Notifying, Reporting and Accounting to Beneficiaries.

Unlike some other states, particularly Delaware, California does not allow so-called “Silent Trusts” — Trusts that limit the disclosure to trust beneficiaries of the existence, terms, assets, liabilities, and administration of an existing trust.

Nevertheless, some trustees subject to California law still fail to notify death beneficiaries and heirs on the death of a settlor, and also fail to report and account to the trust beneficiaries even though required to do so. Beneficiaries and heirs, therefore, do well to consult an attorney regarding their legal rights, when these rights take effect, and what they can do to enforce them.

While a settlor of a revocable living trust is alive and competent – can amend or revoke his or her trust – the trustee’s duty to report and account is owed to the settlor alone. The trustee does not have to disclose anything to the death beneficiaries or settlor’s heirs. The settlor’s death or incapacity to amend or revoke the trust, however, makes the living trust irrevocable.

Once irrevocable, the beneficiaries can request a copy of the trust and information about its assets, liabilities and administration to the extent such is relevant to their own beneficial interest in the trust estate.
The trustee must then provide a statutory notice to the deceased settlor’s surviving beneficiaries and all heirs, including disinherited heirs. The notice tells the recipient that he or she is entitled to request a complete copy of the trust, who and how to contact the trustee, and the time limitation to contest the trust.

A trustee who fails to provide such notice is legally responsible for all damages, attorney fees, and costs caused by the failure unless the trustee has made a diligent effort to comply with the notice requirement. A beneficiary or heir may then sue the trustee for any breach of trust, and petition for a trust accounting replacement of the trustee.

Furthermore, the trustee must then keep the beneficiaries reasonably informed as to the trust’s ongoing administration. Sometimes, in order to protect legal rights, a beneficiary may need to pursue legal remedies during the settlor’s lifetime. In Drake v Pinkham (2013) 217 CA4th 400, a daughter lost her right to contest her disinheritance because she waited until after her mother died. Even though she had believed that her mother was incompetent while alive she waited until after she had died. The delay prevented the mother’s capacity to amend her trust from being examined.

If some or all of a decedent’s trust estate is held in further trust for the lifetime of a beneficiary this can create tension between the current beneficiary and the future beneficiaries who stand to receive what remains.
Consider deceased husband who leaves his or her estate in further trust to his surviving wife, from a second marriage, for her lifetime benefit. The trust provides the surviving wife with all the trust income and for the possible invasion of principal if necessary, but only if the surviving spouse has exhausted her own resources. The deceased husband names his wife as trustee and his own children as the future beneficiaries. The wife as trustee does not have to account to the children during her lifetime. The children may, however, be concerned that their step mother is disregarding the terms of the trust and taking more than she is allowed, to the detriment of the children.

What rights have the children? The children are entitled to a copy of their deceased father’s trust, at his death, and to request information from their stepmother regarding trust administration as relevant to their future beneficial. If no reports are provided or reports show a likely breach of trust then the children can object to the report and can petition to compel an accounting and for trustee to be replaced.

Trustees are more often motivated to fulfill their duties, get compensated, and avoid litigation. If a beneficiary nevertheless confronts the issues discussed above they need a qualified attorney to review their situation, and provide specific legal guidance and representation.