Best for Trustee To Obtain Signed Receipt and Release From Beneficiary


QUESTION: Can a trustee require a beneficiary to sign a receipt and release form?

ANSWER: Under Oregon law, it is likely that trustee can require a beneficiary to sign a receipt and release form so long as the beneficiary does not have a valid reason to object to the signing. (See prior article.)


Case law suggests that a trustee may insist that a beneficiary execute a release where doing so is reasonable under the circumstances. See Masters v. Bissett, 101 Or App 163, 790 P2d 16 (1990).

In Masters, for example, the trustee conditioned the distribution of trust assets upon the beneficiaries’ execution of a document that would release him from any further claim arising out of the administration of the trust. 171. The beneficiaries, however, refused to sign the release because they were aware that the trustee had paid himself fees that he was not entitled to under the trust agreement. Id. The court determined that the demand for release was unreasonable under the circumstances. Id. The fact that the court considered whether the demand was reasonable, however, suggests that a trustee may compel a beneficiary to sign a release where it seems fair to do so.

Likewise, in First Midwest Bank/Joliet v. Dempsey, 157 Ill App 3d 307, 509 NE 2d 791 (1987), a trustee bank refused to distribute the trust property after the beneficiary refused to sign a receipt and release form in order to conclude the bank’s accounting. 310. The court concluded that the trustee’s action in withholding distribution to the beneficiary after the trust had terminated was proper. 315. One of the trustee’s privileges is to be compensated in its position as trustee, and it has a right to a determination of the propriety of its accounts before making a final distribution. Id. Thus, the trustee’s refusal to distribute the trust property without first receiving a receipt and release form was not willful and was within its rights as trustee. Id.

In contrast, other jurisdictions have held that a trustee’s refusal to release funds held by the trust until the beneficiary signs a release constitutes duress or coercion. See Ingram v. Lewis, 37 F2d 259, 263 (10th Cir. 1930) (stating that “it is legal duress for a trustee to refuse to turn over property to his beneficiary rightfully entitled thereto, except upon condition of signing a release.”); Kinney v. Lindgren, 26 NE 2d 471, 474 (Ill 1940) (holding that a release is ineffective if the trustee demands the release as a prerequisite to making a distribution to which the beneficiary is otherwise entitled).

Additionally, Oregon does not have a statute that prohibits the trustee from insisting that a beneficiary sign a release. In California, this action is specifically prohibited by Cal. Prob. Code § 16004.5(a). Because Oregon expressly allows for receipt and release forms, and because Oregon does not have a statute prohibiting the trustee from requiring the beneficiary to sign this type of form, there is indication that a trustee may compel this action.


Invalidating a Trustee’s Release

QUESTION: When can a receipt and release form for a trustee be invalidated by a beneficiary?

ANSWER: A receipt and release form is generally valid and may protect the trustee from liability but it may also be invalidated if it was induced by improper conduct on behalf of the trustee or where, at the time of the release, the beneficiary did not know of his or her rights or know of the material facts relating to any breach.

DISCUSSION: A beneficiary’s release of a trustee in Oregon from liability for breach of trust is valid so long as it does not violate the provisions of ORS 130.730 or ORS 130.840.

These statutes provide that a trustee is not liable to a beneficiary for a breach of trust if the beneficiary consented to the conduct, released the trustee from liability, or ratified the transaction. ORS 130.730(3)(a)(b); ORS 130.840(1)(2). Such provisions are intended to address the circumstance in which the trustee is reluctant to make a distribution until the beneficiary approves, but where the beneficiary will not approve unless the assets are distributed to him. 

A release will be invalid, however, if it was induced by improper conduct on behalf of the trustee or if the beneficiary was unaware of his rights or of material facts relating to the breach. ORS 130.730(3)(a)(b). Factors considered in determining whether the release was valid include: 1) adequacy of disclosure; 2) whether the beneficiary was financially or legally incapable; 3) whether the beneficiary was represented; and 4) whether the trustee engaged in improper conduct.


ORS 130.835 provides that an exculpatory clause included within a trust is unenforceable if it relieves a trustee from liability for a breach committed in bad-faith or  with reckless indifference to the purposes of the trust or interests of the beneficiaries. ORS 130.835(1)(a). Moreover, if the trustee drafted the clause, it is presumptively the result of abuse and is thus invalid. ORS 130.835(2). However, this presumption disappears if: 1) the settlor was represented by independent counsel who reviewed the exculpatory clause; or 2) the trustee proves that the clause is fair under the circumstances and that the clause’s existence and contents were adequately communicated to the settlor. ORS 130.835(2)(b). 


In considering whether an exculpatory clause within a trust is fair, courts consider: 1) the extent of the prior relationship between the settlor and the trustee; 2) whether the settlor received independent advice; 3) the sophistication of the settlor with respect to business and fiduciary matters; 4) the trustee’s reasons for inserting the clause; and 5) the scope of the particular provision inserted.


Exculpatory clauses contained within trusts will be enforced so long as they are fair and do not eliminate the trustee’s liability completely. Mest v. Dugan, 101 Or App 196, 199-200, 790 P2d 38 (1990).