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California Living Trusts: Beneficiary Petition for Information

In this post, I’m going to talk about California Living Trusts and specifically a very common situation that I encounter relating to trustees and beneficiaries. The basic scenario is something like this:

  • Elderly parents who made a living trust years ago, but are now too infirm to really handle things themselves so someone else is serving as trustee of the Living Trust.
  • That trustee is a lay person and, basically, is doing something incorrectly. This incorrect thing that the trustee is doing can vary greatly. On the one hand, it might be that the trustee is doing everything properly, but they just haven’t filled out the right forms simply because they didn’t know that they had to do that. Correcting the problem (e.g. filling out the right forms) is easy.
  • On the other hand, it’s also extremely common for the trustee to knowingly and purposely do something incorrectly. In other words, the fact that the trustee is not a lawyer or has never been a trustee before is not an excuse. They should have known regardless that what they were doing was wrong. A very common example of this is taking money from the trust for the trustee’s own personal use.
  • The beneficiaries to the trust suspect that the trustee is doing something improper because the trustee refuses to talk to them, won’t let them see the trust document itself, etc., but don’t know for sure because the trustee is being so tight-lipped about everything.

The legal question, then, is basically what rights to the beneficiaries have in such a situation to hold the trustee accountable?

The Root Cause
I’ll answer that below, but first, let me describe the root cause that I’ve noticed with scenarios like what I described above: namely, poor trustee selection. Having a Living Trust can be extremely prudent in terms of, for example, reducing taxes, avoiding the time and cost of probate, etc. Real estate in my part of Northern California is generally very expensive and many people have a Living Trust just because they own real estate.

When you create a Living Trust, you need to have a person (i.e. the trustee) who will administer the trust document itself, make sure that everything the trust’s creators wanted to happen actually is carried out. It’s a good idea as well to have several people named as trustees, just in case one of them dies suddenly, can’t be found when needed, etc. A trustee has an enormous amount of power and discretion. If you’re creating a trust and selecting a trustee, what you should ideally do is select that person based on objective criteria, including but not limited to: (1) how dependable they are, (2) how trustworthy they are, (3) how detail-oriented they are, etc.

What many people actually do instead, though, is select one of their younger relatives (e.g. a child) to be trustee. That child might also be dependable, trustworthy, etc., but a lot of times, that younger relative is selected as trustee solely because they’re related to the person creating the trust. Dependability, trustworthiness, etc. are frequently not even considered. Another problem that people often make when selecting a younger relative as trustee is being equally-inclusive to all of their younger relatives. For example, if Mom and Dad are making a trust and they have two children, they might feel obligated to make sure both kids have equal work to do (e.g. one child is executor of the will, the other is trustee of the Living Trust) in order to not hurt any child’s feeling, even though one child might be very qualified (e.g. is dependable, trustworthy, etc.) for the work while the other child is completely unqualified.

When you select a trustee based on, for example, blood relation alone without regard to qualifications (e.g. dependability), that’s when — in my experience — you run into problems with the trustee mismanaging the trust, stealing money from the trust, etc. Based on the cases I have seen, this problem of trust mismanagement or trustee misbehavior is worse if the parents, for example, select the “black sheep child” (i.e. the child who never succeeded to the same degree personally, professionally, financially, etc. compared to their siblings) as trustee.

If you’re reading this and in the process of selecting your children to be trustee, I don’t want to say you should not select your kids to be trustees. Obviously, I don’t know you or your family. What I am trying to say here, though, is that as with most things involving the law, it is significantly easier to prevent a problem from happening in the first place versus trying to address a problem after it has occurred.

Beneficiary Right to See Trust Document:
Anyway, aside over, let’s go back to the question of the beneficiary’s rights in the scenario I mentioned above where the trustee is possibly mismanaging the trust. The beneficiary or beneficiaries have many rights so to keep things simple, I’m only going to address one such right here, namely the right to see the trust document itself. In future posts, I’ll go over additional beneficiary rights, including the right to seek an accounting.

The answer here, unfortunately, is somewhat involved and it’s because of the way the relevant sections of the California Probate Code are worded. As always, I’ll do my best to summarize and paraphrase the relevant code sections, but I encourage you to look up the actual code sections themselves. Like in all my other posts, I’ve mentioned the applicable code sections and provided links to them so you can Google them yourself.

The basic way to answer the question of “Does the trustee have to show the beneficiary the trust document?” is this: A trustee has multiple duties and obligations to keep the beneficiaries of that trust informed, but many exceptions exist as well. The relevant sections of the California Probate Code are going to be sections 16060 to 16069. I’ll mention the exception first, which is in Section 16069:

“The trustee is not required to account to the beneficiary, provide the terms of the trust to a beneficiary, or provide requested information to the beneficiary pursuant to Section 16061, in any of the following circumstances:

(a) In the case of a beneficiary of a revocable trust, as provided in Section 15800, for the period when the trust may be revoked.

(b) If the beneficiary and the trustee are the same person.”

The big exception, I think, is going to be in Section 16069(a) — the trustee has no obligation to provide the terms of the trust to a beneficiary if the trust itself is still revocable. If you look over Sections 16060 to 16069 of the California Probate Code, you’ll see various references to “irrevocable” and “except as provided in Section 16069.”

Aside from this big exception of revocable vs. irrevocable trusts, the trustee generally has several duties to keep the beneficiaries of their trust informed. For example:

  • Section 16060 says that the trustee “has a duty to keep the beneficiaries of the trust reasonably informed of the trust and its administration”/
  • Section 16060.7 says “On the request of a beneficiary, the trustee shall provide the terms of the trust to the beneficiary unless the trustee is not required to provide the terms of the trust to the beneficiary in accordance with Section 16069.”
  • Section 16061 says “Except as provided in Section 16069, on reasonable request by a beneficiary, the trustee shall report to the beneficiary by providing requested information to the beneficiary relating to the administration of the trust relevant to the beneficiary’s interest.”

For irrevocable trusts in particular, Section 16061.5 applies. 16061.5 is a bit long, but it goes over the situations in which a trustee — again, of an irrevocable trust — has to provide copies of the trust. I’ll paraphrase these instances as:

  • Any beneficiary who requests it and any heir of a deceased trust creator who requests it when the trust goes from revocable to irrevocable.
  • Any beneficiary who requests it when the trustee of an irrevocable trust changes.

These sections — namely, 16060.7, 16061.5, and 16061 — are so important that not even the trustor or settlor (i.e. the person(s) creating the trust) can waive them. Under Section 16068, any attempt by the trustor/settlor to waive the trustee’s obligation to provide the information those three code sections require is “against public policy and shall be void.”

So, in summary, the major question that I think needs to be answered first in a situation like this is whether the Living Trust in question is irrevocable or not.

Anyway, I hope this was helpful. To repeat again, I’ve just paraphrased the code sections I mentioned above. If you have a situation, for example, that involves a trustee who you suspect might be misbehaving or you’re a trustee and you want to know what information you are supposed to provide, please do look up the actual code sections. I’ve mentioned them and linked to them above just in case I have somehow left out a detail in the course of my paraphrasing that is somehow critical for your situation.

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Andy Chen

Andy I. Chen is a lawyer licensed to practice law in California and New York. Andy maintains offices in Los Altos, California and Modesto, California. Under the New York Court of Appeals' 2015 decision in Schoenefeld v. State of New York, Andy does not accept cases from those in New York state. He does, however, know many lawyers in New York state and would be happy to make a referral.

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