Trust Disclosure Requirements and Quiet Trusts

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by Carol Warnick

The Uniform Trust Code and the Restatement (Third) of Trusts both follow the presumption that trust beneficiaries should be generally kept aware of the existence of the trust, their status as beneficiaries, and their right to ask for (and receive) further information about the trust and their rights as beneficiaries of the trust. Both also require accountings, at least upon request.

More than two-thirds (2/3) of states in the United States have adopted some form of the Uniform Trust Code as of this writing, but many states have not adopted the disclosure provisions from the Uniform Act. This reflects the feeling voiced by many trust creators that letting a beneficiary be aware of the wealth in a trust set up for the beneficiary’s benefit can be a disincentive for a beneficiary to make their own way in life. This is especially a concern if the beneficiaries are young, or even older beneficiaries that have proclivities towards spending. Many trust creators are also concerned because the sub-trusts they set up for their children don’t have identical provisions, therefore they don’t want their children to know about the provisions in their siblings’ sub-trusts. Read more

Pitfalls of Naming Minors as Beneficiaries

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by Jody H. Hall

It is natural for clients to want to name their children or grandchildren to receive their assets after their death  However, the naming of a beneficiary directly on an account, especially if they are a minor, can derail an otherwise well-thought out estate plan.

Often clients assume that their estate planning is complete once they have signed their Will and Trust.  Then either immediately or through various changes in their assets, they name the same persons listed in their estate planning documents as the direct beneficiaries on their accounts.  If the designated beneficiary is a minor at the time of the account owner’s death, significant and unintended consequences can, and often do, occur. Read more

Discounted Assets and Funding Challenges in Estate Administration

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by Kami Pomerantz

Estate of Miriam M. Warne, T.C. Memo 2021-17 (February 18, 2021)  (“Warne”), a recent Tax Court case, illustrates a potential mismatch between the value of an asset for estate tax purposes and the value of the asset for purposes of the marital or charitable deduction from estate tax.  This mismatch can lead to a phantom loss of estate value for purposes of such deductions and cause an inadvertent estate tax surprise.  Although this mismatch can be avoided, it requires those drafting specific gifts and administering an estate to choose assets carefully when making bequests and funding decisions.

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Update on Colorado Remote Notary Law

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by Jody H. Hall

Remote notary law became effective in Colorado on December 31, 2020 thanks to Colorado SB20-96.  Many of us spent much of 2020 performing remote notarizations under the temporary authorization and rules suspending the in-person requirement for notarizations.  Approved Colorado Remote Notaries can now confidently provide remote notarizations as a service to our clients going forward.

Colorado remote notary law requires the use of real time audio-video communication so that the notary and signer(s) can simultaneously participate and witness the notarial act in real time.  Documents executed via remote notary technology will be signed electronically by both the notary and remotely located individual in separate locations. Read more

Remotely Located Witnesses on Wills and Other Estate Planning Documents

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by Jody H. Hall

A few weeks ago, I shared an overview of remote notarizations in Colorado.  The Governor’s executive order suspending the requirement for a notary public to be physically present with the signer, along with the emergency notary rules surrounding a notarization via real-time audio-video communication issued by the Colorado Secretary of State, have given practitioners the ability to help their clients execute estate planning documents in a safer environment during the pandemic, and for the future.  However, while the ability to notarize documents remotely has proven helpful, estate planners were still faced with the particular challenge involving the execution of documents that require witnesses, and how to execute a fully signed, notarized and witnessed original Will.

Earlier this year, the Colorado Supreme Court promulgated Rules 91 and 92 of the Colorado Probate Rules allowing for the remote witnessing of certain specified documents.  See here.  These rules were effective immediately and are in effect during any period of a public health crisis declared in Colorado requiring physical and social distancing.  Rule 91 details the procedure for remote witnessing of certain non-testamentary documents, including living wills, anatomical gifts and medical powers of attorney.  Rule 92 allows for remote witnesses on last wills and testaments.

