Self-trusteed revocable trusts have become an increasingly popular estate planning device. They allow the owner of assets to act as both the settlor and initial trustee, allowing them to maintain control of assets placed in trust and determine the rules governing asset management and distribution. This provides the owner indispensable leverage and flexibility in choosing how best to allocate their assets while they are living and after death.
What if the Settlor and Initial Trustee Dies or Becomes Incapacitated?
Self-trusteed revocable trusts may also lay out rules governing how assets are either distributed or held in trust following the settlor and initial trustee’s death or incapacity. For this reason, such trusts typically name successor trustees and successor beneficiaries. Sometimes, successor trustees are unaware of their rights and responsibilities regarding management of trust assets following the settlor and initial trustee’s death. If you have been designated as a successor trustee in a self-trusteed revocable trust, it is essential that you are aware of your duty to inform and report; or, if you are a successor beneficiary, your right to receive information.
Nebraska Uniform Trust Code
While a revocable trust provides an opportunity for the settlor to establish their own rules regarding management and distribution, the Nebraska Uniform Trust Code outlines a set of mandatory rules that all parties to a trust must follow. One of those rules is the duty of a trustee or successor trustee to inform and report to Qualified Beneficiaries of the trust.
What is the Duty to Inform and Report?
The duty to inform and report requires that a successor trustee keep Qualified Beneficiaries “reasonably informed” on the management of trust assets and “the material facts necessary… to protect their interests” (R.R.S. Neb. Section 30-3878). The Nebraska Uniform Trust Code lays out regulations specifying the extent to which successor trustees must keep Qualified Beneficiaries informed. When a settlor and initial trustee dies or becomes incapacitated, the successor trustee must sign a document accepting the trusteeship. At this time, they are required to notify all Qualified Beneficiaries of the acceptance and provide their name, address, and telephone number. They must also provide a copy of the trust instrument to Qualified Beneficiaries if requested.
Typically, when a settlor and initial trustee dies, their self-trusteed revocable trust becomes irrevocable, meaning the rules governing trust asset distribution become fixed. When this occurs, the Nebraska Uniform Trust Code requires that the successor trustee has 60 days to inform Qualified Beneficiaries of the trust’s existence, the identity of the settlor and initial trustee, the right to receive a copy of the trust instrument, and the right to a trustee’s report of the trust’s property, liabilities, receipts, and disbursements, including the source and amount of the trustee’s compensation, a listing of the trust assets and, if feasible, their respective market values.
NOTICE
The information contained in this column is general information. Slight changes in individual fact situations may require a material variance in the applicable advice. You should not attempt to solve individual problems based on the advice contained in this column. If you have any questions regarding the above, you should contact an attorney.