Beneficiaries’ Rights

Beneficiaries’ Rights Under Wills and Trusts

A. Definition of a Beneficiary

According to the Restatement (Third) of Trusts (“Restatement 3d”), trust beneficiaries are generally defined as persons that are intended to have enforceable rights in trust property and the successors to those persons. Restatement 3d § 48 adds that “[a] person is a beneficiary of a trust if the settlor manifests an intention to give the person a beneficial interest; a person who merely benefits incidentally from the performance of the trust is not a beneficiary.”

These rules are very relevant to the determination of whether a person has standing to bring a claim against the trustee to enforce the provisions of a trust.

B. Impact of Beneficiaries on Trust Modification and Termination

The issues of whether a person is a beneficiary, and, if so, what type of beneficiary, are relevant with regard to the termination or modification of non-charitable trusts. In most jurisdictions, trust beneficiaries may compel a trust’s termination or modification if: (1) continuance of the trust is not necessary to carry out a material purpose for which it was created; and (2) all of the trust beneficiaries consent and are not incapacitated. If the settlor is alive and not incapacitated, his or her consent is also necessary. Also, the trust will be terminated or modified if the trust’s purposes have become impossible to accomplish, or, because of a change of circumstances, continuance of the trust would defeat or substantially impair the fulfillment of the trust purposes. IV Scott & Fratcher, The Law of Trusts, §§ 337, 340 (4th ed. 2001) (hereinafter “Scott”).

Non-consenting beneficiaries whose interests are not benefited by a termination or modification of a trust will prevent a trust termination, whether or not such beneficiaries only hold contingent interests or are not yet ascertained. Scott § 340; Matter of Schroll, 297 N.W.2d 282 (Minn. 1980) (an inter vivos trust provided that a successor trustee should be a bank. The court held that this provision could not be eliminated by the consent of the settlor and all living beneficiaries, because there were possible unborn contingent beneficiaries). On the other hand, in a number of cases the court has decreed the partial termination of the trust, although one or more of the beneficiaries did not consent to such termination, on the ground that the interests of the non-consenting beneficiaries were not adversely affected. Scott § 340.2.

Some court laws may differ. For example, Cal. Prob. Code § 15404(b) provides that if one or more beneficiaries do not consent to the proposed modification or termination, then a court may still grant a modification or termination if the interests of the non-consenting beneficiaries are not substantially impaired. Section 15404(c) provides that if the trust instrument provides for the disposition of principal among a class of persons, the court may limit the class of beneficiaries whose consent is needed to compel the modification or termination of the trust to the beneficiaries who are reasonably likely to take under the circumstances.

C. Required Disclosures to Beneficiaries

The determination of whether a person is a beneficiary, and, if so, what type of beneficiary, is also relevant to determining the nature and amount of information concerning the trust to which the beneficiary is entitled.

A trustee’s successful administration of a trust is often facilitated by clear and frequent communication with the beneficiaries. Keeping the beneficiaries informed can help avoid the trustee’s involuntary removal and/or being sued for breach of fiduciary duty. Furthermore, to be able to enforce the trustee’s duties, the beneficiaries must know of the trust’s existence and the details of its administration.

1. Information Required to be Disclosed — Nature and Timing

a. The Restatement and Case Law. Usually, when the settlor is competent and can revoke the trust, the settlor can easily keep information regarding the trust from the beneficiaries. Restatement (Third) of Trusts (“Restatement 3d”) § 74 (T.D. 2005). Once the settlor becomes incapacitated or dies and can no longer revoke the trust, however, the trustee’s duties that are owed directly to the beneficiaries and the beneficiaries’ rights regarding the trust are implicated.

b. State Statutory Law. States have enacted statutes regarding a trustee’s duty to disclose to beneficiaries. California provides that the trustee has a duty to: 1) keep beneficiaries of the trust reasonably informed of the trust and its administration, 2) provide upon reasonable request a report of transactions, 3) provide prompt notice to the beneficiaries when the trust becomes irrevocable and whenever there is a change in trustee, 4) provide upon a request a copy of the trust instrument when such trust becomes irrevocable, and 5) provide annual accountings to current beneficiaries. Cal. Prob. Code 16061.2; 16062; 16061.5; 16060; 16061.

c. Duty to Keep Beneficiaries Informed Under the Uniform Trust Code.

