Trustee Surcharge in California: Trustee Liability Guide

Publication Date June 24, 2026 in Trustee’s Duty

Introduction: A Trustee’s Duty Is Not Optional

I am Michael Hackard, founder of Hackard Law. Over five decades of practice, I have fought for heirs, beneficiaries, and elder abuse victims across California – from Sacramento and the San Francisco Bay Area to Los Angeles. I have written four published books on inheritance protection and produced more than 1,000 educational videos that have reached over seven million viewers. One of the most misunderstood dangers in trust administration is the concept of trustee surcharge – the personal financial liability a trustee faces when they fail to enforce claims that belong to the trust. This is not a theoretical risk. It is a real and recurring source of loss for beneficiaries, and it is a real and recurring source of personal exposure for trustees who do not understand their obligations.

Hackard Law provides contingency fee representation for qualified trust and estate cases – no upfront costs to you. To speak with our team, call (916) 313-3030.

Quick Summary

California trustees have a legal duty to enforce claims that are part of trust property. Failing to act on those claims can expose a trustee to personal liability – known as surcharge – for the full value of the loss.

A trustee who ignores a valid $100,000 trust claim can become personally liable for that amount.
Favoring one beneficiary over others by failing to enforce a claim is a breach of the duty of impartiality.
Common scenarios include uncollected rent from a sibling living in a trust property.
Surcharge is a court remedy that holds trustees accountable for preventable financial losses.
Beneficiaries have legal options when a trustee’s inaction causes harm to the trust estate.

How a Trust Works: Roles and Responsibilities

When a parent creates a trust, they typically serve as the initial trustee and primary beneficiary during their lifetime. They manage the assets, make decisions, and keep full control. Upon their death, a successor trustee steps in – often an adult child named in the trust document – to administer and ultimately distribute the trust estate.

That transition is where complexity begins. The successor trustee inherits legal responsibilities that most people have never been trained for. The trust estate may include rental properties, a family home, stocks, bonds, and outstanding legal or contractual claims. Each of these assets requires attention, and the law does not excuse inaction simply because the trustee is a family member acting without professional guidance.

For a deeper look at how real estate becomes a flashpoint in these situations, the page on real estate battles in trust litigation covers the terrain that successor trustees most often navigate unprepared.

The Duty to Marshal Assets and Enforce Claims

California law imposes a clear obligation on trustees: they must take reasonable steps to enforce claims that are part of the trust property. This duty is part of what attorneys call the duty to marshal assets – the obligation to identify, organize, protect, and ultimately distribute the trust estate.

Claims are assets. A contractual right to collect money owed to the trust, a pending legal matter, an unpaid loan from a family member – these are all part of the estate. If a trustee allows those claims to expire, go uncollected, or simply ignores them, the law treats that inaction as a breach of fiduciary duty.

The remedy is surcharge. A court can hold the trustee personally liable for the value of the claim that was lost due to their failure to act. If the trust had a valid $100,000 claim and the trustee let it lapse without pursuing it, that trustee may owe $100,000 out of their own pocket.

Case Pattern: A trust that contained an unpaid promissory note from a third party was taken over by a successor trustee. The trustee did not take any action to collect on the note because they were not familiar with trust administration. The statute of limitations had passed by the time the beneficiaries brought up the matter. The court held the trustee personally accountable for the unpaid sum; this loss could have been avoided with prompt legal counsel.

When a Sibling Lives Rent-Free in Trust Property

One of the most common surcharge scenarios involves a sibling who occupies a trust property without paying rent. The successor trustee – perhaps another sibling – may feel reluctant to demand payment from a family member, or may assume the arrangement is acceptable because it was informal during the parent’s lifetime.

It is not acceptable under California trust law. A trustee has a duty of impartiality: all beneficiaries must be treated equally. When a trustee allows one beneficiary to live in a trust property rent-free while other beneficiaries receive nothing from that asset, the trustee is effectively transferring value from the trust to one person at the expense of the others.

A trustee who fails to collect rent owed from a tenant – including a sibling – is normally subject to surcharge for the unpaid amounts. The longer the arrangement continues, the greater the potential liability.

