Serving as a trustee is a major legal responsibility. Under the California Probate Code, a trustee must manage trust property carefully. The trustee must follow the trust’s instructions and California law when distributing assets. Many trustees are family members who want to do the right thing but lack experience. Even well-meaning people can make mistakes that lead to lawsuits, delays or financial penalties.
Avoiding early distributions
A frequent mistake is giving out property before completing the required legal steps. In California, a trustee has a mandatory duty to take and keep control of all trust assets. You must also notify all beneficiaries and heirs within 60 days of the trust becoming irrevocable.
If you distribute money too quickly, you might not have enough left to pay taxes or debts. If this happens, a court may impose a surcharge on you. This means the court could legally force you to repay the trust using your own personal money.
Treating all beneficiaries fairly
A trustee has a duty of loyalty. This means you must act only in the beneficiaries’ interests, not your own. If there is more than one beneficiary, you have a duty of impartiality. You cannot favor one person over another, such as giving one sibling an early payment or letting them live in a trust-owned house for free.
You must also keep excellent records. In California, you have an active duty to keep beneficiaries reasonably informed. The law usually requires you to provide a formal report, called an accounting, at least once a year.
Why guidance can help
Distributing trust property is more complicated than most people realize. Because the law is so strict, many trustees work with an attorney to make sure they follow every step correctly. This protects the beneficiaries’ inheritance and keeps the trustee safe from personal legal trouble.