Choosing the right trustee is one of the most critical decisions when establishing a trust. The trustee ensures the grantor’s wishes are fulfilled and safeguards the beneficiary’s interests. For those creating a trust as part of their estate plan, understanding the trustee’s role and responsibilities empowers informed decision-making, helping to ensure that your wishes and intent are carried out.

What Does It Mean to Be a Trustee? 

A trustee is a role with a history spanning hundreds of years. At its core, a trustee, whether acting alone or as part of a group, bears the responsibility of acting in someone else’s best interests. This extends far beyond estate planning; for example, the board of trustees overseeing a university or corporation is entrusted with the governance and management of an institution, and it is obliged to prioritize its interests.

In estate planning, a trustee is tasked with managing a trust’s assets and administration and is legally obligated to uphold the trust’s terms and act in the beneficiary’s best interests. A trustee may even be personally liable for outstanding taxes or for actions they take. Among the possible choices for a trustee may be family members, trusted friends, a professional advisor, or a corporate entity.

Deciding who to choose as a trustee depends on the trust’s complexity and the grantor’s preferences.

Once chosen, the trustee is responsible for following the instructions in the terms of the trust, and the requirements of the law, such as:

Managing Trust Assets

Trustees must protect and oversee all trust assets, including real estate, investments, bank accounts, and private property. Their duties include making prudent investment decisions, maintaining precise records, and ensuring proper insurance coverage and maintenance. 

Protecting Trust Assets

Safeguarding the trust’s assets sometimes requires legal action. For example, if money is owed to the trust, the trustee may need to file a lawsuit to recover those funds. Conversely, if a creditor sues the trust, the trustee must defend against the claim to prevent losses. These decisions must weigh costs against potential benefits to avoid wasting the trust’s resources on unnecessary legal battles.

Distributing Assets

Trustees are responsible for distributing income or principal to beneficiaries in strict accordance with the trust’s terms and the requirements of law. This involves adhering to specified timing, amounts, and conditions outlined by the grantor.

Providing Required Notice

The trustee has a duty of notifying known beneficiaries and family members, as well as known and potential creditors.

Compliance and Record-Keeping

Trustees must ensure full compliance with legal and tax obligations. This includes filing required tax returns, maintaining transparent records, and providing beneficiaries with regular, detailed accounting of trust assets.

Types of Trustees

As noted earlier, a trustee generally falls into one of three categories: individual trustees, professional trustees, and corporate trustees. Each type possesses distinct characteristics that may align with different trust requirements.

Individual Trustees  

The most common category of trustees involves family members or close friends appointed by the grantor. This option has the potential to be less costly, as individual trustees often do not charge fees for their services. However, they may lack the necessary expertise, resources, and objectivity to manage trusts effectively. Moreover, choosing the wrong family member, or multiple family members who do not agree, may increase the chance of conflict and even litigation among beneficiaries and other family members.

Pros: 

• No/low cost – Rarely charge fees, making this the most economical choice
• Personal rapport – Understanding of family dynamics and the grantor’s intent
• Aligned values – Likely to prioritize the grantor’s personal wishes  

Cons: 

• Limited expertise – May lack knowledge of legal, tax, or investment matters
• Emotional risks – Personal ties could cloud judgment or create conflicts
• Resource gaps – Often insufficient tools/staff for complex trusts

Professional / Corporate Trustees

Licensed individuals or entities, such as banks, trust companies, or fiduciary firms, can provide comprehensive trust administration services. These typically include investment management, financial advisory, tax filing, and retirement planning.

They are particularly valuable in three key scenarios: when the trust holds complex or illiquid assets like privately held businesses, art collections, or specialized real estate (cases where beneficiaries often lack the expertise or desire to manage such assets); when estates are exceptionally large, where the stakes and tax implications demand professional oversight, and when the dynamics between beneficiaries mean that a family member or lay person will not be effective. However, their expertise comes at a cost, typically between 1% and 2% of the trust’s assets annually.

Pros: 

• Specialized expertise – Skilled in trust administration, legal compliance, and financial management
• Unbiased oversight – Makes objective decisions without emotional influence
• Built-in resources – Includes access to financial and institutional support

Cons: 

• Service fees – Typically charge a percentage of the trust assets annually
• Limited familiarity – Less personal connection to grantors and beneficiaries.   
• Institutional feel – May feel impersonal or bureaucratic to some beneficiaries.  

