California and New York Change Living Trust Laws
by Denis Clifford
Copyright © Nolo Press
California and New York have recently imposed mandatory new requirements on living trusts. If you're preparing a living trust in either of these states, it's vital that you understand how your state's new law works.
California: More Paperwork After Your Death
When someone who has set up a living trust dies, the trust becomes irrevocable. When that happens, the successor trustee--the person in charge of distributing trust property to the beneficiaries--must now notify all trust beneficiaries and heirs of the deceased person. This new rule applies no matter when the trust was drafted. You cannot waive this requirement when you create your trust. (Cal. Probate Code § 16061.5 and following.) The notice that the trust has become irrevocable must be sent within 60 days after the grantor's death, and must include:
- the name and date of death of the grantor, and date the trust document was signed;
- the name, mailing address and phone number of the trustee;
- the address of the "physical location of where the principal place of administration of the trust is located;"
- notification that the recipient is entitled to a copy of the trust, by requesting one from the trustee;
- a specific warning about how many days a recipient has to contest the trust; the precise wording required is set out in Probate Code § 16061.7(e)(6).
This statute contains ambiguities. For instance, does "beneficiary" include alternate or final beneficiaries named in the trust document? In terms of Nolo's living trusts, the answer is no for alternate beneficiaries (who aren't entitled to inherit anything), but yes for the final beneficiaries of an AB trust.
A trickier issue is notifying the deceased person's "heirs." These, by law, are the people who would inherit if the person had died without having any valid document leaving his property. Heirs are the closest family members--usually, the spouse and children. If there is no surviving spouse or children, then parents, siblings and so on are the heirs. (The exact list is in How to Probate an Estate, by Julia Nissley (Nolo Press) and Probate Code § 6400 to 6414.)
The purpose of the statute is to prevent abuse of power by trustees. Mandating that every trustee send these notices, however, seems wasteful overkill. Still, if you are secure that your family and other beneficiaries will not fight over your property or with your trustee, this statute imposes only some relatively minor paperwork on your trustee. If you worry that a fight might develop, this statute provides a reason to see a lawyer before preparing your living trust.
New York: More Paperwork When You Create the Trust
Because of a new state law that affects trusts created after December 25, 1997, New Yorkers should take an additional step to make sure their living trusts accomplish their goals.
You must now formally transfer all trust assets to the trust in order for the trust to legally own them. (N.Y. Est. Powers and Trusts Law § 7-1.18.) This doesn't change the rules for assets that have title documents--real estate, stocks, vehicles and so on. It's always been necessary to change those documents to show the trust as the new owner.
This new law does, however, affect other kinds of property--for example, artworks, jewelry, stereos, books, dishes and furniture. It is no longer sufficient merely to list these items on the Property Schedules attached to the trust document. You should also write up a separate document, usually called a Notice of Assignment or Assignment of Property to Trust. The Notice can simply repeat the listing of the property as used in a trust schedule.
The alleged goal of the New York law is to make it clear what property has been transferred to the trust. Why a separate document is clearer than a trust schedule is not explained. This law seems part of a disturbing trend: Lawyer-dominated legislatures imposing more and more technical requirements on living trusts. Make them complicated enough so more people will decide they have to hire a lawyer to prepare one. Recapture the business that's been lost by people discovering how handy and inexpensive living trusts are--or, at least, were.