I assist Successor Trustees in the administration of living trusts which became irrevocable by virtue of the death of the Settlor. I also am often the attorney for the estate of probate matters in which the decedent passed away owning assets outside of a living trust. Whether there is a trust estate or whether there is a probate estate, there are two questions common to both: “Who needs to know about the administration of the trust or probate estate?” and “What information needs to be given?”
HOW MUCH AND WHEN?
The beneficiaries, on the other hand, have a different pair of questions: “How much will I receive?” and “When will I receive it?”
Sometimes these questions arise because the beneficiary had no idea that he or she was actually named as a beneficiary of a trust or an estate. Sometimes, these questions arise because the beneficiary had already been expecting to receive something from the trust or estate on the death of the Decedent, and now a windfall was expected.
DON’T REVEAL TOO MUCH TOO SOON
I encourage my estate planning clients not to disclose the details of their estate plan to their loved ones during their lifetime. I believe doing so often creates an expectation on the part of the beneficiary which may, or may not, be realized when the actual date of death has occurred. In my opinion, the beneficiaries need to know only when the death has occurred.
Since most folks create their estate plans well in advance of their passing, there is generally a lot of time before the beneficiaries need to know. If the client lives a long time, it may be that much of the assets will be needed to care for the client prior to death. The facts that exist at the date of death such as what kinds of assets remain, and their value may be very different from what they were when the estate plan was initially created. Moreover, if the client established a revocable living trust, he client could change his or her mind about the ultimate disposition of his or her estate. Telling beneficiaries in advance often set them up for disappointment.
Disappointed beneficiaries plague both the administration of trusts and of probate estates, sometimes even going as far as engaging in costly and time consuming litigation with the Successor Trustee or Executor.
BENEFICIARIES DO NEED TO KNOW
California law requires disclosure to the beneficiaries about the terms of the trust or Will. I agree with the statutes that enable a beneficiary to know general information regarding the administration of a trust or the progress of probate estate.
In my experience, however, the beneficiaries often immediately start to think about ways to spend their inheritance sooner than they will actually receive it. I am often called by beneficiaries who tell me that they have this financial need or have made that plan for thus and such in anticipation of receiving their portion of a trust or probate estate. To my way of thinking, this behavior on part of the beneficiary is premature, and again is often the cause of disappointment. I recommend that beneficiaries wait until they actually receive the money they are inheriting before they make plans to spend it. I am certain this kind of behavior is one of the reasons that statistically, beneficiaries spend their entire inheritance within eighteen months of receiving it, regardless of how old they are when they receive it or how much they get.
LIFETIME GIFTS GO AWAY AT DEATH
Many of my clients are generous people. They like to help their family financially, and often give gifts to assist family members who need help. It can be difficult for the recipient of gifts to fully understand that once that person has died, the Successor Trustee or Executor is unable to continue the decedent’s former largesse. It is an unfortunate fact that those gifts end at death. The Successor Trustee or Executor serves as a fiduciary and has an obligation not only to marshal the decedent’s assets, but also to pay the decedent’s debts, expenses, and taxes before distributions can be made to the beneficiaries. This is especially true when the Successor Trustee steps in due to the incapacity of the creator of the trust.
APPROPRIATE ACTION BY THE BENEFICIARY OR HEIR
The beneficiary of a trust or heir of a probate estate may request a copy of the trust or Will if it was not provided when notice of administration was given. They may also request and are entitled to receive an accounting by the Successor Trustee or Executor which shows the value of the assets at date of death, the assets which came in to the trust or probate estate during the period of administration, the extent and nature of expenses that were paid, gains or losses that occurred between the date of death value on sales of assets, and the value of the trust or probate estate prior to final distribution.
If there is a question about an item stated in the accounting, the beneficiary may get additional information the Trustee or Executor, and can undertake further legal action if it becomes necessary; however formal legal action delays the actual distribution and usually diminishes the value of the inheritance.