Families dealing with this pattern can find relevant context at the Sacramento estate lawyer page, and those in Southern California can review Los Angeles estate litigation for regional options.

Case Pattern: Four siblings were named as equal beneficiaries of a trust that held two rental properties. The sibling appointed as trustee allowed one of the other siblings to occupy a property without any rent payment for over two years. When the remaining beneficiaries sought legal help, the trustee faced a surcharge claim for the full rental value lost during that period.

The Duty of Impartiality: No Favorites Allowed

Trustee surcharge is not limited to rent collection. Any time a trustee’s inaction or favoritism results in a financial loss to some beneficiaries while benefiting another, the door to personal liability opens.

California Probate Code requires trustees to administer the trust solely in the interest of the beneficiaries and to act impartially when there are multiple beneficiaries with competing interests. Choosing not to pursue a valid claim because it would be uncomfortable – or because the debtor is a family member – does not satisfy that standard.

For beneficiaries who believe a trustee is mismanaging or ignoring trust assets, the California inheritance theft guide provides a useful overview of the legal landscape. Understanding trustee accountability is also addressed in detail through Hackard Law’s work on Sacramento County probate litigation.

What Beneficiaries Can Do When a Trustee Fails to Act

Recipients are not helpless. When a trustee’s inaction has resulted in quantifiable harm to the trust estate, California law grants the trustee standing to petition the court to compel the trustee to act, request an accounting, and pursue surcharge claims.

Time is important. Underlying claims are subject to statutes of limitations, and the longer a trustee waits, the more value may be lost and the more challenging recovery will be. Early legal action frequently makes the difference between a fully recovered estate and one that is permanently diminished.

For families weighing whether litigation is the right path, contingency fee representation removes the financial barrier that often keeps beneficiaries from acting. Hackard Law handles qualified cases on contingency, meaning the firm’s fees come from the recovery – not from your pocket at the outset.

Discovery, forensic analysis, and the pursuit of accountability – these are not just legal strategies, but safeguards for families whose inheritance is quietly eroding because a trustee chose inaction over duty. For decades, I have stood with families in exactly this position, and I have seen how a steadfast commitment to truth restores what negligence tried to take.

Key Definitions

Trustee: The person or institution legally responsible for managing and administering a trust according to its terms and California law.
Successor trustee: The individual named to take over trust administration after the original trustee dies or becomes incapacitated.
Surcharge: A court-ordered remedy requiring a trustee to personally compensate the trust or its beneficiaries for losses caused by the trustee’s breach of fiduciary duty.
Duty to marshal assets: The trustee’s obligation to identify, collect, protect, and organize all trust property, including legal and contractual claims.
Duty of impartiality: The requirement that a trustee treat all beneficiaries fairly and not favor one over another in trust administration decisions.
Fiduciary duty: The highest standard of legal obligation, requiring the trustee to act in the best interests of the beneficiaries at all times.
Trust claim: A legal or contractual right belonging to the trust, such as a debt owed to the trust or a pending lawsuit.
Statute of limitations: The deadline by which a legal claim must be filed or pursued, after which the right to enforce the claim may be lost.
Breach of fiduciary duty: A trustee’s failure to fulfill the legal obligations owed to the trust and its beneficiaries, which can result in personal liability.

What to Do Next

Look for any outstanding claims or debts owed to the trust that the current trustee has not pursued.
Get copies of the trust document and any accountings provided by the trustee.
Look for patterns of favoritism, such as a beneficiary living in trust property without paying rent or receiving informal distributions others do not receive.
Try to avoid allowing statutes of limitations to run on valid trust claims – time is a critical factor.
Document communications with the trustee, especially any requests for information that went unanswered.
Look into whether the trustee has provided a formal accounting as required by California law.
Try to avoid confronting the trustee without legal guidance, as early missteps can complicate later litigation.
Get a legal assessment of whether the trustee’s inaction has caused quantifiable harm to the trust estate.
Call Hackard Law at (916) 313-3030 to discuss your situation with our team.
Visit our contact page to reach us online and schedule a consultation.