What a trustee must tell the beneficiaries, when, and what a beneficiary can do when a trustee does not respond
Many trust disputes begin when a beneficiary hears nothing for months, asks for information and receives none, and concludes that something is wrong. The Probate Code sets out what a trustee must disclose and when, and gives beneficiaries a direct remedy when a trustee does not comply. The core provisions are sections 16060, 16061.7 and 16062.
Whom the duties run to
While a trust is revocable and the person holding the power to revoke is competent, the trustee’s duties are owed to that person, not to the beneficiaries, under Probate Code section 15800. If every person holding the power to revoke becomes incompetent, the trustee must, within 60 days after receiving information establishing the incompetency, notify the beneficiaries who would take if the settlor had died and give them a copy of the trust, and the duties to account and to provide information are then owed to them, under section 15800(b). The duties to account, to provide the terms of the trust and to provide requested information do not apply when the beneficiary and the trustee are the same person, under section 16069.
The notification by trustee
Under section 16061.7, a trustee must serve a notification when a revocable trust becomes irrevocable because of a settlor’s death, when there is a change of trustee of an irrevocable trust, and when a power of appointment retained by a settlor over a trust that was irrevocable when created takes effect or lapses at the settlor’s death. The duty belongs to the continuing or successor trustee, and any one cotrustee may serve it. The notification goes to each beneficiary and, when the event is a death, to each heir of the deceased settlor, whether or not the heir is a beneficiary. The other duties of a new trustee are discussed in A Trustee’s First Steps After a Death.
The notification is due within 60 days after the event, or within 60 days after the trustee learns of a person entitled to it. If the office of trustee is vacant, the 60 days run from the date the new trustee begins to serve. It must identify the settlor and the date of the trust, give the name, address and telephone number of each trustee and the address of the principal place of administration, include any additional information the trust instrument requires, and state that the recipient may request a copy of the terms of the trust. After a death, it must also contain the statutory warning, in bold type, that the recipient may not contest the trust more than 120 days after service or 60 days after a copy of the terms is delivered during that period, whichever is later. A settlor cannot waive the notification. A trustee who fails to serve it on a beneficiary is liable for the resulting damages, attorney’s fees and costs unless the trustee made a reasonably diligent effort to comply. As to an heir who is not a beneficiary and whose identity the trustee knows, the liability is for the resulting damages, and a reasonably diligent effort means delivery to the heir’s last address actually known to the trustee, under section 16061.9.
Information and the terms of the trust
The trustee has a general duty to keep the beneficiaries reasonably informed of the trust and its administration under section 16060. On a beneficiary’s reasonable request, the trustee must provide information about the administration relevant to that beneficiary’s interest under section 16061. On a beneficiary’s request, the trustee must provide the terms of the trust under section 16060.7. The terms of the trust include amendments, signatures, disclaimers, directions to the trustee that affect the disposition of the trust, and any document irrevocably exercising a power of appointment, but not instruments superseded by a complete restatement before the settlor’s death, under section 16060.5. A settlor’s waiver of the duties to provide the terms of the trust or requested information is void under section 16068.
Accounts
Under section 16062, the trustee must account at least annually, at the termination of the trust and on a change of trustee, to each beneficiary to whom income or principal is required or authorized to be distributed currently. Trustees of living trusts created by instruments signed before July 1, 1987 are not subject to that duty. The contents of an account are set by section 16063 and are discussed in a companion article on fiduciary records.
The duty to account may be waived by the trust instrument or by a beneficiary in writing, under section 16064. A beneficiary may withdraw a written waiver at any time as to later transactions, and regardless of any waiver the court may compel an account on a showing that a material breach of trust is reasonably likely. A waiver in the trust instrument is void as to a sole trustee who falls within the categories in section 16062(e), such as the person who drafted the instrument.
What a beneficiary can do
A beneficiary who does not receive what the statutes require can petition the court under section 17200(b)(7) to compel the trustee to provide the terms of the trust, to provide information, or to account. For information, the petition requires that the trustee failed to provide the requested information within 60 days after the beneficiary’s reasonable written request and that the beneficiary has not received the requested information within the six months before the request. For an account, the trustee must have failed to provide a requested account within 60 days after a written request, with no account made within the six months before the request. A written request that states what is wanted and allows the 60 days is therefore the necessary first step.
Case study: a written request and a petition to compel
Two sisters were beneficiaries of their father’s trust, and their brother was the trustee. He sent the notification after the death but nothing else, and more than a year later he had not answered their questions about the sale of a rental property or the expenses he had paid.
We sent the brother a written request for an account of the administration since the death and for the closing statement from the sale. When 60 days passed without a response, we filed a petition to compel an account under section 17200(b)(7). The brother retained counsel and served an account before the hearing. The account showed that he had paid himself compensation without disclosing it, and the sisters objected on that ground, which was resolved by a reduction in his compensation.
How we can help
Worden Williams advises trustees on the notifications, reports and accounts the Probate Code requires, and represents beneficiaries who need information or an accounting they have not received.
This article is general information about California and federal law as of its date. It is not legal or tax advice and does not create an attorney-client relationship. Case studies are composites drawn from the kinds of matters the firm handles; names, places, amounts and other details have been changed, and the result in any matter depends on its own facts. Tax results should be confirmed with your CPA. Responsible attorney: Tomer T. Gutman, Worden Williams LLP, 462 Stevens Avenue, Suite 100, Solana Beach, California 92075, (858) 755-6604.