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California Trustee Accounting Duties
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Trustee Accounting to Beneficiaries
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When the grantor dies, they leave a person or entity in position to carry out their wishes. The position is called a Trustee. The Trustee has many responsibilities including keeping the beneficiaries reasonably up-to-date.
Who is Entitled to an Accounting?
Now, if you are a beneficiary, the Trust document will determine who is entitled to an accounting, but its typically anyone who has a vested interest in receiving estate assets. There are timelines throughout the trust accounting process, but for a beneficiary, you should expect an annual update. Please read on, however, as there are many points to this topic.
What is Trust Accounting?
One of the objectives of a trustee is to keep good relationships with the beneficiaries throughout the administration process via the following:
- Record keeping: Keeping accurate and organized records is vital for success.
- Transfers of Property: Records should be kept whenever a property enters and exits the trust. (example: during a refinance)
- Communication: Decision-making process for trust investments, for example.
- Account for: Maintain account of principal and income, commissions, expenditures, gains, and losses.
Who can be a Trustee of a Trust?
There are times when a family needs a certain type of Trustee to maintain all the record keeping necessary while keeping cost in perspective. With that said, here are a few options of whom can be a Trustee of a trust.
- Private Trustee
- Corporate Trustee
- Family member
- Successor Trustee
Note: Most times than not, the Trustee is a family member, but if the estate is expansive in scope, it could be necessary to bring in a private trustee or even a corporate trustee. Each type can call out for different fees.
Trustee Accounting to Beneficiaries
Many times people ask, “does a trustee have to provide an accounting?” The answer is yes, unless all beneficiaries agree in writing to waive the required accounting. Take note, however, the beneficiary can withdraw the waiver and the courts may require a full accounting. Therefore, keep good records!
How should a trustee keep the beneficiary informed?
California probate Code §16060 states the Trustee must keep the beneficiaries reasonably informed of the trust and its administration.
- The Trustee has the responsibility to keep the beneficiaries up-to-date at least annually. California probate code 16062 states at least annually.
- The Trustee must also keep the beneficiaries up-to-date if there are changes to the trust and at the trust’s termination. (see Probate Code § 16062)
Please note: If the trustor is still alive and has a living trust, aka., a revocable trust, the probate code does not apply and need not show any administration.
What is the Trustee’s accounting duties:
The below list is the accounting duties, not including trustee fees.
(1) A statement of receipts and disbursements of principal and income that have occurred during the last complete fiscal year of the trust or since the last account.
(2) A statement of the assets and liabilities of the trust as of the end of the last complete fiscal year of the trust or as of the end of the period covered by the account.
(3) The Trustee’s compensation for the last complete fiscal year of the trust or since the last account.
(4) The agents hired by the Trustee, their relationship to the Trustee, if any, and their compensation, for the last complete fiscal year of the trust or since the last account.
(5) A statement that the recipient of the account may petition the court pursuant to Section 17200 to obtain a court review of the account and of the acts of the Trustee.
(6) A statement that claims against the Trustee for breach of trust may not be made after the expiration of three years from the date the beneficiary receives an account or report disclosing facts giving rise to the claim.
When does a trustee have to give the beneficiaries an accounting of trust money
As discussed, the beneficiaries are entitled to receive current accounting. If the Trustee does not provide up-to-date accounting, the Beneficiaries will need to make a written demand to compel the Trustee and allow a reasonable time to reply. If, after 60 days, you hear no response, you can file a probate court petition to get a court order requiring the Trustee to report. Definitely contact a trust attorney at this point.
What if there is a Breach of Fiduciary Duty?
At this point, if one feels the trustee has misused assets, commingling of funds, etc., will need a trust attorney to sort out the fact via the discovery process. As a trustee, the trust assets are used to protect the trust from legal attack. As a beneficiary, the beneficiary will have to incur the cost initially. Still, the beneficiary may be able to recoup the cost by way of trustee removal and suing for all misappropriated assets that the trustee must return.
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What Else Should I know about Trustee Accounting?
Here are some links and topics to further help you make the right decision. Feel free to also call Hess-Verdon & Associates at 949-706-7300.
So, it is essential to know the rights of beneficiaries like the topic, “who has more right a trustee or the beneficiary”, which is subjective.
Let’s start with what rights a beneficiary has.
Beneficiary Rights to See Information
You are entitled as a beneficiary to receive information that the Successor Trustee is managing the Trust properly.
- You have the right to protect the assets the settlor/grantor has bequeathed to you.
- A beneficiary should also understand, however, there are timeframes the Trustee should adhere to, to ensure they keep on the right side of the courts.
- You will want to be up-to-date as to the progress of the Trust Administration process while offering ‘reasonable’ time for the Trustee to distribute the updates that are being asked for.
1st takeaway: As a beneficiary, you have to understand the Trustee has the power to settle the estate, utilizing attorneys, appraisers, and other expert opinions to assist in resolving the estate to ensure no breach of their fiduciary duty. Within the Trustee duties, are ‘timeframes’ to act that typically range between 12-18 months based on whether properties should be sold, debts, tax implications, and so forth.
Is a Trust Public record?
No, a Trust is not a public record and this is why most Trustors choose a Trust over a Will.
Note: When the Trustor/Settlor passes away, the Trust becomes irrevocable straightaway, meaning, it is no longer changeable. If you are a beneficiary of a trust, then it’s at this point you have statutory rights as a beneficiary. If you are the Trustee, you now have a legal duty to keep the beneficiaries of the Trust informed how the trust assets will be managed.
As a Beneficiary, when should I contact a trust litigation attorney?
First, have knowledge on your side. Should you need counsel, because you feel a lack of transparency from the Trustee, then best to seek a trust litigation attorney. Under California Probate Code Section 16061.7, the Trustee has 60 days after the Settlor/Trustor’s death with a real copy of the Trust documents, including any amendments.
The best practice is to stay in front of the curve by sending an email or letter to the Trustee that you are aware of the 60 days and would appreciate the true copy of the Trust documents. Hopefully, this suffices, but if you don’t receive the Trust document, then its time to ratchet it up. Let the Trustee(s) know you may seek counsel, and petition with the courts to receive your copy and that any costs, i.e., attorney fees, etc., will be paid by them.
What Should a Beneficiary Expect from the Trustee at the initial stages?
You will hear the word “reasonably” from time-to-time because there is no fast hard rule as to each part of the Trust Administration process.
So, what are some early expectations you can expect to receive?
It’s the following:
- Trustee to get in touch with all the beneficiaries early on.
- Educate all beneficiaries of the role
- Help determine expectations based on the assets within the Trust
- All assets to be counted for and controlled before distribution of the trust assets to any beneficiary.
Transparency is the key to a successful Trust Administration process.