The Role Comes With Real Power. And Real Responsibility.
When someone steps into the role of trustee, they’re taking on more than most people realize. A trustee has legal control over trust assets, the authority to make financial decisions, and the responsibility to carry out the trust’s terms on behalf of the beneficiaries. That’s a significant amount of power.
But California law doesn’t hand that power over without strings attached. Trustees operate within a defined legal framework, and stepping outside of it, even unintentionally, can have serious consequences.
What a Trustee Is Authorized to Do
The specific powers available to a trustee depend partly on what the trust document itself says and partly on California’s default trustee powers under the California Probate Code. When a trust is silent on a particular power, state law fills in the gaps.
Generally speaking, a trustee in California has the authority to:
- Manage, invest, and reinvest trust assets prudently
- Open and maintain bank and investment accounts in the trust’s name
- Buy, sell, or lease trust property when doing so serves the beneficiaries’ interests
- Hire attorneys, accountants, and other professionals to assist with administration
- Make distributions to beneficiaries according to the trust’s terms
- Pay debts, taxes, and expenses of the trust from trust assets
That’s a broad set of powers. But every one of them comes with the requirement that the trustee act in the best interest of the beneficiaries, not themselves.
Yee Law Group Inc. works with trustees throughout California to help them understand their authority and exercise it correctly from day one.
What a Trustee Cannot Do
This is where things get important. California imposes a fiduciary duty on trustees, which means the trustee must always prioritize the beneficiaries’ interests over their own. There are clear lines that cannot be crossed.
A trustee cannot:
- Use trust assets for personal benefit or self-dealing
- Make gifts from the trust to themselves or family members unless the trust explicitly permits it
- Favor one beneficiary over another without legal justification
- Make speculative or reckless investments with trust assets
- Withhold required accountings or information from beneficiaries
- Ignore the terms of the trust document in favor of their own judgment
Self-dealing is one of the most common violations trustees run into. It doesn’t always look obvious. A trustee who sells trust property to themselves at below-market value, or who hires their own business to perform services for the trust, may be crossing a line even if they don’t realize it.
Working with a Yolo County trust administration lawyer helps trustees identify these risks before they become legal problems.
The Prudent Investor Standard
California holds trustees to what’s called the prudent investor standard. This means trustees must invest and manage trust assets the way a careful, skilled investor would, taking into account the trust’s overall purpose, the needs of the beneficiaries, and the balance between risk and return.
A trustee who parks all trust funds in a non-interest-bearing account, or conversely, who puts everything into speculative investments, may be violating this standard even if the assets don’t actually lose value. The obligation is about process and judgment, not just outcomes.
What About Co-Trustees?
When two or more people serve as co-trustees, they generally must act unanimously unless the trust says otherwise. That can create friction when co-trustees disagree. It can also create shared liability if one co-trustee goes along with a decision they knew was improper.
When the Lines Get Crossed
A trustee who breaches their fiduciary duty can be held personally liable for any losses that result. Beneficiaries can petition the court to surcharge the trustee, which means ordering them to personally reimburse the trust for damages. Courts can also remove a trustee who repeatedly acts outside their authority or fails to meet their obligations.
If you’re serving as a trustee and aren’t sure whether a particular action is within your authority, connecting with a Yolo County trust administration lawyer at Yee Law Group Inc. before taking that step is always the right move.
