If you are serving as a trustee in California, your duties are set out primarily in the California Probate Code, Sections 16000 through 16081, with related provisions on compensation, creditor claims, removal, and liability scattered through Sections 15640 to 19004. The code requires you to follow the trust document, invest prudently, act solely for the beneficiaries, treat multiple beneficiaries impartially, keep assets safe and separate, communicate and account regularly, and distribute according to the settlor’s instructions. Fall short on any of these and you can be personally liable for losses, forced to disgorge profits, denied your fee, and removed.
Follow the Trust Document First
Section 16000 is the starting point. You must administer the trust according to its terms, and where the instrument is silent, follow California trust law.1California Legislative Information. California Probate Code 16000 – Trustees Duties in General Personal disagreement with a provision is not a basis to depart from it. If you think a different approach would serve the beneficiaries better, that view does not override the settlor’s intent unless a court orders otherwise.
This is where many disputes start. Trust language about distributions, investment authority, and beneficiary rights often needs interpretation, and a trustee who misreads the document and pays the wrong person or on the wrong schedule is personally on the hook. When a provision is genuinely ambiguous, the safer move is to petition the court for instructions rather than guess.
The Standard of Care You Are Held To
Section 16040 sets the general rule: administer the trust with the care, skill, and caution a prudent person would use in a similar role.2California Legislative Information. California Probate Code 16040 – Trustees Standard of Care That covers administrative decisions like hiring vendors, managing real property, and handling tax filings.
If you have particular expertise, or the settlor chose you because of skills you claimed to have, Section 16014 raises the bar. You must apply the full extent of those skills, and you will be judged against the standard you held yourself out as meeting.3California Legislative Information. California Probate Code 16014 A corporate trustee marketing sophisticated investment capabilities cannot later ask to be judged like a family member who agreed to serve as a favor.
The Prudent Investor Rule
Investment decisions have their own governing standard. Section 16046 requires compliance with the Uniform Prudent Investor Act.4California Legislative Information. California Probate Code 16046 – Duty to Comply with Prudent Investor Rule The settlor can expand or restrict that rule in the trust document, and a trustee who relies in good faith on those express provisions is not liable for doing so.
Section 16047 spells out what prudent investing looks like. You evaluate investments in the context of the whole portfolio, not one at a time, and weigh economic conditions, inflation, tax consequences, liquidity needs, and each beneficiary’s other resources.5California Legislative Information. California Probate Code 16047 Reasonable diversification is required. Courts look at whether the overall risk and return objectives are reasonably suited to the trust’s purposes.
This is a common trap for family-member trustees. Keeping the settlor’s longtime concentrated stock position out of sentiment or inertia, without ever analyzing whether that concentration still serves the beneficiaries, is exactly what the rule is designed to prevent. The analysis has to happen, and it needs to be documented.
Loyalty and the Bar on Self-Dealing
Section 16002 requires you to administer the trust solely in the interest of the beneficiaries.6California Legislative Information. California Probate Code 16002 – Trustees Duties in General There is no competing constituency. Every decision is for them.
Section 16004 prohibits self-dealing. You cannot use trust property for personal profit, participate in transactions where your interests conflict with the beneficiaries’, or buy claims against the trust.7California Legislative Information. California Probate Code 16004 – Trustees Duties in General When a trustee enters a transaction with a beneficiary and gains an advantage, the law presumes a fiduciary violation, and the trustee has to prove otherwise. That presumption applies as long as the trust exists or the trustee’s influence over the beneficiary continues.
The consequences are steep. In Estate of Gump (1991) 1 Cal.App.4th 582, a bank trustee committed both negligent and intentional breaches. The court disallowed roughly $91,570 in trustee fees and denied over $79,000 in attorney fee claims.8Justia. Estate of Gump Self-dealing can also trigger removal and a surcharge order requiring reimbursement to the trust.
Treating Multiple Beneficiaries Impartially
When more than one beneficiary is involved, Section 16003 requires impartial dealing, taking their differing interests into account.9California Legislative Information. California Probate Code 16003 The classic tension is between a current income beneficiary and the remainder beneficiaries who will eventually take the principal. Chase high current yield and you shortchange the remaindermen. Push all-growth with no income and the current beneficiary is starved.
Impartiality does not mean identical treatment. If the trust instrument directs unequal treatment, following that direction is your job. The duty bites where the trust is silent or grants discretion. Base discretionary decisions on objective criteria, not personal relationships, and write down your reasoning at the time you make the call. That contemporaneous record is the single best defense against a later challenge, as the trustee in Estate of Bixby (1961) 55 Cal.2d 819 discovered when a life income beneficiary contested the allocation of oil royalties to principal rather than income.