Administration

Regardless of who is appointed, the trustee must follow both the trust terms and legal requirements of the California Probate Code, with family-appointed individual trustees often providing a personal approach, while professional and corporate trustees deliver specialized expertise, impartial decision-making, and reliable responsiveness that many grantors and beneficiaries find valuable.

The choice ultimately depends on the trust’s complexity, the grantor’s priorities, and the beneficiaries’ needs.

Can a Trustee Be the Beneficiary of a Trust?

Yes, a trustee can also be a beneficiary of the trust, but these dual roles come with specific legal and ethical considerations. Under California Probate Code,16002 et seq, they still must adhere to their fiduciary duties, acting in the best interests of all beneficiaries, not just themselves. This means they must avoid conflicts of interest, act impartially, and manage the trust’s assets prudently. Otherwise, they could face legal consequences, including removal or liability for breach of fiduciary duty. 

To minimize these risks, some grantors appoint multiple trustees, including independent ones, to provide checks and balances. So, while a trustee can also be a beneficiary, it is crucial to carefully consider the potential challenges and implement safeguards to uphold the trust’s integrity and the interests of all beneficiaries.

Trustee vs. Executor: What’s the Difference? 

Both trustees and executors play distinct but equally important roles in estate administration, each with specific responsibilities. Understanding the difference between them is crucial for an effective estate plan:

• Trustee: An individual or entity appointed to manage and administer a trust. Their primary responsibility is to carry out the grantor’s wishes as outlined in the trust document. They mostly work on their own and are governed by the terms of the trust document.
• Executor: An individual responsible for administering a deceased person’s will and appointed by the court during probate proceedings. Their role involves managing the estate, paying debts and taxes, and distributing assets to beneficiaries as specified in the will.

While both roles involve managing and distributing assets, a trustee’s responsibilities are ongoing and tied to the trust’s duration, which may last indefinitely. In contrast, an executor’s role ends once probate closes. However, this doesn’t mean the roles are mutually exclusive; the same individual or entity can be named as both trustee and executor, which can streamline some administrative work but requires a clear understanding of the separate responsibilities involved.

How a Trustee Contributes to Effective Estate Planning

While trustees usually do not participate in the determination of the terms of the trust, they still play a critical role by ensuring that the grantor’s wishes are properly executed and beneficiaries’ interests are safeguarded. Their fundamental responsibility lies in implementing the estate plan with precision. This includes critical functions such as:

Following the Trust’s Terms

Trustees ensure that assets are distributed as outlined in the trust document, whether that means making immediate distributions, setting up staggered payments, or holding assets for future use.

Handling Complex Distributions 

In cases where beneficiaries have different needs or conditions are attached to distributions (e.g., age or milestone-based distributions), trustees manage the logistics and ensure fairness. Key responsibilities include:

• Understanding the Trust Document: Reviewing and interpreting the trust’s terms to ensure compliance with the grantor’s wishes.  
• Legal Compliance: Adhering to state laws, such as California’s Probate Code, and filing required documents with courts or government agencies, and notices.  
• Communication: Keeping beneficiaries informed about the trust’s administration, including providing regular accounting and responding to inquiries.

Balancing Interests

When multiple beneficiaries are involved, trustees act as impartial decision-makers, balancing competing interests and ensuring that no one is unfairly favored. This impartiality becomes especially critical when different beneficiaries are entitled to the income than those entitled to the principal of the trust. If siblings are named as co-trustees, family dynamics can complicate the administration of a trust, as childhood rivalries and emotional tensions can interfere with sound decision-making.

Safeguarding Assets

Trustees manage and protect trust assets, ensuring they are preserved and grown for the benefit of the beneficiaries. This includes making prudent investment decisions and maintaining proper insurance coverage.  

Ensuring Compliance

Trustees ensure that the trust operates within the legal framework at both the state and federal levels. These usually include: 

• Tax Compliance: Filing tax returns for the trust, paying any taxes owed, and ensuring compliance with federal and state tax laws.  
• Investment Management: Making prudent investment decisions to grow and preserve trust assets while balancing risk and return.  
• Distributions: Distributing income or principal to beneficiaries as specified in the trust document, ensuring timely and accurate payments.  

In essence, an estate plan serves as the blueprint for trust administration, detailing the grantor’s wishes for asset distribution and beneficiary care. Trustees, whether a family member or a professional, carry out these directives, even after the grantor can no longer oversee them. This ensures your intentions are honored and your loved ones are properly provided for.

