Serving as a trustee can be a big responsibility. If you are a trustee and want to know your responsibilities, or have questions about a trustee on a trust you benefit from, knowing this information can be critical. Trustees have specific duties and responsibilities under California law. Not following through on them can lead to liability. The right attorney helps protect everyone’s rights.
At Filippi Law Firm, P.C., our California estate planning attorneys are ready to help. We help trustees meet all of their obligations and families create trusts that work for years to come.
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The Trustee’s Core Role Under California Law
A trustee is responsible for managing trust assets in a way that benefits the beneficiaries. The trustee may be a person or even an institution responsible for this. Trustees have to follow the rules of the trust, state law, and always act in the best interests of the beneficiaries.
The trustee’s responsibilities generally fall into three categories:
- Managing trust assets
- Communicating with beneficiaries
- Carrying out the trust’s instructions
Fiduciary Duties: The Highest Legal Standard
California trustees have strict fiduciary rules to follow. They have to follow the key duties of:
Duty of Loyalty
The trustee must always act in the beneficiaries’ best interests, not their own. Self-dealing, conflicts of interest, and using trust assets for personal benefit are prohibited.
Duty of Impartiality
If there are multiple beneficiaries, the trustee can’t favor one over the other. There may be exceptions to this, such as when the trust document specifically instructs a trustee to do so.
Duty of Prudence
A trustee must use their reasonable skill, care, and caution in managing the trust assets. They should do their best to make good investment decisions and protect the trust from loss.
Duty to Follow the Trust Document
The trust’s written instructions control. A trustee can’t just ignore the rules or terms unless the law allows them to for some reason.
Administrative Responsibilities of a California Trustee
Trustees in California also have administrative duties. They most often include:
1. Marshaling and Safeguarding Assets
The trustee has to locate and secure all assets of the trust, including, but not limited to:
- Real estate
- Bank accounts
- Personal property
- Investments
2. Notifying Beneficiaries and Heirs
California law requires trustees to send out appropriate notices. A Notice of Trust Administration lets beneficiaries or heirs know about a person’s death, as well as other potential notices.
3. Managing and Investing Trust Assets
Trustees must follow the California Uniform Prudent Investor Act. This may require:
- Risk management
- Diversification
- Ongoing monitoring
- Other responsible activities
4. Paying Debts and Expenses
There are often debts and expenses that need paid. These might include administrative costs, final bills, and funeral costs.
5. Filing Tax Returns
Trustees often have to file final tax returns for the decedent or for the trust itself.
6. Keeping Detailed Records
California requires that the trustee keep very detailed records. The trustee should also provide periodic reports to any beneficiaries, and provide reasonable records upon request.
7. Distributing Trust Assets
The trustee will ultimately distribute trust assets in accordance with the rules of the trust once all debts or other obligations are resolved.
Trustee Liability: When Mistakes Become Personal
Trustees can be held personally liable if they do not do their job correctly. This could happen when:
- Failing to communicate with beneficiaries
- Mismanaging investments
- Mixing trust assets with personal assets
- Delaying administration without good reason
- Improperly distributing assets
- Ignoring tax obligations
- Acting in self-interest
When Trustees Should Talk to an Attorney
Even well-intentioned trustees can make mistakes simply because they do not understand California’s complex trust laws. An experienced California trust administration attorney can help trustees:
- Interpret the trust document
- Prepare required notices and accountings
- Manage deadlines and reporting obligations
- Avoid conflicts with beneficiaries
- Reduce the risk of personal liability
- Ensure distributions are made correctly
Legal guidance is especially important when the trust contains real estate, business interests, tax-sensitive assets, or beneficiaries who disagree about administration.
Don’t Go It Alone: Trustees Can Trust in Sound Legal Advice to Avoid Liability
Serving as a trustee is highly important. You have many obligations and duties but you don’t have to go about it alone. You have the right to consult with someone that has your best interests in mind, and keeps you compliant.
Let the dedicated estate planning attorneys at Filippi Law Firm, P.C. review your case. Contact us today for a consultation.
