Young family meeting with advisor, discussing what fiduciaries are not allowed to do? in detail

What Are Fiduciaries Not Allowed To Do?

If you are a California senior, an adult child helping a parent from another state, or a family member serving as trustee, executor, conservator, or power of attorney, you already carry a heavy responsibility. You know someone needs to “manage the money” and “follow the trust,” but the lines can feel blurry.

At some point, a hard question often comes up: What are fiduciaries not allowed to do?

Understanding that line matters. It protects the person at the center of it all, and it also protects the honest family member who is trying to do the right thing.

This guide will walk you through those limits step by step, using Smith Marion’s decades of experience with trust and estate accounting, court accountings, and fiduciary services for California seniors and families. While it is general information and not legal advice, recognizing these boundaries will help you identify issues early and know when to seek help.

What is a fiduciary?

A fiduciary is someone who has a legal duty to act in another person’s best interest. In this article, we focus on:

  • Trustees of living or testamentary trusts
  • Executors / personal representatives of estates
  • Agents under financial power of attorney (POA)
  • Court-appointed conservators of the estate (and sometimes of the person)
  • Licensed professional fiduciaries in California who may serve in any of these roles

These roles come with core fiduciary duties:

  • Loyalty: put the other person’s interests first
  • Care: act carefully and thoughtfully with their property
  • Good faith: act honestly and fairly
  • Disclosure: share information when the law or trust requires it

The California Probate Code, court orders, and the California Professional Fiduciaries Bureau define and enforce these standards.

With those duties and standards in mind, let’s move to the main focus: what fiduciaries are not allowed to do.

1. They are not allowed to put their own interests first

A fiduciary cannot use the position for personal gain at someone else’s expense. Examples include:

  • Paying personal bills from a trust or estate account
  • Giving themselves “loans” from the funds
  • Steering investments or property sales in a way that benefits them instead of the person they serve

This kind of self-dealing is a classic breach of fiduciary responsibility. If a court later finds that a fiduciary put their own interests first, they can be removed and ordered to repay the loss.

2. They are not allowed to ignore the trust, will, POA, or court order

A fiduciary does not get free rein. They must follow:

  • The terms in the trust document
  • The instructions in the will
  • The powers and limits of the power of attorney
  • Any orders from the probate court

Examples of crossing the line:

  • Making distributions that conflict with the trust’s instructions
  • Refusing to sell or transfer assets that the will clearly directs to a specific heir
  • Acting under a power of attorney after the person has died (a POA ends at death)
  • Ignoring a court requirement to seek approval before selling real estate

If a fiduciary treats the documents as suggestions rather than rules, they are stepping outside their authority.

3. They are not allowed to hide information that beneficiaries have a right to see

In many California situations, beneficiaries and other interested parties have rights to key information. A fiduciary is not allowed to:

  • Refuse to provide a copy of the trust when the law requires it.
  • Ignore written requests for an accounting.
  • Share figures in conversation, but never provide clear written reports.
  • Keep family members in the dark about major sales, fees, or distributions.

Lack of communication is one of the most common complaints we hear from beneficiaries. Silence, by itself, may not constitute fraud, but it can be a breach of the duty to keep people reasonably informed. It is also a strong indication that a closer examination is warranted.

4. They are not allowed to mix personal funds with trust or estate funds

Fiduciaries must keep money separate and maintain clear records. They are not allowed to:

  • Use a personal checking account as the main account for trust or estate transactions.
  • Deposit trust income into a personal account “just for a day or two.”
  • Swipe a personal credit card for estate expenses and never document or reimburse it correctly.
  • Store cash in ways that cannot be traced back to bank statements and receipts

This kind of “commingling” makes it almost impossible to prove what belongs to whom. Courts look at it very seriously. In our experience, even honest people can fall into this trap if they begin “just helping” without a clear structure.

