From the desk of Jennifer N. Sawday, Esq: What is California Probate Code Section 16061.7 and why does it pack a big punch? This is a California code provision for the administration of revocable trusts when such trust becomes irrevocable. This provision requires that whenever a revocable trust becomes irrevocable or there is a change of trustees of such an irrevocable trust that a notification be sent to those entitled to notice. To reiterate, the actual code section is titled: “Duty to Provide Notification of Events†and refers to events such as when a trust becomes irrevocable or a change of trustees to an already irrevocable trust for example. As you read this article, please understand that this is not legal advice to your situation and this particular provision is being narrowly parsed in this article. So if you have a revocable living trust and the persons who have created the trust have passed away, this provision requires that the then acting successor trustee send out a trust notification with certain required text in certain sized font to those entitled to notice. The notice has many purposes:

1. One important purpose is to start and stop the statute of limitations for contesting the terms of the trust or the administration of the trust as to the successor trustee. The notice essentially says that once you receive notice that you have a 120 days from service of notice or 60 days from receipt of the trust terms to file or commence a contest to the trust. If you file a contest to the terms of the trust after the 120 day notice period or 60 days from when you receive the trust – you may be forever barred from starting a contest. Arguing over how the trust is being administered is not necessarily a contest. A no contest clause may also not deter someone from filing a contest – riddle yourself this: if you are omitted entirely from the trust and stand not to get a penny and you file a trust contest – what do you have to lose? Nothing. A good trust may contain a small cash gift or percentage to a contesting beneficiary so that they do have something to lose if they file a contest.
2. Another important purpose is to identify the principal place of administration for the trust. The successor trustee based on the terms of the trust and other factors can select the appropriate city/county/state for the administration of the trust. This is important in case there will be litigation concerning the trust. A trust may be administered in the county which the successor trustee sits, the county in which the law firm sits, the county in which the creator or settlor of the trust created it or even the county in which the trust owns real estate. Of course the answer varies and depends on a multitude of factors but this is a key reason for sending or receiving the notice.
3. The notice also identifies the acting successor trustee and a well prepared and served notice will include what the code states as true and correct terms of the trust. There is a related code provision that says that when you provide notice and include the true and correct terms of the trust: you include all trust terms after a restatement, any amendments after a restatement and anything else that the trustee considers part of the trust terms. See California Probate Code Section 16060.5. In fact this code says that you must include “…signatures, amendments, disclaimers, and any directions or instructions to the trustee that affect the disposition of the trust.†This code section also makes it clear that the …the terms of the trust “does not include trust instruments or amendments which are superseded by the last restatement before the settlor’s death, but it does include amendments executed after the last restatement.â€

When I see a potential client about concerns about trust administration, my first question is have you received the 16061.7 notice and can I review it? And then I compute the statute of limitations and whether the true and correct terms of the trust was also included. This notice will tell me whether the potential client can litigate the terms of the trust or if the potential client does not need to litigate the terms of the trust, but instead has a strong case governing a breach of fiduciary or other duties by the successor trustees to the trust beneficiaries. Arguing about how a trust is being administered is not always a trust contest.

When I see a potential client who is named as a successor trustee about hiring our firm for trust administration following the death of the settlor(s), I explain the importance of preparing and serving the 16061.7 notice and, yes, this is the first thing I prepare and send out with the client’s signature as the successor trustee if we get retained to assist with trust administration.

When I prepare and serve the 16061.7 notice, I always follow the code, include the true and correct terms of the trust with the notice and draft a proof of service that includes exactly what was served and have it served by a staff member in my office. We also carefully decide with the client what is the principal place of trust administration where different counties could be chosen. Then once served by mail, as allowed, we calendar the 120 day contest period and advise the client of this important deadline. We often tell the client (successor trustee) not to distribute any trust funds to any trust beneficiaries until after this period has passed. Of course there are exceptions and legal advice is tailored specifically to each trust administration based on our collective years of experience at TLD Law and the exact facts of that trust administration.

Lastly, notice must be given to every single name, charity or other organization named in the true and correct terms of the trust. Notice must also be given to all heirs of the deceased settlor.

In terms of trust administration when a revocable trust becomes irrevocable, this code section is very valuable. Appropriate legal advice by a qualified attorney will help you understand the importance of the notice, prepare and serve this notice for you as your attorney of record on behalf of you as the successor trustee for the trust.

Jennifer Sawday is a partner at TLD Law, LLP. She serves a wide range of clients in all matters related to probate, trusts, estate planning, conservatorships, guardianships—and related litigation. She also handles pre- and post-death administration for clients who serve as personal representatives, executors, and trustees for trusts and estates. If you would like more information or to set up an appointment, please call TLD Law at (562) 923-0971 or email [email protected].