Mother’s Incapacity Does Not Force Trustee To Account

NOVEMBER 8, 1999 VOLUME 7, NUMBER 19

Elisabeth Frudenfeld lives in California. In 1987, she established a revocable living trust. Nine years later, the California courts appointed a professional fiduciary as conservator to handle her affairs.

Ms. Frudenfeld’s trust was primarily designed to avoid the probate process, and so she retained the power to revoke it. In fact, though she is unlikely to ever regain the ability to sign a revocation or amendment, she could at least theoretically revoke the trust even now.

The trust established by Ms. Frudenfeld, like most revocable living trusts, requires that the trust’s assets be held for her benefit until her death, at which time any remaining assets must be divided among her children. In trust terms, that makes her children the “remainder” beneficiaries. Under general trust principles, such remainder beneficiaries are not entitled to any accounting or other information from the trustee.

In Ms. Frudenfeld’s case, however, circumstances have changed. Since she is incapacitated, and the court has appointed someone to protect her interests, one of her daughters reasoned that perhaps the rules should change to adapt to the changed circumstance.

Ms. Frudenfeld’s daughter Laurie Cook Johnson brought suit against the trustee (her sister Karla Kotyck) to try to force her to divulge the value and management of trust assets. Ms. Kotyck objected, arguing that only their mother is entitled to such account information.

The probate court decided that Ms. Johnson is not entitled to a trust accounting, and dismissed her petition. She appealed, and the California Court of Appeals affirmed the dismissal of her claim.

Ms. Johnson’s stated concern, as it happens, is not about her future inheritance, but about the professional fiduciary’s monitoring of her mother’s trust. She believes that the conservator may not be acting to prevent misuse or poor handling of trust assets by her sister, Ms. Kotyck. While the court has declined to give her direct access to trust information, it has reaffirmed that the conservator has not only the power to monitor the trust’s administration, but also a duty to do so.

A desire to avoid the conservatorship process is often one of the reasons a trust is established in the first place. The court in Ms. Frudenfeld’s case makes it clear that when a conservator has been appointed, the conservator has the duty to monitor the trustee and may later be liable to family members or other beneficiaries for failure to prevent mismanagement. It does not follow, though, that the ultimate beneficiaries can demand information just because the person establishing the trust has become incompetent. Johnson v. Kotyck, November 4, 1999.

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