What Are a Beneficiary’s Rights in a California Trust Administration?

You just found out you are a beneficiary of a living trust. That’s bad news and good news. The bad news is it means someone who cared about you has died. The good news is that person wanted to make your life better with an inheritance.

If you are trying to understand the broader process first, our article What Happens After Someone Dies With a Living Trust in California? walks through the trust administration from beginning to end.

There Is a Trustee Lane and a Beneficiary Lane

One abiding principle in trust administration: beneficiaries are not the trustee, and the trustee has fiduciary duties to the beneficiaries. Each has a lane, and the lanes shouldn’t be crossed.

This article will discuss your rights as a beneficiary in a California trust administration.

Right to Receive Notice

One of the first things the successor trustee must do is send the notice required by California Probate Code section 16061.7.

The trustee sends this notice to the beneficiaries of the trust and the deceased person’s legal heirs. It includes the Probate Code language and states that the trust has become irrevocable, identifies the trustee, explains that you have the right to request a copy of the trust, and provides information about the deadline to contest the trust.

We discuss the notice in more detail in our article, What Is California Probate Code Section 16061.7?

The notice is usually the first formal step in the trust administration.

Right to a Copy of the Trust

If you are a beneficiary or heir, you have the right to request a copy of the trust.

Do not rely on somebody telling you, “Mom left everything equally to the kids,” or “Dad wanted me to handle it this way.”

Read the trust.

The trust may divide everything equally. It may make specific gifts first. It may treat different beneficiaries differently. It may require that a beneficiary’s share remain in trust instead of being distributed outright.

The trustee has to follow what the trust says.

Often the trustee, or the trustee’s attorney, will send a copy of the trust with the 16061.7 Notice. If not, request one.

Right to Be Kept Reasonably Informed

You also have the right to be kept reasonably informed about the trust administration.

Emphasis on “reasonably informed.”

This does not mean the trustee has to give you a weekly report.

A trust administration takes time. The trustee will need to locate assets, get date-of-death values, sell a house, transfer investment accounts, pay bills, deal with taxes, and decide what money needs to be held back in reserve before making distributions.

If you want to see what the trustee is actually dealing with during the early part of the administration, see The First 30 Days as a California Successor Trustee.

Reasonable things you could ask about include: Will the house be sold? Am I a beneficiary of the IRA? When will the investment accounts be transferred? Is something holding up the administration? Will I have any income tax liability from the distributions?

Those are fair questions.

The Trustee Has to Follow the Trust

The trustee’s job is to follow the terms of the trust.

The trustee cannot arbitrarily change the terms of the trust because it would be more fair or because that is what the beneficiaries want. The trustee has a fiduciary duty to follow the terms of the trust.

If the trust says the estate is divided equally among three children, the trustee cannot decide that one child deserves more money, or that distributions should be made to grandchildren or family friends.

The trustee cannot change the distribution because one child needs the money more, was closer to Mom or Dad, or helped more during the last few years of their life.

The trust must be followed as it was written.

Sometimes beneficiaries will want the trustee to make distributions to someone not named in the trust, like a family friend, caregiver, or longtime employee.

But the trustee cannot do that.

The trustee can only make the distributions spelled out in the trust. To do otherwise would be a breach of the trustee’s fiduciary duty.

However, once a beneficiary receives his or her distribution from the trustee, that beneficiary can gift part of the inheritance to anyone he or she wants.

Beneficiaries can fix a perceived unfairness by gifting from their own share. They cannot insist that the trustee alter the terms of the trust.

For more on the trustee’s role and authority, see What Is a Successor Trustee in California?.

Right to Fair Treatment

It is very common for a parent to name one child as successor trustee and leave the estate equally to all of the children.

There is nothing unusual about that.

But the child who is trustee is wearing two hats.

As a beneficiary, that person is entitled to his or her inheritance. As trustee, that same person has to administer the trust fairly for everyone.

The trustee cannot use the position to benefit himself or herself at the expense of the other beneficiaries.

This does not mean every decision has to make every beneficiary happy. It means the trustee has to make decisions as trustee, not based on personal interests or family disagreements.

Right to an Accounting

An accounting is one of the most important protections a beneficiary has.

The accounting tells you what the trust owned, what money came in, what money went out, what expenses were paid, what remains in the trust, and how the trustee proposes to distribute the remaining assets.

Not every trust administration needs a complicated probate court-style accounting.

In many of the trust administrations we handle, the beneficiaries are siblings, everyone gets along, and the financial activity is easy to understand.

A spreadsheet showing assets, expenses, the amount to hold in reserve for future bills and taxes, and the proposed distributions to beneficiaries is often enough.

The beneficiaries have a right to see what happened to the trust assets in a way they can understand.

We discuss this in more detail in How to Prepare a California Trust Accounting.