Take Control, Keep Things Separate, Enforce Claims
Once you accept the role, act quickly to take possession of the assets. Section 16006 requires reasonable steps to gain and maintain control of trust property and to preserve it.10California Legislative Information. California Probate Code 16006 – Trustees Duties in General Section 16007 adds a duty to make the property productive in furtherance of the trust’s purposes.11California Legislative Information. California Probate Code 16007 – Trustees Duties in General Secure real estate. Collect rents and investment income. Verify that assets are actually titled in the trust’s name. Do not let property sit idle or deteriorate.
Section 16010 requires reasonable steps to enforce claims that belong to the trust.12California Legislative Information. California Probate Code 16010 – Trustees Duties in General If someone owes the trust money, pursue collection. If a third party damages trust property, seek recovery. Ignoring valid claims is itself a breach.
Trust property must also stay separate from your own. Section 16009 imposes two related duties: keeping trust property apart from non-trust property, and ensuring trust property is designated as belonging to the trust.13California Legislative Information. California Probate Code 16009 Commingling funds or failing to re-title an asset creates exactly the kind of confusion that produces liability. Separate accounts and clear records are not optional.
What You Can and Cannot Delegate
Section 16012 prohibits transferring the office of trustee or delegating the entire administration.14California Legislative Information. California Probate Code 16012 You cannot hand everything off to a financial advisor or attorney and walk away. Where delegation of a specific task is appropriate, you keep a duty to supervise.
Section 16401 sets out when you become liable for an agent’s mistakes. A trustee is generally not on the hook for an agent’s acts, but liability attaches if the trustee directed the acts, delegated something that should not have been delegated, failed to use reasonable care in selection or retention, or neglected to periodically review performance.15California Legislative Information. California Probate Code 16401 Investment management has its own delegation framework under Section 16052, which allows broader delegation to professional investment managers so long as you exercise care in choosing and monitoring them.
If You Serve With Co-Trustees
Each co-trustee has an independent duty to participate. Section 16013 also requires each co-trustee to take reasonable steps to prevent a fellow trustee from committing a breach and to compel a breaching co-trustee to fix it. Deferring silently to the others is not a defense. Passive co-trustees who look the other way while another trustee mismanages assets face their own liability.
Keeping Beneficiaries Informed
Section 16060 imposes a broad duty to keep beneficiaries reasonably informed about the trust and how it is being administered.16California Legislative Information. California Probate Code 16060 – Trustees Duty to Report Information and Account to Beneficiaries Administering a trust in secrecy is a violation, even when the document says nothing about communication.
Section 16061.7 adds a hard deadline. When a revocable trust becomes irrevocable, usually because the settlor has died, you must serve a formal notification on all beneficiaries and heirs within 60 days.17California Legislative Information. California Probate Code 16061.7 The same 60-day notice applies to a change of trustee on any irrevocable trust. If the trustee position is vacant at the time of the triggering event, the clock starts when the new trustee begins serving. Missing the deadline does not eliminate the duty, and it extends the window during which the trust can be contested, because the notice triggers the 120-day contest period under Section 16061.8.
The Formal Accounting
Section 16062 requires written accountings at least annually, at trust termination, and on any change of trustee, to each beneficiary who is currently receiving distributions or is eligible to receive them at your discretion.18California Legislative Information. California Probate Code 16062
Section 16063 specifies what each accounting must contain:
- A statement of all receipts and disbursements of principal and income during the period.
- A statement of assets and liabilities as of the end of the period.
- The trustee’s compensation paid since the last accounting.
The point is to let beneficiaries evaluate whether the trust is being managed properly.19California Legislative Information. California Probate Code 16063 – Trustees Duty to Report Information and Account to Beneficiaries Complex assets like real estate and business interests need accurate valuations and disclosure. In Conservatorship of Coffey (1986) 186 Cal.App.3d 1431, a conservator who failed to disclose a lapsed insurance policy in a final accounting was surcharged $13,500 plus interest for the omission of a material fact.
A trust instrument can waive the accounting requirement in some cases, and a beneficiary can waive it in writing. Even so, Section 16064 lets a court compel an accounting when there is reason to believe a material breach has occurred.20California Legislative Information. California Probate Code 16064 Certain disqualified trustees, as defined by the Probate Code, cannot benefit from a waiver at all.
Using the Notice of Proposed Action
California gives trustees a procedural shield worth using. Before taking a significant step, you can serve a written Notice of Proposed Action on beneficiaries describing the action and the reasons. Section 16502 requires your contact information, a description of the proposed action, an explanation of the reasons, and a deadline of at least 45 days for beneficiaries to object.21California Legislative Information. California Probate Code 16502
If no beneficiary files a written objection within that window, Section 16503 protects you from liability for that action, not just against the beneficiaries who received notice but against all current and future beneficiaries.22California Legislative Information. California Probate Code 16503 The objection process is low-friction for beneficiaries. Checking a box and returning the form is enough, with no obligation to explain the objection. If a beneficiary does object, you can either abandon the proposed action or petition the court for approval.
Use this tool for anything reasonably open to question: selling real property, making large distributions, changing investment strategies, borrowing against trust assets. The protection does not apply if the beneficiary receiving notice was a minor or an incapacitated adult without a guardian or conservator receiving notice on their behalf.
