Trustees, are you confident you’ve completed all your legal responsibilities? This final, crucial question is one every trustee should ask—but the answer is rarely simple. In this episode of Absolute Trust Talk, host Kirsten Howe and associate attorney Jessica Colbert delve into the often-overlooked legal notices trustees are required to send before making final distributions. They discuss the critical 120-day notice to trust beneficiaries and heirs, informing them of their rights to contest the trust. They also cover essential notifications to the Department of Health Care Services and the county assessor’s office. Missing these steps might seem minor, but they can lead to significant delays and legal complications. Tune in to learn more about these requirements and why addressing them early is essential for a seamless trust administration.
Time-stamped Show Notes:
0:00 Introduction
1:15 Picking up from our previous episode with the fourth and final question for trustees: “Have I done everything I’m required to do?”
2:00 Next, let’s explore the first of several common notices that trustees often overlook.
2:30 The 120-Day Notice to Beneficiaries and Heirs: Why this written notice is crucial and its specific language requirements.
3:38 There are beneficiaries, and then there are heirs. Here’s what you need to know about notifying each as a trustee.
5:00 Have you filed a notice to the Department of Healthcare Services? We discuss why it’s an important step, even if you believe it doesn’t apply.
6:30 If the decedent owned any real estate, you’ll need to submit this to the county assessor’s office. Listen in for more details.
7:10 The final takeaway: Ask the questions we covered today sooner rather than later to avoid complications.
Transcript:
Hello, and welcome to Absolute Trust Talk. I’m Kirsten Howe, Managing Attorney here at Absolute Trust Counsel, and we’re happy to have you back again. With me here is Jessica Colbert, who’s one of our Associate Attorneys.
In our last episode, we started with the premise that we had four questions that we think trustees need to ask before they make the final distributions to their beneficiaries. In our last episode, we managed to cover three of them—that’s pretty good—but we ran out of time. So now, we’re going to cover the fourth one.
Just to refresh you, in case you’ve forgotten, or for anyone who didn’t see the last episode, we have been experiencing a little cluster of trustees who come to us after they’ve been administering a trust for quite a period of time—their grantor died, and now they’re the trustee—they’ve done pretty well, but they missed some things. They come to us and discover that they’ve missed some things.
These are the four questions we would love every trustee to ask before making final distributions. Here, we’re on question number four, which is really not fair to call it question number four because it’s such a catch-all question.
It’s: “Have I done everything I’m required to do?”
As a trustee, have I done everything I’m required to do? That does cover, obviously, a lot of territory. But we see commonly in these situations where the trustee has been working without an attorney and then they come and talk to us, there are certain notices that they are required to send out and they haven’t done it.
A lot of trust administration is common sense. But for this kind of thing, you’re required to give these notices. That’s not common sense. You just have to know it. Somebody has to tell you this is what you’re required to do. So, we’re going to talk about the common notices that trustees overlook but are required to give.
Jessica, why don’t you start with the first one?
The first one is a written notice that goes to the trust beneficiaries and the decedent’s heirs. It is a written notice that has very specific language requirements. The purpose of this notice is to let the recipients know that the person has died, that they had a trust, and that these recipients are entitled to a copy of the trust. They have 120 days to contest the terms of that trust. Once the 120 days pass, our trustee can move on and proceed with administering the trust, knowing that someone down the road can’t challenge it.
It’s not at all uncommon for trustees to come at what they consider to be the end of their trust administration and discover, “Oh, I didn’t do that, and I’m required to do that. And it’s in my best interest to do that.” The purpose of that 120-day limitation on contest is to protect the trustee. Once 120 days have passed, they will know that this is a valid trust, and I can follow it. And anything I do that’s consistent with this trust is valid. You want that, not at the end. You want to get that out of the way at the beginning.
They come to us at the end, and we’ve still got to do that because that’s the only way we can protect our client, the trustee.
Jessica, you also mentioned that it goes to the trust beneficiaries and heirs. Talk about that.
The trust beneficiaries may be a certain set of people, but in addition to those people getting the notice, so would the decedent’s heirs. And these are determined by law.
