Inherited House in a Trust — California Probate Code §§ 16060–16069

California's rules for trustees live in the Probate Code. When a house sits in a revocable living trust and the trust becomes irrevocable because a settlor died, the continuing or successor trustee must serve a written notification by trustee (§ 16061.7(a)(1), (a)(4)), and the statutes start two clocks: the trustee's 60-day deadline to serve it (§ 16061.7(f)) and the recipient's 120-day window to contest the trust (§ 16061.8).

This page walks through what the statutes say about those duties, in the order they usually come up: the general duty to inform, the notification, the contest deadline, accountings, and the separate filing with the county assessor when real property passes by reason of death through a trust. It describes the enacted text; it does not describe a trustee's other powers or duties, which are outside the sections quoted here.

The starting point is one sentence: the trustee has a duty to keep the beneficiaries of the trust reasonably informed of the trust and its administration (§ 16060). On a reasonable request by a beneficiary, the trustee must report by providing requested information about the administration of the trust that is relevant to the beneficiary's interest (§ 16061).

On a beneficiary's request the trustee must also provide the terms of the trust (§ 16060.7). For a revocable trust that has become irrevocable at a settlor's death, the trustee must provide a true and complete copy of the terms of the irrevocable trust to any beneficiary who requests it and to any heir of the deceased settlor who requests it (§ 16061.5(a)(1)). "Terms of the trust" is a defined phrase: it covers the provisions in effect at the settlor's death that affect the part of the trust that became irrevocable, including signatures, amendments, disclaimers and directions to the trustee, but not documents meant to affect disposition only while the trust was revocable (§ 16060.5).

There are limits. The trustee is not required to account, provide the terms, or provide requested information in two situations: for a beneficiary of a revocable trust, for the period when the trust may be revoked, and when the beneficiary and the trustee are the same person (§ 16069(a)). And a settlor's waiver of the trustee's duty to provide the terms or requested information is against public policy and void (§ 16068).

A trustee must serve a notification by trustee when a revocable trust, or any part of it, becomes irrevocable because of the death of a settlor, or because the trust's own terms make it irrevocable within one year of a settlor's death because of a contingency related to the death (§ 16061.7(a)(1)). A notification is also required whenever the trustee of an irrevocable trust changes (§ 16061.7(a)(2)), and when a power of appointment the settlor retained becomes effective or lapses at the settlor's death (§ 16061.7(a)(3)). To identify heirs, the trustee relies on any final court determination of heirship it knows of, and otherwise may make a good-faith determination by any reasonable means (§ 16061.7(c)). The duty belongs to the continuing or successor trustee, and any one cotrustee may serve it (§ 16061.7(a)(4)).

It must be served on each beneficiary of the irrevocable trust or irrevocable portion (subject to § 15804), and, when the event is a settlor's death, on each heir of the deceased settlor; for a charitable trust supervised by the Attorney General, on the Attorney General (§ 16061.7(b)). The trustee need not give a copy to a beneficiary or heir who is unknown, or who is known but cannot be located after reasonable diligence (§ 16061.7(d)). Service is by one of the methods in Section 1215, to the last known address (§ 16061.7(e)).

The deadline is not later than 60 days after the event that requires the notification — or 60 days after the trustee became aware of a person entitled to receive it, if that person was not known when the event occurred. If the office of trustee is vacant on the date of the event, or the event causes a vacancy, the 60 days start when the new trustee begins to serve (§ 16061.7(f)).

The notification must contain: the identity of the settlor or settlors and the date the trust instrument was signed; the name, address and telephone number of each trustee; the address of the principal place of administration of the trust; anything else the trust instrument expressly requires; and a statement that the recipient is entitled, on reasonable request, to a true and complete copy of the terms of the trust (§ 16061.7(g)). When the notification follows a settlor's death, it must also carry a warning in a separate paragraph in not less than 10-point boldface type (or a reasonable equivalent) about the contest deadline (§ 16061.7(h)). A settlor's waiver of the requirement to serve the notification is against public policy and void (§ 16061.7(i)). The statute does not require a notification for an event that occurred before January 1, 1998 (§ 16061.7(j)).

