The settlor (also called “trustor”) of a revocable trust has the authority to change or cancel the trust’s provisions. The settlor can also assign other trustees to help manage the trust. For a revocable trust, the trustee normally only owes duties to the settlor who is able to revoke the trust. However, the ability of the settlor to revoke the trust can be terminated upon the determination of the incapacity or the death of the settlor, causing duties to be owed by the trustees to the beneficiaries. Cal. Prob. Code § 15800.
In the former case, when the settlor is determined to be incompetent and no one else is competent and entitled to revoke the trust, the trustee has a mandatory duty to provide the information in the Trust to the beneficiaries. Additionally, the trustee also has to produce annual accountings. Cal. Prob. Code § 15800. The only exception would be that upon determining the incapacity of the settlor, the court appoints a conservator as the conservatee’s decision-making surrogate and the right to revoke the trust is automatically passed onto the conservator. Johnson v. Kotyck, 76 Cal. App. 4th 83, 90 Cal. Rptr. 2d 99 (1999).
For example, In Johnson, the court determined that “the only limitation on the court’s ability to authorize the revocation of a conservatee’s revocable trust is if the trust instrument “(i) evidences an intent to reserve the right of revocation exclusively to the conservatee, (ii) provides expressly that a conservator may not revoke the trust, or (iii) otherwise evidences an intent that would be inconsistent with authorizing or requiring the conservator to exercise the right to revoke the trust.” Id. at 87.
In the latter case, when there is no other competent person entitled to revocation of the trust after the death of the settlor, the beneficiaries have the right to request information and annual accounting from the trustee. The accounting of the trust needs to list what the assets were at the beginning of the year, the spending and the income generated from the trust, and what assets remain at the end of the accounting term. Trust accounting helps with the supervision of the actions of the trustees to make sure that the trustees are doing their job. However, the existence of any other person entitled to revoke the trust then denies the beneficiaries access to the trust information and accounting. Further, the Law Revision Commission also comments on Section 1580(a) that “the consent of the person holding the power to revoke, rather than the beneficiaries, excuses the trustee from liability as provided in Section 16460(a) (limitations on proceedings against trustee).”
Hence, in summary, usually, if a revocable trust has an incapacitated settlor, then the Trustee must account to the beneficiaries and provide them with the terms of the Trust; however, the determination of incapacity of the settlor does not force an accounting or providing copies of the Trust if any other competent person has a power to revoke the trust in whole or in part when the trust is still revocable.
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California has required employers to “indemnify” employees for “necessary expenditures or losses incurred by the employee in direct consequence of the discharge of his or her duties, or of his or her obedience to the directions of the employer” in substantially the same terms since 1937 under Labor Code § 2802.