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Preparing for Potential Tax Reform – Consider Wealth Transfer Planning in 2020

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by Kami Pomerantz

Current planning environment. While 2020 has been challenging in many ways, it has also provided favorable conditions for tax and wealth transfer planning. The U.S. is experiencing historically low interest rates, some assets have low valuations due to economic volatility, and current tax laws are favorable for wealth transfer planning transactions. These factors combine to allow individuals to transfer assets out of their taxable estates at a reduced transfer tax cost.

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Colorado to Make Remote Notarization Authorization Permanent

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by Jody H. Hall

In one of the many responses necessary to continue crucial business and legal services at the onset of the current pandemic, Colorado notaries became authorized to perform remote notarizations under Governor Polis’s Executive Order D 2020 019 dated March 27, 2020.  That authorization has now been made permanent by SB 20-096 which was signed into law on June 26, 2020.  The bill will codify the current temporary rules for remote notarization until December 31, 2020.  The bill will then take effect on December 31, 2020, along with permanent rules. Read more

Arbitration Clause Held Not Enforceable as to the Validity of the Trust Amendment

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by Carol Warnick

There has been considerable discussion regarding including arbitration clauses in estate planning documents over recent years. Some estate and trust attorneys are actively pushing for the inclusion of such clauses.  Recently, an Arkansas Appellate Court held that an arbitration provision in a trust, if enforceable at all, would not be enforced to determine the validity of a trust document – in this case a trust amendment.[1]

The decedent’s revocable trust already provided an arbitration clause, but just before his death, he signed a trust amendment expanding the arbitration clause to purportedly cover all disputes and be binding on all trustees and beneficiaries. 

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Finding Lost Life Insurance Policies

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by Jody H. Hall

As a probate paralegal, I often assist personal representatives, trustees and family members in collecting information about their loved one’s assets.  Life insurance proceeds can be a blessing to the family to pay for expenses and in relieving the financial burden after a death.  However, while the client may think they remember the deceased person having life insurance, they may not be able to locate any existing policies or have access to related documents.  In addition, the life insurance company may have changed names or merged, many times more than once, since the policy was issued.  If the policy was paid up, no correspondence may have been sent to the insured for literally decades.  A non-family member or professional fiduciary may not have any information about insurance at all.

In 2016, the National Association of Insurance Commissioners (NAIC) created the Life Insurance Policy Locator to help address the growing problem of millions of dollars in unclaimed life insurance proceeds.  The Life Insurance Policy Locator along with Frequently Asked Questions can be found here:  https://eapps.naic.org/life-policy-locator/#/welcome

The client should continue to review the deceased’s important papers, research bank accounts for evidence of premium payments, and search online to find successor companies for old policies.  But when specific information cannot be located, this resource could potentially find those lost benefits for the family.  The requestor should need to be a person authorized to received information (note that the Attorney or Legal Representative for the Deceased is an option on the NAIC request) and will need to provide pertinent details about the deceased.  According to the Colorado Department of Regulatory Agencies, more than $92.5 million in life insurance proceeds was matched with beneficiaries in just the first year of the locator.

I have not yet used the Life Insurance Policy Locator, but I am thankful to have a resource to provide to those clients where that illusive policy just cannot be located.

Trustees Beware: Provide Timely Information to Beneficiaries

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by Carol Warnick

Individual trustees often fail to fulfill the duties imposed on trustees, not only by the trust instrument, by also by the trust statutes applicable in the jurisdiction.  It is often the case that the individual trustee is a member of the family and seems to believe that the rest of the family won’t care if he or she doesn’t follow the applicable statutory and trust requirements.

A recent Nebraska case, In Re Estate of Forgey, 906 N.W. 2d 618, (Neb. 2018), featured a decedent who died in 1993.  By 2013, when one of the family members initiated litigation, the trustee, a son of the decedent, had neither distributed out the property of the trust into the separate shares called for by the trust document, nor had provided annual accountings to the beneficiaries as required by both the Nebraska statutes and the trust document itself.  In addition, he failed to sign and file the timely prepared federal estate tax return, resulting in an IRS assessment of penalties and interest of over $2 million. 

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