Code Section Group

Probate Code - PROB

DIVISION 9. TRUST LAW [15000 - 19530]

  ( Division 9 enacted by Stats. 1990, Ch. 79. )

PART 4. TRUST ADMINISTRATION [16000 - 16504]

  ( Part 4 enacted by Stats. 1990, Ch. 79. )

CHAPTER 4. Liability of Trustees to Beneficiaries [16400 - 16465]

  ( Chapter 4 enacted by Stats. 1990, Ch. 79. )

ARTICLE 4. Limitations and Exculpation [16460 - 16465]
  ( Article 4 enacted by Stats. 1990, Ch. 79. )

16460.
  

(a) Unless a claim is previously barred by adjudication, consent, limitation, or otherwise:

(1) If a beneficiary has received an interim or final account in writing, or other written report, that adequately discloses the existence of a claim against the trustee for breach of trust, the claim is barred as to that beneficiary unless a proceeding to assert the claim is commenced within three years after receipt of the account or report. An account or report adequately discloses existence of a claim if it provides sufficient information so that the beneficiary knows of the claim or reasonably should have inquired into the existence of the claim.

(2) If an interim or final account in writing or other written report does not adequately disclose the existence of a claim against the trustee for breach of trust or if a beneficiary does not receive any written account or report, the claim is barred as to that beneficiary unless a proceeding to assert the claim is commenced within three years after the beneficiary discovered, or reasonably should have discovered, the subject of the claim.

(b) For the purpose of subdivision (a), a beneficiary is deemed to have received an account or report, as follows:

(1) In the case of an adult who is reasonably capable of understanding the account or report, if it is received by the adult personally.

(2) In the case of an adult who is not reasonably capable of understanding the account or report, if it is received by the person’s legal representative, including a guardian ad litem or other person appointed for this purpose.

(3) In the case of a minor, if it is received by the minor’s guardian or, if the minor does not have a guardian, if it is received by the minor’s parent so long as the parent does not have a conflict of interest.

(c) A written account or report under this section may, but need not, satisfy the requirements of Section 16061 or 16063 or any other provision.

(Amended by Stats. 1996, Ch. 862, Sec. 40. Effective January 1, 1997.)

16461.
  

(a) Except as provided in subdivision (b), (c), or (d), the trustee can be relieved of liability for breach of trust by provisions in the trust instrument.

(b) A provision in the trust instrument is not effective to relieve the trustee of liability (1) for breach of trust committed intentionally, with gross negligence, in bad faith, or with reckless indifference to the interest of the beneficiary, or (2) for any profit that the trustee derives from a breach of trust.

(c) Subject to subdivision (b), a provision in a trust instrument that releases the trustee from liability if a beneficiary fails to object to an item in an interim or final account or other written report within a specified time period is effective only if all of the following conditions are met:

(1) The account or report sets forth the item.

(2) The period specified in the trust instrument for the beneficiary to object is not less than 180 days, or the trustee elects to follow the procedure provided in subdivision (d).

(3) Written notice in 12-point boldface type is provided to a beneficiary with the account or report in the following form:

NOTICE TO BENEFICIARIES

YOU HAVE [insert “180 days” or the period specified in the trust instrument, whichever is longer] FROM YOUR RECEIPT OF THIS ACCOUNT OR REPORT TO MAKE AN OBJECTION TO ANY ITEM SET FORTH IN THIS ACCOUNT OR REPORT. ANY OBJECTION YOU MAKE MUST BE IN WRITING; IT MUST BE DELIVERED TO THE TRUSTEE WITHIN THE PERIOD STATED ABOVE; AND IT MUST STATE YOUR OBJECTION. YOUR FAILURE TO DELIVER A WRITTEN OBJECTION TO THE TRUSTEE WITHIN THE PERIOD STATED ABOVE WILL PERMANENTLY PREVENT YOU FROM LATER ASSERTING THIS OBJECTION AGAINST THE TRUSTEE. IF YOU DO MAKE AN OBJECTION TO THE TRUSTEE, THE THREE-YEAR PERIOD PROVIDED IN SECTION 16460 OF THE PROBATE CODE FOR COMMENCEMENT OF LITIGATION WILL APPLY TO CLAIMS BASED ON YOUR OBJECTION AND WILL BEGIN TO RUN ON THE DATE THAT YOU RECEIVE THIS ACCOUNT OR REPORT.

(d) A provision in a trust instrument that provides for a period less than 180 days to object to an item in an account or report shall be ineffective to release the trustee from liability. A trustee of a trust created by an instrument with an ineffective period may elect to be governed by the provisions of subdivision (c) by complying with the requirements of subdivision (c), except that “180 days” shall be substituted in the notice form for the ineffective period.

(e) Subject to subdivision (b), a beneficiary who fails to object in writing to an account or report that complies with the requirements of subdivision (c) within the specified, valid period shall be barred from asserting any claim against the trustee regarding an item that is adequately disclosed in the account or report. An item is adequately disclosed if the disclosure regarding the item meets the requirements of paragraph (1) of subdivision (a) of Section 16460.

