Trustee Liability for Failure to Give Proper Notice After a Settlor’s Death

 TRUSTEES MUST SEND PROPER NOTICE TO BENEFICIARIES AFTER A SETTLOR DIES

The California Probate Code requires the trustee of a revocable inter vivos trust (i.e., a trust that was established as a revocable trust during a settlor’s lifetime) to give certain notices, and disclose certain information, to the beneficiaries of the trust at certain established times. When the settlor of a trust that is partly or fully revocable dies, the trustee must send the beneficiaries a notice that contains specific information set forth in Probate Code Section 16061.7.

At a minimum, the notice must contain:

• The settlor’s name and the date of the trust instrument
• The trustee’s name, mailing address, and telephone number
• The address of the principal place of the trust administration (usually, the Trustee’s office, or the office of the Trustee’s lawyer)
• Any information the trust instrument requires the trustee to include in the notice (which varies, and may be nothing)
• A statement that the recipient has the right to request and receive a true and complete copy of the trust’s terms
• A proper statutory warning pursuant to Probate Code 16061.7(h) (however, there is no warning requirement if the notice is being sent because of a change of trustee).

WHAT IS THE PROBATE CODE SECTION 16061.7 STATUTORY WARNING?

Probate Code Section 16061.7(h) requires that a notice from a trustee, sent to inform beneficiaries that a trust (or a portion of a trust) has become irrevocable (or in certain other circumstances relating to irrevocability), must contain a specific warning that complies with all of the following elements:

• The warning must be set apart from the other text of the notice (i.e., in a separate paragraph)
• The warning must be printed in at least 10-point bold type (or a reasonable equivalent)
• The warning must consist of the following language: “You may not bring an action to contest the trust more than 120 days from the date this notification by the trustee is served upon you or 60 days from the date on which a copy of the terms of the trust is delivered to you during that 120-day period, whichever is later.” 

The reason for these requirements is to ensure that the warning is easy for beneficiaries (or other notice recipients) to identify, recognize, and understand. In other words, the warning cannot be “hidden” or buried in other text.

WHAT HAPPENS IF A TRUSTEE FAILS TO SEND THE NOTICE?

If a trustee does not serve (or at least make reasonably diligent efforts to serve) the statutory notification on (a) a beneficiary, or (b) an heir (whose identity is known to the trustee), the trustee is liable for any resulting damages. The damages for failing to notify a beneficiary include attorney fees and costs, though this is not necessarily the case in the event of failure to notify an heir.

It is not possible for a settlor to waive or release the trustee from the obligation to serve this notification on beneficiaries and known heirs.

WHAT HAPPENS IF A TRUSTEE SENDS A DEFECTIVE NOTICE?

If a trustee sends a notice that does not comply with the statutory requirements, the notice is still valid unless the recipient suffers prejudice or injury as a result of the defect. Causation is required; if the prejudice or injury results from some cause other than the defect in the notice, the defective notice does not trigger liability for the trustee. As with any other concerns about a trustee’s behavior, if you believe a trustee has failed to comply with his or her legal obligations, consult a lawyer promptly for an analysis of your legal rights.

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