The UTC contains provisions concerning how much trust information must be disclosed to beneficiaries and a settlor’s right to control such disclosure. The provisions of the UTC that codify the trustee’s duty to inform and report are among the most controversial portions of the UTC and, as a result, have become the least uniform among jurisdictions that have enacted the UTC.

D. Trustee Compensation

1. State Law Regarding Trustee Compensation

For some time a trustee has been allowed compensation in the United States unless the trustee voluntarily serves without compensation or waives his or her right to compensation. The amount of the compensation is fixed either by the terms of the trust instrument, by contract between settlor and trustee, by statute or by court action.

In most states there are statutes that govern the allowance of a trustee’s compensation.

There are basically three types of trustee compensation statutes in force. The most common type of statute authorizes the court in its discretion to allow the trustee “reasonable compensation.” See, e.g., Cal. Prob. Code 15681. Under this type of statute the trustee often requests a specific amount on one or more of the trustee’s accountings, and the court grants the trustee a fee which it deems fair and reasonable under the circumstances. A second type of statute provides that the trustee is “entitled” to compensation and authorizes the trustee to collect the compensation from the trust estate without prior court authorization but subject to review upon petition of an interested person. The third basic type of compensation statute sets forth, in varying degrees of detail, a schedule or scale of commissions or fees that are permitted a trustee.

The following factors have been considered in determining the reasonableness of a trustee’s appropriate compensation: (1) the size of the trust; (2) the responsibility involved; (3) the character of the work involved; (4) the results achieved; (5) the knowledge, skill, and judgment required and used; (6) the time and services required; (7) the manner and promptness in performing its duties and responsibilities; (8) any unusual skill or experience of the trustee; (9) the fidelity or disloyalty of the trustee; (10) the amount of risk; (11) the custom in the community for allowances to trustees; (12) any estimate of the trustee of the value of his services.

Many corporate trustees publish schedules of fees for their services as trustee under a will or a trust agreement.

2. Other Considerations in Corporate and Individual Trustee Compensation

Fees charged by a corporate trustee, including minimums, can vary greatly. A frequent misconception is that substantial amounts are saved by naming an individual trustee. Often, however, using an individual trustee can end up costing money due to the individual’s inexperience with the complex legal requirements of trusts, lack of investment or tax knowledge or not having time to perform the job. The fees charged by a corporate trustee are sometimes believed to be less than the differential between the investment return earned in a given trust by a corporate trustee and the investment return that would have been earned in such trust had a family member served as trustee. Also, in most states, using a corporate trustee avoids the need to obtain a bond.

Frank discussion of fees and expenses in advance can also extinguish unrealistic expectations and potential problems. Acting as trustee entails considerable responsibility, inconvenience and potential risk. Although it is often anticipated that an individual trustee will not charge a fee, the trustee should certainly understand what is involved before agreeing to serve without a fee. If it is anticipated that the individual trustee will take a fee, it may avoid misunderstanding if the instrument specifies (or there is agreement) that a fee will be taken and, if possible, how it will be calculated.

The trust instrument should discuss compensation especially when the trust instrument appoints co-trustees. Depending on the circumstances, each trustee may receive a full fee; a single fee may be divided between two trustees, or the individual trustee may forego receiving any compensation. However, it is generally unwise to set forth a rigid compensation schedule in the trust instrument because of the difficulty in anticipating the services that may be required of the trustee and the difficulty of obtaining approval of any change in such schedule.

Post Date: May 15th, 2010 | Author: Daniela Lungu (925) 558-2710

CONTACT San Diego Trusts Attorney (619) 630-7766

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Contest Of Will: California Probate Code – Section 8250-8254

Contest Of Will: California Probate Code – Section 8250-8254, Article 3.

8250.  (a) When a will is contested under Section 8004, the
contestant shall file with the court an objection to probate of the
will. Thereafter, a summons shall be issued and served, with a copy
of the objection, on the persons required by Section 8110 to be
served with notice of hearing of a petition for administration of the
decedent's estate. The summons shall be issued and served as
provided in Chapter 4 (commencing with Section 413.10) of Title 5 of
Part 2 of the Code of Civil Procedure. The summons shall contain a
direction that the persons summoned file with the court a written
pleading in response to the contest within 30 days after service of
the summons.
   (b) A person named as executor in the will is under no duty to
defend a contest until the person is appointed personal
representative.

