California Trust Beneficiary Notice Requirements: Trustee Duty & CA 16061.7
The most common line of questioning we receive when someone realizes they are the trustee, or manager, of a trust is what do they have to tell the beneficiaries? What documents do they have to provide? These questions become quite pressing where we have expecting individuals asking around for trust documents and when they are going to get their expected inheritances, which yes, does happen. Below, we’ll address what notice requirements are expected of a trustee when administering a trust after death.
Trustee’s Duty to Provide Notice to Heirs and Beneficiaries
To begin, a trustee does have a duty to provide a notice to heirs and beneficiaries of a trust in a few circumstances, but we will be discussing the two most common that cover the vast majority or circumstances where this duty to provide notice arises. All of these are outlined in the California Probate Code Section 16061.7.
When a Trust Becomes Irrevocable
The first instance is when a revocable trust, or any portion thereof, becomes irrevocable due to a variety of circumstances – typically either by the terms of the trust itself or where one or more of the trustors, also known as the settlors and who are the makers of the trust, pass away. An example of this would be a husband and wife setting up a typical revocable living trust. If one passes away, the other may still amend or change the trust, thus no notice is required to be served to the beneficiaries. However, once the survivor passes, the trust becomes irrevocable as the parties who made it, the husband and wife, have now both passed away. Due to this, the trustee then must serve notice to the heirs and beneficiaries of that trust.
Change of Trustee of an Irrevocable Trust
The second instance is when there has been a change of trustee of an irrevocable trust. Also note, this triggers a duty to account as well, but we’ll cover trustee duties in more detail in a later post. Usually there is a change of trustee when the current trustee is unable or unwilling to serve for whatever reason – typically due either to health reasons or for convenience. Sometimes it is easier to have someone more local to where the trust assets are, as in a family home for example. However, a trustee can be removed by a court for committing a breach of trust, a topic we have covered before.
Time Limits for Notice and Required Language
In either circumstance, know that the trustee is on a time limit as well. This notice must be served within 60 days of the event giving rise to the duty to provide notice. That means if a trust becomes irrevocable due to the death of the trustor, the trustee then has 60 days from the date of death to serve notice to the heirs and beneficiaries.
Additionally, there are some requirements for the content of the notice going so far as to cover the formatting of the font itself. Most importantly however, the notice must include this statement, “You may not bring an action to contest the trust more than 120 days from the date this notification by the trustee is served upon you or 60 days from the date on which a copy of the terms of the trust is delivered to you during that 120-day period, whichever is later.” This is why we call these trustee notice letters 120-Day notice letters.
What that statement means is the party who receives notice has 120 days, from the day they receive their notice, to challenge the trust, otherwise they are precluded from doing so. In addition to this, they can toll or extend those 120 days an additional 60 days by asking for a copy of the trust. Therefore, it is good practice to simply include a copy of the trust with the notice itself to avoid that kind of game playing or delays in administration. Regardless, heirs and beneficiaries are entitled to a copy of the trust when it becomes irrevocable so there is no reason not to simply include it with the notice.
Please keep in mind, this statement is primarily focused on closing claims related to the validity of a trust, not a trustee’s actions in administering the trust itself. Thus, simply because a trustee has met their duty to notify heirs and beneficiaries to a trust, does not mean the trustee’s other duties in that capacity need not be met. Some examples are a trustee’s duty to account, operate in the best interest of the beneficiaries (duty of loyalty), further communicate with beneficiaries, and more which, again, we’ll cover in a future post.
How to Provide Notice
Next, due to the probate code having strict timing requirements, many points of contention regarding these notices arise when parties either fail to meet these deadlines or fail to have proof of meeting them. To attempt to avoid these issues, trustees are often encouraged to mail these notices via Certified Mail with a return receipt requested. That way, a record of the delivery of the notice and all enclosed documents may be kept should a timeline need to be established later.
Heirs vs. Beneficiaries
On a side note, an heir and a beneficiary technically refer to something different but are often used interchangeably. Legally speaking, a beneficiary is someone who is to receive an inheritance under a Will or Trust. However, an heir is someone who would naturally be a beneficiary and therefore has an interest in the administration of an estate in the same way a beneficiary has an interest.
As an example, I have a son. My son is my heir due to the fact of being my child. My son may also be a beneficiary of my trust where my distribution says everything goes to my son. However, if I also had a daughter but disinherited her from my trust, then she would still be an heir, but not a beneficiary. In that case, both my son and daughter would be entitled to copies of my trust and to receive notice of the trust having become irrevocable at my death, even if everything was to go to only my son.
Summary
To summarize, a trustee must provide notice to heirs and beneficiaries of a trust when the trust, or a portion of it, becomes irrevocable, or when there has been a change of trustee of an irrevocable trust. The trustee has 60 days to serve that notice and it must conform to the requirements of the probate code. Finally, while not required, it is best practice to include a copy of the trust with the notice since the heirs and beneficiaries are entitled to a copy regardless and to track any notices or documents sent in the mail.
While the probate code is relatively constant, everyone’s situation and circumstances are different meaning every case must be approached in a careful and thoughtful manner. Thus, if you are a trustee of a trust, you should speak with an attorney to make sure you are aware of your duties and to know what actions you need to take to meet those duties under the law.
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