The COVID-19 pandemic presents new concerns for all trustees. Shelter in Place orders interrupt the flow of work. Institutional trustees are stretched thin. Individuals may need to divert their attention to non-work matters.
Trustees nonetheless should anticipate that beneficiaries’ inquiries and demands will intensify. For many the need for funds has become critical. Individual beneficiaries may have lost their jobs and have no other source of income. They may be worried that their institutional trustees may become insolvent and the trust funds will be lost.
Trustees need to be responsive in this challenging environment. Trustees have a duty to keep the beneficiaries reasonably informed of the trust and its administration. (Probate Code § 16060.) They have a duty to report to the beneficiary on the beneficiary’s reasonable request, by providing requested information relating to the administration of the trust relevant to the beneficiary’s interest. (Id. § 16061.) Most disputes between trustees and beneficiaries arise as a result of a lack of responsiveness or miscommunication. Trustees need to communicate the progress of their work to the beneficiaries when the current crisis impedes their ability to act swiftly.Beneficiaries will expect trustees to distribute trust funds upon request.
Many trust instruments permit a distribution of income or principal when necessary for the beneficiary’s health, education, maintenance, and support. The scope of this standard may have expanded during the pandemic.
Many instruments require the trustee to consider the beneficiary’s other resources when deciding whether to distribute funds. The beneficiary’s resources likely have diminished during the pandemic.
Trustees have a duty to invest and manage the trust assets as a prudent investor would invest and manage those assets. (Probate Code § 16047.) They have a duty to administer the trust according to the trust instrument. (Id. § 16000.) The trustee should seek professional advice to evaluate the asset composition of the trust and to review the investment and management of the trust assets in this unusual financial setting.
The requirements imposed upon trustees to preserve trust property and make it productive may have changed during the pandemic. Trustees have a duty to take reasonable steps under the circumstances to preserve trust property. (Probate Code § 16006.) They have a duty to make the trust property productive under the circumstances. (Id. § 16006.) The trustee should seek advice on whether the trustee should hold real property until the market improves, and whether the trustee should liquidate stock. If a small business is a trust asset, the trustee may have a duty to apply for relief under the recently enacted Coronavirus Aid, Relief, and Economic Security (CARES) Act.
Please feel free to call upon the lawyers at HBH with any questions you may have.
Many trustees employ counsel to provide advice on dealing with and responding to inquiries from beneficiaries. Trustees may believe that their communications with and advice from counsel are confidential and cannot be disclosed to the beneficiaries without their consent. The recent court decision in Fiduciary Trust International of California v. Klein (2017) 9 Cal. App. 5th 1184 is a cautionary tale that warns trustees against assuming that all communications with an attorney are confidential.
Hartog, Baer, Zabronsky, APC is pleased to announce the recipients of the 2024 HBZ Diversity Scholarship. Congratulations to Saleshia Ellis, Alejandra Hernandez, and Jiayu Fang for their outstanding achievements!
Congratulations to Kevin O’Brien for his article published in The Recorder. Kevin analyzes the nuance of appeals within trusts & estates cases in the article, “In Trust Litigation, It’s Best to Take the ‘Appeal Now’ Approach.”