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This is part three of a five-part series on the most common errors and issues that can arise in the administration of a trust upon the death or disability of the trustors.
Obligation to Beneficiary
Under California law, a trustee is obligated to keep the beneficiaries of a trust apprised of what is happening with the trust. Probate Code section 16060 states, “[t]he trustee has a duty to keep the beneficiaries of the trust reasonably informed of the trust and its administration.”
A constant source of friction in the administration of a trust is when a beneficiary does not believe they are being kept abreast of developments in the administration of the trust. As trustee, you have an obligation to keep the beneficiaries reasonably and timely informed. What does reasonably informed mean? That is not easily answered, but in broad terms, it means keeping all beneficiaries generally aware of any serious ups and downs or questions in the administration of the trust. For example, you probably don’t need to inform the beneficiaries of each transaction tied to paying insurance, utilities, or bills tied to keeping a property protected each time you make such a transaction. But, you probably should inform the beneficiaries of the sale, encumbrance, or leasing of the property. You likely don’t need to inform them of the various stocks the trust has with a stockbroker, but you should let them know you are planning on liquidating the account.
There are no fast and concrete rules when it comes to keeping beneficiaries reasonably informed and that obligation may be heavily dependent on the facts and circumstances of your individual situation. Keeping the beneficiaries informed of potential or actual changes to the assets of the trust can help diffuse potential flash points as beneficiaries feel involved and apprised . As a fiduciary, your legal duty is to act in the best interest of the beneficiaries and making the beneficiaries aware of the actions you are taking for their benefit is a great way of keeping the beneficiaries “happy” with your actions. A trustee’s failure to be transparent will likely lead to ill will, potential acrimony, and allegations of a lack of transparency against the trustee, which may result in claims or threats of litigation.
Prevention is Key
The best way to avoid an allegation of a lack of transparency, and to understand the best practices in the transparent administration of a trust, is to speak with a practiced attorney who can help walk you through the process of administering a trust.
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The information provided herein does not, and is not intended to, constitute legal advice; instead all information, content, and materials are for general informational purposes only. Neither this website nor this post are intended to create an attorney-client relationship.
If you have questions on how to avoid an allegation of a lack of transparency, please give Victor Herrera or our estate planning team a call at (805) 546-8785. They can help walk you through the process of administering a trust and help teach you how to avoid common pitfalls. For more details, please read our full disclaimer.