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

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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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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Best Practice Tip: TPP Memos

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by Brooke Simons

When viewing an estate as a whole, Tangible Personal Property (“TPP”) is not usually the most financially significant component.  However, it is often the single most bitterly disputed area in an estate. 

Often times, when TPP is being administered under an estate, there are specific provisions in the will as to how the estate should be distributed, but nothing directly addressing specific items of TPP, such as the china collection or Mom’s recipe box.  If one spouse dies first, then under C.R.S. § 15-11-805, there is a general presumption that all TPP in the joint possession or control of spouses is held in a joint tenancy with right of survivorship.  (“[T]angible personal property in the joint possession or control of the decedent and his or her surviving spouse at the time of the decedent’s death is presumed to be owned by the decedent and the decedent’s spouse in joint tenancy with right of survivorship if ownership is not otherwise evidenced by a certificate of title, bill of sale, or other writing.”).  This means that if you are married when you die, then your TPP will go to your spouse, who will then own the TPP outright and be able to dispose of it as they see fit.

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Reminder – Mandatory Notice Provisions in CUTC

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by Brooke Simons

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. 

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Wyoming Creates a New Chancery Court Which Will Hear Trust Cases

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by Carol Warnick

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). 

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Ethical Issues Surrounding Pro Se Litigants

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by Brooke Simons

Pro se litigants present a unique set of challenges when encountered in the practice of law.  In particular, pro se litigants seem to be on the rise on the fiduciary litigation context.  Whether this is due to the highly personal nature of fiduciary litigation or perhaps the increase in the availability of a form-based approach by the courts, it is unclear.  What is clear is that this variety of “opposing counsel” presents their own specific set of difficulties when running the litigation gauntlet. 

Pro se litigants are not represented by counsel and have instead voluntarily taken on the challenge of representing themselves.  Their lack of legal experience and training in a highly nuanced and specialized area of law often creates a perfect storm of confusion.  You may find a pro se litigant looks to you, opposing counsel, for guidance as they are unfamiliar with the litigation process; however, it is important to remember that your duty is to your client. 

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No-Contest Clause Upheld by the Wyoming Supreme Court With No Probable Cause Exception

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by Carol Warnick

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

Litigation Victory

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by Carol Warnick

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!

Your Secret’s Safe with Your Estate Planning Attorney, Or Is It?

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by Lauren A. Morris

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