One of the first duties of a new successor-trustee of a California Living Trust is usually to send a notice in the form prescribed by California Probate Code Section 16061.7. This notice is often referred to as a “120 Day Letter.” Sending this letter is often critical to winding up a trust estate and in any case it is a legally prescribed duty for trustees. Perhaps the most important thing about a 120 Day Letter is that it starts the Statute of Limitation running on when a beneficiary can bring a Trust Contest Most trustees want to get this deadline behind them and eliminate the possibility of protracted litigation of this sort.
The contents of the 120 Day Letter are very specifically set forth in California Probate Code Section 16061.7. Among other things, the letter must contain the following information:
(1) the identity of the settlor or settlors of the trust and the date of execution of the trust instrument;
(2) the name, address, and telephone number of each trustee of the trust;
(3) the address of the physical location where the principal place of administration of the trust is located, pursuant to Section 17002;
(4) any additional information that may be expressly required by the terms of the trust instrument;
(5) a notification that the recipient is entitled, upon reasonable request to the trustee, to receive from the trustee a true and complete copy of th terms of the trust.
[Cal. Probate Code Section 16061.7(g)
Additionally, if the notification by the trustee is served because the trust or a portion of it (e.g. the Decedent’s Trust, for example) has become irrevocable, the letter must set out, in at least 10 point type:
“You may not bring an action to contest the trust more than 120 days from the date this notification by the trustee is served upon you or 60 days from the date on which a copy of the terms of the trust is delivered to you during that 120-day period, whichever is later.”
[See generally Cal. Probate Code Section 16061.7(h)].
California Probate Code Section 16061.7 (i) is also important. It reads: “[a]ny waiver by a settlor of the requirement of serving the notification by trustee required by this section is against public policy and shall be void”
This is a lot of information to unpack, but here goes. Basically, once any part of the trust becomes irrevocable, or the trustee of an irrevocable trust changes, or certain other less common events occur [see generally Cal Prob. Code Section 16061.7(a)(3)] the trustee must send the prescribed Probate Code Section 16061.7 letter. If the trustee is sending the letter because a part of the trust recently became irrevocable, it must contain the 120 day warning language supra, above. Thus, if a new letter is required to be sent only because the trustee changed, and not because a portion of the trust recently became irrevocable, the letter need not contain the 120 day warning language in ten point or larger type.
One of the most common errors in sending a 120 Day Letter is that trustees often don’t know that they are required to send it when only a part of a trust becomes irrevocable. Probably the most common example of this is when, in a common A/B Trust, the first spouse dies, thereby (usually) creating the Decedent’s Trust which is (usually) irrevocable upon the death of the first spouse. It is extremely common that the surviving spouse, who is usually also the surviving trustee of the trust, does not send a 120 day letter to the beneficiaries of the Decedent’s Trust. Usually the surviving spouse has no idea that he or she has duties to the beneficiaries of the Decedent’s Trust once the first spouse passes.
Whenever a Probate Code Section 16061.7 letter is required, it must be sent to each “heir” and to each beneficiary of the Trust. [See generally Cal. Probate Code Section 16061.7(b)]. An “heir” is different than a beneficiary. A beneficiary is anyone who takes under the trust. An “heir” is anyone who would inherit under the laws of intestacy (i.e. by operation of law if there were no will or trust) regardless of whether each “heir” is actually a beneficiary under the terms of the trust writings. Thus, for example, if a child were disinherited, he or she would still be entitled to receive a Probate Code Section 16061.7 notice letter.
Note also that the trust writing itself cannot waive the legal requirement to the trustee of sending the Probate Code Section 16061.7 notice. Therefore, if the Trust instructs the Trustee that he or she need not send the notice, that provision is void and the legal requirement to send the notice would nonetheless still exist. [Buffington Law Firm’s Trust litigation team actually successfully litigated a case about this a few years ago.]
The importance of sending a Probate Code Section 16061.7 Letter
There are many reasons why it is very important for trustees to comply with the requirements of Probate Code Section 16061.7. Firstly, as discussed supra, sending the letter gets the Statute of Limitation running to time-bar a possible trust contest. Secondly, failure by a trustee to comply can make the trustee liable for consequential attorney’s fees and/or damages. Probate Code Section 16061.9 provides:
(a) A trustee who fails to serve the notification by trustee as required by Section 16061.7 on a beneficiary shall be responsible for all damages, attorney’s fees, and costs caused by the failure unless the trustee makes a reasonably diligent effort to comply with that section.
(b) A trustee who fails to serve the notification by trustee as required by Section 16061.7 on an heir who is not a beneficiary and whose identity is known to the trustee shall be responsible for all damages caused to the heir by the failure unless the trustee shows that the trustee made a reasonably diligent effort to comply with that section. For purposes of this subdivision, “reasonably diligent effort” means that the trustee has delivered notice pursuant to Section 1215 to the heir at the heir’s last address actually known to the trustee.
If this all seems complicated, it is because it is indeed somewhat complicated. Often it is not clear what happens to a trust when one of the trustmakers (“Trustors”) dies or when a trust becomes partially or fully irrevocable. If you have any doubt at all, you should consult a qualified trust attorney. If you have a trust litigation issue or require advice about this, Buffington Law Firm invites you to give us a call for a Free Legal Consultation. All consultations are with an experienced trust litigation, are completely protected by the attorney-client privilege, and there is never any obligation to you.
By Roger J. Buffington