Trustee Duty to Manage Trust Property Productively in California

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

If you are a trust beneficiary, you expect the trustee to protect the property that may eventually become part of your inheritance. But what happens when a trustee lets a home deteriorate, leaves trust funds sitting idle, or makes decisions that cause the trust to lose money?

California trustees have a fiduciary duty to take reasonable steps to protect trust property and make it productive. A trustee who neglects property or fails to manage trust assets responsibly may be breaching their fiduciary duties.

At The Grossman Law Firm, Attorney Scott Grossman represents beneficiaries throughout California in trust litigation involving trustee mismanagement and other potential breaches of fiduciary duty.

• California trustees have a duty to take reasonable steps to protect trust property and make it productive.
• Trustees must manage trust assets according to the terms of the trust and their fiduciary duties under California law.
• Neglecting trust property, failing to manage trust assets responsibly, or allowing avoidable losses may amount to a breach of fiduciary duty.
• Beneficiaries who suspect trustee mismanagement can request information and may be able to ask the probate court to intervene.
• If a trustee breaches their duties and causes financial harm to the trust, the court may have several remedies available, depending on the circumstances.

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.

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

Mismanaging Trust Money or Investments

Keep idle cash/investment examples, but I’d remove “using trust money for personal expenses” from this subsection. That’s really self-dealing/duty of loyalty rather than failure to make property productive.

Failing to Act When the Trust Requires Action

The delayed sale/distribution example is good.

For example, suppose a trust owns a rental property that should generate income for the beneficiaries. The trustee stops collecting rent, ignores necessary repairs, and allows the property to deteriorate. A beneficiary who eventually receives less because of those decisions may have reason to question whether the trustee fulfilled their fiduciary duties.

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. A trustee must administer the trust according to its terms and fulfill the fiduciary duties imposed by California law. Personal convenience or self-interest should not drive decisions about trust property.

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.

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. 

• 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