Release of Trust Funds

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Hi, this is Keith Davidson from Albertson & Davidson.  In this video, I’m talking about can you release your trustee from liability and, in particular, can a trustee force you to sign a release in order to get your trust distribution?  And you see this happen fairly often or more often than it really should.  Which is a trustee will say, “I have your money.  I’m ready to distribute it out to you, but I won’t give you a dime until you first sign this release relieving me, the trustee, of all liability under California Probate law and Trust law.”  And the answer is no.  A trustee cannot force you to sign a release as a condition to getting a distribution of your trust share.

Now, that doesn’t mean that a trustee can’t still ask you to sign a release.  You voluntarily can choose to sign a release if you’d like to.  And there are some reasons why you might want to do that.  Because if you don’t sign a release, the trustee might choose, instead, to seek court approval of a trust accounting.  And the reason why a trustee would want to do that, is if they disclose all of their activities in a trust accounting and they file it with the court, and the court approves that accounting, then all of those acts cannot be sued on later.  So, once the trust accounting is approved, the beneficiaries can’t come back later and sue the trustee for those acts.  And for that reason, the trustee may say, “Well, I either need you to sign this release voluntarily, or I’m going to have to file an accounting with the court.  And I’m allowed to use trust funds to pay for that preparation of that accounting.”

So you’re in the unusual position where the trustee cannot withhold your money, pending you signing a release.  But the trustee can spend some of your money to get a trust accounting prepared and filed with the court and seek court approval of that accounting.

That doesn’t mean that the trustee can withhold all of your money, however, because even preparation of a trust accounting, it only costs so much.  So it might cost five, ten, fifteen thousand dollars to hire an accountant to do a trust accounting.  You might have to pay a lawyer similar amounts, but it’s not going to be your entire trust share, in most cases.  So if you’re entitled to a million dollars, the trustee can’t withhold a million dollars because they want to get court approval of an accounting.  They have to give you a distribution.  They can hold a reserve, let’s say a hundred thousand dollars out of your million, but they can’t keep the whole million dollars hostage until the court approves their accounting or until you sign a release. And, unfortunately, this happens quite often.  Trustees will threaten that they will withhold your money unless you sign a release, and unfortunately, a lot of times people feel compelled to sign those documents.

And our advice would be don’t sign the documents.  Get some advice before you take any action.  And hopefully, the trustee will do the right thing, will follow California Trust law, and will give you your trust distribution.