Required Notification by Trustee to Beneficiaries - First Step

Introduction:

Upon the passing of the Trustor of a Trust, the successor Trustee must assume not only many of the duties previously undertaken by the now deceased Trustee, but often more since most Revocable Intervivos Trusts, upon the death of the people who first created it (the “Trustors” or “Settlors”) require distribution of the assets to the next generation or other people. See our article on Wills and Trusts.

One who has not previously encountered a fiduciary duty may be overwhelmed by the obligations suddenly imposed, especially during what may be a time of grief. In reality, the duties, while important, are not beyond the ability of the average person to accomplish if they are wise enough to retain the services of the appropriate advisors which almost all Trust instruments encourage. Indeed, some courts have held that a Trustee is obligated as part of his or her duties to retain the right advisors immediately so as to accomplish the duties required under the Trust. See our article on Duties of a Trustee.

This writer well remembers one retired school teacher who at first baulked at the duties she confronted when her sister died naming her as the successor Trustee. Three years later, as the Trust was filing its annual tax returns and she was directing the CPA as to appropriate tax planning for her allocated distributions, I commented that she had certainly mastered the duties and seemed very comfortable with fulfilling them. She stopped a moment, a bit surprised, then smiled and agreed. “It’s what Doris wanted me to do and I’m really doing no more than listening to professionals giving me suggestions and choices and making the choices. It’s not much harder that handling my own checkbook, really.”

One of the first duties a Trustee encounters is selecting the professionals to advise and notifying the beneficiaries of the change in status of the Trust. This article concentrates on the latter and includes a basic form required by the California Probate Code.

 

Notice To Beneficiaries:

As discussed in our article on Wills and Trusts, the average American now uses a revocable intervivos Trust (a “Living Trust”) to avoid the cost of probate when transferring estate assets to the next generation. Until death, the Trust remains entirely revocable-the Settlor can alter or end the Trust at will. Upon death, however, the Trust becomes irrevocable, at least in part.

With an average couple, when one spouse dies the Trust becomes irrevocable as to one half of the assets and when the second spouse dies, the entire Trust becomes irrevocable. At that point, the successor Trustee is expected to either hold or distribute the assets as directed by the Trust instrument.

The change in status of the beneficiaries (new ones may be entitled to income or principal of the Trust) and the fact that the Trust now cannot be altered are two critical facts that must be communicated to the beneficiaries under California law. This is vital from the court’s point of view since a beneficiary will not be able to protect his or her own interest or make his or her own plans absent knowledge that the Trust has vested in their favor.

Further, if there is going to be a contest of the Trust by any of the beneficiaries, perhaps claiming more of the assets or challenging the legality of the Trust, the court wishes to quickly have that process begin and the Notice below also creates a period during which a beneficiary must challenge the Trust or is barred from doing so.

The following notice is therefore required to be sent to each and every beneficiary of the Trust and note that it also indicates to the beneficiary their right to receive a copy of the Trust and how to obtain it:

 

________. 200__

 

Name of Beneficiary/Heir

Address

 

RE: THE ESTATE OF _________________ Date of Death:

 

 

NOTIFICATION BY TRUSTEE PURSUANT

TO PROBATE CODE §16061.7

 

___________ executed ____________ FAMILY REVOCABLE TRUST in his capacity as Settlor on _____________, which was last amended __________.

Said Trust Agreement became irrevocable as of the date of death ___________. Pursuant to Probate Code §16061.7, the trustee is required to serve notice to all potential beneficiaries of a trust whenever (1) a Revocable Trust (or portions thereof) become irrevocable; or (2) there is a change of trustee of an irrevocable trust.

 

1. The name, mailing address and telephone number of the trustee of the trust is set forth below: _______________________________

2. The address of the principal place of trust administration pursuant to Probate Code § 17002 is set forth below:

 

Stimmel, Stimmel & Smith, PC

155 Montgomery Street, 12th Floor

San Francisco, CA 94104

 

3. You are entitled to receive from the trustee a true and complete copy of the terms of the trust by requesting same from the trustee listed above.

 

4. 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 OF WHICH A COPY OF THE TERMS OF THE TRUST IS MAILED OR PERSONALLY DELIVERED TO YOU IN RESPONSE TO YOUR REQUEST DURING THE 120-DAY PERIOD.

 

5. If you would like a copy of the terms of ____________ REVOCABLE TRUST, please mail the request form set forth below (certified mail, return receipt requested) to the trustee at the trustee address set forth above.

 

 

Dated:

_________________________________

__________, Trustee of

__________ REVOCABLE TRUST

 

 

REQUEST FOR COPY OF TERMS OF TRUST

 

 

Dear Trustee:

 

I respectfully request a true and complete copy of the terms of ____________ REVOCABLE TRUST as defined in Probate Code §16060.5 be mailed to me at my address set forth below:

 

Name: ____________________________________________

 

Address: _____________________________________________

_____________________________________________

 

Phone: _____________________________________________

 

SSN: _____________________________________________

 

 

___________________________________________

 

Signature

 

 

 

Conclusion:

The above notice may be personally served or may be sent to the beneficiary by certified mail, return receipt requested. Obviously, if the beneficiary wishes a copy of the Trust, it should be promptly forwarded.

Assuming a challenge to the Trust, legal counsel will be required to file the requisite pleadings in the Court and the Trustee should calendar the sixty or one hundred and twenty day period so that he or she knows when the period to challenge has expired.