A common theme when it comes to the settlement a decedent’s estate is the beneficiaries expecting to receive their expected inheritance immediately. Unless a beneficiary is also the executor or successor trustee, generally beneficiaries have no concept of tasks required to properly settle a decedent’s estate including taking inventory of the assets, obtaining appraisals of the assets, paying final bills, filing final tax returns, and sending any required notices to various agencies. This process often takes several months with a trust administration and much longer with a probate, yet beneficiaries often suspect something is afoul if they are not given information about the estate immediately. Below is an outline of the various requirements a trustee has to disclose information concerning a trust.
Living Trust When Trust Maker is Living
Most clients who establish proper estate planning use a living trust as their primary document. A living trust is revocable while the trust maker is living, meaning that the trust maker is free to make any change he or she wishes or even revoke the trust all together. Only after the trust maker passes away does the trust become irrevocable.
While the trust is still revocable, the persons who are named as beneficiaries upon the trust maker’s death have no right to know what is in the trust, what the trust says, or how the trust is being administered. The reason is simple: the beneficiaries at this stage do not have any vested interest in the trust; they merely have an “expectancy.” The trust maker is still free to change his or her mind about who the beneficiaries should be and the amount they should receive. Thus a person could be named as a beneficiary of the living trust today and could be entirely excluded from receiving anything from the trust tomorrow. The decision of who inherits, what a person inherits, and how a person inherits is solely at the discretion of the trust maker.
Living Trust Upon Death of Trust Maker
Upon the death of a trust maker, the trust generally becomes irrevocable. (One major exception to this rule is if a married couple creates a joint trust and the first spouse passes away. It will then depend upon how the trust is structured as to whether the trust remains revocable by the surviving spouse or whether a portion of the trust becomes irrevocable. This outline assumes a trust with a single trust maker.)
When a trust becomes irrevocable due to the trust maker’s death, all beneficiaries named in the trust and all heirs of the decedent are entitled to a notice prescribed by California Probate Code 16061.7 within 60 days of the death of the decedent. The required notice must include information such as, but not limited to, the fact that the decedent died, that the decedent had a trust, that due to the decedent’s death all or a portion of the trust has become irrevocable, the name and address of each trustee, the address of the principal place of administration, and a notice that upon reasonable request, the beneficiaries and heirs are entitled to a true and complete copy of the trust.
Ongoing Right to Information After Death of Trust Maker
Sometimes, after a trust becomes irrevocable due to the decedent’s death, the trust might be structured in such a way as to provide for one or more current beneficiaries and then, after their death(s), to provide for one or more remainder beneficiaries. In general, only the current beneficiaries are entitled to an annual accounting of the trustee’s administration of the trust. The remainder beneficiaries are generally not entitled to an annual accounting, though under certain circumstances they might be able to request certain information from the trustee.
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This article is for general information only. Reading this article does not create an attorney/client relationship. You should consult with a qualified attorney licensed to practice law in your community before acting upon any of the information presented in this article.