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REQUIRED
NOTIFICATION BY TRUSTEE TO BENEFICIARIES: FIRST STEPS
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.
- The name,
mailing address and telephone number of the trustee of the trust is
set forth below: _______________________________
- 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
- 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.
- 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.
- 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.
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