New Story – Charity requests an accounting after all assets are distributed – nothing left to pay for it

Here’s a new story that I heard about recently – it’s not one of my cases.

The decedent died and the successor trustee began administering the trust. The trustee then made prior partial distributions to all of the beneficiaries including the charity, none of whom objected or requested additional information or an accounting. Over time the trustee finished the administration of the trust and then distributed the remaining assets to the same beneficiaries. No assets remain in trust.

The charity beneficiary has now requested an accounting – not that they believe anything is wrong – they just want an accounting to be sure.

The trustee had a couple of options for how to make the final distribution: (1) do it as the trustee did; (2) get a waiver of accounting and information (and consent) from each beneficiary (see Cal. Probate Code sections 16060 through 16069), (3) prepare and provide an accounting to each beneficiary and obtain a waiver and consent; or (4) prepare an accounting and submit a petition to the court for an order approving the accounting.

Unless in some situations the trust provides otherwise, the statute of limitations on an action against a fiduciary trustee for breach of duty is three years, but also could be longer in cases where wrongful actions were hidden and it could not be expected that the beneficiary knew or should have known about the wrongful actions.

Each case is different, there isn’t one correct or absolutely wrong way to handle the above situation, but only (4) will (in most cases) clear the trustee from future actions and liability.

In the above situation the trustee now has to provide the requested accounting and information, but without the funds being available in the trust to pay for it. There might also be a possible need or requirement for beneficiary return of assets that have already been distributed – but that possibility also raises the issue whether return of assets can be compelled.

These situations require risk management, due diligence and evaluation of the various options available.

 

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