8251.  (a) The petitioner and any other interested person may
jointly or separately answer the objection or demur to the objection
within the time prescribed in the summons.
   (b) Demurrer may be made on any of the grounds of demurrer
available in a civil action. If the demurrer is sustained, the court
may allow the contestant a reasonable time, not exceeding 15 days,
within which to amend the objection. If the demurrer is overruled,
the petitioner and other interested persons may, within 15 days
thereafter, answer the objection.
   (c) If a person fails timely to respond to the summons:
   (1) The case is at issue notwithstanding the failure and the case
may proceed on the petition and other documents filed by the time of
the hearing, and no further pleadings by other persons are necessary.
   (2) The person may not participate further in the contest, but the
person's interest in the estate is not otherwise affected. Nothing
in this paragraph precludes further participation by the petitioner.
   (3) The person is bound by the decision in the proceeding.

8252.  (a) At the trial, the proponents of the will have the burden
of proof of due execution. The contestants of the will have the
burden of proof of lack of testamentary intent or capacity, undue
influence, fraud, duress, mistake, or revocation. If the will is
opposed by the petition for probate of a later will revoking the
former, it shall be determined first whether the later will is
entitled to probate.
   (b) The court shall try and determine any contested issue of fact
that affects the validity of the will.

8253.  At the trial, each subscribing witness shall be produced and
examined. If no subscribing witness is available as a witness within
the meaning of Section 240 of the Evidence Code, the court may admit
the evidence of other witnesses to prove the due execution of the
will.

8254.  The court may make appropriate orders, including orders
sustaining or denying objections, and shall render judgment either
admitting the will to probate or rejecting it, in whole or in part,
and appointing a personal representative.

Contesting a Will

How to Contest a Will in California

Wills can be contested for a variety of reasons, the most common of which is for wills that were made fraudulently. Contesting a will is something you can do on your own, but you should enlist the aid of an experienced probate attorney to help you. Not only will your lawyer know the procedure to follow in your will contest, but he will also improve your chances of success. There is only a limited amount of time you have to contest a will after probate has begun, so be sure to file any necessary paperwork as soon as possible.

Difficulty: Challenging

Instructions

  1. 1

    Ensure that you have standing to challenge the will. The only people who can challenge a will are those who are specifically named in the will, were named in a previous will or would have received a share of the estate under intestacy laws (California laws that determine how an estate is divided when someone dies without a will). Individuals in the last category tend to be spouses or children.

  2. 2

    Identify the legal reason you have for contesting the will. You cannot contest a will merely because you do not like it; California requires that you have a specific legal reason. The most common reasons are lack of capacity (Californians must be at least 18-years-old and of sound mind to create a will), duress (if someone coerced the individual to make a will), menace (if someone threatened to injure or blackmail the individual unless she made a will), fraud, undue influence (someone took advantage of a relationship with the deceased to encourage her to make a will) and mistake.

  3. 3

    Look for any no contest clauses in the will. Some wills include provisions that disinherit beneficiaries if they attempt to challenge a will. If such a provision exists, you will have to decide if it is worth the risk to challenge the will, as a failure will mean that you will not collect anything from the estate.

  4. 4

    File an objection with the probate court that is handling the individual’s estate. Your objection must state your reasons and explain why you have standing on the issue. The form of the objection will vary depending on your jurisdiction within California, but the clerk of the probate court should be able to provide you with a document to fill out if you are representing yourself.

  5. 5

    Attend the hearing that is assigned to you. At the hearing, you will have the burden to prove why the will is invalid. Present any evidence you have (including previous wills if any exist) and try to convince the probate judge that the will in question should not be used to distribute the estate.

Post Date: May 6, 2010 | Author: By Kyle Cavnett, eHow

Tips & Warnings

  • A probate attorney will be able to determine if you have standing to challenge the will, if your reasons for contesting the will are legally valid and if it’s a good idea to challenge (based on familial relations or no contest clauses). He will also be able to help you with the process. Unless you are very confident that you understand the formalities of California probate court, do not attempt to contest a will on your own.

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Learn to how to probate an estate in California, here.

CONTACT San Diego Trusts Attorney (619) 630-7766

Questions? – Please feel free to comment!

Trust Litigation & California Probate Code

Trust Litigation & California Probate Code

San Diego Probate Lawyer A trust avoids probate, but one may contest a trust by filing a petition in California Probate Court. A contested trust case is argued and decided in probate court. If you are faced with a possible trust contest, speak to a trust litigation attorney for advice. Call us, we are here to fight for you.

CONTACT San Diego Trust Attorney (619) 630-7766

Questions?  –  Please comment!