Archive for category: Administration of Trust

Is the Statute of Limitations Really Running?

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by Matthew Skotak

The concept of a statute of limitations is easy to understand: a lawsuit has to be commenced within so many years after the complained of act occurred or pursuit of the lawsuit may be forever barred.  Where it gets tricky are the exceptions to this rule.  For example, if the wrongdoer concealed the wrongful act or the wrongful act occurred in some way that made it highly unlikely that the aggrieved person would know about it, then the statute of limitations should not start running until the injured person knows or through reasonable diligence should have known about the wrongful act.  This “tolling” of the statute of limitations is typically referred to as the discovery rule: the statute of limitations doesn’t start running until a plaintiff knew or reasonably should have known of the alleged wrongful act.

Not all states apply the discovery rule, and not all states apply it to every cause of action. However, many jurisdictions apply the discovery rule to fiduciary related actions.  As an example, the equitable discovery rule was applied in Utah to a lawsuit regarding a trust. Read more

When Beneficiaries are Not Heirs

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by Jody H. Hall, Paralegal

The terms Beneficiary and Heir both refer to someone who receives an inheritance after someone passes away.  However, while the terms are often used interchangeably, they do not always refer to the same individual or set of individuals.  Heirs can be beneficiaries but beneficiaries are not always heirs.

In our practice, we often see issues arising when these 2 sets are not identical or are different than the expectations of the parties. Read more

Generative Trusts and Trustees: A New Paradigm For Trust Design and Administration

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Note:  From time to time we invite guest bloggers to share their thoughts on our blog.  The following is a guest blog authored by John A. Warnick, the founder of the Purposeful Planning Institute.

by John A. Warnick, Esq.

Family Trusts commonly preserve family financial asset, but fail to preserve either family or trust—Hartley Goldstone, author of Trustworthy and Co-Author of Family Trusts – A Guide for Beneficiaries, Trustees, Trust Protectors and Trust Advisors

I have been concerned about the emotional and relational impact of trusts since I had a “professionally jarring” encounter in 2001 with a beneficiary of an irrevocable trust established by her grandfather.  The dependency, disempowerment and entitlement I witnessed led me to ask “Is there a better way?”  

The Generative Trust and the Generative Trustee are part of that better way.

I’m convinced there is a better way to think about the purpose and meaning of trusts which still honors the legal roles and responsibilities but lifts the influence of the trust to the point it becomes a generative (positive) influence in the lives of beneficiaries. Read more

Decanting to Eliminate a Beneficiary – New York Says Yes

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by Kelly Dickson Cooper

Settlors often ask whether they can change the beneficiaries of an irrevocable trust because life circumstances or relationships have changed. Often, the answer is no.  However, in a recent case in New York, the trustee was able to accomplish the settlor’s desire to disinherit one of his children through a decanting. Read more

Fifty Ways to Leave Your Lover (or Fifty Ways to Plan, Administer and Litigate Estates)

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by Carol Warnick

As the old song by Paul Simon contemplates, there are fifty ways to leave your lover, and there are also fifty ways to plan, administer and litigate estates and trusts.  I have recently become aware of various situations in which attorneys assume that because things are done a certain way in the state in which they practice, they are done the same way in other states.

I am licensed in three states, Colorado, Utah and Wyoming, and deal regularly with the significant differences between them.  For example, Colorado tends to use “by representation” in dealing with passing assets down the generations, but Utah and Wyoming both use “per stirpes.”  Read more

Fiduciary Duty of Loyalty: Which Interest is Best?

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by Matthew Skotak

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

Good News for Surviving Spouses Seeking to Elect Portability

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by Chelsea May

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

New Uniform Directed Trust Act

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by Kelly Dickson Cooper

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

Beneficiary Designations: They Aren’t Always What They Seem

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by Jody H. Hall, Paralegal

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

IRS Rules on Tax Impacts of Trust Modification

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by Kelly Dickson Cooper

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