Fiduciary Duties of a Trustee

While the responsibilities of trust administration might be clear, trustees sometimes need to make decisions that may not be covered by the trust document. To aid this decision-making, there are some fiduciary duties set out by law to push trustees to act ethically and responsibly. By upholding their fiduciary obligations, trustees maintain the trust’s integrity, protect beneficiaries’ rights, and fulfill the grantor’s intentions. At their core, these duties include:  

1. Loyalty: Trustees must prioritize the interests of the trust and its beneficiaries above their own, avoiding conflicts of interest and refraining from using trust assets for personal gain. For example, a trustee cannot invest trust funds in a business without explicit permission from the beneficiaries or the trust document.
2. Impartiality: If a trust has multiple beneficiaries, the trustee must act impartially and avoid favoring one beneficiary over another. This is particularly important when making distributions or investment decisions that could impact beneficiaries differently.
3. Prudence: Trustees are required to manage trust assets with care, skill, and caution. This includes making informed and reasonable investment decisions, diversifying assets to minimize risk, and avoiding speculative or overly risky ventures. The “prudent investor rule” often guides this duty, emphasizing long-term growth and preservation of trust assets.

What Happens if a Trustee Fails in Their Duties? 

This brings us to a critical point: if a trustee fails to fulfill their role or breaches their fiduciary duties, beneficiaries have legal means to address this. Trustees are held to a high standard of care, and their failure to meet these obligations has significant consequences. Actions that beneficiaries can take to hold a trustee accountable include:

1. Breach of Fiduciary Duty Claims: Beneficiaries can file a lawsuit against the trustee and, if successful, they may be required to compensate the trust for damages, return improperly distributed assets, or forfeit fees. The trustee didn’t live up to their responsibilities
2. Surcharge: If a trustee’s actions result in financial losses to the trust, the court may order the trustee to repay the lost funds or assets. This is known as a surcharge.
3. Petition for Removal: Under California Probate Code Section 17200, beneficiaries can petition the court to remove a trustee who has mismanaged the trust or acted inappropriately. A probate judge may suspend or remove the trustee and appoint a successor trustee. This remedy is usually reserved for instances where a trustee has engaged in self-dealing or other serious breaches. It can be difficult to get a trustee removed, but depending on the gravity of the situation, it is possible.

Courts take breaches of duty seriously, as they undermine the trust’s purpose and the beneficiaries’ rights. These safeguards ensure that trustees adhere to their responsibilities and that the trust’s assets and beneficiaries’ interests are protected.

How to Choose a Trustee

The trustee will manage trust assets, make critical financial decisions, and ensure the grantor’s wishes are carried out, so it’s essential to choose someone capable, trustworthy, and aligned with your goals. To help make an informed decision, here are some of the most important qualities when evaluating potential trustees: 

1. Trustworthiness: A trustee must be honest and reliable, as they will have significant control over your assets. Look for someone with a strong moral character and a history of making ethical decisions.  
2. Impartiality: If there are multiple beneficiaries, the trustee must act fairly and avoid favoritism. This is especially important in families with potential conflicts.  
3. Availability: Trust administration can be time-consuming. Ensure your trustee has the time, temperament, and willingness to fulfill their duties effectively.
4. Organizational Skills: Trustees must keep detailed records, communicate with beneficiaries, and adhere to legal requirements. Strong organizational and administrative skills are crucial.  
5. Financial Knowledge: Managing a trust often involves complex financial tasks, such as investing assets, filing taxes, and distributing funds. A trustee with financial expertise or the ability to work with financial professionals is ideal.  

As discussed earlier, the choice between a family member and a professional trustee hinges on your specific needs. When deciding between the two, consider the trust’s size, complexity, and the potential for family conflicts. In some cases, appointing co-trustees (a family member and a professional) can provide a balance of personal insight and technical expertise, ensuring the trust is managed thoughtfully. 

