Earlier this year, California trust law got a meaningful update as Revised Probate Code section 15804 now gives trustees and beneficiaries a much broader ability to use “virtual representation” in trust matters.
In simple terms, virtual representation allows one person to represent and bind another person who may not be able to act for themselves. That can include minors, unborn beneficiaries, incapacitated persons, and persons whose identity or location cannot reasonably be determined. Notice given to a proper representative can have the same effect as notice given directly to the represented beneficiary.
The new statute recognizes several different types of representation. For example, a parent may represent minor or unborn children in certain circumstances, a trustee may represent trust beneficiaries, and a personal representative may represent persons interested in an estate. The law also allows a person with a “substantially identical interest” to represent certain beneficiaries, and it contains useful rules for beneficiaries with successive interests.
One particularly helpful provision allows the holder of a lifetime or testamentary power of appointment to represent and bind permissible appointees and takers in default. That rule alone may simplify notice and consent issues in many trust administrations.
The practical impact of the new law could be significant. It may make it easier to give trustee notices under Probate Code section 16061.7, obtain the consents needed for trust modifications or terminations under section 15404, and complete certain trust decantings without going to court solely to appoint a guardian ad litem.
There are still important limits. Virtual representation generally cannot be used if the representative and the represented beneficiary have a conflict of interest concerning the matter at issue. Any consent given on behalf of another person must also be in writing.
Because the law is new, some questions remain unanswered, especially regarding what qualifies as a disqualifying conflict of interest and how the statute interacts with California’s existing decanting rules. Practitioners also need to remember that virtual representation solves notice and consent problems; it does not eliminate separate fiduciary, gift tax, GST tax, or other substantive issues that may arise when modifying a trust.
For California trustees and beneficiaries, the new statute should make many routine trust matters more efficient, particularly where minor, unborn, contingent, or otherwise hard-to-represent beneficiaries are involved.