Can a Trustee Be a Beneficiary?

When a person creates a trust, they must decide who will serve as their trustee to manage the trust. They must also choose beneficiaries who will inherit the trust assets after their death. But can one person be used for both of these roles? Can a trustee be a beneficiary? The answer is yes, but there are a few pitfalls to be aware of when one person is both a trustee and a beneficiary.

Can a Trustee Also Be a Beneficiary? 

A trust settlor may select anyone they like to serve as their successor trustee, as long as they are at least 18 years old and of a sound mind. Similarly, the settlor may select anyone they like as a beneficiary of their estate. Often the successor trustee is one of their children or another family member and is also listed as a beneficiary.

This arrangement may be quite straightforward when the trustee is the settlor’s only living child and the sole beneficiary of the trust. But when there are multiple beneficiaries, it gets a bit more complicated to administer a trust. 

Can a Trustee Play Favorites?

A trustee who is also a beneficiary must be very careful to avoid any conflicts of interest that could be interpreted as self-dealing. Trustees have many duties under the California Probate Code, including:

• Duty to Avoid Conflicts of Interest: This means avoiding any self-dealing transactions. 
• Duty of Impartiality: This means a trustee cannot favor one beneficiary (including themself) over the others. 

Examples of inappropriate trustee behavior that violates these duties include:

• Using trust funds to pay for personal expenses
• Taking a personal loan from the trust
• Selling trust property to themselves or another person at a price that is below market value
• Investing trust funds in a personal business endeavor

If you are a beneficiary and believe the trustee is engaging in these types of behaviors, you should immediately seek the counsel of an experienced trust litigation attorney. They can offer guidance on how to recover stolen trust funds, restore your inheritance, and potentially replace the current trustee with a more suitable person.

Can a Trustee Take Compensation from the Trust?

Is it ever appropriate for a trustee to take money from the trust? Yes, it is perfectly legal for a trustee to pay themself a trustee fee in exchange for the work they perform. 

A trustee fee may be a percentage of the total trust assets, a flat fee, or an hourly rate based on the trustee’s time (for example: $25-35 per hour). The amount of the trustee’s fee may be laid out in the trust document. But if the trust document does not specify a fee, California Probate Code §15681 states that a trustee is entitled to receive “reasonable compensation”.

A portion of this fee can either be taken at the end of the calendar year or in a lump sum at the end of the trust administration. If you’re a beneficiary who believes that the trustee fee was not reasonable or they stole trust assets, seek the advice of a trust litigation attorney.

If you have any questions about this topic, feel free to contact our law firm.

Law Offices of Daniel A. Hunt

The Law Offices of Daniel A. Hunt is a California law firm specializing in Estate Planning; Trust Administration & Litigation; Probate; and Conservatorships. We've helped over 10,000 clients find peace of mind. We serve clients throughout the greater Sacramento region and the state of California.