Successor Trustee Mistakes to Avoid in California

Being named successor trustee is an honor—but it's also a serious legal responsibility. Mistakes can cost you personally, delay distributions to beneficiaries, and even lead to lawsuits.

Here are the most common successor trustee mistakes and how to avoid them.

MISTAKE #1: Distributing Assets Too Early

The mistake:

Giving assets to beneficiaries right away, before completing required steps.

Why it's dangerous:

• The 120-day trust contest period hasn't expired
• Debts and taxes haven't been paid
• You may not have enough left to cover obligations
• You could be personally liable for the shortfall

Real example: A trustee distributed $200,000 to beneficiaries within weeks of the death. Later, $80,000 in medical bills and taxes came due. The trustee had to sue beneficiaries to recover funds—and pay the difference personally when he couldn't.

The right approach:

1. Wait until the 120-day contest period expires
2. Pay all known debts and taxes first
3. Reserve funds for potential unknown claims
4. Then distribute remaining assets

MISTAKE #2: Missing the 60-Day Notice Deadline

The mistake:

Failing to send required notices to beneficiaries and heirs within 60 days.

Why it's dangerous:

• The 120-day contest period never starts
• Trust can be contested indefinitely
• Beneficiaries may sue you for breach of duty
• Administration is stuck in limbo

California requirement: Probate Code §16061.7 requires notice within 60 days of the trustor's death (or within 60 days of becoming trustee).

The right approach:

1. Send notices by certified mail immediately
2. Include all required information
3. Send to ALL beneficiaries AND legal heirs
4. Keep proof of mailing
5. Calendar the deadline the day you become trustee

MISTAKE #3: Mixing Trust Funds with Personal Funds

The mistake:

Depositing trust money into your personal account, or paying trust expenses from personal funds without documentation.

Why it's dangerous:

• Called "commingling"—a serious fiduciary breach
• Makes accounting nearly impossible
• Creates suspicion of theft or mismanagement
• Can result in personal liability and removal

Real example: A trustee deposited estate checks into her personal account "for convenience." She paid bills from the same account. When beneficiaries demanded an accounting, she couldn't prove which funds were hers and which were the trust's. She was removed and surcharged.

The right approach:

1. Open a separate trust bank account immediately
2. Never deposit trust funds into personal accounts
3. If you pay trust expenses personally, document it and reimburse yourself from the trust account
4. Keep trust and personal finances completely separate

MISTAKE #4: Ignoring Beneficiaries' Requests

The mistake:

Not responding to beneficiaries' questions, not providing accountings, or keeping them in the dark.

Why it's dangerous:

• California law requires you to keep beneficiaries "reasonably informed"
• Silence breeds suspicion and conflict
• Beneficiaries can petition the court to compel information
• You look like you're hiding something (even if you're not)

The right approach:

• Respond to reasonable requests promptly
• Provide regular updates (quarterly is good)
• Share accountings when requested
• Over-communicate rather than under-communicate

MISTAKE #5: Not Reading the Trust Document Carefully

The mistake:

Assuming you know what the trust says, or relying on what family members tell you.

Why it's dangerous:

• You might distribute assets incorrectly
• You might miss special provisions
• You might exceed your authority
• You might miss restrictions on your powers

Real example: A trustee assumed the estate split evenly among three siblings. He didn't read carefully enough to see that one sibling's share was held in a sub-trust until age 35. He distributed everything outright, violating the trust terms.

The right approach:

1. Read the entire trust document
2. Read all amendments
3. Take notes on key provisions
4. Ask an attorney to explain anything unclear

MISTAKE #6: Self-Dealing

The mistake:

Using your trustee position for personal benefit.

Examples of self-dealing:

• Buying trust property at below-market price
• Paying yourself excessive fees
• Hiring your own business to provide services
• Borrowing from the trust
• Living in trust property rent-free

Why it's dangerous:

• Even if the deal is "fair," self-dealing is prohibited
• You can be removed as trustee
• You can be forced to return profits
• You can be personally surcharged for damages

The right approach:

• Don't transact with the trust personally
• If you must (like buying property), get independent appraisal, pay fair value, and get beneficiary consent
• Keep compensation reasonable and documented
• When in doubt, don't do it

MISTAKE #7: Failing to Keep Records

The mistake:

Not documenting decisions, expenses, and activities.

