trustee-legal

Trustee’s Duty To Provide Notice Upon Incapacity Of Trustor

WHAT HAPPENS WHEN A TRUSTOR DIES?

Typically, the person or persons who create a revocable living trust hold power to revoke the trust. However, when that person or the last of those persons dies, the revocable trust becomes irrevocable because they can no longer revoke their trust. Once a successor trustee takes over a trust that has become irrevocable due to the settlor’s or trustor’s (the trust’s creator) death, they have a duty to the trust’s beneficiaries to notify them of the trust’s irrevocability and provide them with an accounting. Effective January 1, 2022, California Probate Code Sections 15800 and 16069 are amended by Assembly Bill 1079. The changes affect trustees who assume their role when the settlor becomes incapacitated.

WHAT LEGAL STEPS DOES A SUCCESSOR TRUSTEE HAVE TO TAKE?

Under AB1079, the law now recognizes that, as a practical matter, a trust becomes irrevocable when a settlor becomes incapacitated and no longer has the cognitive ability to revoke the trust. At that point, the law now states that when the person or persons who hold power to revoke the trust are no longer competent, the trustee must provide notice to all the beneficiaries and heirs who would be entitled to notice once the settlor dies. The trustee must provide them with a copy of the trust and any amendments. Within 60 days of the trustee obtaining the necessary documentation, this notice is required to establish that the settlor or trustor is incompetent. The trustee must also provide the beneficiaries with an accounting at least annually or otherwise determined by the trust document.

WHY DO BENEFICIARIES RECEIVE ACCOUNTINGS IF THE SETTLOR IS STILL ALIVE?

Although the beneficiaries are deemed beneficiaries entitled to notice and accounting during the lifetime of an incapacitated settlor, they are not necessarily the present beneficiaries of the income and principal of the trust. The incompetent settlor would still be the primary beneficiary of the trust assets, with the other beneficiaries not inheriting any assets until the settlor’s death.

WHEN SHOULD A SUCCESSOR TRUSTEE STEP IN TO REPLACE AN INCAPACITATED SETTLOR?

If you are the successor trustee for a loved one’s trust, you may have to start administering the trust before your loved one passes away if they become incompetent. It is important to note that the trust document itself determines incompetence or incapacity. Please do not hesitate to reach out to your estate planning attorney for assistance with a trust that may name you as a successor trustee. You may need to step in before someone dies, and it would be prudent to understand your duties.

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Catherine J. Banti is a director with the firm of Anderson Zeigler. She has been in practice since 2002, specializing in Estate Planning and Administration, Taxation, General Business Law, Copyright, Trademark and Patent, Real Estate, and Intellectual Property Law