Newly appointed trustees often share a version of the same admission with me: they agreed to serve because it felt like the right thing to do, and only afterward did they realize how many rules come with the role. Trusteeship is manageable, and it requires deliberate attention, informed judgment, and consistent adherence to fiduciary duties.

Serving as a trustee carries significant legal responsibility. Under the California Probate Code and general fiduciary principles, trustees owe strict duties to beneficiaries. When those duties are breached, even unintentionally, trustees can be personally liable. The good news is that most risks come from a small number of common, avoidable mistakes.

Failing to Administer the Trust According to Its Terms

The trust document is the governing instrument. A trustee’s primary obligation is to follow the trust creator’s instructions as written. Problems arise when trustees distribute assets too early, ignore specific distribution formulas, or overlook restrictions tied to particular assets. Even well-meaning deviations can result in a surcharge claim if they contradict the plain language of the trust. Careful review of the document at the outset, and consultation with counsel when provisions are unclear, can prevent costly missteps.

In one matter, a successor trustee acting out of genuine care for the beneficiaries distributed the family home to the decedent’s children before the creditor claim period had run, unaware that the trust also directed a specific reimbursement to one sibling for loans made to the decedent during his lifetime. By the time the oversight was discovered, the asset had already been transferred, the reimbursement obligation went unsatisfied, and the trustee faced a surcharge claim for the full amount, a result that a single conversation with counsel at the outset would have avoided.

Poor Communication Between Trustees and Beneficiaries

Breakdowns in communication are among the most common catalysts for trust disputes. Beneficiaries are entitled to certain statutory notices and, in most cases, periodic accountings. When trustees fail to provide timely information or do not respond to reasonable inquiries, suspicion grows. That suspicion often evolves into formal demands or trust litigation. Consistent, proactive communication establishes transparency and reduces the likelihood of conflict.

Commingling Trust Assets and Violating Fiduciary Duties

Trust assets must remain separate from the trustee’s personal property at all times. Depositing trust funds into a personal account, paying personal expenses from trust assets, or even temporarily mixing funds can constitute a breach of fiduciary duty. Courts view commingling seriously because it blurs accountability and invites misuse. Establishing dedicated trust accounts immediately after appointment and taking steps to maintain accurate records protects both the trust and the trustee.

Self-Dealing and Conflicts of Interest

Trustees owe a duty of loyalty that requires them to act solely in the interests of the beneficiaries. Transactions that benefit the trustee personally, favor one beneficiary without legal justification, or involve purchasing trust property without proper authorization can trigger trustee liability. Even the appearance of a conflict can create problems. Full disclosure and, where appropriate, written consent or court approval are critical safeguards when potential conflicts arise.

Failure to Properly Invest or Manage Assets

Trustees are responsible for prudent asset management. In California, the Uniform Prudent Investor Act, incorporated into the California Probate Code, requires trustees to exercise reasonable care, skill, and caution. Leaving substantial funds idle, failing to diversify, neglecting real property, or holding risky assets without analysis may expose a trustee to claims of mismanagement. Prudence is measured by process rather than outcome, which means thoughtful decision-making and documentation are essential.

Delays in Administration

Trust administration should progress within a reasonable and deliberate timeframe. Prolonged delay in marshaling assets, preparing property for sale, satisfying tax obligations, or making distributions can prejudice beneficiaries and expose the trustee to avoidable liability. More often than not, delay arises not from misconduct, but from hesitation, indecision, or tension among beneficiaries. Establishing a defined timeline at the outset of administration substantially mitigates risk. In my experience, thoughtful involvement of counsel can also help streamline the process and ease strained beneficiary dynamics before they escalate.

Personal Liability for Trustees

Seeking the guidance of counsel at the outset can help trustees avoid the pitfalls that lead to personal liability. Personal liability, when it does arise, most often stems from inattention rather than misconduct. By adhering closely to the trust’s terms, communicating transparently, maintaining strict financial separation, avoiding conflicts, managing assets prudently, and moving administration forward diligently, trustees can fulfill their responsibilities while protecting themselves from avoidable exposure. Engaging trusted legal counsel at the outset is one of the most effective steps a trustee can take to protect both the estate and themselves.

This article is intended for general informational purposes only and does not constitute legal advice. Every trust and every situation is unique.

Lilit Arabyan is a Trust Administration and Estate Planning attorney at KJMLAW Partners. She advises families with both domestic and international property interests, guiding them through the trust administration process with particular attention to tax compliance and asset transfer matters. Her work includes preparing and filing estate and gift tax returns, drafting trust distribution and allocation agreements, overseeing property transfers, and petitioning the court to ensure proper asset titling.

Lilit also represents clients in probate administration, contested conservatorships, and related civil litigation matters. Prior to joining KJMLAW, she served as a Deputy Attorney General for the California Department of Justice, interned at the Business and Tax Section, and clerked for the Honorable Neil W. Bason of the U.S. Bankruptcy Court for the Central District of California.

If you have questions about trust administration or estate planning in California, contact Lilit Arabyan to schedule a consultation.