November 18, 2016

Notice from a Trustee

When a revocable trust becomes irrevocable, the trustee is required to provide notice of it to beneficiaries and heirs. See Prob C § 16061.7. The notice must inform the recipient that he or she is entitled to a complete copy of "the terms of the trust" or that the trustee provide the recipient with an actual complete copy of "the terms of the trust." See Prob C § 16061.7(g)(5). Prob C § 16060.5 defines "the terms of the trust" to include all amendments in effect at the time of the settlor's death.

[Author's comment: my standard practice when doing a trust administration is to always include a copy of the trust with the Prob C § 16061.7 notice. Naturally any person will be curious to know if they are to inherit anything. Hence they will want to read the trust, or at least try to read it. There is no sense in playing "hide the ball" because a beneficiary or heir will always be entitled to a copy of the trust.

A natural dilemma arises when the trustee is in possession of a document that amends the trust but is of dubious validity. For example, the document is incoherent, lacks a signature or references assets not in the trust.

The imprudent approach is for the trustee to unilaterally decide which documents to provide beneficiaries and heirs. An example of this can be found in the the following case (unpublished appellate opinion, Anderson v. Anderson (2016) ___ Cal.App.4th _____ : 

"Alice died in December 2013. On January 9, 2014, Joan, as successor trustee and acting with the assistance of her daughter, Connie, sent Tom a notice pursuant to section 16061.7. The notice stated that it included a "true and complete copy of the trust agreement." The notice included a copy of the January 11, 1996 restatement and the 1999 amendment, but did not include a copy of the second amendment executed in 2013, though Joan and Connie were in possession of a notarized copy of the second amendment at the time the notice was prepared." 

The prudent approach is for the trustee to file a petition to determine the validity of the questionable documents. The probate code specifically allows a trustee to perform such an action. See Prob C § 17200.     

As one would expect from the above quote, Tom was displeased that the trustee provided him with an incomplete set of documents. Tom filed a petition for "removal of Joan as trustee, the appointment of a replacement trustee, an accounting, an order requiring the successor trustee to prepare a new notice pursuant to section 16061.7 that would include the second amendment, and damages for breach of the trustee's duties."

One wonders if this situation could've been de-escalated had Joan originally served all the documents on Tom and then filed a petition to determine the validity of the 2nd amendment................