by Kevin Bayley
When a loved one becomes incapacitated, whether suddenly through an accident or gradually due to cognitive decline, life gets complicated fast. There can be medical decisions to make, care to coordinate, and many emotions for all parties. If you’re also the successor trustee for the incapacitated person, you are stepping into a role that comes with real responsibilities and can come with real liability if you get it wrong. Your family members will have real expectations as well.
Here are some things to consider in California when the settlor (the person who created the trust) can no longer manage their own affairs:
- Before you do anything else, make sure you understand what the trust requires. Many California trusts require a written certification from one or two licensed physicians to determine incapacity. Some require a court order. Don’t assume that because a family member tells you the settlor “isn’t doing well” that you can step in. Follow the process the trust spells out while documenting everything about how the change was confirmed.
- At the settlor’s incapacity, the trust becomes irrevocable barring uncommon circumstances such as court action or, even more rarely, when someone else has been given specific powers. An incapacitated settlor can no longer revoke it, amend it, or give direction to the trustee. Nor can the trustee change the trust.
- Incapacity also changes who the trustee is accountable to. If you were already acting as trustee before incapacity, the settlor was likely the only person you needed to report to. After the settlor’s incapacity, the remainder beneficiaries, who will inherit from the trust when the settlor passes away, have many more rights to information. California law, updated significantly by Assembly Bill 1079 in 2022, makes this explicit.
- You now owe those beneficiaries transparency and accountability, including some strict actions that should be done, or at least well-planned for, in a timely manner. These include notifying the beneficiaries of the incapacity, preparing and making available annual accountings, ensuring taxes are filed, and regular bills are paid, and, of course, communicating with beneficiaries about much of the above.
- California law sets out defaults for trustee duties, but often the trust itself can change those. So, remember to check the trust for the settlor’s wishes. Then check with a lawyer or with California law to make sure there aren’t other duties that the trust is silent on.
- A good trustee also recognizes the limits of their authority and ability. Managing trust property does not mean you can make medical decisions or control assets that are held outside the trust. Those matters require other documents or court action, such as an advance health care directive, durable power of attorney, or conservatorship. Just because the documents allow you to carry on running a family business doesn’t mean you should.
- If you do have overlapping roles, it’s important to remember that when communicating with beneficiaries. Confidentiality obligations may limit what you can disclose, and you should be especially cautious about sharing medical or financial information beyond what is necessary.
- Above all, even if family members disagree over care arrangements, spending, gifts, or use of a family home, you must always keep the present beneficiary, likely only the settlor, top of mind. It is important to safeguard assets, so something is left for remainder beneficiaries, but the most important job is making sure you’re taking care of the needs of the settlor.
- If disputes do arise, you should stay neutral as trustee, unless the trust expressly authorizes unequal treatment. If the disagreement becomes serious, consult a trusts and estates attorney. Even if it gets resolved informally, as trustee you want to make sure the decision sticks and doesn’t get brought up again every few years at Thanksgiving.
As trustee, your job is to take the feeling of trust that the settlor had in you and carry out what they wrote in the trust document when they can’t anymore. If you need help understanding your responsibilities or navigating the trust administration process, the team at Deka Law is here to guide you.
Author: Kevin Bayley
