Trustee Duty to Beneficiaries

Trustee in California Has Duty to Inform Beneficiaries

The duty to provide accountings is often waived by the trust’s creator, because the creator wants to reduce trust administration costs associated with preparing the accounting.

 Trust beneficiaries, however, need to know the particulars relating to the trust assets and trustee’s use of them in order to protect themselves against the trustee’s breach of trust.

Trustee has a primary duty to inform beneficiariaries – as set forth in California Probate Code section 16060, “… to keep the beneficiaries of the trust reasonably informed of the trust and its administration.”  This duty cannot be waived. 

This is unlike the trustee’s statutory duty to furnish an accounting under California Probate Code section 16062, which may be waived.

What information must a trustee provide pursuant to section 16060 of the Probate Code?

The California Supreme Court in Salter v Lerner (2009) did not provide clear guidance, except to say:   “[t]he trustee is under a duty to communicate to the beneficiary information that is reasonably necessary to enable the beneficiary to enforce the beneficiary’s rights under the trust or prevent or redress a breach of trust.”

The Salter decision went on to say that whether the information requested by a beneficiary is information that must be provided under section 16060 of the Probate Code or may be withheld by a trustee of a trust that waives an accounting would have to be decided by a trial court in the course of litigation.

Section 16060 of the California Probate Code (as amended) provides that a trust becomes irrevocable, a trustee must provide the, “requested information about the assets, liabilities, receipts, and disbursements of the trust, the acts of the trustee, and the particulars to the beneficiary relating to the administration of the trust relevant to the beneficiary’s interest, including the terms of the trust.”

Before the foregoing addition of the worded “requested” the statute did not require that trustee to provide requested information relevant to the beneficiary’s interest it only required the trustee to provide information.

This law has strengthened in favor of disclosing information to the beneficiary.

However, a trustee might still contend that the requested information is the sort of information that would amount to an accounting and is not therefore required to be provided if the trust waives an accounting.

Under the Salter case decision, the outcome of such a dispute would need to be determined by a court during litigation.

While accountings can be burdensome and costly for a trustee to prepare, they are often prepared by trustees of trusts that waive the accounting in order to achieve finality as to issues that would otherwise remain open sources of future litigation.

A trustee who relies on a trust waiver of an accounting and does not prepare an accounting will continue to be subject to legal actions by the beneficiaries indefinitely.

By providing an accounting the trustee can limit the three-year statute of limitations period, and perhaps reduce that down to 180 days by petitioning the court for an order approving the accounting.

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Source of information: Dennis A. Fordham, California attorney, State Bar Certified Specialist in Estate Planning, Probate and Trust Law.

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