New Duties for Successor Trustees When Settlor is Incapacitated

Effective January 1, 2022, California Probate Code Sections 15800 and 16069 are amended by Assembly Bill 1079. The change in law affects Trustees who assume their role when the settlor or trustor (the creator of the trust) becomes incapacitated. Typically, the person or persons who create a revocable living trust hold the power to be able to revoke the trust. When a person dies, their revocable trust becomes irrevocable because they can no longer revoke their trust. Once a successor trustee takes over a trust that has become irrevocable due to the death of the settlor, they have a duty to the beneficiaries of the trust, to notify them of the trust’s irrevocability and to provide them with.

Under this new AB1079, the law now recognizes that, as a practical matter, a trust becomes irrevocable when a settlor becomes incapacitated and no longer has the cognitive ability to revoke the trust. At that point, the law now states that when the person or persons who hold the power to revoke the trust are no longer competent, the trustee must then provide notice to all the remainder beneficiaries who would be entitled to notice once the settlor dies, and the trustee must provide them with a copy of the trust and any amendments. This notice is required within 60 days of the trustee obtaining the necessary documentation establishing that the settlor is incompetent. The trustee must also provide the beneficiaries with an accounting at least annually, or as otherwise determined by the trust document.

Please note that although the beneficiaries are deemed beneficiaries entitled to notice and accounting, they are not necessarily the present beneficiaries of the income and principal of the trust. The incompetent settlor would still be the primary beneficiary of the trust assets with the other beneficiaries not inheriting any assets until the settlor’s death.

If you are the successor trustee for a loved one’s trust, you may have to start administering the trust prior to your loved one passing away, if they become incompetent. It is important to note that incompetence or incapacity is determined by the trust document itself.

Please do not hesitate to reach out to your estate planning attorney for assistance with a trust that may name you as a successor trustee. You may need to step in before someone dies and it would be prudent to understand your duties.

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