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In general,beneficiaries must have access to essential information regarding the trust in order to protect their interests and properly monitor the trustee's performance. Under the Pennsylvania Uniform Trust Act the burden of monitoring the trustees' performance and oversight of the trust is on the beneficiaries. As a trustee you must keep the beneficiaries informed and this could even limit your liability in the future. However, this requirement or notice is new, and the trustees of many trusts may not even realize that it applies to them.
It is a mistake to think that the burden is on the beneficiary so you only need to communicate if the beneficiary asks. For example in a revocable trust when the settler (person who created the trust) dies the trustee must notify the settler's spouse, children, personal representative, and all current beneficiaries of the trust. Failure to follow this and other notice requirements can cause unnecessary hostility from the family and beneficiaries towards the trustee and can lead to personal liability on the trustee's part.
Certian notice provisions can also help you to protect yourself from lawsuits in the future.
A beneficiary has five years to challenge a transaction after the beneficiary receives notice of the removal, resignation, or death of a trustee; five years after the termination of the beneficiaries interest terminates; or five years after the termination of the trust, whichever occurs first. These challenges may be barred sooner if you provide annual written reports including information about the trusts assets, liabilities, receipts, and disbursements to beneficiaries. These written reports help protect the trustee, the beneficiary, and the trusts assets. Communication, notice, and information is key to a workable relationship between you and the beneficiaries and when done might, limit your liability in the future!
See all ten of our articles on How To Avoid The Most Common Mistakes Trustees Make:
Avoiding Trustee Mistakes No. 1: Trustees Failing To Understand The Trust Language
Avoiding Trustee Mistakes No. 2: Trustees In Trouble Making Early Distributions
Avoiding Trustee Mistakes No. 3: Trustees Failing To Follow The Prudent Investor Rule
Avoiding Trustee Mistakes No. 4: Trustees Failing To Follow The Uniform Trust Act
Avoiding Trustee Mistakes No. 5: Trustees Failing To Follow The Principle And Income Act
Avoiding Trustee Mistakes No. 6: Trustees Failing To Communicate Properly
Avoiding Trustee Mistakes No. 7: Failing To Properly Reform, Amend, Or Terminate
Avoiding Trustee Mistakes No. 8: Failing To File Tax Returns Or To Seek Professional Assistance
Avoiding Trustee Mistakes No. 9: Failing To Understand The Role Of Multiple Trustees
Avoiding Trustee Mistakes No. 10: Trustees Failing To Do The Job
David M. Frees III
[email protected]
610-933-8069
Pennsylvania Trustee and Executor Lawyer
