What Trustees Need to Know About Beneficiary Release Forms
As the trustee of a living trust or another type of estate planning trust, it is wise to be concerned about personal liability. To avoid liability, you may be thinking about getting the trust beneficiaries to sign a release. However, before you go down the path of printing a boilerplate beneficiary release form and sending it off to a beneficiary, there are some things you need to consider to avoid costly mistakes in
If this is your first time being a trustee or you are not a professional trustee, there is a lot you may not know about beneficiary releases, waivers, and consents. This article highlights key points about this important aspect of trust administration.As a trustee, it can be beneficial to obtain a beneficiary's consent on certain trust administration matters, and to obtain a release or waiver before making final trust distributions. See
Trust Distribution Letter. Nevertheless, you will not benefit from getting these types of documents signed if they are invalid or unenforceable. Before requiring a beneficiary to sign a release, you need to determine if it is lawful to do so under applicable state law. Recent court cases illustrate state law differences on the issue of trustees using consents, releases, and waivers with beneficiaries. A related form for trustees is the
Waiver of Accounting Form.Trustees should always consult an attorney before attempting to require a beneficiary to sign a release as a condition to receiving trust distributions to which the beneficiary is clearly entitled. Depending on the state, this may not be allowed.
See state laws on trusts and estates. Trustees should also be aware that regardless of whether this type of release is permissible, requesting that beneficiaries provide a release of liability can actually lead to trust litigation or a trust dispute, especially if the beneficiary retains an attorney to review the release. The bottom line on the use of beneficiary consents, releases, and waivers is that a new trustee should consult a professional with trust administration experience before deciding whether to use this type of form. For related forms, go to forms for trustees.
Risks of Using Beneficiary Release Forms
The beneficiary release forms you can purchase online are usually not state-specific and may not reflect recent changes in case law and applicable state statutes. The laws applicable to trustees, executors, and other fiduciaries are complex and often differ depending on the state. For state-specific information, go to
Trust Law.A trust beneficiary release and indemnification should be drafted by an attorney familiar with the particular trust being administered, any issues with the beneficiaries, the size of the trust, and the concerns of the trustee. Because each estate planning trust is unique, a pre-printed release form is unlikely to be written in a way that will be effective in protecting you in your specific situation. If you are concerned about personal liability, carefully consider whether you want to use a release form you can buy online just to save money in the short-term.
How to Use a Beneficiary Release Form
The following is a list of steps trustees can take to properly use a beneficiary release form:1. Determine whether the use of a trust beneficiary release is lawful in the state where it will be used. If a beneficiary release is permissible, find out the requirements for a release to be valid. For example, must the release be voluntary or can a trustee withhold trust distributions until the beneficiary signs a receipt and release?2. Discuss with an attorney what provisions you want the release form to include. For example, do you want to include an indemnification provision? Do you want the beneficiary to waive an accounting? If there was a prior trustee and you are the successor trustee, do you want to obtain a release of claims against the prior trustee as well?3. Have an attorney draft the release language in a manner that is tailored to the specific trust being administered. See
administering a trust.4. Provide full disclosure to the beneficiary of all material facts and information prior to obtaining the beneficiary's signature on the release. Such disclosure is generally required to obtain a valid trust beneficiary release. Document such disclosure for your records.
Beneficiary Release Form Will Not Protect Trustee Against Certain Acts
Even if the beneficiary signs a consent, release or waiver, the trustee may still be held liable. A trustee must adhere to the standards of a fiduciary and fulfill certain duties. For example, the trustee may still have a duty to provide all relevant or material information to the beneficiary. For an overview of trustee duties, see
for trustees.If a trustee has failed to disclose information to the beneficiary, deceived the beneficiary in securing the release or mislead the beneficiary, the release probably will not be enforceable. Also, if a trustee has committed fraud, stolen assets from the trust, grossly mismanaged trust investments or engaged in other types of misconduct, a signed beneficiary release or waiver secured under these circumstances will not prevent the trustee from being held liable. See
trustee investment duties.
Limitations on Trustee in Securing a Beneficiary Release or Waiver
When considering how to use consents, releases, and waivers in trust administration, a trustee must keep in mind the fiduciary duty and the standards that apply in that role. For example, a trustee should not act in a manner that appears to place his own interests above those of the beneficiaries. A trustee also typically has a duty to keep beneficiaries informed about administration of the trust. See
right to information about trust.For more detail on trustee duties and the rights of beneficiaries, refer to the Restatement of Law, 3rd, Trusts. You can find related information for trustees on our Trust Law Sources page.
If Beneficiary Will Not Sign a Release
If the beneficiary will not sign a release or waive an accounting, a trustee that is concerned about personal liability has a few other options, including:
1. File with the court to have the accounting approved and have the court approve distributions and settlement of the trust.2. Depending on applicable state law, there may be steps you can take to shorten the statute of limitations on beneficiary claims or otherwise limit your liability. Consult an attorney about the statute of limitations on beneficiary claims against a trustee and ask what steps are recommended under local laws for a trustee to limit liability.
Other Steps in Trust Administration
If you want to limit your liability as a trustee or have other questions about trust administration, go to
probate lawyer.Another important step in administering a trust is providing an accounting to beneficiaries. For answers to common questions, see
Trust Accounting.When you have completed all your duties as a trustee, it may be time to close the trust. For a list of steps to take, see How to End a Trust.
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This article was updated May 19, 2016.
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