The amendment is expected to positively impact many small trust beneficiaries by facilitating earlier termination of trusts that are no longer economically viable. By adjusting the threshold, the bill enables trustees to eliminate administrative costs for trusts that have diminished in value, thus streamlining the process for beneficiaries who may otherwise remain in limbo while administrative costs sour their potential benefits. Legal counsel for trustees also stands to gain clarity and additional empowerment in making decisions regarding less financially viable trusts.
Summary
Assembly Bill No. 2426, introduced by Maienschein, amends Section 15408 of the Probate Code to increase the threshold for trust termination by trustees from $40,000 to $50,000. This change allows trustees to exercise their power to terminate a trust when the principal amount does not exceed the new limit. It aims to alleviate the burden of ongoing trust administration when the cost outweighs the benefits, thereby enabling more efficient trust management for smaller trusts. This bill was approved by the governor on July 9, 2018.
Sentiment
General sentiment surrounding AB 2426 appears to be supportive, as it addresses efficiency in trust administration, which benefits beneficiaries and trustees alike. Stakeholders in estate planning and trust management recognize the practicality of allowing faster trust termination when funds are scarce, allowing for a more rapid redistribution of assets. While there are always considerations surrounding the management of assets held in trusts, the legislation is described as a practical adjustment to fit contemporary administrative realities.
Contention
Notable points of contention around AB 2426 include concerns about potential misuse of the trustee's power to terminate trusts under the new limit. Critics argue that increased thresholds could lead to hasty decisions being made without thorough consideration of individual trust circumstances. Additionally, the balance between protecting beneficiaries' interests and allowing trustees autonomy could come under scrutiny, as some beneficiaries might be disadvantaged by a quick termination if they prefer the trust to remain active for other benefits.