Right to Receive Your Inheritance

When the trustee has followed the terms of the trust and met the legal obligations, you are entitled to receive your inheritance.

But the steps have to be followed, and this takes time.

The trustee cannot cut you a check the day after your dad dies because you really need it now.

There is a process in trust administration. It is not nearly as time-consuming, complicated, or expensive as probate, but it is still a process that takes time.

It is not unusual for our trustee clients to tell us a story that goes like this: their brother insists he needs his payout now because of pressing debt obligations, and that if he does not receive his inheritance in the next few days he will lose everything and end up on the street.

This is no exaggeration. It happens.

What would this brother have done if his dad had not just died?

You will get your inheritance, and you should receive it in a timely manner, but it will not be instant.

If you do not receive it, you need to hold the trustee accountable. And if the trustee does not respond, you may need to retain a trust litigator to rattle the cage.

But hiring an attorney to rattle the cage when the trustee is doing a good job and moving things forward will only delay the trust administration.

A trustee also does not always have to wait until every last issue is resolved before making a distribution. We discuss that in Can a Trustee Make Partial Distributions?.

Being a Beneficiary Does Not Make You the Boss of the Trust

Beneficiaries have important rights. But being a beneficiary does not mean you are in charge.

The trustee runs the trust, not you.

That means you generally do not get to pick the realtor, CPA, attorney, bank, or investment advisor. You do not get to approve every expense. And you do not get to tell the trustee exactly when to sell property or how to handle every decision that comes up.

You can ask questions. You can ask for information. And you can hold the trustee accountable if the trustee is not doing the job properly.

But you are not the trustee.

And inserting yourself into every decision and action by the trustee will only cause problems and delay the administration. In some cases, it can force the trustee to punt the administration to the probate court so a judge can get everyone back in their lane.

This can be a hard distinction in family trusts, especially when the trustee and beneficiaries are siblings.

One sibling may think the house should be sold immediately. Another may want to wait. Another may think the trustee should use a different realtor or get another appraisal.

Those opinions may have merit.

But ultimately, the trustee has to make the decisions and take responsibility for them.

After all, the decedent chose that person to be the trustee, and they did not choose you.

Let the trustee do her job.

A beneficiary has the right to make sure the trust is being administered properly. A beneficiary does not have the right to take over the administration.

You Can Challenge a Trustee Who Is Not Doing the Job

Most trust administrations do not go to court.

But beneficiaries do have remedies when something is genuinely wrong.

If the trustee refuses to provide information, refuses to account, ignores the trust, misuses trust assets, improperly favors one beneficiary, or otherwise fails to perform the trustee’s duties, a beneficiary can ask the probate court to step in.

The court has broad authority over trust administration.

Depending on the problem, the court can order the trustee to provide information, prepare an accounting, make a distribution, follow the terms of the trust, or correct other problems.

In a serious case, the court can remove the trustee.

But these are extreme and rare cases.

Court Usually Should Not Be the First Step

If you think something is wrong, start by figuring out what the problem actually is.

Ask the trustee.

Ask for the information you need.

Sometimes a bank statement answers the question. Sometimes the trustee explains why a distribution has been delayed. Sometimes there is a good reason the administration is taking longer than expected.

But sometimes, not often, there really is a problem.

Those situations should not all be treated the same way.

Court is available when it is needed. But probate litigation is expensive, slow, and can make family relationships much worse.

If the issue can be solved with better information and better communication, that is usually a better result.

Communication Makes Trust Administration Easier

A lot of disputes between trustees and beneficiaries start because nobody is communicating.

The trustee thinks everything is moving along fine.

The beneficiaries have heard nothing for three months and start wondering whether the trustee is doing anything.

Then everyone gets suspicious.

That is usually unnecessary.

The trustee does not have to report every phone call or every bill that gets paid. But beneficiaries should know the general status of the administration and what remains to be done.

Beneficiaries also need to understand that trust administration takes time.

A trustee should keep the beneficiaries informed. And beneficiaries should give the trustee a reasonable amount of time to do the job.

The Bottom Line

If you are a beneficiary of a California trust, you have important rights.

You have the right to receive notice, request a copy of the trust, be kept reasonably informed, be treated fairly, receive an accounting when required, and receive the inheritance the trust provides for you.

You also have the right to hold the trustee accountable if the trustee does not follow the trust or California law.

But the trustee is still the person responsible for administering the trust.

Most trust administrations go much better when the trustee communicates, the beneficiaries understand the process, and everyone stays in their lane.

The result is usually a smoother and more efficient distribution of the trust assets.

If you are a beneficiary or successor trustee and have questions about a California trust administration, contact us to schedule a free initial call with one of our estate planning attorneys. Clark Allison LLP assists clients throughout California, meeting with clients in person at our El Dorado Hills and Roseville offices and virtually throughout the state.