Trustee Obligations To Beneficiaries
They Have a Right to Know
You must notify all beneficiaries of the existence of the trust, your contact information and beneficiaries’ rights to obtain relevant information about the trust and its administration.
This may seem obvious to many, but I assure you that it’s not to a few: you actually have to tell your beneficiaries about the existence of the trust and your identity.
I can’t tell you how many times beneficiaries have told me that they didn’t know someone had created a trust for them, or that they were a beneficiary. Many times, beneficiaries are not even sure who the trustee is.
Quite often, trusts are created without notice to the successor trustee or the future beneficiaries. The first time anyone even knows of the existence of the trust is after the grantor passes away. This is understandable in certain instances.
Consider one’s revocable trust, which is fully revocable or “change-able” during the grantor’s life. Once the trust becomes irrevocable, such as upon the death of the grantor, the successor trustee has a duty to notify all beneficiaries who probably didn’t know they were a beneficiary until now.
This is accomplished by writing a simple letter and sending it via US Mail.
Increasingly, email is used. The notice of trust will inform each beneficiary of:
The name of the trust. The identity of the trustee . The address or contact information for the trustee and who counsel is . Perhaps a statement akin to a beneficiaries’ “Bill of Rights”. The right to receive a complete copy of the trust agreement, including all amendments. Relevant information regarding the trust and its administration . Other information required to be disclosed under the law, which governs the administration of the trust.
In addition to a written notice that may be provided by communicating directly with the beneficiaries, the trustee may also be required to file a more public or formal notice of trust. A successor trustee of a decedent’s revocable trust, which is now irrevocable when the grantor passes away, may be required to file a notice in any probate proceeding pertaining to the estate of the decedent grantor, or in the county records for the county where the decedent passed away.
This court-filed or public records-filed notice of trust is in tended to identify the trustee and discloses the existence of the trust. It also gives notice to creditors and recognizes that a decedent’s revocable trust may be responsible for the payment of the decedent’s debts and obligations.
Beneficiaries of a grantor’s revocable trust should understand that the assets, which comprise a revocable trust, must first be used to satisfy all obligations of the decedent – before those assets may benefit the beneficiaries.
Example: the decedent dies with a revocable trust containing $10 million in marketable securities and cash. The trust states that after the death of decedent it shall be administered for his surviving spouse and children. The grantor’s trust is liable for all of the decedent’s debts, expenses, and obligations which may not be satisfied by his other assets. If the decedent had a $1 million bank account which was in his own, individual, name, and $4 million in loans, debts, and expenses of administration, the trust would be funded only with $7 million. One may not place assets in trust during life, and then keep those assets free from creditors. You can’t shun your known creditors by placing assets in a trust for the benefit of your loved ones.
A notice of trust may also limit the time frame for some.one to challenge, or attack, the validity of the trust. The governing law might provide that a notice shall indicate that if anyone wants to challenge the validity, that they only have a matter of time to do so. This is often important when a trustee, or one’s lawyers, know that a disgruntled family member, perhaps not receiving an expected inheritance, is expected to litigate.