always putting the beneficiaries’ interests first. Because of this role, trustees hold significant control and discretion, and as a result, California law imposes strict obligations on their conduct.

For that reason, a trustee may not use trust property, funds, authority, or information for personal benefit unless the trust explicitly permits it. In that situation, when a trustee places their own financial interests ahead of the beneficiaries’ interests, the conduct is known as self-dealing.

For example, self-dealing does not have to involve outright theft. In other words, a trustee can break their duties just by arranging deals that benefit themselves, even if the trust does not lose money right away. Therefore, beneficiaries should not assume a delay means they have no legal options.
At The Grossman Law Firm, we see how self-dealing erodes trust administration and puts beneficiaries at risk. When a trustee crosses this line, early legal guidance can help protect trust assets and prevent further harm.

Why Self-Dealing Violates a Trustee’s Fiduciary Duties

The duty of loyalty sits at the core of every trust relationship.
Trustees must administer the trust solely in the interests of the beneficiaries. They cannot compete with the trust, profit at the trust’s expense, or place themselves on both sides of a transaction without clear legal authority.
California probate courts treat self-dealing seriously because it undermines the administration of trust itself. In practice, beneficiaries rely on trustees to act impartially and transparently. When trustees blur that line, the entire administration becomes suspicious.
Importantly, courts evaluate conduct, not intent. A trustee who claims they “meant well” or “did not realize” the issue may still face liability.

Common Examples of Trustee Self-Dealing

For example, self-dealing takes many forms. Some are more subtle than beneficiaries expect.
Common examples include:
  • Paying excessive trustee compensation without justification
  • Using trust funds to cover personal expenses
  • Selling trust property to themselves or related parties at below-market value
  • Borrowing trust money without proper authority
  • Steering trust investments toward businesses that the trustee owns or controls
  • Modifying trust administration practices to increase personal fees
So, in most cases, beneficiaries first notice self-dealing by reviewing trustee compensation. Flagging issues such as Inflated fees, vague billing entries, or unexplained payments often signals deeper problems.
What starts as a financial concern frequently leads to broader questions about transparency, record-keeping, and honesty.
Do you suspect your trustee is not acting in your best interest?  If so, do not wait, act now. Explore 20 Ways Your Trustee May Be Breaching Their Fiduciary Duties to learn the most common warning signs and what steps beneficiaries can take next.

How Beneficiaries Can Hold a Trustee Accountable

California law provides beneficiaries meaningful ways to respond when a trustee crosses the line.
When a trustee engages in self-dealing, beneficiaries can ask the probate court to intervene and address the issue. What the court does next depends on the trustee’s conduct and the extent of the damage. In appropriate cases, the court may:
  • Demand that the trustee repay the money that was taken or misused
  • Hold the trustee liable for damages
  • Decrease or deny trustee compensation
  • Remove the trustee
These remedies protect beneficiaries and allow for proper trust administration. Courts do not intervene lightly, but when a trustee prioritizes personal interests over the trust, judges often act decisively.
Self-dealing is a time-sensitive issue. As it continues, transactions become harder to unwind and financial records more difficult to reconstruct. Early legal intervention can help secure evidence, clarify what the trustee was required to do, and limit further harm before it compounds.
Finally, for many beneficiaries, seeking legal advice from a trust attorney as soon as possible can help preserve their inheritance.
At The Grossman Law Firm, we help beneficiaries identify applicable remedies and take timely action to hold trustees accountable when self-dealing threatens trust assets.

FAQ

Does a trustee have to steal money to be guilty of self-dealing?

No. A trustee can engage in self-dealing without taking money outright. Any situation in which the trustee uses trust assets or authority for personal benefit without legal approval may constitute self-dealing under the California probate law.

Can a trustee be removed for self-dealing in California?

Yes. California probate courts can remove a trustee who breaches fiduciary duties through self-dealing, especially when the conduct harms the trust or the beneficiaries.

What if the trust allows the trustee to be paid?

Trustees are generally entitled to reasonable compensation. However, charging excessive fees or paying oneself without justification can still amount to self-dealing.

How The Grossman Law Firm Can Help

At The Grossman Law Firm, we assist beneficiaries throughout California in protecting their interests when trustees cross legal boundaries.
For more than twenty-five years, attorney Scott Grossman has devoted his practice exclusively to probate and trust litigation. TGLF understands how self-dealing cases unfold and how early intervention can stop further harm.
Call (888) 443-6590 or complete our Get Help Now form to take the next step.
Our Intake Specialists can evaluate your situation at no cost. Qualifying cases will be scheduled for a free phone consultation with Attorney Scott Grossman.
Originally Published: September 4, 2016