If you find yourself serving as the successor trustee of a living trust, one of your key jobs will be dealing with the trust beneficiaries. After all, you’re managing their money for them. And you have a legal (fiduciary) duty to keep them informed about how you are managing the trust assets. The beneficiaries need reliable information, or they won’t be able to protect their interests.
Your responsibilities to the beneficiaries start almost immediately. Do a good job with the first step—letting beneficiaries know that you’re now in charge of the trust now that the person who created the trust (the settlor) has died—and it will make your job easier down the road.
When you take over as successor trustee of the trust, you need to let the beneficiaries know that you’re now in charge. Some states require specific language; in others, a simple letter in your own words will do. You will need to explain the situation, which usually includes these basic facts:
Be realistic with the beneficiaries about when they can expect to receive money from the trust. Unless they’ve inherited before, they probably have no idea that it will be a while before you are ready to distribute assets from the trust. Explain that first, you’ve got to inventory trust assets and also determine what debts and taxes need to be paid. That process may take only a few weeks, or it could take a few months.
Almost half the states have specific rules about how you must notify beneficiaries about the trust and what information you must provide. Several states require you to send a notice to all trust beneficiaries within a certain time after you take over as successor trustee of the trust. Most states give you 30 or 60 days to send this initial notice.
Who must you notify? Some states require that the deceased settlor’s legal heirs—that is, the people who would be entitled to inherit under state law if the person did not leave a valid will or trust—receive a notice about the trust. Some states require that notices be sent to everyone who is a “qualified beneficiary.” These beneficiaries are, basically, anyone who might be entitled to get money from the trust—that is, any beneficiary named in the trust, even as an alternate or contingent beneficiary. The qualified beneficiary category includes people:
The notice you send isn’t a fancy legal form; you can just write a letter, as long as it includes all the necessary information (and satisfies your state’s rules about content and format, if any). Here are the essentials, in most states:
Explain that the trust exists. Some beneficiaries may be well aware that the settlor made a trust, but others may not know.
Provide your name and contact information. Beneficiaries need to know how to get in touch with you.
Tell beneficiaries that they have the right to see a copy of the trust document and that you will send them one if they request it. You can go ahead and include a copy of the trust with your letter, but you don’t have to unless they ask for it.
Give the deadline for court challenges. It’s rare for a beneficiary to go to court and challenge the validity of a trust, but it happens. Your notice should tell beneficiaries that if they want to contest the trust in court (for example, because they think the settlor wasn’t of sound mind when he or she made the trust), they must do it by a certain time.
Supply whatever other information your state requires. If your state is listed above, make sure you understand its rules about exactly what the notice must contain. (Your state might even dictate how big the font must be.) To avoid problems, follow these rules meticulously. If you don’t understand what’s required, talk to a local lawyer who has helped other successor trustees administer living trusts.