The Instructions for Form 706 released in November 2018
included new addresses; however, we felt a reminder could be useful since the
filing address changed mid-year. Effective
for United States Estate (and Generation-Skipping Transfer) Tax Returns (Form
706) filed after June 30, 2019,
Form 706’s should no longer be sent to the Cincinnati campus for filing, but
should instead be sent to:
Department of the Treasury Internal Revenue Service Kansas City, MO 64999
As we have just passed the one-year
anniversary of the CUTC being signed into law, now seems like an appropriate
time to go over a few reminders with regards to its mandatory provisions – in
particular the Notice provisions.
The CUTC is generally
considered to be a default statute – that is, a statute that can be overridden
by the settlor’s intent as reflected in deliberate drafting of the trust
instrument. However, there are thirteen
(13) mandatory provisions in the CUTC that cannot
be drafted around, regardless of the settlor’s intent. Section 15-5-105 lists the thirteen (13)
mandatory provisions under the CUTC. Amongst
these thirteen provisions are two “notice” requirements that must be
satisfied.
Wyoming has created a chancery court which will be
authorized to hear cases in fifteen (15) specific areas, including cases
alleging breach of fiduciary duty and transactions governed by the Wyoming
Uniform Trust Code, in addition to hearing business disputes. This represents a significant change in the
way many trust disputes, as well as business disputes, will be handled in
Wyoming.
Effective March 15, 2019, the special court of limited jurisdiction, called the Chancery Court of the State of Wyoming, was authorized to assist in the expeditious resolution of disputes involving commercial, business, trust and similar matters. It is directed “to employ nonjury trials, alternative dispute resolution methods and limited motions practice and shall have broad authority to shape and expedite discovery as provided in the rules adopted by the supreme court to govern chancery courts.” WYO. STAT § 5-13-115 (a).
https://fiduciarylawblog.com/wp-content/uploads/2022/10/logo_vertical-v2.png00adminhttps://fiduciarylawblog.com/wp-content/uploads/2022/10/logo_vertical-v2.pngadmin2019-04-12 10:22:442019-04-12 10:22:44Wyoming Creates a New Chancery Court Which Will Hear Trust Cases
In the past week, our firm has had several clients receive
in the mail, and fortunately ask us about, a form titled “2019 – Period Report
Instruction Form (Colorado LLCs)”. This
form purports to advise the client that the annual report or renewal for their
entity is now due; however, the form is not from the Colorado Secretary of
State but is instead from a non-related company. The form does list the specific entity name
and address information and looks deceptively official; however, it also
specifically states “… is not a government agency and does not have a contract
with any governmental agency to provide this service.”
No-contest clauses (sometimes called in terrorem clauses) are extremely common in today’s litigious society. A no-contest clause essentially makes all gifts under the will or trust conditional upon not challenging the document. Many clients are concerned about a beneficiary (or a disinherited heir) contesting their estate planning documents, especially if the client wants to hold a beneficiary’s assets in trust or restrict or cut off a potential beneficiary’s idea of what they might inherit. In my practice, clients are asking for them much more frequently than when I first began doing estate planning in 1990. This is particularly true with blended families where there may be a greater potential for disagreement among the various beneficiaries or between those who are favored by the plan and those who feel they were wronged by the dispositive terms. Trust and estate litigation is frequently driven by emotion, and many times the beneficiary’s complaints are not rational, thereby leading to protracted litigation and waste of the trust or estate’s assets. This is what the settlor is typically trying to avoid by the use of a co-contest clause. Read more
https://fiduciarylawblog.com/wp-content/uploads/2022/10/logo_vertical-v2.png00adminhttps://fiduciarylawblog.com/wp-content/uploads/2022/10/logo_vertical-v2.pngadmin2018-09-12 10:38:212018-09-12 10:38:21No-Contest Clause Upheld by the Wyoming Supreme Court With No Probable Cause Exception
The Holland & Hart Trust and Estate Litigation Group announces a big litigation victory. After a three-day trial, ruling from the bench, the court upheld our trustee client’s interpretation of a trust in defeating a claim that there was a contract to make a trust. In addition, we were able to enforce a no contest clause against the beneficiary bringing the claim and prevailed in enforcing a fee-shifting provision contained in the document. Congratulations to our team of litigators and our Persuasion Strategies consultant who combined to bring home this victory!
A mother visits her attorney to discuss her estate plan. She expects that the conversations she has with her attorney will be forever confidential and privileged, particularly when she wishes to guard uncomfortable realities from her family members, such as her desire to disinherit her son. Upon the mother’s death, her disinherited son figures out that he is in fact removed from her estate plan. Here we have the classic scenario in which a snubbed child wants to challenge the provisions in the estate plan to prove that the decedent did not intentionally fail to provide for him. But with the mother now deceased, how do we determine her actual intent?
