Time To Tune Up Your Trust (Again)
Just when you think you know the rules….
In 2011, the Washington Legislature enacted significant changes to the laws governing both revocable and irrevocable trusts. Lengthy and complicated legislation often requires “fixes,” and in 2013, the legislature revisited its 2011 amendments.
As a brief refresher, the 2011 amendments to Washington trust laws were highlighted by the following
• Upon creation of an irrevocable trust, trustees were required to give notice of the trust’s existence to all “interested persons,” including beneficiaries.
• Trustees of irrevocable trusts were required to keep all persons interested in the trust, including beneficiaries, reasonably informed about the administration of the trust through written reports.
• Revocable trusts became subject to new requirements addressing such issues as the capacity required to create, amend, revoke or add property to a trust; the procedures for revoking or amending a trust; and the limitations on judicial actions challenging revocable trusts.
• A document entitled “Certificate of Trust” was authorized for purposes of conducting business relating to the trust. This eliminated the need to provide the entire trust document and all of its potentially sensitive information.
• Trustees were authorized to send a proposed distribution plan to beneficiaries that “starts the clock” on the 30 day period in which objections to the plan may be filed.
• New procedures were authorized for “reforming” (correcting) mistakes in a trust or will. Beneficiaries must show by the fairly high standard of “clear, convincing and cogent evidence” that the trust or will does not reflect the creator’s true intent.
One of the “fixes” addressed in the 2013 amendments was a softening of the requirement that all “interested persons” (including beneficiaries) receive notice when a trust is created. The 2013 legislation now allows the creator of the trust to waive the notice requirement. The waiver must be within the trust document or in a separate writing that can be delivered to the trustee at any time.
A second significant revision in the 2013 amendments involves the trustee’s ongoing duty to keep trust beneficiaries informed. (This is a separate duty from the trustee’s obligation to inform beneficiaries about the creation of the trust.) The 2013 amendments made four significant changes to this ongoing duty to report:
1. Limiting the group of people to whom the beneficiary must report by defining “qualified beneficiary” as a person who is a current mandatory or discretionary beneficiary or a person who would become a mandatory or discretionary beneficiary upon death of a current beneficiary or termination of the trust. The Trustor is also prohibited from changing the definition of “qualified beneficiary.”
2. Removing the specific requirements for what a Trustee’s report must contain to be considered presumptively valid. This was done for fear that enumerating minimum reporting requirements would result in trustees defaulting to the lowest possible standard rather than evaluating what the report should contain on a case-by-case basis.
3. Removing the trustee’s 60 day response period following receipt of a valid request for information regarding the trust’s administration. It is important to note that although the 2013 legislation eliminated a trustee’s duty to regularly report on the trust to more remote beneficiaries, these individuals can still request that the trustee provide them with a report.
4. Creating two default exemptions to the trustee’s duty to provide regular reports on trust administration. The first default exemption releases trustees of revocable trusts from the duty of providing information to anyone other than the Trustor so long as the Trustor is alive. The second exemption applies to the so-called “Spousal Trust” where the spouse of the Trustor is the only permissible distributee and the descendants of the spouse are the only other possible beneficiaries. In this case, the trustee only has a duty to report to the spouse, so long as he or she is competent.
A third area addressed by the 2013 amendments is “virtual representation.” This is the concept whereby one individual can speak for another who cannot speak for themselves. The 2013 amendments allow parents or another individual without a conflict of interest to virtually represent children yet to be born, living minor children, other individuals who lack legal capacity, as well as persons who cannot be located. The 2013 amendments also allow competent, adult individuals to appoint another person with substantially identical interests to represent them.
The duties of Washington trustees have greatly expanded in the past few years. The role of trustee is
laden with responsibilities and fraught with potential pitfalls. Trustors need to carefully consider their options when creating or modifying a trust. Potential Trustees also need to be fully aware of their responsibilities before accepting any trustee position. As always, if you have questions about creating a trust or modifying an existing trust, we are here to help.
Barry M. Meyers
David M. Neubeck
Elder Law Offices of Barry M. Meyers, P.S.
DISCLAIMER: The content of this newsletter is: for information purposes only, subject to change by government agencies, should not be relied upon as current, and, does not constitute legal advice. Reading this newsletter does not establish an attorney-client relationship.