What are the Legal Obligations of a Trustee?

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 demand from trustee who thinks that he or she gets to make the rules.  Our best guess is that the $1,000 is a fee quote from a lawyer the trustee consulted with for some trust administration work and that the trustee thinks, incorrectly, that you ought to pay for it.

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 most people don’t know how to do themselves. This accounting usually runs from the date-of-death to the distribution of the trust assets. An accounting can be avoided if all of the beneficiaries agree, but your trustee isn’t creating an environment of trust and cooperation that would make a waiver of accounting likely.

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.

The best thing for you to do is to have a lawyer write a letter to the trustee (or the trustee’s lawyer if there is one) demanding a copy of the trust and an accounting. If the trustee hasn’t got a lawyer, such a letter is usually enough to goad the trustee into hiring a lawyer who will help make sure the job is done correctly.

Len & Rosie