When a trustee fails to protect trust assets, they can be held legally responsible for losses caused by their actions or inaction. Beneficiaries may have the right to demand repayment, seek removal of the trustee, or ask the court to step in and recover what was lost. At OC Trial Group, APC, we represent beneficiaries throughout Orange County in exactly these disputes.
What Does It Mean for a Trustee to Protect Trust Assets?
A trustee has a legal duty to manage and safeguard trust property for the benefit of beneficiaries. Under California Probate Code section 16006, a trustee must take reasonable steps to take control of and preserve trust property. In practice, that means preserving value, avoiding unnecessary risk, and acting in line with the terms of the trust.
Protecting assets often involves investing trust funds in line with the prudent investor standard (Probate Code section 16047), maintaining real property or business interests, keeping accurate records, and preventing the misuse or theft of trust property. When a trustee ignores these responsibilities or makes careless decisions, it can lead to financial harm and may rise to a breach of fiduciary duty.
Consequences When a Trustee Breaches Their Duty
Failure to protect trust assets is typically treated as a breach of fiduciary duty. When that happens, several consequences may follow.
The Trustee May Be Personally Liable
If a trustee’s conduct causes financial loss, they may have to repay the trust out of their own funds. This can include losses from poor investment decisions, a decline in property value due to neglect, and missing or misused funds. Courts focus on whether the trustee acted reasonably under the circumstances, and even unintentional mistakes can result in liability if they fall below that standard.
The Court May Remove the Trustee
When a trustee fails to protect assets, beneficiaries can ask the court to remove the trustee under California Probate Code section 15642. Courts may appoint a replacement to prevent further harm and stabilize trust management. Removal is more likely when there is a pattern of mismanagement, a conflict of interest, or a refusal to correct problems. Where trust property is at immediate risk, section 15642(e) also lets the court suspend the trustee’s powers on an emergency basis.
The Trustee May Have to Account for Their Actions
Beneficiaries have the right to request a formal accounting, which requires the trustee to provide a detailed record of income and expenses, asset management decisions, and distributions made. If discrepancies appear, they can support a legal claim against the trustee.
Common Examples of Failing to Protect Trust Assets
Some situations come up more often than others, and recognizing them can help you assess whether there may be a problem:
- Letting real estate fall into disrepair
- Failing to insure valuable assets
- Making high-risk or inappropriate investments
- Mixing trust funds with personal accounts, a form of self-dealing
- Ignoring tax obligations or deadlines
Each of these can reduce the value of the trust and expose the trustee to liability.
What Legal Options Do Beneficiaries Have?
If you believe a trustee is not protecting assets, you have several options under California law, and acting early can limit further damage. These remedies are part of a broader toolkit we cover in our overview of the legal remedies available in trust litigation.
Petition the Court
Under Probate Code section 17200, you can file a petition asking the probate court to compel the trustee to act, suspend or remove the trustee, or order repayment of losses. Courts have broad authority to correct misconduct and protect beneficiaries.
Seek a Surcharge
A surcharge is a financial judgment against the trustee. Under Probate Code sections 16420 and 16440, it requires the trustee to compensate the trust for losses tied to their breach of duty. If the trustee acted in bad faith, section 859 may allow the court to award double damages.
Request Injunctive Relief
In urgent situations, the court can issue orders to prevent further harm, such as freezing accounts or blocking certain transactions, before more value is lost.
How Do You Prove a Trustee Failed to Protect Assets?
These cases often come down to evidence. You need to show that the trustee’s conduct fell short of their legal duties and caused harm. Key evidence may include financial records and account statements, property appraisals or maintenance reports, communications showing neglect or poor decisions, and expert analysis of investment or management practices. We work with financial professionals when needed to evaluate whether a trustee’s decisions were reasonable. The same is true when the core problem is that the trustee simply ignored the trust document, which we cover in our guide on how to handle a trustee’s failure to follow trust terms.
When Should You Take Action?
Delays can make recovery more difficult. Assets may continue to decline in value, or records may become harder to obtain. You may want to act if you notice unexplained losses, a lack of communication from the trustee, a refusal to provide accountings, or sudden or questionable financial decisions. Keep in mind that California generally requires a claim for breach of trust to be brought within three years after the beneficiary receives an accounting that discloses the breach, so waiting can cost you the right to recover. Even if you are unsure, it helps to review your situation sooner rather than later.
Trust Litigation Across Orange County
Trust disputes in Orange County are heard in the probate division of the Orange County Superior Court in Santa Ana. Our trust and estate litigation team represents beneficiaries across the county, including clients handling trust litigation in Newport Beach, Irvine, and Costa Mesa. Whether the trustee is mismanaging real estate, refusing to account, or putting their own interests ahead of yours, we can help you protect what the trust was meant to provide.
Protecting Your Interests Starts With the Right Strategy
When a trustee fails to protect assets, the impact can reach your financial future and the intent behind the trust itself. We help beneficiaries evaluate what went wrong, gather the right evidence, and pursue appropriate legal action to recover losses or replace the trustee.
If you believe a trustee is mishandling or failing to safeguard trust property, contact OC Trial Group, APC to discuss your options. Call 714-202-2640 for a free consultation, and we will review your situation and help you decide on the next steps to protect your interests.
Frequently Asked Questions
Can a beneficiary sue a trustee in California?
Yes. A beneficiary can petition the probate court under Probate Code section 17200 to compel, suspend, or remove a trustee and to recover losses caused by a breach of duty.
How long do you have to sue a trustee in California?
Generally, a claim for breach of trust must be brought within three years after the beneficiary receives an account or report that adequately discloses the breach. Other deadlines can apply, so confirm your situation with an attorney quickly.
What is a surcharge against a trustee?
A surcharge is a court order requiring a trustee to personally repay the trust for losses caused by their breach of duty, under Probate Code sections 16420 and 16440.