Making Distributions
Section 16000 sends you back to the settlor’s instructions on when and how distributions occur.1California Legislative Information. California Probate Code 16000 – Trustees Duties in General Distributions might be outright, staggered, or tied to conditions like reaching a certain age or completing a degree. Departing from those instructions, even with good intentions, exposes you to liability.
When the trust grants discretion, Section 16081 still requires you to act in accordance with fiduciary principles and not in bad faith or in disregard of the trust’s purposes, even where the trust uses words like “absolute” or “sole” discretion.23California Legislative Information. California Probate Code 16081 If you are also a beneficiary, extra limits apply. Unless the trust clearly says otherwise, a beneficiary-trustee can exercise a discretionary distribution power in their own favor only for health, education, support, or maintenance, as those terms are understood under federal tax law.
Document the reasoning behind each discretionary decision. A short contemporaneous note explaining what the beneficiary requested, what standard you applied, and why you decided as you did is hard for a later challenger to overcome.
Handling Creditor Claims After the Settlor Dies
When the settlor dies, trust property that was subject to the settlor’s power of revocation becomes available to pay the settlor’s creditors, but only to the extent the probate estate is insufficient. That framework is set by Section 19001.24California Legislative Information. California Probate Code 19001 Distribute everything to beneficiaries without reserving enough for valid creditor claims and you can be personally liable when those creditors surface.
Section 19003 lets you file a proposed notice to creditors with the court when no probate has been opened.25California Legislative Information. California Probate Code 19003 Once you publish and serve the notice, creditors must file within the statutory window. Under Section 19004, claims not filed in time are barred, and the creditor cannot maintain an action without first filing properly.26California Legislative Information. California Probate Code 19004 You must also notify known creditors within the later of four months after the first publication or 30 days after you first learn of that creditor.
Filing the creditor notice is optional. Skip it and you lose the ability to cut off late-arriving claims. For trusts with significant assets or a settlor who may have had debts, the procedure is worth the effort.
Trustee Compensation
You are entitled to be paid. If the trust instrument specifies compensation, those terms control. When the trust is silent, Section 15681 entitles you to reasonable compensation under the circumstances.27California Legislative Information. California Probate Code 15681
California Rule of Court 7.776 lists the factors that determine what is reasonable:28Judicial Branch of California. Rule 7.776 – Compensation of Trustees
- The gross income and overall value of the trust estate.
- Whether the administration was successful or produced losses.
- Any unusual skill or experience the trustee brought to the role.
- The risk and responsibility the trustee took on.
- The time the administration actually required.
- What settlors authorize, courts allow, and corporate trustees charge for similar trusts locally.
Excessive compensation is itself a ground for removal under Section 15642. Paying yourself generously without documentation invites a petition from the beneficiaries.
What Happens If You Breach
Section 16440 sets out the financial consequences. A breaching trustee can be charged with any loss or depreciation in trust value resulting from the breach (with interest), any profit the trustee personally made through the breach (with interest), and any profit the trust would have earned but for the breach.29California Legislative Information. California Probate Code 16440 If the trustee acted reasonably and in good faith, the court has discretion to excuse liability in whole or in part when equity warrants.
Section 16461 caps the protection an exculpatory clause can offer. No matter how the trust is written, the clause cannot shield a trustee who committed an intentional breach, acted with gross negligence or bad faith, or showed reckless indifference to the beneficiaries’ interests. It also cannot shield profits derived from a breach.30California Legislative Information. California Probate Code 16461
Section 16460 imposes a three-year statute of limitations on beneficiary claims. If you provided a written accounting or report that adequately disclosed the existence of the claim, the beneficiary must file within three years of receiving it. If no adequate disclosure was made, the three years run from when the beneficiary discovered or should have discovered the breach.31California Legislative Information. California Probate Code 16460 That is one of the practical reasons for thorough, detailed accountings. A clear accounting starts the clock; a vague one may leave you exposed indefinitely.
Resigning or Being Removed
You cannot simply walk away. Section 15640 limits resignation to specific methods: a procedure set out in the trust instrument, consent from the holder of the power to revoke for revocable trusts, consent from all adult beneficiaries currently receiving or entitled to receive income or principal for irrevocable trusts, or a court petition.32California Legislative Information. California Probate Code 15640 Resignation does not erase responsibility for what happened during your tenure, and you have to hand off cleanly to a successor.
Involuntary removal is available under Section 15642. A settlor, co-trustee, or beneficiary can petition the court on grounds that include:
- Breach of trust, meaning any violation of the duties above.
- Unfitness or insolvency.
- Hostility among co-trustees that impairs administration.
- Failure or refusal to act.
- Excessive compensation.
The court can also act on its own motion.33California Legislative Information. California Probate Code 15642 – Resignation and Removal of Trustees A removed trustee can still be surcharged for losses caused during their tenure, on top of whatever flows from the underlying breach.