Attorney shaking hand with client and discussing trust administration.

Common Problems in Trust Administration

Trust agreements are an essential and versatile tool in estate planning. Many individuals use one or more trusts to protect assets, avoid probate, reduce tax liability, or delay distributions to minors and other beneficiaries. However, trustees can run into problems with the trust administration, especially if they did not consult a California estate planning attorney when developing or overseeing the trusts. 

Our team of skilled trusts and estate attorneys focuses on planning ahead to foresee and, when possible, avoid potential conflicts.  But when a conflict arises, we also stand ready to represent a trustee or beneficiary in litigating and resolving the conflict.

Problems Trustees Face When Administering a Trust

There are several issues that a trustee might encounter when administering a trust. Some common problems trustees face as they work to fulfill the terms of the trust agreement include:

  • Allegations of Mismanagement of Trust Funds — A beneficiary may allege that a trustee did not invest or manage the trust property in the best interests of the beneficiaries. Allegations of mismanagement of trust assets often arise if a beneficiary does not agree with how the trustee is performing his or her duties.
  • Disputes Regarding Authority — One or more individuals may dispute whether the trustee has authority over the trust assets. This situation is common when a trustee dies, and a successor trustee takes control over the trust funds and assets. In most cases, a review of the trust can resolve the dispute, unless the trust’s wording is vague or there are other errors within the trust document.
  • Demands for Distributions from the Trust — The trust document should provide specific directions and conditions for distributions to be made directly to beneficiaries or on behalf of beneficiaries. In many cases, a trust may give the trustee discretion regarding distributions. In the latter situation, there are often disputes when beneficiaries believe they are entitled to distributions from the trust, but the trustee does not believe the distributions are in the best interest of the trust or the beneficiaries.
  • Failure to Transfer Assets to the Trust — The trustee may believe he or she has the authority to administer certain assets. However, if the owner failed to take the legal steps to transfer the assets into the trust, the trustee may have no authority over those assets. It is up to the trustee to accurately identify and secure trust assets upon assuming the role of trustee, and to seek court relief if the assets have not been properly transferred into the trust.
  • Outdated Terms or Provisions — Unfortunately, some trusts may contain terms and provisions that become outdated or void. A trustee may need to seek court approval for certain actions if the terms of the trust are outdated or unclear.
  • Deceased or Incapacitated Beneficiaries — A trustee can have problems with the trust administration when a beneficiary dies or becomes incapacitated after the trust is created. If the trust was not amended or did not address these issues, the trustee may need to seek direction from a court before proceeding with the trust administration. 
  • Contests of the Trust — The beneficiaries or other individuals may contest the trust agreement or certain terms of the trust. The trustee and beneficiaries may need to fight the contest in court. Trustees or beneficiaries need to be sure they find skilled trial attorneys with experience in trust and estate litigation to ensure that their rights are adequately protected. 

Contact a California Estate Planning Attorney for Help

The above problems with trust administration can be time-consuming, stressful, and costly for the trust and the trustee, or for a beneficiary who feels his or her rights are not being protected.  We recommend that a trustee or beneficiary should seek advice from a California estate planning attorney as soon as possible if you encounter problems with the administration of a trust. Contact us today for a consultation.

What Are California Trustees Responsible For?

Being named as a trustee is an important role. Trustees have certain legal duties that they must fulfill, in addition to adhering to the terms of the trust agreement. Even though the trustee has the right to manage trust assets, and the discretion to administer the assets reasonably, the trustee is also bound by certain fiduciary obligations to the trust beneficiaries. A California trust administration attorney can help you review qualifications for a trustee. If you are a trustee, an attorney can answer questions you might have regarding your duties and responsibilities as a trustee.

Duties and Responsibilities of Trustees in California

The trust document itself dictates many of the trustee’s duties and responsibilities. However, trustees are also bound by the duties outlined in the California Probate Code under the Trust Administration section. 

Some of the duties and responsibilities outlined in the code include:

  • The code requires a trustee to administer the trust in the best interests of the trust beneficiaries. 
  • A trustee of a revocable trust should follow the written directions of the settlor or someone appointed by the settlor to give the trustee directions. An exception may be if the written directions modify the trust.  In that case, the trustee does not need to follow the directions unless they follow the procedures outlined in the trust for modifying the terms of the trust.
  • A trustee must treat multiple beneficiaries fairly and impartially when dealing with the beneficiaries and managing the trust property. 
  • A trustee cannot use or destroy trust property for the trustee’s benefit. 
  • Trustees cannot require beneficiaries to release the trustee from liability as a condition of making disbursements from the trust.
  • A trustee should take reasonable steps to enforce claims that are part of the trust, avoid accepting roles that are adverse to the trust and defend actions that could harm the trust assets.

The most important role of a trustee is to serve as a fiduciary. As a fiduciary, the trustee must always act in the best interest of the trust beneficiaries. That duty typically guides all other duties and responsibilities of the trustee. A trustee should also maintain the trust assets separate and apart from all of his or her other property, and maintain detailed, current, and accurate books and records for the trust. Beneficiaries may request an accounting of the trust assets periodically. The trustee may have a duty to provide the accounting, depending on the terms of the trust and other factors. 

Trustees also have a duty not to delegate their responsibilities and duties to another party when the trustee is reasonably able to perform the duties. This requirement does not prohibit a trustee from employing professionals, such as attorneys, accountants, financial advisors or property managers, when necessary to assist with the administration of the trust.

The type of trust can dictate some of the trustee’s duties and responsibilities.  A trustee should always read the trust document in full to ensure the trustee understands the duties and responsibilities outlined within the trust document. 

Contact a California Estate-Planning Attorney For Help

Trustees may consult with a California estate planning attorney when they have questions regarding their duties and responsibilities. They may retain the services of an attorney when they need assistance with various legal matters that impact the trust. Talk with our California estate planning attorneys today