Most California family trusts do not require a trustee to purchase a bond before beginning administration. This differs from many probate and conservatorship proceedings, where fiduciary bonds are common. Still, circumstances can arise in which a California trustee bond becomes an important protection for beneficiaries, particularly when concerns exist about the trustee's ability to safeguard trust property.

California Probate Code section 15602 provides the basic rule. A trustee ordinarily is not required to give a bond unless the trust instrument requires one, the court determines that a bond is necessary to protect beneficiaries or other interested persons, or an individual who was not named as trustee in the trust instrument is appointed by the court. A court may require a bond even when the trust document itself purports to waive it if circumstances make protection necessary.

A California trustee bond is generally designed to provide financial protection against losses associated with a trustee's failure to properly perform fiduciary duties. It is not insurance protecting the trustee from personal liability. Rather, the surety potentially provides another financial source for recovery if trust property is lost through conduct covered by the bond, after which the surety may have rights against the trustee.

Beneficiaries sometimes seek a bond when they believe trust assets are at unusual risk. Examples might include concerns about unexplained transfers, substantial liquid assets under the control of an inexperienced trustee, a history of poor financial management, substantial disputes regarding ownership of trust property, or circumstances suggesting assets could disappear before the court resolves the dispute. The existence of family conflict alone does not necessarily establish that a bond is required.

The court has flexibility when addressing the issue. Probate Code section 15602 permits a court to excuse certain bond requirements, increase or decrease the amount, release a surety, or permit substitution of another bond. When an individual who was not named in the trust instrument is appointed by the court, however, the statute places greater limitations on excusing the bond requirement.

The amount of a bond can also matter. A trust containing significant cash or marketable securities may present different risks than a trust whose principal asset is real property subject to restrictions on sale. Courts can consider the circumstances of the particular trust when determining the appropriate security, rather than treating every trust administration identically.

Trustees should not view a request for a California trustee bond as equivalent to a judicial finding that misconduct occurred. A court may use bonding prospectively to protect trust property while administration or litigation continues. At the same time, beneficiaries considering a bond request should generally identify a concrete reason why additional security is appropriate rather than relying solely on distrust of the fiduciary.

Key takeaways:

• California trustees ordinarily do not have to post a bond unless the trust, the circumstances, or a court appointment requires one.
• A court may require a bond despite language in the trust waiving the requirement when protection is necessary.
• Bonding is primarily a financial safeguard and does not by itself establish that the trustee breached a fiduciary duty.

Helpful educational links:

• https://leginfo.legislature.ca.gov/faces/codes_displaySection.xhtml?lawCode=PROB§ionNum=15602
• https://leginfo.legislature.ca.gov/faces/codes_displayText.xhtml?article=1.&chapter=1.&division=9.&lawCode=PROB&part=3.&title=&
• https://selfhelp.courts.ca.gov/probate

This article provides general information and is not legal advice. Questions about whether a trustee should be bonded depend on the trust instrument, the assets involved, and the circumstances of the administration. Call Westlake Law Group at (818) 444-2022. 30699 Russell Ranch Road, North Building, Suite 210, Westlake Village, California. Virtual consultations are available throughout Southern California.