Trust Notifications in California: An Overview
Trust notification is an important part of the estate planning process in California. In general, trust notification refers to the step of providing beneficiaries with notice that they are beneficiaries of a trust. Some California trusts are governed by the Probate Code’s rules of trust administration, specifically Probate Code sections 16060 through 16069. These rules outline a number of rights that beneficiaries and trustees may have in the context of trust administration, including the right for beneficiaries to receive certain information about the trust.
Sections 16061 and 16061.7 of the Probate Code provide specific statutory notice requirements to be followed by each trustee regarding the beneficiaries of a currently effective trust. Generally, the notice requirements can be grouped into two categories:
(1) Notice to beneficiaries who are entitled to receive a current distribution from the trust; and
(2) Notice to any other beneficiary of that trust.
However, one size does not fit all. The specific requirements for notifying beneficiaries who are entitled to receive a current distribution versus notifying any other beneficiary depend on the type of beneficiary. For example, special rules apply to notifying the following types of beneficiaries:
These rules also provide additional notice requirements in some circumstances. For example, notification obligations may be waived or altered by the terms of the trust, if it is clear that the affected beneficiary is an adult and competent . Special notice rules apply if the trust is a charitable remainder trust. And presumptions apply if notice is given at the same time to all adult competent beneficiaries. (Probate Code § 16061.7(b).)
As noted above, the statutory requirements to provide notice are merely the "floor" that trustees must meet. In addition, each trustee has fiduciary duties to the above-mentioned beneficiaries, as well as special duties to primary beneficiaries to not interfere with their rights and to act in good faith and with reasonable care, skill, and caution. To the extent that beneficiaries wish to know more about a trust than is required under the statutory notice requirements, each trustee must act in good faith to provide such notice.
Finally, in some situations, there may be concerns over the trustee’s ability to perform his or her duties as trustee. For example, the named trustee may feel he or she is not technically competent to manage the trust. Or the beneficiaries may believe that the trust is being mismanaged and are seeking to have the current trustee replaced. Where necessary, it may be appropriate for a beneficiary or someone interested in the trust to commence a proceeding under the Probate Code to remove the current trustee and appoint a new trustee.
In sum, while the minimum notification requirements are statutorily set forth and are the "floor" that must be met, for California trustees, those requirements are only the beginning of their obligations.
Who is Required to be Notified of a California Trust?
A California trustee must notify all beneficiaries, all successors, and all creditors of the trust of the existence of the trust. If a California trustee fails to notify creditors that he or she has settlor’s consent to serve (or object to a subsequent transfer of the property), those creditors can come forward and object as well as sue the trustee for all damages sustained and to recover all liabilities incurred.
Failure to comply with the California notification rules can have severe consequences. A trustee who violates the requirement to give notice of the existence of the trust (and rights under it) could find their personal assets making up for the lack of notice under the Olguin case.
Trust Notice Deadlines
When a revocable trust becomes irrevocable, or when a settlor passes away, "qualified beneficiaries" should receive a "notification of the trust" within 60 days (Probate Code Section 16061.7), along with "information about the administration" within 120 days of the settlor’s death. (Section 16061.7.) The notification of trust must include: Generally the notice is given to all qualified beneficiaries, either: (1) the beneficiaries named in the trust instrument; or (2) the beneficiaries as might be determined according to the current income or principal interest. (Section 15804.) Notice is also given to any other person who requests it. The trustee then has at least 120 days from the settlor’s date of death to provide the qualified beneficiaries with the following information: (1) The assets under the trustee’s control as of the settlor’s death; (2) Identity and address of the trustee; (3) The trustee’s telephone number; (4) A description of how the trust beneficiary may request, by mail, a statement of administration of the trust under Probate Code Section 16240(b), which requires the trustee to inform the beneficiary, within 60 days, (a) Of a general description of the trust property, (b) Of the trust interests of the beneficiary, and (c) Of the amount that has been paid or distributed to the trust beneficiary and of other transactions affecting the trust interest of the beneficiary. And (5) A copy of the trustee’s obligation to account under Section 16062, which requires the trustee to serve annual accountings on the beneficiary by mail. The trustee must also notify beneficiaries of changes in their rights under the trust. For example, when the trustee stops serving. (Section 15660(c)(2).) A beneficiary whose right to receive under the trust is subject to being reduced or increased based upon certain contingencies (i.e., a child’s right in a surviving spouse’s trust) should receive notice whenever the contingencies happen (i.e., the child is no longer a minor.) (Section 16065.) If the trust instrument provides for special notice requirements (i.e., by personal delivery or email), the requirements in the trust prevail. (Section 16061.7(c).)
What Must a California Trust Notice Include?
To maintain a strong and transparent fiduciary trust, the following essential information must be included in a trust notification to comply with California laws:
I. The name and address of each trustee.
II. The address at which the trust records are kept.
III. A statement that a person entitled to receive notice may inspect on reasonable notice, and copy, the trust instrument and any amendments to it.
IV. A statement that the notice is being sent pursuant to the California Probate Code, and that the trust is revocable, according to the trust instrument.
V. A statement listing the amount to be paid to each of the beneficiaries who are the reason for sending the notice or, if no amount is specified, identifying the shares of the distributed property.
