Can a Trustee Favor Certain Beneficiaries

It started with a phone call from Emily, frantic. Her mother had recently passed, leaving a family trust with her brother, Dax, as trustee. Emily explained Dax was suddenly using trust funds to pay for his daughter’s expensive private school tuition – a school Emily’s children never had the opportunity to attend. Worse, he seemed to be dragging his feet on approving legitimate expenses for Emily’s son’s college application fees. The potential cost to Emily’s son if he missed the application deadline was devastating: scholarship opportunities lost, a delayed start, and potentially, a different future altogether.

As a California estate planning attorney and CPA with over 35 years of experience, I see this situation – a trustee appearing to favor one beneficiary over others – far too often. It’s a breach of the trustee’s fiduciary duty, a serious legal issue, but often difficult for beneficiaries to prove. The key lies in understanding the trustee’s obligations and knowing your rights.

What Does a Trustee Actually Have to Do?

A trustee’s primary duty is to administer the trust impartially, according to the terms of the trust document. This doesn’t mean equal treatment in every instance, but it absolutely means fair treatment. They must act in the best interests of all beneficiaries, not just the ones they happen to like most. This is where things get complicated.

A trustee can make discretionary distributions, meaning the trust document allows them to decide how and when funds are distributed. They’re not required to fund every request, but those decisions need to be based on objective criteria—need, education, health, for example—and consistently applied. Favoritism, or the appearance of it, is a red flag.

How Can I Prove a Trustee is Being Unfair?

Document, document, document. Every interaction with Dax, every denied request, every approval of a questionable expense. Keep copies of emails, text messages, and detailed notes of phone conversations. If Dax won’t provide a clear explanation for his decisions, that’s another problem.

Under Probate Code § 16060 & § 16062, trustees have an affirmative duty to keep beneficiaries “reasonably informed” and provide a formal accounting at least annually. If Dax refuses to provide an accounting or ignores your requests for information, you have legal recourse. A petition to compel the accounting is often the first step.

What if the Trust Document is Silent?

Even if the trust document is vague or doesn’t address discretionary distributions specifically, the trustee is still held to a high standard. California law implies certain duties, including the duty of loyalty and the duty of reasonable care. The CPA advantage comes into play here. We can analyze the trust assets, evaluate potential capital gains implications, and determine a fair and reasonable distribution plan that minimizes taxes and maximizes benefit for all beneficiaries. A well-documented valuation can be incredibly powerful in demonstrating a trustee’s compliance (or non-compliance) with their obligations.

Can I Challenge the Trustee’s Decisions in Court?

Yes, but it’s not always easy. You need to show the trustee acted improperly – self-dealing, mismanagement of assets, or, as in Emily’s case, preferential treatment. Court petitions can be expensive and time-consuming, but sometimes they’re necessary to protect your inheritance.

What About Removing a Trustee Who’s Playing Favorites?

It’s definitely possible. Under Probate Code § 15642, beneficiaries can petition to remove a trustee not just for theft, but for “hostility or lack of cooperation” that impairs the administration of the trust. You don’t always need to prove a financial loss to remove a bad trustee, simply demonstrating a pattern of unfair behavior can be enough. However, the court will also consider the best interests of the trust and the beneficiaries as a whole.

In Emily’s situation, we gathered evidence of Dax’s selective application of trust funds and his disregard for her son’s needs. We were able to file a petition to compel an accounting and, ultimately, to remove Dax as trustee and appoint a neutral professional administrator. It wasn’t a quick process, but Emily was ultimately able to secure the funds her son deserved and protect his future.

What separates an efficient California probate process from a drawn-out conflict over authority and assets?

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.

Ultimately, the difference between a routine distribution and a protracted legal battle often comes down to preparation. By anticipating the demands of the Probate Code and addressing potential friction points with beneficiaries and creditors upfront, fiduciaries can navigate the system with greater confidence and lower liability.

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.