Proper estate planning will generally involve setting up at least one trust. A trust is a separate legal entity that is created to hold the assets and funds of an individual (or individuals). A trust allows those assets and funds to be passed on to heirs, or beneficiaries in a specific and timely manner. Most people will choose to set up a revocable trust. A Revocable Trust is one that can be changed during the lifetime of the settlor (the person setting up the trust). Once that person(s) dies, the trust becomes irrevocable, meaning it cannot be changed without court order. Beneficiaries of a trust have no rights while the trust remains revocable. When it becomes irrevocable, beneficiaries of a trust are generally entitled to several rights regarding the management of the trust by the trustee.
The trustee is responsible for the management and distribution of the trust. Most clients I have worked with in the SF East Bay choose to make themselves the primary trustee while they are alive, and name a secondary trustee to take over once they pass or are no longer able to manage the trust. The trustee, who may or may not be a beneficiary themselves, have the following responsibilities:
1. A fiduciary responsibility to manage the investments, properties, and other assets of the trust and disperse the funds according to the terms of the trust.
2. To follow the terms of the trust: to read and review trust documents to ensure a full and complete understanding, and act accordingly
3. Manage Investments Prudently and in the best interest of beneficiaries.
4. Distributing funds to beneficiaries in a way that best serves all beneficiaries, using your discretion when necessary and appropriate
5. Proper Accounting – The trustee must keep accurate and precise records of all trust accounting and report this accounting to beneficiaries according to the terms of the trust
6. File taxes for the trust if needed
7. Delegation of duties 1-6. A trustee may delegate the above duties to a trust attorney, an accountant, or financial advisor. They must still be the one to make decisions that will impact the trust in a major way.
8. The trustee is entitled to fees. In Contra Costa County and Alameda County, most trusts use the 1% rule – ie the trustee is entitled to receive 1% of the value of the trust for the their efforts. Other fee structures are also valid, such as hourly.
The beneficiaries of an irrevocable trust have the right to hold the trustee accountable for carrying out their responsibilities. These rights typically apply to current beneficiaries, not remainder beneficiaries (who would have rights only after current beneficiary’s interest has ended).
As a trust attorney in Walnut Creek with clients primarily in Contra Costa County and Alameda County, I have dealt with many situations in which a trustee is not upholding their end of the bargain, and a beneficiary is forced to seek legal help. A beneficiary may seek to have the trustee removed, or they may wish to work with the trustee to resolve their issues. Either way, seeking the help of an experienced trust lawyer is usually beneficial. Read California’s specific laws on beneficiary rights.
Overview of Trust Beneficiary Rights in Contra Costa and Alameda County
1. Right to receive Payment. Current beneficiaries have the right to receive distributions pursuant to terms set forth in the trust document.
2. Right to receive notice of the trust’s existence and copy of trust
3. Right to trust accountings and other information regarding the beneficiary’s trust interests
4. Right to hold trustee accountable for wrongdoings, errors, or omissions that impact the interest of the beneficiaries, as well as a right o enforce the terms of the trust
5. Right to petition court to change or end the trust, or remove trustee, if:
there is a Breach of trust;
Trustee is unfit to act as trustee;
There is a lack of cooperation between co-trustees or hostility that prevents trust from being administered
The trustee no longer wants to be the trustee;
Payment to the trustee is excessive;
CA law says certain individuals must be disqualified from serving as a sole trustee. They are listed in Probate Code Section 21350.
With a responsible trustee in place, the administration of a trust in the SF East Bay is generally a smooth process. However, when there is a problem with the trustee, or a trustee does not exist (because of death or other unforeseen circumstances), beneficiaries have the right to obtain an attorney to defend their interests.
For questions about a trust in Contra Costa or Alameda County, call 925-322-1795 to set up a consultation.