VI. A statement identifying any other distribution other than money being provided by the trust.
VII. The name, address and telephone number of the person that a recipient may contact if he or she wants to request a copy of the trust instrument.
VIII. Any of the following information that is relevant to understanding the trustee’s duties in the administration of the trust:
IX. The manner in which, and the place at which, the notice may be received.
Common Errors in Trust Notifications – How to Avoid Them
In an effort to work towards compliance with the law, many estate planning attorneys will draft a notification letter to clients. The letter is usually a brief document, which is simply meant to alert beneficiaries of their potential right to information. Many attorneys, however, will fail to include the information required by California Probate Code section 16061.7.
Probate Code 16061.7 states:
(a) Notice to a beneficiary under a trust shall be given as follows:
(1) If the beneficiary is current, his or her address may be omitted from the notice.
(2) The only beneficiaries of a trust to whom the notice must be given are those who meet any of the following conditions:
(A) Are currently eligible to receive mandatory distributions under the terms of the trust.
(B) Would be currently eligible to receive mandatory distributions under the terms of the trust if the trust terminated on the date on which notice is to be given.
(C) Would receive mandatory distributions from the trust on the termination of the trust.
(b) Consent shall not be required for the notice, but a beneficiary may consent in writing to its receipt in a manner other than as provided in this section. Consent may be implied from the beneficiary’s acts, including the failure to act, but consent expressed or implied shall be sufficient for the purposes of this part. Consent need not be sought from a beneficiary who has waived notice. At the request of a current beneficiary who has not waived notice, the trustee shall transmit the notice to the beneficiary by electronic communication at the beneficiary’s request, provided that the electronic notice complies with the requirements of this section .
(c) A notice given under this section shall include all of the following:
(1) Either:
(A) The name of the trust and date of the trust instrument.
(B) The name of the settlor of the trust and the date of the trust instrument.
- (2) The address and telephone number of the trustee.
- (3) The address of the beneficiary who is receiving notice.
- (4) If it is not practicable to give notice by mail, this fact shall be stated in the notice and the method of giving notice shall be described in the notice and in a declaration of diligence, as specified in Section 1215 of the Code of Civil Procedure.
- (5) The notice shall be accompanied by a copy of the entire trust instrument or, at the option of the trustee, a copy of the relevant portions of the trust instrument, provided, however, that a copy of the relevant portions of the trust instrument shall not be included if the notice is given to a beneficiary who has already received a copy of the trust instrument or such relevant portions of the trust instrument.
As noted above, the trustee should give notice to certain beneficiaries of the Trust. This notice must contain specific information to satisfy the requirements in Administration of a California Trust. A current Trustee should not rely on the notification letter drafted by the drafting attorney, but instead should review the notice requirements and either adopt the letter if it contains all of the necessary information, or revise the letter to comply with the requirements of the California Probate Code.
The Legal Ramifications of Failing to Meet Trust Notification Requirements
Failure to comply with notification requirements may have legal and financial consequences for the trustee. A probate court can be petitioned to remove a trustee who does not comply with formal notice requirements, and the court can also impose other remedies and sanctions on the trustee as the court sees fit. This means that a person who is a beneficiary of a trust can petition the court to obtain a decree that would remove the trustee and terminate the trust – but only where the probate court determines that such action is in the best interests of the beneficiaries.
A court supervised account may be required, and this will allow the probate court to approve trustee fees and determine to whom property of the trust will be distributed. In addition, where the trustee has violated fiduciary duties or prohibited practices under California law, the trustee may be liable to the beneficiaries for any damage that is caused to the trust estate. There are also civil penalties that may be imposed by the court against the trustee in an amount of up to one thousand dollars ($1,000) per violation of certain trust litigation statutes—$5000 for willful violations. Also, a trustee may be ordered to file an account with the probate court, to submit a report to the surrogate court, and to deliver property of the trust estate to it within a specified time period. There are other remedies available to the beneficiaries under California probate litigation laws.
A trustee also has to comply with California’s laws of limitation in order for claims not to be barred against the trust property. Certain claims and petitions of beneficiaries must be filed within four months of the first issuance of the letters to the trustee, or they will be barred by the statute of limitations. If a beneficiary is a minor or lacks capacity when the claims need to be filed, the claims do not run until the minor’s or incapacitated beneficiary’s disability has been removed. The limitation period on any claim in a contested probate case is three years from the entry of the decree or judgment in the superior court action.
How a Lawyer Can Assist with Trust Notification
It is important to note that individual trust beneficiaries may have certain rights under the California Probate Code when it comes to receiving information regarding the Trust and/or a trust distribution. It is very important to understand that there are various steps and requirements that must be satisfied in order to properly serve a legal notice on a Trustee and/or Trustor (people who have created the Trust). Moreover, the notice must be served on the correct person who has the legal authority to receive legal notice of a Trust, which is often time a Trust Manager or the Trustee . The wrong notice being served upon the wrong person could result in a technical violation of the Trust, and in certain circumstances such a violation could lead to further chances for litigation between the beneficiaries of the Trust and the Trustee.
Further, if the Trustee of the Trust does not properly serve the notice we have outlined above then such a violation could result in liabilities of the Trustee. Hence, it is imperative that you seek professional advice so that the Trustee and/or the beneficiaries of the Trust are complying with all the complex California Trust laws and regulations.