It may be, let’s say, that the decedent had three children and left everything to two of them. Those two would be the trust beneficiaries. However, the third child is still an heir of the decedent. So that person, even though they are not getting anything from the trust, would still have to get this notice.
Right. And even if their name isn’t in the trust—and that’s possible, although usually when you disinherit a child, you specifically say that in the trust. It’s important to know because we know people who may leave everything to a charity, so the charity is the trust beneficiary. But they do have heirs at law out there who aren’t mentioned anywhere in the trust. Those people are entitled to be notified.
If they aren’t notified and they come back later and complain after all the money’s gone, who’s holding the bag now? Our trustee.
The other notices that we commonly see trustees didn’t know about. Jessica, go ahead and lay that one out for us.
One thing that most trustees don’t realize they need to do is to give a notice to the Department of Healthcare Services. Anytime someone dies in California, the Department of Healthcare Services will be notified. The purpose of this is if the decedent received Medi-Cal at any point during their lifetime, the Department of Healthcare Services wants to be reimbursed for that. If the decedent did not receive Medi-Cal at any point, usually the department will send a letter back saying everything’s fine, but you do still need to send this notice regardless.
If you don’t know with a hundred percent certainty in some cases whether your decedent was on Medi-Cal or not. As lawyers representing the trustee, we must also provide that notice. There’s no way that we know because we may never meet the decedent. How would we know if he or she was on Medi-Cal? So, we always do it, and the trustees should be doing it. That’s always fun to tell them, “You didn’t do that”. And again, that’s a four-month waiting period because you send out the notice, and the Department of Healthcare Services has four months to reply. It’s better to do that at the beginning.
The last one—I’m going to talk about the last one—is the change in ownership statement, which is a notice that we have to send to the assessor’s office if the decedent owned real estate in the county. It just lets them know, “Hey, somebody who owned real estate has died.” The assessor is always looking for an opportunity to increase the assessment and raise the property taxes. We let them know that change in ownership statement, “No, there’s an exception that applies here,” or, “Maybe you are going to get to reassess.” You’re required to give that notice, and a lot of times, people don’t do that.
That’s our final bit of notices that have to be sent. Jessica, what would you say is your big takeaway from this episode?
I’d say the most important thing is to ask these questions sooner rather than later. If you have an attorney you’re working with, meet with them early in the trust administration. If you don’t have one, we recommend that you meet with one to ensure you’re doing all these things earlier instead of thinking you’re almost done and finding out, “Oh, this four-month waiting period is going to start now.”
If you’re smart, you’ll end up getting at least some legal advice. Do it early, not at the end. That’s a perfect takeaway.
Well, thank you all for listening and watching. Thank you, Jessica, as always. And we look forward to connecting with you next time.
Resources Related to This Episode:
- Absolute Trust Talk Episode 158: Avoiding Trustee Liability: Critical Steps Before Distributing Assets https://absolutetrustcounsel.com/158-avoiding-trustee-liability-critical-steps-before-distributing-assets/
- A Will is Not Enough – Securing Your Legacy with Estate Planning Life can change in an instant. A will is not enough to be prepared. Get free access to our actionable E-book Guidebook #1 and start protecting your legacy today. https://absolutetrustcounsel.com/guidebooks/
- Learn how to comfortably define gray areas and assess your own unique needs to effortlessly build a secure future now. Check out Guidebook #2, Estate Planning Beyond the Basics, here > https://absolutetrustcounsel.com/guidebooks/
- Get our free introductory guide to the most used estate planning tool, family trusts, and understand how we plan to help protect your family. Guidebook #3: https://absolutetrustcounsel.com/guidebooks/
- Absolute Trust Counsel would love to offer access to our Incapacity Planning resource page: https://AbsoluteTrustCounsel.com/Incapacity-Planning/. We’ve collected our top planning information all in one place so listeners can find videos, guidebooks, blog posts, and a host of information with tips and strategies on implementing, planning, and protecting themselves and their loved ones.
- We’re pleased to provide a library of e-books to address common estate planning questions and concerns in practical, easy-to-understand language. https://AbsoluteTrustCounsel.com/Resources/.
- ASK KIRSTEN: If you’d like Kirsten to answer your question on the air, please email her at Info@AbsoluteTrustCounsel.com.
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