Prob Code 16314 California
In California, the law of trust administration has only recently caught up with the law of decedent's estates in regulating interest payable by a trustee.
In 1986, the California Revised Uniform Principal and Income Act was enacted as part of the trust law. (Prob. Code, former 16300-16313.)
This was a "well-developed scheme for allocating to the income and remainder beneficiaries of the trust interest and income that accrue during trust administration," but it did not address distributions from the trust. (Resommendation Relating to Interest and Income During Administration (Dec. 1987) 19 Cal. Law Revision Com. Rep. (1988) p. 1024.)
In 1988, Probate Code former sections 16314 and 16315 were added, "to parallel the law applicable to probate estate administration: if distribution of a general pecuniary gift from a trust is not made when due, the amount of the distribution accrues interest from the date it is due, except in the case of a distribution due on the death of the settlor, in which case interest begins to run one year after death." (Ibid.)
Probate Code former section 16314 provided that a general pecuniary gift distributable under a trust "bears interest from the date of the settlor's death or other event upon which the distributee's right to receive the gift occurs, in the same manner as a . . . general pecuniary devise . . . under a will . . . ." But as to trusts created before July 1, 1989 (as this one was), former section 16314 "does not affect any aspect of the trust administration that occurred, or rights of beneficiaries that existed, before that date." (Prob. Code, former 16315.) As in many other states, before 1989 there was no requirement that a trustee of a revocable living trust pay interest on a cash gift. (See Tax Law and Estate Planning Course Handbook Series; Estate Planning and Administration, Planning and Administration of a Large Estate (May 1985) 159 PLI Real Estate 9 "State Law frequently requires that interest be paid on unpaid bequests; these laws usually do not apply to bequests made by revocable living trusts".)