Trustee's Million Dollar Question: Who Is Entitled to Notice of Trust Administration?

• Publication year: 2007
• Author: By James P. Lamping

TRUSTEE'S MILLION DOLLAR QUESTION: WHO IS ENTITLED TO NOTICE OF TRUST ADMINISTRATION?

By James P. Lamping^*

I. INTRODUCTION

The identity of the persons entitled to notice of a trust administration is less clear than is the identity of those entitled to notice of a probate administration. The statutes governing notice of a trust administration are ambiguous and what is worse, trustees generally do not have the protections afforded by a court supervised administration. As a result, a trustee may face significant liabilities many years after a trust administration has been completed.

II. PROBATE ADMINISTRATION NOTICE REQUIREMENTS

A probate administration is initiated by the filing of a petition for administration.¹ The persons entitled to notice are expressly defined by statute. Probate Code section 8110 provides:

At least 15 days before the hearing of a petition for administration of a decedent's estate, the petitioner shall serve notice of the hearing by mail or personal delivery on all of the following persons:
(a) Each heir of the decedent, so far as known to or reasonably ascertainable by the petitioner.
(b) Each devisee, executor, and alternative executor named in any will being offered for probate, regardless of whether the devise or appointment is purportedly revoked in a subsequent instrument. (Emphasis added.)²

To determine which non-heirs are entitled to notice, a petitioner need look no further than the names listed in the will and any codicils that the petition seeks to have probated.³ Once the order admitting a will to probate or appointing a personal representative becomes final, it is generally a conclusive determination of the court's jurisdiction and cannot be collaterally attacked.⁴ This general rule is subject to three exceptions.

First, an order will not be conclusive if it was procured by extrinsic fraud,⁵ but even where an heir's existence is known to a devisee, the personal representative's failure to provide notice may not be fatal. The court in Stevens v. Torregano (1961) 192 Cal. App. 2d 105 held that the executor's failure to provide notice to the decedent's only child did not constitute a basis for setting aside a previously entered decree of distribution because the executor was not aware of the child's existence. This was true even though one of the devisees was aware of the child and did not inform the executor that the child existed. There was no evidence that the executor ever asked the devisee whether the decedent had any children, and the devisee had no affirmative duty to make this fact known.⁶ Consequently, extrinsic fraud was not present.⁷

Secondly, a "court order . . . based on the erroneous determination of the decedent's death" will not be conclusive.⁸ While Tom Sawyer making a surprise appearance before the probate court may rarely arise in practice,⁹ this illustrates the extent to which the personal representative is insulated from personal liability. Where a missing person presumed to be dead does reappear, the personal representative is liable only to return the property still in their possession, less fees, costs, and expenses incurred to date.¹⁰ The missing person has even fewer remedies against distributees.¹¹ In other words, the personal representative in a probate administration generally will not be subject to personal liability for previous distributions even where the person whose assets were distributed turns out to be alive.¹²

The third exception is perhaps the most significant in its distinction from the notice of a trust administration. A personal representative will not be subject to liability for distributions made to date where a subsequent codicil surfaces providing for a different plan of distribution. Probate Code section 8226 provides:

(a) If no person contests the validity of a will or petitions for revocation of probate of the will within the time provided in this chapter, admission of the will to probate is conclusive, subject to Section 8007.
(b) Subject to subdivision (c), a will may be admitted to probate notwithstanding prior admission to probate of another will or prior distribution of property in the proceeding. The will may not affect property previously distributed, but the court may determine how any provision of the will affects property not yet distributed and how any provision of the will affects provisions of another will.
(c) If the proponent of a will has received notice of a petition for probate or a petition for letters of administration for a general personal representative, the proponent of the will may petition for probate of the will only within the later of either of the following time periods:

(1) One hundred twenty days after issuance of the order admitting the first will to probate or determining the decedent to be intestate.
(2) Sixty days after the proponent of the will first obtains knowledge of the will.

Probate Code section 8270(a) generally requires that a contest be filed within 120 days of the order admitting the will to

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probate.¹³ Unless a particular exception applies, the probate court's order can even be binding upon those who did not receive notice.¹⁴Perhaps that is as it should be, but the outcome may be far different for a trustee in a trust administration.

III. THE DILEMMA CREATED BY NOTICE REQUIREMENTS IN A TRUST ADMINISTRATION

The notice requirements in a trust administration are more ambiguous than in a probate administration. In particular, it is not clear whether a beneficiary or successor trustee whose name was deleted by a subsequent amendment is entitled to...