Why it's dangerous:

• You can't prove what you did or why
• Accounting becomes impossible
• Beneficiaries can challenge everything
• You have no defense against accusations

The right approach:

• Keep all receipts
• Document all decisions in writing (notes are fine)
• Maintain a chronological log
• Save all correspondence
• Keep bank statements organized
• Store records for at least 5 years after trust closes

MISTAKE #8: Not Getting Professional Help

The mistake:

Trying to handle everything yourself to "save money."

Why it's dangerous:

• You don't know what you don't know
• Mistakes cost more than professional fees
• Complex tax issues require expertise
• Personal liability risk is significant

Real example: A trustee handled a $1.2 million estate himself to save the $15,000 attorney fee. He missed a tax election that cost the estate $45,000 in unnecessary capital gains taxes. Then he distributed assets improperly and faced a $25,000 lawsuit from a beneficiary.

The right approach:

• Hire an attorney for trust administration
• Hire a CPA for tax issues
• Professional fees are paid from the trust, not your pocket
• Good advice prevents costly mistakes

MISTAKE #9: Favoring One Beneficiary Over Others

The mistake:

Treating beneficiaries unequally (unless the trust requires it).

Examples:

• Giving one beneficiary information but not others
• Letting one beneficiary take items before others choose
• Distributing to one before others
• Making decisions that benefit one at others' expense

Why it's dangerous:

• Violates duty of impartiality
• Creates conflict and lawsuits
• Can result in removal
• Even appearance of favoritism is damaging

The right approach:

• Treat all beneficiaries the same
• Distribute information equally
• Distribute assets at the same time
• If the trust requires unequal treatment, document that you're following trust terms

MISTAKE #10: Delaying Unnecessarily

The mistake:

Taking years to complete an administration that should take months.

Why it's dangerous:

• Beneficiaries are entitled to timely distribution
• Delay damages relationships
• Trust incurs ongoing expenses
• You can be petitioned for removal

Reasonable timelines:

• Simple trust: 3-6 months
• Moderate trust: 6-12 months
• Complex trust: 12-18 months

The right approach:

• Create a timeline at the start
• Meet deadlines
• Make decisions—don't procrastinate
• If you need more time, communicate why to beneficiaries

MISTAKE #11: Not Paying Debts Properly

The mistake:

Ignoring debts, paying them in wrong order, or paying invalid debts.

Why it's dangerous:

• Creditors can sue the trust (and you)
• Distributing before paying debts creates liability
• You might pay fraudulent claims
• Priority rules exist for a reason

The right approach:

• Inventory all debts
• Verify claims are valid
• Pay in proper priority order
• Don't distribute until debts are settled
• Reserve for unknown claims

MISTAKE #12: Ignoring Tax Obligations

The mistake:

Not filing required tax returns or missing tax elections.

Why it's dangerous:

• IRS penalties and interest
• California FTB penalties
• Personal liability for unpaid taxes
• Missed opportunities (like stepped-up basis elections)

Required filings may include:

• Deceased's final income tax return (Form 1040/540)
• Trust income tax returns (Form 1041/541)
• Estate tax return (if estate over $13.61 million)

The right approach:

• Hire a CPA
• Get an EIN for the trust immediately
• File all required returns on time
• Make elections properly

What Happens If You Make Mistakes?

Mistakes can result in:

• Personal liability (surcharge): You pay from your own pocket
• Removal as trustee: Court appoints someone else
• Denial of compensation: You don't get paid for your work
• Litigation: Beneficiaries sue you
• Reputation damage: Family relationships destroyed

The good news: Most mistakes are avoidable with proper guidance.

Protect Yourself

The Law Offices of Rozsa Gyene helps successor trustees avoid these costly mistakes. We guide you through California trust administration step by step, ensuring you fulfill your duties properly.

Call (818) 291-6217 for a consultation, or visit our contact page.

Serving Glendale, Burbank, Pasadena, and all of Los Angeles County.

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This article provides general information about successor trustee responsibilities in California. Every trust is different. Consult an attorney for advice specific to your situation.