Trust Disputes

A trustee’s role is both powerful and exposed. Trustees control all aspects of the trust, but as Uncle Ben once said, “with great power comes great responsibility.” If a trustee shirks this responsibility, or even if a beneficiary just thinks they have, disputes arise. Below are some common categories of disputes and some tips for avoiding them in the first place.

Delays in Distribution

Beneficiaries often expect an immediate payout. In reality, trustees have a long-list of tasks they must first accomplish before distributing a dime. At a minimum, trustees should wait until the claims period under California Probate Code § 16061.7 has run. A trustee who distributes too quickly may expose themselves to personal liability.

Trustees must act diligently and move administration forward. Where appropriate, preliminary distributions can provide beneficiaries with partial enjoyment while reserving sufficient funds to resolve outstanding matters. Done correctly, this reduces tension without increasing risk.

Lack of Transparency or Accounting

California law requires trustees to keep beneficiaries reasonably informed. Even when nothing significant has occurred, silence can create suspicion.

Communication should be early, consistent, and documented.

Considering an estate sale? Notify beneficiaries in advance.

Hiring a realtor? Share credentials.

Selling real property? Send a Notice of Proposed Action and get a price opinion.

The trust will also outline when (and how often) the trustee is required to provide an accounting to the beneficiaries.

Disagreements Over Property

Cash is king, but real estate, heirlooms, and personal property frequently trigger conflict, especially when pecuniary value is low but sentimental value is high.

Common flashpoints include:

• Whether to sell or retain property
• Appraisal disputes
• Buyout disagreements
• Claims that a trustee-beneficiary retained preferred assets

Remember, the trust instrument controls first. If no specific directive exists, liquidation is often the default approach. Professional appraisals, independent valuations, and structured buyouts reduce exposure.

Trustee Compensation Disputes

Trustees are typically entitled to “reasonable compensation,” but beneficiaries may challenge the amount.

Beneficiary concern: “The trustee is overpaying themselves.”

Trustee concern: “The work is substantial and time-consuming.”

Time records, expense documentation, and transparency are critical. Compensation disputes are far easier to defend when the trustee can demonstrate contemporaneous records showing what was done, what benefit resulted, how long it took, and how much it would have cost for someone else to do it.

Allegations of Mismanagement or Breach of Fiduciary Duty

The most serious disputes involve claims of self-dealing, improper investment decisions, failure to diversify, conflicts of interest, preferential treatment of one beneficiary, and commingling of assets.

Trustees are not required to be perfect, butt hey are required to act reasonably, loyally, and in good faith. Trustees should get second opinions, maintain documentation, disclose potential conflicts, and avoid unilateral decisions that disproportionately benefit the trustee.

Trust Contests

To be valid, a trust must reflect the settlor’s intent and be validly signed. If a trust (or a trust amendment) is the product of undue influence, fraud, forgery, or not properly executed, a beneficiary or heir has standing to contest its validity.

Trust contests often involve complex facts and require documentation from banks, doctors, care facilities, drafting attorneys, witnesses, and family members. Also, trusts often have no-contest clauses, meaning a failed contest could result in disinheritance.

WFZ has the knowledge, attentiveness, and tenacity to get the results our clients deserve.