In 2022, California’s Assembly Bill 1079 brought significant updates to Probate Code Section 15800, providing much-needed clarity to trustee duties when a settlor of a revocable trust becomes incapacitated. These revisions, effective January 1, 2022, address longstanding ambiguities about a trustee’s obligations when the settlor can no longer revoke or amend the trust due to incompetence, ensuring greater transparency and protection for beneficiaries. Note that if any person holding the power to revoke the trust still has capacity, the legal requirements below are not triggered. Although this law has been in place for several years, we have found that many clients are not aware of the new requirements.
Under the revised Section 15800(b), trustees are now required to take specific actions once the settlor’s incapacity is established, either through the trust’s designated method or a judicial determination. Within 60 days of receiving information confirming the settlor’s incompetence, the trustee must provide notice to certain beneficiaries—specifically, those who would be entitled to receive income or principal distributions if the settlor had died at that time. This group, often referred to as remainder beneficiaries, includes individuals such as children or other heirs named to inherit upon the settlor’s death. The notice must include a true and complete copy of the trust instrument and any amendments, ensuring these beneficiaries are informed of the trust’s terms.
Additionally, the revised code mandates that trustees provide an annual accounting to these same beneficiaries – those who would receive distributions if the settlor were deceased during the accounting period. This requirement extends the trustee’s duty beyond the settlor, who remains the primary beneficiary while alive, to include those with a future interest in the trust. The annual accounting offers a detailed report of trust assets, income, and expenditures, fostering accountability and allowing beneficiaries to monitor the trustee’s management.
These changes mark a shift from prior law, where beneficiaries often had limited rights until the settlor’s death. By requiring notice and annual accountings during the settlor’s incapacity, revised Probate Code 15800 balances the settlor’s privacy with the need to safeguard the trust’s integrity, offering beneficiaries a clearer window into its administration.
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