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Trustee Duties: When a Trustee has a Conflict of Interest

By July 8, 2025No Comments

Table of Contents

  • Key Takeaways
  • Why Trustees Must Avoid Conflicts of Interest
  • Recognizing a Breach of Duty
  • What You Can Do if a Trustee Has a Conflict
  • Related Resources
  • FAQ
  • Next Steps

Key Takeaways

  • California law strictly prohibits trustees from benefiting at the expense of beneficiaries.
  • Conflicts of interest often involve self-dealing, poor transparency, or questionable transactions.
  • Beneficiaries have the right to challenge a conflicted trustee through court petitions, removal actions, or damages orders.
  • The Grossman Law Firm helps California beneficiaries uncover conflicts and hold trustees accountable.



Trustee Duties: When a Trustee Has a Conflict of Interest in California

Why Trustees Must Avoid Conflicts of Interest

Under California Probate Code, trustees are bound by fiduciary duties, including a strict obligation to avoid conflicts of interest. A conflict arises when a trustee’s personal interest interferes with their duty to the beneficiaries.California law includes three core provisions that govern conflict-related conduct:

These provisions include:

1: Prohibition Against Self-Dealing

  • Trustees are prohibited from using or dealing with trust property for their own personal profit.
  • They must avoid using trust property for purposes unrelated to the trust.
  • They may not engage in transactions that create an adverse interest against the beneficiary.

 2: Restrictions on Personal Gain

  • Trustees cannot use the trust for their own gain.
  • They cannot enforce claims against trust property they purchased after becoming a trustee.

3: Presumption of Breach When Gaining Advantage

  • If a trustee gains an advantage from a transaction with a beneficiary, the law presumes a breach occurred.
  • Trustees bear the burden of proving fairness when this presumption arises.

These rules are not optional—they protect beneficiaries from exploitation and help ensure trustees act with transparency and good faith.

Recognizing a Breach of Duty

Any time a trustee acts in a way that benefits themselves over the beneficiary, it raises concern. Here are a few red flags:

  • Self-Dealing: A trustee loans trust funds to themselves or buys trust property at below market value.
  • Unfair Leverage: A trustee controls a transaction with a beneficiary and uses their authority to extract personal gain.
  • Unreasonable Investment Choices: Investments that serve the trustee’s interest or appear negligent may suggest misconduct.

When a breach occurs, California Probate Code § 16440 permits the court to impose penalties, including:

  • Repayment for losses or depreciation of trust assets
  • Return of profits gained through the breach
  • Compensation for profits the trust would have earned but for the breach

Even if a trustee claims to have acted in good faith, the court may still impose consequences. However, the court also has discretion to reduce liability if fairness supports leniency.

What You Can Do if a Trustee Has a Conflict

If you suspect a conflict of interest, there are two main legal options available:

1. Petition the Court for Surcharge (Damages Order):

  • You can ask the court to order the trustee to repay any losses to the trust.

2. Petition for Suspension or Removal of the Trustee:

  • You may request that the trustee’s powers be suspended or that they be removed entirely.
  • Courts grant these requests when evidence shows the trustee violated their duties.

Both processes benefit from legal representation. At The Grossman Law Firm, we help beneficiaries take swift action to stop ongoing harm and protect their inheritance.

Related Resources

FAQ

What is a conflict of interest in trust administration?

A conflict occurs when a trustee’s personal interests interfere with their fiduciary duties. It could include self-dealing, unfair transactions, or making decisions that benefit themselves over the beneficiaries.

Can a trustee be removed for a conflict of interest?

Yes. If a court finds a trustee acted inappropriately, it can suspend or remove them.

What does it mean to surcharge a trustee?

A surcharge means the trustee must repay the trust for losses incurred due to their breach of duty.

How do I prove a trustee has a conflict of interest?

Evidence may include financial documents, communication records, or witness statements showing the trustee prioritized their interests over yours.

Is a conflict of interest always intentional?

Not always, but intention doesn’t eliminate liability. Trustees must avoid even the appearance of impropriety.

Next Steps

If you believe your trustee is acting in their interest instead of honoring their legal duties, now is the time to act. Waiting can allow harm to continue and make it harder to recover misused funds.

At The Grossman Law Firm, we’ve helped California beneficiaries remove untrustworthy trustees, recover lost assets, and gain peace of mind during difficult times.

Call (888) 443-6590 or fill out our Get Help Now form.

Our Intake Specialists can evaluate your case to assess your situation at no cost to you. Qualifying cases will be scheduled for a Free Phone Consultation with Attorney Scott Grossman.

Don’t wait—let us help you protect your rights and your loved one’s legacy.