Trust

Trustee Mismanagement in California

By February 27, 2026No Comments
trustee mismanagement California

Table of Contents

Key Takeaways

  • In California, a trustee must act in the best interests of the beneficiaries.
  • Mismanagement may include self-dealing, favoritism, failure to report, or poor investment decisions.
  • Through the CA probate court, beneficiaries can seek the removal of the trustee and recover damages.
  • As a result, courts evaluate what the trust would have earned if the misconduct had not occurred when calculating losses.

What Is Trustee Mismanagement?

When someone is appointed trustee after a loved one passes away, that person is responsible for carrying out the terms of the trust and protecting its assets. The role is not ceremonial. It involves real legal duties and real accountability.
Under California law, a trustee’s primary obligation is to act in the best interests of the beneficiaries. That means maintaining property, making prudent investment decisions, keeping accurate records, and distributing assets in accordance with the trust terms.
When a trustee fails to meet those obligations—whether intentionally or through neglect—the result can be significant financial harm to the trust.
At The Grossman Law Firm, Attorney Scott Grossman regularly represents beneficiaries in trust litigation matters involving alleged mismanagement and breach of fiduciary duty.

Common Examples of Trustee Mismanagement

How Mismanagement Typically Occurs

Some of the more common examples include:
  • A conflict of interest caused the trustee to act in the best interests of someone other than the beneficiaries.
  • The trustee favored certain beneficiaries and ignored the best interests of others.
  • Decisions were made for the trustee’s personal gain without regard to the trustee’s fiduciary duties.
  • Profits resulting from the trust were not reported to beneficiaries.
  • The trustee misappropriated funds from the trust for personal use.
  • The trustee isn’t taking the necessary action with the trust, isn’t sending out reports to beneficiaries, is missing deadlines, and isn’t showing up in court.
  • The trustee let the real property fall into disrepair or sold it for far below market value.
  • The trustee refused to seek the counsel of a financial advisor and made unwise investment decisions that resulted in significant capital losses.
These situations can affect not only the value of the trust but also the relationships among family members.

Mismanagement vs. Disagreement

Not Every Dispute Constitutes Mismanagement

Not every dispute amounts to mismanagement. A trustee is not required to make decisions exactly as a beneficiary would prefer. Differences of opinion regarding investment strategies or timing of distributions do not constitute a breach of a fiduciary duty.
The key question is whether the trustee acted prudently, meaning in good faith and in a loyal manner.
If a trustee is fulfilling fiduciary obligations, even if you would have liked it handled differently, court intervention may not be appropriate. However, when actions fall outside those duties and cause measurable harm, beneficiaries have the right to seek remedies.

Recovering Damages for Trustee Misconduct

If mismanagement has caused the trust to lose value, beneficiaries may be entitled to recover damages. California courts often evaluate what the trust reasonably would have earned had it been properly managed.
In many cases, financial experts are used to projecting lost earnings or diminished asset value. The court may also consider removing the trustee, suspending the trustee, or imposing a surcharge.
If you suspect your trustee isn’t acting in your best interest, don’t wait. Explore 20 Ways Your Trustee May Be Breaching Their Fiduciary Duties to learn common warning signs and available actions.

FAQ

What is trustee mismanagement?

Trustee management involves breaches of fiduciary duties, such as self-dealing, failure to account, neglect of assets, or imprudent investments that harm the trust.

Can a trustee be removed?

Yes, a trustee can be removed if their decisions breach their duty or cause harm. The California Probate Court distinguishes between poor judgment made in good faith and neglectful conduct that violates their trustee duties.

How are damages calculated?

Courts typically examine the trust’s financial position as it would have been if no misconduct had occurred and award damages accordingly.

Additional Resources on Trustee Duties and Trust Litigation

How The Grossman Law Firm Can Help

Trust mismanagement is a serious matter. If you believe a trustee has caused financial harm to a trust through neglect, self-dealing, or failure to act, you do not have to address it alone.
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.
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 August 5, 2016