QUESTION: When an annual report or proposed distribution is provided to the beneficiary of a trust, can the statute of limitations be signficiantly reduced?
ANSWER: Likely, but the limitation for bringing an action based on an annual report is only applicable where the final report discloses specific information, including the existence of a potential claim.
A. Proposal for Distribution
Upon the termination of a trust, the trustee may send out a proposal for distribution to the trust beneficiaries. ORS 130.730(1). If a beneficiary wishes to object to the proposal, he or she must notify the trustee of the objection within thirty days after the proposal was sent so long as the proposal notifies the beneficiary of the right to object.
Absent objections, the trustee should be able to treat the period beyond 30 days as a safe harbor for distribution purposes. Although the time limitation included in ORS 130.730(1) is not specifically referenced in the provision limiting actions against a trustee (ORS 130.845), the comment to ORS 130.845 provides that the limitations that it imposes are not the only means from barring an action by a beneficiary. Oregon Uniform Trust Code and Comments at 388. The comment states, for example, that claims may be barred by consent, release, and principles of equity under the common law of trusts. Id.
B. Trustee’s Report
A trustee must send a trustee report to the beneficiaries of the trust at least annually. ORS 130.710(3). This report must include information such as trust property and liabilities, the market values of trust assets, and receipts and disbursements of the trust. Id. Moreover, ORS 130.820, which relates to limitations of actions against a trustee, states that a beneficiary may not commence an action against a trustee more than one year following the date on which the beneficiary was sent a report that discloses the existence of a potential claim and that informs the beneficiary of the time allowed for commencing a proceeding. ORS 130.820(2). But that statute is very specific. ("A beneficiary may not commence a proceeding against a trustee more than one year after the date the beneficiary or a representative of the beneficiary is sent a report by certified or regular mail that adequately discloses the existence of a potential claim and that informs the beneficiary of the time allowed for commencing a proceeding. A copy of this section must be attached to the report. The report must provide sufficient information so that the beneficiary or representative knows of the potential claim or should have inquired into its existence.") Accordingly, a standardized annual report with a statement that the beneficiary will have one year to bring a claim based on the matters covered by the report will not be adequate. Id. Thus, if there is no potential claim to be disclosed, the one year limitation period will not apply. Rather, the six year statute of limitations for actions against a trustee contained in ORS 130.820 will apply.
C. Statute of Limitations
Two Oregon cases discuss the statute of limitations in the context of actions by beneficiaries against trustees. In Condon v. Bank of California, 92 Or App 691, 694-95, 759 P2d 1137 (1988), and McDonald v. U.S. National Bank, 113 Or App 113, 830 P2d 618 (1992), the beneficiaries sued the trustees for negligence in the administration of the trust. In both cases, the courts enforced the two year statute of limitations for negligence, although they also held that the discovery rule was applicable. 92 Or App at 694; 113 Or App at 115. (Note that these cases were decided prior to the enactment of ORS 130.820.)