Other Key Considerations When Appointing a Trustee  

• Location: If your trust involves managing real estate or other location-specific assets, it’s practical to have a trustee geographically close to or familiar with the area.  
• Experience: For complex trusts, prioritize trustees with experience in trust administration, investment management, or legal compliance.  
• Expertise: If your trust involves specialized assets, such as a business or unique investments, choose a trustee with relevant expertise or the ability to consult professionals.  
• Succession Planning: To ensure seamless trust management and avoid the need for court intervention, it’s wise to name multiple successor trustees in your estate plan. By designating a primary trustee along with one or more backups, you provide continuity in case your first choice is unable or unwilling to serve. This proactive step helps prevent delays, disputes, or legal complications, ensuring your wishes are carried out smoothly without relying on judicial appointments.

Whether you select a trusted family member or a professional trustee, the right choice will guarantee that the trust is managed appropriately and your wishes are carried out as intended. Otherwise, you risk mismanagement, family disputes, or even legal challenges, which will undermine the very purpose of your estate plan.

Are Trustees Paid?

Yes, trustees can receive payment for their work, according to what’s established in the California Probate Code Section 15680. Individual trustees, such as family members, may choose not to charge fees, while professional or corporate trustees typically require compensation for their time. However, in either case, compensation is subject to taxation, since it is considered income, not part of an inheritance.

Common Payment Structures for Trustees

• Hourly Rate: Trustees may charge an hourly rate for their services, particularly for tasks like record-keeping, communication, or legal compliance. This structure is common for professional trustees handling complex trusts.  
• Flat Fee: Some trustees charge a flat fee for specific services or for administering the trust over a set period. This provides predictability but may not account for unexpected complexities.  
• Percentage of Trust Assets: As mentioned, corporate trustees often receive a percentage of the trust’s assets, typically ranging from 1% to 2% annually. This structure aligns the trustee’s compensation with the trust’s size and performance.  

Courts and trust documents usually stress that trustee compensation should be fair and reasonable. If fees seem too high, beneficiaries can push back, but if they’re too low, it might discourage skilled individuals or professionals from taking on the role. Being upfront about how fees are structured is key to keeping things running smoothly and avoiding conflicts. It’s not uncommon for family members to waive their fees.

Common Trustee Disputes

Trust administration, while designed to be straightforward, can still lead to conflicts, especially when multiple trustees or beneficiaries are involved. These disputes can strain relationships and complicate the management of the trust. Here are some common issues and ways to resolve them: 

Trustee Negligence or Inaction

A trustee failing to fulfill their duties can create frustration and financial harm for beneficiaries. This often happens due to a lack of expertise, personal conflicts, or simple procrastination. To resolve this, beneficiaries may need to formally request accountability or, in extreme cases, petition the court for trustee removal.

Multiple Trustee Disputes

When co-trustees are involved, disagreements can arise over decisions like selling property, making investments, or distributing assets. Differing opinions or approaches can lead to deadlock, stalling the trust’s administration.

Trustee vs. Beneficiary Conflicts

Beneficiaries may challenge a trustee’s decisions, such as selling a cherished family asset or making distributions they perceive as unfair. These conflicts often stem from miscommunication or differing interpretations of the trust’s terms.  

Discretionary Distribution Disputes

Trustees often have discretion over how and when to distribute assets, which can create tension among beneficiaries. For example, one beneficiary may feel favored over another, leading to accusations of bias or unfair treatment. 

Many conflicts can be resolved through clear and transparent communication. Trustees should provide regular updates to beneficiaries and explain their decisions, fostering trust and understanding. If disputes escalate, mediation offers a cost-effective and less adversarial approach to resolving issues. A neutral third party can facilitate discussions and help find mutually acceptable solutions.

When disputes cannot be resolved informally, beneficiaries or trustees may pursue legal recourse. Courts can intervene to remove a trustee, clarify the trust’s terms, or resolve conflicts over distributions. Under the California Probate Code, beneficiaries have the right to petition the court to address mismanagement or breaches of fiduciary duty.  

Find the Help of KJMLAW Partners Today

At KJMLAW Partners, we understand that effective trust administration requires both legal precision and a deep commitment to your family’s future. Whether you’re establishing a trust, navigating complex distributions, or addressing disputes among beneficiaries, our seasoned trust litigation attorneys provide clarity, compliance, and compassionate advocacy.

With experience both defending trustees against unfair claims and suing trustees for negligence or misconduct, we ensure your rights and interests are protected, no matter your role in the trust. Let us help you choose the right trustee, resolve conflicts, or ensure your wishes are honored without unnecessary delays or stress.

Contact us today at 626-565-5680 for a consultation. Together, we’ll safeguard your legacy and protect what matters most.