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Full text of California Code Section reads:

ARTICLE 1. Trustee’s Duties in General [16000 - 16015]
( Article 1 enacted by Stats. 1990, Ch. 79. )

16004.5. [click for link]

(a) A trustee may not require a beneficiary to relieve the trustee of liability as a condition for making a distribution or payment to, or for the benefit of, the beneficiary, if the distribution or payment is required by the trust instrument.

(b) This section may not be construed as affecting the trustee’s right to:

(1) Maintain a reserve for reasonably anticipated expenses, including, but not limited to, taxes, debts, trustee and accounting fees, and costs and expenses of administration.

<p>(2) Seek a voluntary release or discharge of a trustee’s liability from the beneficiary.</p>

<p>(3) Require indemnification against a claim by a person or entity, other than a beneficiary referred to in subdivision (a), which may reasonably arise as a result of the distribution.</p>

<p>(4) Withhold any portion of an otherwise required distribution that is reasonably in dispute.</p>

<p>(5) Seek court or beneficiary approval of an accounting of trust activities.</p>

Were there cases or complaints that lead to passage of this as law? or How might I find out the legislative history?

I'm looking for specific events leading to this, not a general explanation.

Burt_Harris
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2 Answers2

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Let's say the trustee runs into a situation where the beneficiary demands some action, and the trustee thinks this action is a really, really bad idea.

Then the trustee can either say "no". Or the trustee can say "yes" and be liable (so if the action is a really bad idea then the trustee won't do this). The trustee can NOT say "yes if you sign this paper that I'm not liable for the result of this action", because the job of the trustee is to protect the beneficiary and he wouldn't be doing that.

gnasher729
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Bellows v. Bellows, 196 Cal.App.4th 505 (2011) convincingly explains the legislative intent:

The legislative history confirms this interpretation of the statute. An analysis of the bill explains,

“Existing law requires a trustee to administer a trust solely in the interest of the beneficiaries, and prohibits a trustee from dealing with trust property for the trustee's own profit. Thus, it is likely that under existing law, a trustee could be held liable for requiring an exoneration from liability as a condition to making a distribution, as this action benefits the trustee rather than the beneficiary. However, the beneficiary may not always be willing or able to litigate this issue. 

<p>The sponsor gives an example of a situation how this issue
may arise without court oversight. In the example, a trust
terminates January 1. On January 2, the trustee mails
an agreement to the beneficiary which, if signed, would
hold the trustee harmless for his or her actions as trustee.
Trustee informs the beneficiary that upon signing
and returning the agreement, the beneficiary will receive
the distribution required under the trust instrument. Even
if the trustee has never accounted to the beneficiary as
required under law, and even if the distribution is less
than the beneficiary expected, the beneficiary may be
placed in a situation where he or she believes that the cost
of litigating the issue is greater than the potential gain.
Thus a beneficiary may sign the agreement and accept
the distribution as is and the issue of the propriety of the
trustee's actions will never come before the court. This bill,
by creating clear statutory direction of this issue, should
help to prevent this situation from occurring.” </p>

<p>(Assem.
Com. on Judiciary, conc. in Sen. Amends. to Assem.
Bill No. 1705 (2003–2004 Reg. Sess.) as amended June
26, 2003, p. 3.) </p>

The conditional distribution made by Frederick in this case is precisely the conduct the statute is designed to prevent.

Burt_Harris
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