“Keep in mind – beneficiaries are like cats and they will bite you for no good reason.” Serving as the trustee of a trust can be challenging because a trustee’s administrative responsibilities are, at times, layered with complicated family or beneficiary dynamics. While there is no way to guarantee a problem-free administration or termination of trust, Ohio law provides a method to expedite the process to complete distribution while providing protections for the trustee against future claims of the beneficiaries.
Upon final accounting of a trust administration, circumstances may arise where the trust instructs an unexpected scheme of distribution that may surprise the beneficiaries, in kind distributions have been made or the administration has been wrought with beneficiary discord. Ohio Revised Code 5808.17(a) governs the trust termination process. Under this statute, prior to distribution or termination of the trust, a trustee has the option to notice beneficiaries with a proposed distribution. The notice provides a thirty-day time period in which the beneficiary may object to the proposed distribution plan, at which point the beneficiary’s right to object expires. The failure to object does not operate as a release of liability in that a release requires an affirmative act by the beneficiary. Furthermore, a failure of a beneficiary to object does not preclude the beneficiary from bringing an action with respect to matters not disclosed in a proposal for distribution. Taking this extra step of issuing notice may provide the trustee with some security in knowing an otherwise appropriate distribution will not be challenged, saving expense for the trust.
Once the objection period has expired or any objections have been presented, the trustee has the obligation to evaluate existing exposure to the trust in proceeding with distribution. There may or may not be a need to adjust the proposed distribution. If the objections cannot be resolved or risk of litigation hovers over the trust otherwise arising from the final distribution scheme, a trustee has the option to circulate and request to be executed by all beneficiaries a waiver, receipt, release and indemnification of the trustee’s final account and distribution on the basis. A release of this nature will forgo the need of the trustee to take the time and expense of petitioning the court for approval of the final account prior to distribution. Instead of making the distribution and crossing his or her fingers that a lawsuit isn’t filed, the trustee can proactively seek the beneficiary’s agreement to the account or submit the question to the court.
Amy Kanyuk, Esq. McDonald & Kanyuk, PLLC, comments at Heckerling Institute
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