What Power Does a Trustee of a Trust Have in California?

At Desert Law Group, we’ve been helping families in Palm Springs and the Coachella Valley with estate planning, probate and trust administration for over 25 years. A common question we hear is about the role of a trustee in California.

A trustee is authorized to manage and invest trust assets, pay debts and taxes, distribute property to beneficiaries, and act in the trust’s best interest.

They can hire professionals for assistance and initiate or defend legal actions on the trust’s behalf.

Understanding these powers and responsibilities is essential for smooth trust administration.

Role of a Trust Executor in California

First, let’s clear up a common misunderstanding between “executor” and “trustee.” The term “executor of a trust” isn’t correct in California.

When it comes to trusts, the person responsible for managing the trust and ensuring its terms are carried out is called the trustee.

While the roles of an executor (for a will) and a trustee share some similarities, they have distinct differences in their duties and authority.

A trustee takes on several critical responsibilities, including:

• Taking inventory of the trust’s assets to know what’s included.
• Protecting and managing those assets.
• Paying off any debts or expenses owed by the trust.
• Distributing assets to beneficiaries as outlined in the trust.
• Keeping accurate records and providing reports to beneficiaries when needed.

Essentially, a trustee acts as the “administrator” of the trust, ensuring everything runs smoothly and according to the trust’s terms.

Powers Granted to a California Trustee

The trustee’s powers are primarily determined by the trust document itself and California law. Here’s a breakdown of the most common powers granted to a trustee:

Asset Management

One of the core responsibilities of a trustee is managing the trust’s assets. This includes collecting and retaining trust property, ensuring it remains secure and well-maintained.

Trustees are also granted the authority to make necessary repairs or improvements, whether routine or more substantial in nature.

Additionally, they may subdivide or develop land, adjust property boundaries, or even dedicate land for public use if it aligns with the trust’s purpose.

Financial Powers

Trustees are entrusted with significant financial responsibilities.

They have the power to invest trust funds, including placing them in government bonds or other approved investment vehicles, to preserve or grow the trust’s value.

Trustees can also deposit funds into bank accounts, borrow money when necessary to fulfill trust obligations and handle stock-related transactions such as buying, selling, or converting shares.

Business Operations

If the trust includes a business, the trustee may play a direct role in managing its operations. This could involve continuing the business, restructuring it, or even incorporating or dissolving it, depending on what the trust terms require.

The trustee has the authority to ensure the business aligns with the trust’s objectives and benefits the beneficiaries.

Legal Authority

The trustee also has legal powers to protect the trust’s interests. They can initiate or defend legal actions to safeguard trust property and address claims against the trust.

Trustees are empowered to settle disputes, negotiate payments, and execute legal documents necessary for trust administration.

Distribution Powers

A key responsibility of a trustee is distributing trust assets to the beneficiaries. Trustees have the discretion to distribute money or property as outlined in the trust, even making adjustments to account for valuation differences when necessary.

They can also manage distributions to beneficiaries who are under a legal disability, ensuring that the terms of the trust are followed.

Hiring and Delegation

Managing a trust can be complex, and trustees are permitted to hire professionals like attorneys or accountants to assist with administration.

While trustees can delegate certain tasks, they are responsible for supervising and ensuring that these matters are handled appropriately and in line with the trust’s terms.

Fiduciary Duties and Potential Liabilities of a Trustee

Being a trustee isn’t just about authority—it’s also about responsibility. Trustees are bound by fiduciary duties, meaning they must always act in the best interests of the beneficiaries. Key duties include:

• Loyalty: Acting without personal bias and avoiding conflicts of interest.
• Impartiality: Treating all beneficiaries fairly, especially when their interests may differ.
• Preservation of Trust Property: Taking steps to protect and grow the trust’s assets.
• Accountability: Keeping detailed records and being transparent with beneficiaries.

Failing to fulfill these duties can lead to serious consequences. Trustees who breach their fiduciary duties may face:

• Financial liability for any losses incurred.
• Legal actions to remove them from their position.
• In extreme cases, criminal charges for misconduct.

Navigating the responsibilities of a trustee can be complex, and professional legal guidance can make all the difference. If you have questions about your role as a trustee or need assistance with trust administration, Desert Law Group is here to help.

Call us today at 760-239-5661 for a consultation. Let us help you ensure your trust is managed efficiently and in compliance with California law.