Trustee Duties: Why is it important to manage a trust property productively?

Table of Contents

Key Takeaways
What It Means to Manage Trust Property Productively
Examples of Failing to Manage Trust Property Productively
Why Productive Management Matters Under California Law
What Beneficiaries Can Do If the Trustee Is Not Managing Assets Properly
Related Resources
FAQ
How The Grossman Law Firm Can Help

• California trustees must manage trust property in a way that makes it reasonably productive under Probate Code §§16006 and 16047.
• Failing to invest, maintain, or monitor trust assets may constitute a breach of fiduciary duty.
• Losses caused by mismanagement can lead to surcharge, trustee removal, or court-ordered corrective action.
• Beneficiaries can demand information, request an accounting, or petition the probate court if the trustee fails to act responsibly.

California beneficiaries often expect a trustee to preserve and grow trust assets actively. But when the trustee ignores property maintenance, leaves funds idle, or allows assets to depreciate, beneficiaries may be left wondering whether their rights are being protected. The Grossman Law Firm regularly helps California beneficiaries understand trustee duties and take action when mismanagement threatens their inheritance.

This article explains what productive asset management means, how to recognize when a trustee is falling short, and what beneficiaries can do to address the problem.

Under the California Probate Code, a trustee must do more than simply hold assets. They must manage trust property in a way that preserves value and, when appropriate, produces reasonable returns. Productive management includes:

Ensuring Assets Are Maintained and Protected

A trustee should take steps such as:

• Paying property taxes and insurance
• Conducting needed repairs
• Securing vacant real estate
• Monitoring market conditions

Making Appropriate Investment Decisions

California’s Uniform Prudent Investor Act (Probate Code §§16045–16054) requires trustees to invest trust funds prudently. This includes:

• Diversifying investments when reasonable
• Evaluating risk versus return
• Avoiding speculation
• Using professional advice when necessary

Keeping Assets Separate and Properly Titled

A trustee must avoid commingling and ensure that trust property is clearly identified and held for the benefit of the trust.

Providing Beneficiaries With Information

A trustee’s duty of reasonable care also includes communicating about major decisions that affect the trust’s value.

A trustee may breach their fiduciary duties when they allow trust assets to lose value unnecessarily or fail to take steps a reasonable trustee would take. Examples include:

Neglecting Real Estate

• Allowing a home to sit vacant without maintenance
• Ignoring needed repairs, which results in reduced property value
• Failing to collect rent on an income-producing property

Poor Financial Management

• Leaving substantial cash uninvested for long periods
• Engaging in high-risk, speculative investments
• Using trust money for personal expenses

Failing to Act When Action Is Needed

• Delaying the sale of property when the trust requires distribution
• Not hiring professionals (realtors, CPAs, appraisers) when expertise is needed

If the trustee’s inaction or poor decisions cause financial loss, beneficiaries may have grounds for a surcharge or removal.

Productive management is central to a trustee’s fiduciary responsibilities. California law requires trustees to:

Preserve and Grow Trust Assets

Probate Code §16006 obligates trustees to take reasonable steps to protect and make trust property productive. This standard applies to all assets, real estate, investments, and bank accounts.

Act in the Best Interests of Beneficiaries

A trustee cannot prioritize personal convenience or ignore their obligations. Their decisions must always advance the beneficiaries’ interests.

Avoid Waste and Unnecessary Loss

If a trustee’s mismanagement causes depreciation, lost rental income, or avoidable expenses, the court may:

• Order surcharge
• Require repayment
• Impose corrective duties
• Temporarily suspend or remove the trustee

Beneficiaries should not absorb the cost of a trustee’s inaction.

If you believe the trustee is failing to manage the trust productively, you have several options under California law.

1. Request Information or an Accounting

Beneficiaries have the right to request:

• Financial records
• Details about property management decisions
• A formal trust accounting

A trustee must respond within a reasonable time.

2. Demand Corrective Action

If the trustee is neglecting property or failing to invest assets prudently, a written demand may prompt compliance.

3. File a Petition in Probate Court

When a trustee refuses to act, or the trust is being harmed, beneficiaries can petition for:

• An order compelling action
• A report or accounting
• Surcharge
• Temporary suspension
• Removal of the trustee

Acting early helps protect the trust and prevents further loss.

• Overview of California Trust Litigation
• Know What You’re Getting Into: The Timeline of a Trust and Estate Lawsuit
• Beneficiary Rights in California?
• Can a Trustee Be Removed for Mishandling Assets?
• Do Beneficiaries Have to Pay Taxes?
• 20 Ways Your Trustee Can Be Breaching Their Fiduciary Duties
• Can’t Afford a Probate or Trust Attorney?

What if the trustee says they are “too busy” to manage the trust?

Being busy is not a legal excuse. A trustee must fulfill their duties or seek court guidance if they cannot manage the trust properly.

Can a trustee hire professionals to help manage the assets?

Yes. In fact, California law expects trustees to seek professional help when needed, including real estate agents, financial advisors, and accountants.

What if the trustee refuses to provide updates about trust property?

Beneficiaries can request information in writing and, if necessary, file a petition to compel an accounting under Probate Code §17200.

Can a trustee be removed for mismanagement?

Yes. If mismanagement causes harm or puts the trust at risk, the probate court may remove the trustee and appoint a successor.

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. Qualifying matters will be scheduled for a Free Phone Consultation with Attorney Scott Grossman.

Originally Published June 17, 2022