The statute also addresses a trustee who does not serve it. A trustee who fails to serve the notification on a beneficiary is responsible for all damages, attorney's fees and costs caused by the failure, unless the trustee made a reasonably diligent effort to comply (§ 16061.9(a)). For an heir who is not a beneficiary and whose identity is known to the trustee, the trustee is responsible for damages caused to the heir, unless the trustee shows a reasonably diligent effort (§ 16061.9(b)).

The boldface warning in the notification states the rule. A person served with the notification under § 16061.7(a)(1) may not bring an action to contest the trust more than 120 days from the date the notification is served on them, or 60 days from the date a copy of the terms of the trust is delivered to them during that 120-day period, whichever is later (§ 16061.7(h); § 16061.8). The delivery of the terms must be made under Section 1215 (§ 16061.8).

The same rule applies whether the notification was served within the trustee's 60-day period or after it (§ 16061.8). So a late notification does not remove the deadline; it starts the 120 days from the date of service on that person. The 60-day extension applies only to a copy of the terms delivered during the 120-day period (§ 16061.8).

Because the contest period may still be open, a trustee deciding on the timing and nature of distributions of trust assets may take into account that a beneficiary's or heir's period to contest has not expired (§ 16061.9(c)). The statute leaves that as something the trustee "may" consider, not a requirement.

Except as § 16062 and § 16064 provide otherwise, the trustee must account at least annually, at the termination of the trust, and on a change of trustee, to each beneficiary to whom income or principal is required, or authorized in the trustee's discretion, to be currently distributed (§ 16062(a)). A trustee of a living trust created by an instrument signed before July 1, 1987 is not subject to that duty (§ 16062(b)); a trustee of a trust created by a will signed before July 1, 1987 is also exempt unless the trust has been removed from continuing court jurisdiction (§ 16062(c)).

An account must show: receipts and disbursements of principal and income for the last complete fiscal year or since the last account; the trust's assets and liabilities at the end of that period; the trustee's compensation; and the agents hired by the trustee, their relationship to the trustee if any, and their compensation (§ 16063(a)(1)–(4)). It must also state that the recipient may petition the court under Section 17200 to review the account and the trustee's acts (§ 16063(a)(5)), and that claims against the trustee for breach of trust may not be made after three years from the date the beneficiary receives an account or report disclosing the facts giving rise to the claim (§ 16063(a)(6)).

The duty to account can be waived in some cases. The trustee need not account to the extent the trust instrument waives the account, or as to a beneficiary who waived in writing (a written waiver can be withdrawn for later transactions), and in the circumstances of § 16069 (§ 16064(a)–(c)). Even then, on a showing that it is reasonably likely a material breach of the trust has occurred, the court may compel the trustee to account (§ 16064(a), (b)). A waiver in the trust instrument is void as to a sole trustee who is a disqualified person as § 16062(e) describes (§ 16062(e); § 16064(a)).

Separately from the Probate Code duties, the Revenue and Taxation Code requires a filing when real property changes hands by reason of death. When an interest in real property is transferred by reason of death and the property is not in a probate proceeding — "including a transfer through the medium of a trust" — the trustee (if the property was held in trust) or the transferee files a change in ownership statement with the county recorder or assessor in each county where the decedent owned an interest in real property, within 150 days after the date of death (Revenue and Taxation Code § 480(b)).

The statement is signed under penalty of perjury and gives information such as a description of the property, the parties, the date of acquisition and the terms of the transaction (Revenue and Taxation Code § 480(c)). The statute's required notice says that if the filing is not made within 90 days from the date the assessor mails a written request, a penalty applies: the greater of $100 or 10 percent of the taxes on the new base year value, capped at $5,000 if the property qualifies for the homeowners' exemption or $20,000 if not, where the failure was not willful (Revenue and Taxation Code § 480(c)). Whether the house is reassessed at all is a different question, answered by other sections of the Revenue and Taxation Code.

This page is general information, not legal advice. Read the enacted text linked below, and talk to a probate or trust lawyer about a specific trust.