The mother’s estate planning attorney is in the next best position to ascertain her intent, but doesn’t the attorney’s duty of confidentiality to the mother prevent him from disclosing any information he may have regarding her intent, specifically when the mother thought she was speaking in confidence? Read more
https://fiduciarylawblog.com/wp-content/uploads/2022/10/logo_vertical-v2.png00adminhttps://fiduciarylawblog.com/wp-content/uploads/2022/10/logo_vertical-v2.pngadmin2018-08-15 14:39:122018-08-15 14:39:12Your Secret’s Safe with Your Estate Planning Attorney, Or Is It?
It is very difficult for a trustee to have conflicts of interest without breaching the duty of loyalty. We typically think of trustee conflicts as they relate to self-dealing by the trustee, which is almost always a problem and for which the beneficiaries can obtain redress. But I have seen more conflicts lately in my practice where a trustee is trustee of different trusts that have conflicting interests, or the trustee is serving as trustee of a trust and also as personal representative of an estate whose interests are in direct conflict with each other.
When faced with a conflict situation, a trustee needs to take action before he or she breaches the duty of loyalty, which is a bedrock duty owed by all fiduciaries. Restatement of Trusts § 78 (1) states that a “trustee has a duty to administer the trust solely in the interest of the beneficiaries . . . .” That is not possible when the two trusts (or the trust and the estate) have conflicting interests and what the fiduciary does as trustee of one trust would be detrimental to the other. One example would be engaging in a specific transaction that is beneficial to the beneficiaries of one trust but harmful to the beneficiaries of the other trust or of the estate. Read more
https://fiduciarylawblog.com/wp-content/uploads/2022/10/logo_vertical-v2.png00adminhttps://fiduciarylawblog.com/wp-content/uploads/2022/10/logo_vertical-v2.pngadmin2018-07-16 09:59:412018-07-16 09:59:41Avoiding Fiduciary Conflicts of Interest
Fiduciary litigation continues to grow and often times outpaces the development of case law regarding the myriad of issues that arise in estate and trust disputes. Historically fiduciary litigation involved disputing family members or changes in family circumstances. However, another frequent source of litigation is the estate planning documents themselves. For this reason, estate planners often include a no contest clause, or in terrorem clause, in a will or trust as a means of deterring feuding beneficiaries from challenging the validity of the instrument; yet, enforcement of these no contest clauses carries its own burden.
A no contest clause is more frequently contained in a will, although it can also be prudent to include these provisions in trusts – especially when the underlying concern is to discourage litigation over the decedent’s estate plan by disinheriting a person who unsuccessfully contests the will and/or trust. The enforceability of these provisions varies from state to state; however, Colorado has determined that a no contest clause is valid when the contesting party lacks probable cause to bring their challenge. See Colo. Rev. Stat. §§ 15-11-517, 15-12-905. Read more
https://fiduciarylawblog.com/wp-content/uploads/2022/10/logo_vertical-v2.png00adminhttps://fiduciarylawblog.com/wp-content/uploads/2022/10/logo_vertical-v2.pngadmin2018-07-03 11:07:112018-07-03 11:07:11No Contest Clauses – Not Just for Wills
Acting in the best interests of the trust and the trust beneficiaries, a trustee has the duty to protect and preserve trust assets and, generally, to make the assets productive. In making investment decisions and managing trust assets, the trustee must further abide by the “prudent investor rule,” which requires a trustee to exercise reasonable care, skill and caution. See Colo. Rev. Stat. §§ 15-1.1-101, et. seq. (the “Uniform Prudent Investor Act”) and §§ 15-1-1101, et. seq. (the “Uniform Management of Institutional Funds Act”).
Pursuant to the prudent investor rule, a trustee should consider broad investment factors, such as: current economic conditions, effects of inflation or deflation, tax consequences, the nature of closely-held business interests, alternative investments, expected returns on income and capital, other resources of the trust or trust beneficiaries, the need for liquidity versus preservation of capital, the production of income, the special value or relationship of a particular asset to the trust or the beneficiaries, diversification of investments, and more. See, Restatement (Second) of Trusts § 227. Additionally, while it is important to note that Colorado courts have not officially adopted the Restatement (Third) of Trusts, one could refer to § 90, which lists five helpful “principles” of the prudent investor rule. Generally, any single investment will not violate the prudent investor rule and the trustee should manage the trust portfolio as a whole taking into account these considerations. Read more
https://fiduciarylawblog.com/wp-content/uploads/2022/10/logo_vertical-v2.png00adminhttps://fiduciarylawblog.com/wp-content/uploads/2022/10/logo_vertical-v2.pngadmin2018-05-07 10:12:572018-05-07 10:12:57Prudently Investing: What Trustees Need to Know
