Interestingly, Probate Code sections 15800 (b) (3)-(4) work to give trustees a large degree of discretion in determining whether a beneficiary is owed the duties described in subsections (b) (1)-(2).
Specifically, subsection (b) (3) states, “A beneficiary whose interest is conditional on some facts not yet in existence or not yet determinable shall not be considered a beneficiary for purposes of this section, unless the trustee, in the trustee’s discretion, believes it is likely that the condition or conditions will be satisfied at the time of the of the settlor’s death.” Read plainly, this could potentially apply to all beneficiaries of a revocable trust, since their interests are typically conditioned on, at a minimum, two facts: (1) surviving the settlor(s), and (2) on the settlor(s) not revoking or amending their trust to remove the beneficiary altogether.
This creates a situation where a trustee could argue that a beneficiary is not entitled to the benefits described by subsections (1) and (2) because, in the trustee’s discretion, the beneficiary’s interest will not vest to them, perhaps because the trustee believes that the beneficiary will not survive the settlor(s) or because the trustee believes that the settlor(s) may regain sufficient competence to amend or revoke their trust and eliminate that beneficiary.
Subsection (b) (4) goes on to state that if a trustee determines, pursuant to the provision of subsection (b) (3), that a given beneficiary is not entitled to the rights afforded under subsections (b) (1) and (2), the trustee instead owes these duties to the beneficiary that would, “next succeed to that interest at the relevant time or period as determined under the trust instrument[.]”
In such a case, Probate Code section 15800 could be construed to extend rights to beneficiaries of a class to which no other Probate Code section affords rights simply by virtue of a trustee’s “belief” and “discretion” that another class of beneficiaries’ interests will not vest to them because it is unlikely the conditions of subsection (b) (3) will be satisfied. Case law has not yet addressed these ambiguities.
In any event, the broad authority apparently granted to trustees in these subsections is ripe for contention, potentially pitting contingent beneficiaries of different classes against each other simply because a trustee exercised the poorly defined discretion granted to them by the revised Probate Code section 15800.
Though this has not yet occurred, given that the revision only recently took effect, it is safe to assume that it is only a matter of time before the court is forced to interpret the precise scope and nature of the discretion granted to trustees by Probate Code section 15800 (3) and (4).
