California AB 1079 Clarifies Trustee Duties During Incapacity of Settlor

Effective January 1, 2022, California Assembly Bill 1079 (“AB 1079”) amends Probate Code sections 15800 and 16069, clarifying certain trustee obligations when the settlor of a revocable trust is incapacitated.

When a trust is revocable, the trustee must provide fiduciary accountings to anyone who has the power to revoke the trust.  Generally, only the settlor holds the power to revoke, in which case, the trustee only has to account to the settlor. During the incapacity of the settlor, prior law was unclear as to whom the trustee was obligated to provide accountings and information.

Under AB 1079, if someone besides the settlor has the power to revoke, then the trustee owes accountings to that power-holder.  If no one else has power to revoke, or if that power-holder is also incapacitated, then the trustee must provide accountings to each beneficiary who would be entitled to receive distributions of income or principal after the death of the settlor (“remainder beneficiaries”).

Notably, AB 1079 states that the right of a remainder beneficiary to bring an action against a trustee is not diminished. Under prior case law, during the settlor’s incapacity or after the trust becomes irrevocable, remainder beneficiaries may file claims against the trustee for breach of fiduciary duty, or to compel an accounting or information, with respect to the period when the settlor was living.

If you have questions about AB 1079, contact one of our California trusts and estates attorneys or another qualified attorney.

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Joseph Ferrucci is a hands-on trusts and estates attorney with more than a decade of experience.  He regularly assists his clients with estate planning related not only to ordinary wills and revocable living trusts, but also sophisticated estate planning strategies with respect to gift tax, estate tax and the generation-skipping transfer tax.  He has experience establishing and administering irrevocable gift trusts, irrevocable life insurance trusts, qualified personal residence trusts, and charitable trusts.  He also advises clients on real property matters and Prop 13 property tax planning. Read more here.