The term “fiduciary” can be considered a vague term that encompasses many different people and several different relationships. Under Colorado law, a fiduciary includes, without limitation, a trustee of any trust, a personal representative, guardian, conservator, receiver, partner, agent, or “any other person acting in a fiduciary capacity for any person, trust, or estate.” Colo. Rev. Stat. § 15-1-103(2). It is within this context that we examine a fiduciary’s duty of loyalty and how best to uphold that duty.
In the context of a trust, and as stated in the Restatement (Second) of Trusts § 2, a fiduciary relationship with respect to property arises out of the manifestation of an intention to create the fiduciary relationship and subjects the trustee “to equitable duties to deal with the property for the benefit of another person.” From this relationship stems several inherent and implied fiduciary duties. Generally, the fiduciary duties applicable to a trustee are: the duty of loyalty, the duty to exercise care and skill in managing the trust assets and administering the trust, and the duty to remain impartial to all beneficiaries. Read more >>
We are often asked as trust and estate litigation attorneys for advice on how to avoid future family disputes with better estate planning. I want to highlight an issue that seems to be appearing more frequently in disputes involving family partnerships. When a partner dies, the succession provisions of the partnership agreement can become an issue in litigation when the provisions are not clearly drafted or fail to coordinate with other estate planning documents.
We have had several cases involving whether the decedent’s successors are partners, or simply assignees who do not have all the rights of a partner. Family partnership agreements may allow for the transfer of a partnership interest to another family member automatically. Even in these scenarios, there may be technical terms of the partnership agreement that have to be complied with before the family member officially becomes a partner. Some agreements do not allow anyone to succeed to a partner’s interest unless otherwise determined by the partnership/other partners. Accordingly, if a partner’s will purports to unilaterally pass a partnership interest to a beneficiary, it may cause a dispute if such a transfer is not allowed by the partnership agreement. The dispute is often fueled by a beneficiary who asserts that the will is the best evidence of the decedent’s intent. Read more >>
IRS Revenue Procedure 2017-34, effective as of June 9, 2017, increases the amount of time that a surviving spouse has to file an estate tax return (Form 706) for the purpose of electing portability of the Deceased Spousal Unused Exclusion amount (otherwise known as “DSUE”). The portability election, which was first introduced in 2010 and made permanent under the American Taxpayer Relief Act of 2012, offers a great way for a surviving spouse to preserve the unused estate tax exemption of their deceased spouse. The DSUE amount can then be added to the surviving spouse’s own exemption amount and be used to shelter the surviving spouse’s lifetime gifts and transfers at death from estate taxes.
Prior to June 9, 2017, a portability election was required to be made on a timely filed estate tax return, due to the IRS nine months from the decedent’s date of death, with the availability of an automatic six month extension. The IRS has once before provided some relief from this deadline in Revenue Procedure 2014-18, but that ruling was temporary and provided no relief for the estates of decedents dying after January 1, 2014. The IRS claims to have been flooded with numerous requests for an extension of time to file for the portability election and has issued this new Revenue Procedure to provide a simplified method to obtain the extension to elect portability for a decedent’s estate who has no estate tax filing requirement to the later of (i) January 2, 2018 or (ii) the second anniversary of the decedent’s date of death. Note that the regulation provides that this longer deadline is not available to the estate of a decedent if an estate tax return was timely filed. In such case, the executor either will have elected portability by timely filing the return or will have affirmatively opted out of portability by not making the election. Read more >>
More and more, I review trust agreements that appoint a trustee, but then appoint other individuals or institutions to perform certain tasks that are normally in the domain of the trustee. They are sometimes referred to as trust protectors, trust advisors, trust directors, special powerholders, investment trustees, or distribution trustees. I most often see these appointments in the areas of investments or distributions.
The trust language that attempts to divide the responsibilities of a trustee among a group is often unclear and give rise to difficult questions as to the scope of each individuals’ responsibilities. There is also the question of whether the trustee is responsible for the actions of the other appointees and if the appointees are fiduciaries. These problems with interpretation are often exacerbated because the laws are not clear about the division of these responsibilities and the liability of each actor. Read more >>
As long as I have been a probate paralegal, and even prior when I worked in financial services, I have spoken about assets with beneficiary designations, including life insurance, retirement accounts and annuities passing outside of probate as if they were a foregone conclusion. Period. End of Story. However, some recent situations have reminded me that the plot of the story may indeed have a surprise ending.
First of all, it bears reminding to our clients, that documents with beneficiary designations do not pass in accordance with the general instructions in the Decedent’s Will. I recently worked with a client that became concerned when we learned that an estranged family member received a portion of an IRA account due to the beneficiary designation. It was very confusing and upsetting to her that this family member received assets in addition to those provided for in the Will.
Secondly, there are situations where the beneficiary designation needs to be reviewed and confirmed, both at the time the designation is made and at the time of the claim. Read more >>
I recently joined forces with family law attorney Ian Shea to co-author an article for The Colorado Lawyer. The article highlights a few of the intersections between probate law and family law, including spouse’s property interests in trusts, the automatic temporary injunction, the revocation of spouse’s interests under the Colorado Probate Code, and representation of fiduciaries in divorce proceedings.
As regular readers of this blog know, one of our favorite topics is digital assets, including estate planning for digital assets. Today, we’re taking a slightly different focus and discussing developments in digital estate planning, more commonly known as electronic wills.
One of the more recent developments in estate planning is the concept of electronic wills. In general, an electronic will is one that is signed and stored electronically. Instead of signing a hard copy document in ink, the testator electronically signs the will, and it is also signed by witnesses and notarized electronically. Not surprisingly, companies like LegalZoom are very interested in this topic.
In my practice, I regularly answer questions regarding the permissibility and advisability of modifying irrevocable trusts. With the enactment of a decanting statute in Colorado in 2016, these types of requests will only increase. One of the major hurdles in modifying irrevocable trusts (and a trap for the unwary) is the potential tax consequences of a modification. We often have to consider estate tax inclusion issues, the possibility of the imposition of gift taxes due to the modification, and the potential loss of generation-skipping transfer tax exemption for a trust. Read more >>
The Oklahoma Supreme Court recently upheld a ruling that has required the Personal Representative of an Estate to take the necessary steps to transfer the deceased spousal unused election (DSUE) to the surviving spouse. The case stems from the rights created by the federal gift and estate tax laws regarding portability. More specifically, beginning in 2010 one spouse was allowed to transfer, at death, his or her unused gift and estate tax exemption to the surviving spouse. Prior to 2010, each spouse had his or her own gift and estate tax exemption, but any portion of that exemption which remained unused by the spouse at death could not be transferred to the surviving spouse.
In In re Estate of Vose, 390 P.3d 238 (Okla. 2017), the Personal Representative of the Estate, one of the children of the decedent by a prior marriage, had refused to make the required election for transfer even though the surviving spouse agreed to pay the cost required to prepare the necessary Federal Estate tax return to do so. Read more >>
The Colorado Court of Appeals recently issued an opinion reinforcing the breadth of the probate court’s jurisdiction. In re Estate of Arlen E. Owens, 2017COA53.
In Owens, the decedent’s brother filed a petition to set aside nonprobate payable-on-death (“POD”) transfers, alleging that at the time the decedent executed certain beneficiary designations, he lacked testamentary capacity and was unduly influenced by his caretaker. The caretaker filed an objection based on jurisdiction, which the court denied. After an evidentiary hearing on the petition, the trial court set aside the beneficiary designations and imposed a constructive trust over the transferred assets held by the caretaker. Read more >>