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The Evolving Duty of Trustee Communication with Beneficiaries

Trustee communications with beneficiaries have followed an interesting legal path in Kentucky. The original Kentucky statute regarding communication with the beneficiaries required that the trustee must keep the beneficiaries reasonably informed about trust activities. This statute, KRS 386.715, did not make a distinction between revocable and irrevocable trusts. The traditional presumption is that a settlor may change a revocable trust at will, and thus the trustee of a revocable trust did not have a duty to notify beneficiaries of trust status, as the identity of the beneficiaries could potentially be in flux.

The Kentucky Supreme Court came to the opposite conclusion in the 2009 case of JP Morgan Chase Bank, N.A., v. Longmeyer, however. The court in that case noted it was hamstrung by the lack of an explicit distinction between revocable and irrevocable trusts under Kentucky trust law, stating that the statutory duty of a trustee to inform beneficiaries knows no distinction between the two types of trusts. The court then hinted that it is "the legislature's task to amend the statutes, not this Court's role to re-write them."

The legislature took the less-than-subtle hint, amending the statute in 2010 to clarify that the trustee's duty to inform and report is only to the settlor when the trust is revocable. The moment the settlor dies or becomes incapacitated, the trustee then has this duty as to the beneficiaries as well. Kentucky's adoption of the Uniform Trust Code in 2014 restated this principle while further expanding on and clarifying the duty of communication.

Under the new rules, a trustee may take up to sixty days after accepting a trusteeship to inform "qualified beneficiaries," but the trustee is no longer under the duty to try to inform beneficiaries with future interests. Once an irrevocable trust is created or a revocable trust becomes irrevocable, the trustee must, within sixty days, inform the beneficiaries of the existence of the trust, all financial activity, and other pertinent information, as well as the right to request reports and a copy of the trust. The 2014 statute reiterates an earlier provision that requires the trustee, on the request of the beneficiary, to give annual reports.

© 2020 by McBrayer, McGinnis, Leslie & Kirkland, PLLC. All rights reserved.National Law Review, Volume V, Number 135


About this Author

Terri R. Stallard, McBrayer Law Firm, Estate Planning Attorney

Terri R. Stallard is a Member of McBrayer, McGinnis, Leslie & Kirkland, PLLC and practices from the Lexington and Louisville offices. Ms. Stallard concentrates her practice in the areas of estate planning, trust and estate administration, and charitable planning. She is licensed to practice law in Kentucky, Georgia, and Tennessee, and in the U.S. Tax Court. She received her B.A. from Transylvania University, her J.D. from the University of Louisville Louis D. Brandeis School of Law, and attended the LLM program in Taxation at Emory University School of Law.

Ms. Stallard has...