5. They are not allowed to exceed the powers granted

Every fiduciary role has limits. They may not act beyond the authority in the documents or by the court, for example:

  • A POA agent making gifts to themselves that the document does not allow
  • A trustee changing beneficiary shares when the trust is clear
  • A conservator selling a house that requires court approval, without getting that approval
  • An executor investing estate funds in risky assets that do not fit their duty of care

The rule of thumb is simple: if the document or court order does not give that power, the fiduciary should not assume they have it.

6. They are not allowed to ignore recordkeeping and court-accounting standards

Fiduciaries must be able to show exactly what happened with each dollar. In California, courts expect clear, organized accountings that follow Probate Code-style formats, usually along this path:

Beginning balances → receipts → disbursements → gains/losses → assets on hand

A fiduciary is not allowed to:

  • Rely on memory or rough notes in place of real records.
  • Throw away statements and receipts they might need later.
  • Refuse to prepare accountings in a proper format for conservatorships, guardianships, or estates.

This is where Smith Marion’s work is often critical. Our team has prepared California-standard trust and court accountings that meet the expectations of the probate court. We organize data into clear, complete reports that attorneys and judges can review.

Red flags that a fiduciary may be doing something they should not

Fiduciary services are often most effective when problems are still small. Watch for signs like:

  • Long periods with no accounting or reports, even after a trust becomes irrevocable
  • Trustees or helpers who refuse to share copies of the trust or basic statements
  • Unpaid bills, late notices, lapsed insurance, or tax troubles while someone “handles” the money
  • A sudden new friend, caregiver, or distant relative who gains control over accounts or beneficiary forms
  • Unclear or missing documentation: no receipts, hand-written lists only, or assets that appear in tax returns but not in inventories
  • A fiduciary who seems lost about deadlines, formats, or court rules

Any single sign does not prove misconduct, but these patterns may indicate that the fiduciary is close to or has crossed a line they should not cross.

Common gray areas and myths

Some situations can be confusing for almost everyone at first. Here are a few to clear up.

“No accounting means automatic fraud.”

A lack of accounting is a serious problem and may constitute a breach of duty, but the response typically begins with a clear written request for information. If that fails, the next step may be filing a petition with the probate court, which would allow a judge to require an accounting.

“Beneficiaries have zero rights until the estate is closed.”

In many California situations, beneficiaries have rights to important information and accountings after death or incapacity, not just at the very end. A trustee who ignores those rights may be crossing a line.

“A POA or trustee can keep going after death.”

A financial power of attorney ends at death. After that, the executor or successor trustee steps in. Acting under a POA after death is outside the agent’s authority.

“Any honest family member can serve; training does not matter.”

Good intentions help, but the law expects real recordkeeping and compliance. In many cases, a licensed professional fiduciary and an experienced CPA firm are needed to meet court standards.

“You can waive all accountings forever with no risk.”

Sometimes beneficiaries can waive accountings, but that choice also reduces oversight. There are times when a waiver is fine and times when a formal accounting is safer. Many families ask for help to weigh this decision.

How Smith Marion helps when you suspect a problem

Smith Marion has worked in settings where records, rules, and accountability matter: nonprofits, government agencies, trusts, estates, conservatorships, and more.

When you suspect a fiduciary is doing something they should not, or you are in the role and feel overwhelmed, our team can:

  • Prepare independent, court-ready accountings that show every receipt, disbursement, asset, and fee.
  • Help current fiduciaries fix recordkeeping, separate funds, and bring reports up to Probate Code standards.
  • Review existing accountings for beneficiaries and attorneys to spot gaps or concerns.
  • Work alongside professional fiduciaries, care managers, and lawyers as the numbers-focused part of the team.

In short, we turn a messy financial picture into clear, organized numbers that a family and a court can actually work with.

Next step: Talk with Smith Marion

If you are asking, “What are fiduciaries not allowed to do, and is something wrong here?”, you do not have to guess alone.

Smith Marion’s fiduciary, trust, and estate accounting services help California seniors, families, and trustees understand what has happened, what must change, and how to move forward in a way that honors both the law and the person’s wishes.

You can:

Bring your questions, your concerns, and your paperwork. We bring clear accounting, structure, and steady support so you can protect the people and the legacy that matter most.