But my will doesn't matter much, does it? Mine is a modern estate plan, based on a living trust agreement. Are the terms of the trust agreement as private as the provisions of my will? Apparently not, at least not if I live in Kentucky:
[M]any laypersons who create revocable living trusts as will substitutes might be shocked to learn that a trustee has a duty to inform contingent beneficiaries of their potential interests, given the understanding of many settlors that so long as they are living and competent the trust assets remain essentially under their control and that they may freely change their mind about beneficiaries' interests . But if our trust statutes are out of touch with modern policy or with the expectations of today's community, it is the legislature's task to amend the statutes, not this Court's role to re-write them.Hat tip to The Wills, Trusts and Estates Prof for spotlighting this case.
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Note that the duty to contingent beneficiaries arose when their interest was terminated, not when it was created. That seems odd.
Note also that the trustee didn't merely have a right to inform beneficiaries, it had an obligation to do so. Apparently the beneficiaries could have sued the discharged trustee had it not brought the matter to their attention. Whatever happened to privity?
This could be a nightmare for trust departments. Every time a living trust is amended in any way, does every contingent beneficiary need to be contacted? What are the financial risks of not doing the paperwork?
Having said all that, there is no doubt that the facts in this case did not pass the smell test.
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