Duty of Impartiality

Probate Code §16003 provides that "[i]f a trust has two or more beneficiaries, the trustee has a duty to deal impartially with them and shall act impartially in investing and managing the trust property, taking into account any differing interests of the beneficiaries." This is commonly called the duty of impartiality. In the vast majority of trust administration cases, there will be multiple beneficiaries that the trustee has to treat impartiality. That is, the trustee cannot exhibit bias towards one beneficiary over another. However, this can be challenging because a successor trustee is typically a family member that often has a positive or negative relationship with the beneficiaries. 

In a recent published appellate opinion, a trustee was surcharged for attorney fees that were expended, $201,164.15, for the defense of a disputed third trust amendment. Zahnleuter v. Mueller __ Cal.App.5th __ (2023). The trial court found that the trustee "breached his duty to deal impartially with all beneficiaries, as he did not take a neutral position in the dispute over the validity of the third amendment. Instead, he represented the interests of one side (Amy and others) over the other side (Katherine)."

Footnote #6 from the appellate opinion was quite illuminating:

"We are unpersuaded by Thomas's assertion that he did not "litigate a single issue, motivated by bias against . . . Katherine." During his deposition, Thomas referred to Katherine as a "greedy, manipulative, deceiving individual," and claimed that, after Richard's death, Amy took "precedence" over Katherine. Thomas admitted that his defense of the third amendment, if successful, would benefit Amy and harm Katherine, and that he was more concerned about Amy than Katherine. Thomas also conceded that he did not treat the beneficiaries equally. He explained that he distributed $135,000 from the trust estate to Amy as well as $10,000 each to Julie and his two daughters, but he refused to distribute the $100,000 he was "supposed to give Kate" because of the "golden rule"—"[h]e who has the gold rules."