Can a Trustee Favor Certain Beneficiaries

I had a call with Emily last week, absolutely distraught. Her mother had recently passed, leaving a trust naming Emily’s brother, David, as trustee. Emily discovered David was using trust funds to pay for his children’s private school tuition while denying similar benefits to Emily’s children. The potential cost to Emily – the denial of educational opportunities for her kids – was heartbreaking, and the legal fight ahead could easily exceed $25,000.

This situation, unfortunately, is far more common than people realize. Trustees have a fiduciary duty to all beneficiaries, meaning they must act impartially and in the best interest of everyone involved, not just those they personally favor. But what does that actually look like in practice? And what can you do if you suspect a trustee is breaching that duty?

What Does “Impartiality” Mean for a Trustee?

The standard isn’t that a trustee can’t have relationships with any of the beneficiaries. It’s that they can’t let those relationships influence their decisions. A trustee can’t put their own interests – or the interests of one beneficiary – ahead of the others unless the trust document specifically grants them that power. If the trust is silent on the issue, the default rule is strict impartiality. This means making decisions based on the trust terms, considering the needs of all beneficiaries, and documenting every step of the process.

For example, a trustee can’t use trust funds for their personal vacation simply because they are the trustee. Likewise, they can’t approve a larger distribution to one child without a valid reason supported by the trust language. Common legitimate reasons could include documented medical expenses or a beneficiary needing financial assistance due to unforeseen circumstances. But a “Christmas bonus” for one child while denying a much-needed home repair to another is a red flag.

What if the Trust Document Allows Discretion?

Sometimes, a trust will explicitly give a trustee discretion over distributions or other decisions. This doesn’t give them a free pass to act unfairly. Even with discretion, the trustee must exercise it reasonably. California courts will scrutinize discretionary decisions, and a trustee who acts arbitrarily or capriciously can be held liable.

This is where my background as a CPA becomes incredibly valuable. Understanding the tax implications of distributions is crucial. For instance, a trustee might legitimately favor a beneficiary who needs funds to avoid a higher tax bracket, or to take advantage of a step-up in basis on inherited assets. These are complex considerations that a non-CPA trustee might overlook, potentially opening themselves up to legal challenges.

What are Your Options if a Trustee is Favoring Someone?

First, document everything. Keep records of all communications with the trustee, any distributions made, and any expenses incurred. Then, send the trustee a formal written demand for an accounting. This is your right under Probate Code § 16060 & § 16062, and a refusal to provide one can be grounds for legal action.

If the accounting doesn’t resolve the issue, or the trustee is uncooperative, you may need to petition the court. You can ask the court to compel the trustee to provide an accounting, remove the trustee for breach of fiduciary duty, and even surcharge them for any losses caused by their misconduct.

What if the Trustee Claims it’s a “Family Agreement”?

“But we always talked about David getting extra help!” This argument is surprisingly common. While family dynamics might inform the trust creator’s intent, they don’t override the legal requirements of the trust. Unless that “agreement” is explicitly written into the trust document, it’s unlikely to hold up in court.

Protecting Your Inheritance: The Importance of Vigilance

After 35+ years as an Estate Planning Attorney & CPA in Escondido, California, I’ve seen countless trusts mismanaged due to trustee misconduct. Don’t hesitate to seek legal counsel if you suspect a trustee is acting unfairly. The sooner you act, the better your chances of protecting your inheritance and preserving your family’s legacy. The cost of inaction – as Emily’s case demonstrates – can be far greater than the cost of a legal fight.

What failures trigger contested proceedings and court intervention in California probate administration?

Success in probate court depends less on the size of the estate and more on the accuracy of the petition and the behavior of the fiduciary. Whether the issue is a forgotten asset, a contested creditor claim, or a disagreement among siblings, understanding the procedural triggers for court intervention is the best defense against prolonged administration.

• Court Battles: Prepare for litigating probate disputes if agreement fails.
• Document Challenges: Understand the grounds for contesting a will.
• Cross-Over: Navigate complex probate and trust disputes.

A stable probate administration outcome usually follows from clarity, consistency, and readiness for court review, especially when multiple stakeholders and competing interpretations are involved. When documentation supports enforcement and timelines are respected, families are less likely to face preventable escalation.

Verified Authority on California Beneficiary Rights

• Statutory Notification Window (The “120-Day Rule”): California Probate Code § 16061.7
  This is the most critical statute for beneficiaries. Once a trustee serves this formal notice, you have exactly 120 days to file a contest. If you miss this deadline, you are generally forever barred from challenging the validity of the trust, regardless of the evidence you have.
• Right to Accounting & Information: California Probate Code § 16060 (Duty to Inform)
  Trustees have a mandatory legal duty to keep beneficiaries “reasonably informed” about the trust and its administration. Under Probate Code § 16062, most trustees must provide a formal financial accounting at least once a year. If they refuse, the court can compel them to do so.
• Inheriting Real Estate (Prop 19): California State Board of Equalization (Prop 19)
  Beneficiaries must understand that inheriting a home no longer guarantees low property taxes. Under Prop 19, to avoid reassessment to current market value, the child must make the home their primary residence within one year of the parent’s death.
• No-Contest Clause Enforceability: California Probate Code § 21311
  Fear of disinheritance often stops beneficiaries from fighting for their rights. However, this statute clarifies that a No-Contest clause is only enforceable if the contest is brought without “probable cause.” If you have a reasonable basis for your claim, your inheritance is likely safe.
• Recovering Trust Assets (Heggstad): California Probate Code § 850 (Heggstad Petition)
  If a beneficiary finds that a parent intended an asset to be in the trust but failed to sign the deed or change the account title, a Section 850 Petition allows the court to “transfer” that asset into the trust without a full probate proceeding.
• Removal of a Bad Trustee: California Probate Code § 15642
  Beneficiaries have the right to petition for the removal of a trustee who is unfit. Grounds for removal include excessive compensation, inability to manage finances, or “excessive hostility” toward beneficiaries that interferes with the trust’s administration.