Trust Administration

Dear Len & Rosie,

Both of my parents are now deceased, the most recent being my step-dad. Are the four of us adult children legally due to receive a financial statement of how funds were spent during my dads illness? Are we entitled to a copy of the trust at no charge, along with the financial statement? The lawyer hired by the trustee is charging $1.000 for a copy of the trust, if we want it, and it has been stated that no one will receive a financial statement until after all funds are dispersed at the end of a waiting period. We were told the waiting period was 120 days but are now hearing it could be six months.

Bill

Dear Bill,

As beneficiaries of an irrevocable trust, the trustee is legally obligated to provide you a copy of the entire terms of the trust, at no cost. The trustee was supposed to provide you a notice pursuant to California Probate Code section 16061.7 within 60 days of your stepfather’s death telling you this.

Having said that, we find it hard to believe that the lawyer representing the trustee is telling you that it’ll cost you $1,000 for a copy of the trust document. This sounds more like a Stupid Trustee Trick from a trustee who thinks that he or she gets to make the rules. The trustee is a fiduciary, like the person standing behind the counter at the bank, and owes you and the other beneficiaries a duty of loyalty and competence. Our best guess is that the $1,000 is a fee quote from a lawyer the trustee consulted with for some trust administration work.

That means the trustee is required to provide an accounting to all of the beneficiaries presently entitled to distributions of trust income or principal. And by “accounting” we don’t mean a simple financial statement. We mean a formal accounting following the rules of the court which is really an exercise in double-entry bookkeeping that mere mortals don’t know how to do themselves. This accounting runs from the date-of-death to the distribution of the trust assets. Normally you are not entitled to an accounting for the period prior to your stepfather’s death, but if you suspect the trustee is up to no good, you can hire a lawyer and petition the court to compel an accounting for the entire time the trustee was in charge.

The 120-day waiting period is mentioned in that notice you were supposed to have received. Once the notice is mailed out, a 120-day countdown begins. When it ends, you will lose your right to contest the trust. By “contest the trust” we mean filing a court petition asking the court to declare that the trust document is void. You will still be able to enforce your rights as a trust beneficiary, including the right to compel the trustee to provide you with an accounting.

Once this countdown ends, there is usually nothing to prevent the trustee from distributing most of the trust assets, retaining enough to file trust income tax returns next year and to cover any potential creditor claims against the trust, as creditors have a year from the date-of-death to sue on your stepfather’s debts.

Len & Rosie