(f) Except as provided in subdivision (a) of Section 16460, the trustee may not be released from liability as to any claim based on a written objection made by a beneficiary if the objection is delivered to the trustee within the specified, effective period. If a beneficiary has filed a written objection to an account or report that complies with the requirements of subdivision (c) within the specified, valid period that concerns an item that affects any other beneficiary of the trust, any affected beneficiary may join in the objection anytime within the specified, valid period or while the resolution of the objection is pending, whichever is later. This section is not intended to establish a class of beneficiaries for actions on an account and report or provide that the action of one beneficiary is for the benefit of all beneficiaries. This section does not create a duty for any trustee to notify beneficiaries of objections or resolution of objections.

(g) Provided that a beneficiary has filed a written objection to an account or report that complies with the requirements of subdivision (c) within the specified, valid period, a supplemental written objection may be delivered in the same manner as the objection not later than 180 days after the receipt of the account or report or no later than the period specified in the trust instrument, whichever is longer.

(h) Compliance with subdivision (c) excuses compliance with paragraph (6) of subdivision (a) of Section 16063 for the account or report to which that notice relates.

(i) Subject to subdivision (b), if proper notice has been given and a beneficiary has not made a timely objection, the trustee is not liable for any other claims adequately disclosed by any item in the account or report.

(j) Subdivisions (c) to (i), inclusive, apply to all accounts and reports submitted after the effective date of the act adding these subdivisions.

(Amended by Stats. 2004, Ch. 538, Sec. 1. Effective January 1, 2005.)

16462.
  

(a) Notwithstanding Section 16461, a trustee of a revocable trust is not liable to a beneficiary for any act performed or omitted pursuant to written directions from the person holding the power to revoke, including a person to whom the power to direct the trustee is delegated.

(b) Subdivision (a) applies to a trust that is revocable in part with respect to the interest of the beneficiary in that part of the trust property.

(Enacted by Stats. 1990, Ch. 79.)

16463.
  

(a) Except as provided in subdivisions (b) and (c), a beneficiary may not hold the trustee liable for an act or omission of the trustee as a breach of trust if the beneficiary consented to the act or omission before or at the time of the act or omission.

(b) The consent of the beneficiary does not preclude the beneficiary from holding the trustee liable for a breach of trust in any of the following circumstances:

(1) Where the beneficiary was under an incapacity at the time of the consent or of the act or omission.

(2) Where the beneficiary at the time consent was given did not know of his or her rights and of the material facts (A) that the trustee knew or should have known and (B) that the trustee did not reasonably believe that the beneficiary knew.

(3) Where the consent of the beneficiary was induced by improper conduct of the trustee.

(c) Where the trustee has an interest in the transaction adverse to the interest of the beneficiary, the consent of the beneficiary does not preclude the beneficiary from holding the trustee liable for a breach of trust under any of the circumstances described in subdivision (b) or where the transaction to which the beneficiary consented was not fair and reasonable to the beneficiary.

(Enacted by Stats. 1990, Ch. 79.)

16464.
  

(a) Except as provided in subdivision (b), a beneficiary may be precluded from holding the trustee liable for a breach of trust by the beneficiary’s release or contract effective to discharge the trustee’s liability to the beneficiary for that breach.

(b) A release or contract is not effective to discharge the trustee’s liability for a breach of trust in any of the following circumstances:

(1) Where the beneficiary was under an incapacity at the time of making the release or contract.

(2) Where the beneficiary did not know of his or her rights and of the material facts (A) that the trustee knew or reasonably should have known and (B) that the trustee did not reasonably believe that the beneficiary knew.

(3) Where the release or contract of the beneficiary was induced by improper conduct of the trustee.

(4) Where the transaction involved a bargain with the trustee that was not fair and reasonable.

(Enacted by Stats. 1990, Ch. 79.)

16465.
  

(a) Except as provided in subdivision (b), if the trustee, in breach of trust, enters into a transaction that the beneficiary may at his or her option reject or affirm, and the beneficiary affirms the transaction, the beneficiary shall not thereafter reject it and hold the trustee liable for any loss occurring after the trustee entered into the transaction.

(b) The affirmance of a transaction by the beneficiary does not preclude the beneficiary from holding a trustee liable for a breach of trust if, at the time of the affirmance, any of the following circumstances existed:

(1) The beneficiary was under an incapacity.

(2) The beneficiary did not know of his or her rights and of the material facts (A) that the trustee knew or reasonably should have known and (B) that the trustee did not reasonably believe that the beneficiary knew.

(3) The affirmance was induced by improper conduct of the trustee.

(4) The transaction involved a bargain with the trustee that was not fair and reasonable.

(Enacted by Stats. 1990, Ch. 79.)

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