The Uniform Trust Code, which went into effect January 1, 2020, creates new obligations for the trustee of an intervivos trust. The trustee now has a duty to provide an annual financial report to beneficiaries, unless waived under the trust agreement or by the beneficiaries. In addition, the trustee has new notice obligations. Within 60 days after the creation of an irrevocable trust or the death of the settlor (creator) of a revocable trust, the trustee must notify beneficiaries of their rights and provide them with the trustee’s contact information. This type of notice must also be sent after a successor trustee is appointed. Notices must be sent to the beneficiaries directly, or to their parents if they are minors. Additionally, in certain circumstances, notices may be sent to a Designated Representative, if one is appointed under the trust agreement. A Designated Representative may receive notices, represent and bind the beneficiary. For example, this may be an appropriate measure with a beneficiary who struggles with substance abuse addiction.
An individual can bring a proceeding to contest the validity of a revocable trust within one year of the settlor’s death, unless the trustee sends a copy of the trust agreement and a statement that the individual can bring a proceeding only within 120 days of such notice. For notices of this type given to a beneficiary, the notice must go to the beneficiary directly and not just to his or her Designated Representative.
A beneficiary can bring a claim for breach against the trustee not later than three years after the first to occur: (1) the removal, resignation or death of the trustee; (2) the termination of the beneficiary’s interest in the trust; or (3) the termination of the trust. Alternatively, if the trustee sends a financial report to the beneficiary, then the beneficiary only has one year from the mailing date to file a claim, as long as the beneficiary is advised of his or her rights. We recommend that the trustee send annual financial reports to have protection from claims sooner. If the beneficiary signs a receipt and release and was made aware of his or her rights, then he or she is barred from making a claim.
If the trustee wishes to make a distribution from the trust and sends a proposed distribution to the beneficiaries along with a notice stating their rights and the time period to object, the trustee will be protected from claims brought beyond 30 days.
Trusts set up under a Will generally are not subject to the above provisions but must comply with statutory and probate court rules. The trustee of a testamentary trust cannot be released from liability using receipts and releases but instead must get probate court approval, which can be costly and time-consuming. For more information, please contact Kimberly T. Smith (ksmith@brodywilk.com) or another BW attorney.