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Probate and Trust Issues in Colorado’s Upcoming Legislative Session
/in Administration Expenses, Administration of Estate, Administration of Trust, Conservator, Court Procedures, Fiduciary Discretion, Fiduciary Duties, Fiduciary Litigation, Guardian, Legislation, Life Insurance, Personal Representative, Powers of Attorney, Removal of Fiduciary, Surcharge of Fiduciary, Testamentary Capacity, Trust Litigation, Trustee, Undue Influence, Will & Trust Constructionby Kelly Cooper
Colorado’s General Assembly will reconvene on January 8, 2014. At this time, it appears that at least two probate and trust related issues will be the subject of debate by the Assembly.
The first is a proposed change to the Colorado Civil Unions Act that would permit partners to a civil union to file joint income tax returns if they are permitted to do so by federal law. Under the current proposal being considered by the Colorado Bar Association, there would be changes to both the Civil Unions Act and Colorado’s income tax statutes. This is partly in response to the issuance of Revenue Ruling 2013-17 by the Internal Revenue Service, which permits married same sex couples to file joint federal income tax returns.
The second is a proposal to codify a testamentary exception to Colorado’s attorney-client privilege. The necessity and proposed scope of the testamentary exception are currently being discussed by a subcommittee of the Statutory Revisions Committee of the Trust & Estate Section of the Colorado Bar Association and will likely be discussed later this week at Super Thursday meetings.
The Colorado Supreme Court has previously recognized that the attorney-client privilege generally survives the death of the client to further one of the policies of the attorney-client privilege – to encourage clients to communicate fully and frankly with counsel. The Colorado Supreme Court has also held that a “testamentary exception” to the privilege exists, which permits an attorney to reveal certain types of communications when there is dispute among the heirs, devisees or other parties who claim by succession from a decedent so that the intent of the decedent can be upheld.
Keeping up to date with ICCES
/in Court Proceduresby Jody H. Hall, Paralegal
The latest updates and enhancements to ICCES (Integrated Colorado Courts E-Filing System) were released on October 19, 2013. The release bulletin, which can be found on the ICCES Home page, is attached here for your easy reference.
We found a couple of items of specific interest to those of us that work in the probate and trust arena:
We recommend that you (and/or others in your office) read the entire bulletin and implement those practices that will help you stay up to date with the most current information on e-filing in Colorado – the Court Clerks, as well as other interested parties in your case, will appreciate you for it.
An Old Idea Is New Again
/in Arbitrationby C. Jean Stewart
When he died in December of 1799, George Washington left a will that was remarkable in many ways. Shortly after his death, the will was printed in Virginia, and was then circulated throughout the country in pamphlet form. In concluding the dispositive part of his handwritten will, Mr. Washington inserted an arbitration clause that provided, in part:
“ . . . I hope, and trust, that no disputes will arise . . . ; but if, contrary to expectation, the case should be otherwise . . . My Will and direction expressly is, that all disputes (if unhappily any should arise) shall be decided by three impartial and intelligent men, known for their probity and good understanding; two to be chosen by the disputants—each having the choice of one—and the third by those two. Which three men thus chosen, shall, unfettered by Law, or legal constructions, declare their sense of the Testators intention; and such decision is, to all intents and purposes to be as binding on the Parties as if it had been given in the Supreme Court of the United States.”
The mandatory arbitration provision in wills and trusts has not been without controversy in this country in recent times although, as Mr. Washington’s example reveals, it clearly was used previously. It is sometimes argued that the arbitration provision would be unenforceable in modern times where state law did not specifically provide for its use in the context of a will or trust dispute because of arbitration’s inherently contractual nature.
This makes the recent decision from the Supreme Court of Texas hopeful in that the Texas Arbitration Act (modeled on the Uniform Arbitration Act in force in 22 states and the District of Columbia) provides that an arbitration clause in an “agreement” is enforceable and the Texas Supreme Court held that the trust in question was an agreement. Hence, the Court enforced the arbitration provision against the Beneficiary/Plaintiff.
In my view, the most significant holding in the opinion in terms of Alternative Dispute Resolution, is the Court’s use of the “doctrine of direct benefits estoppel” to find that a beneficiary/plaintiff who had accepted the benefits of the trust and had filed a suit to enforce its terms had exhibited the degree of assent required to form an enforceable agreement to arbitrate under Texas state law.
I continue to urge estate planners to include ADR language in their wills and trusts and to share with their clients the advantages of avoiding protracted and expensive litigation over estate and trust disputes. Perhaps Colorado will soon have an appellate decision enforcing one of those arbitration provisions?
Contest A Trust While The Grantor Is Alive
/in Administration of Trust, Trust Litigation, Undue Influenceby Carol Warnick
How many times have we been told by our clients that their dad would be having a fit if he knew that one of the children was contesting his estate plan? Or how often have we heard that mom knew there was likely to be a problem at her death, and she tried to make her trust as bullet-proof as possible, but now that she is dead some child is trying to contest it anyway?
Wyoming and several other states across the country are amending their trust code to allow the validity of a revocable trust to be contested while the grantor is still alive. Wyoming’s statute is found at § 4-10-604, in the middle of Wyoming’s Uniform Trust Code. It states that a proceeding to contest the validity of the revocable trust (or an amendment thereto) can only be brought the earlier of two (2) years after the settlor’s death or one hundred twenty (120) days after the trustee sent that person a copy of the trust and a notice informing of the trust’s existence, the trustee’s name and address, and the time allowed for commencing a proceeding. For purposes of the 120 days, notice is deemed to have been given when received by the person to whom it is given. Absent evidence to the contrary, it is presumed that delivery to the last known address of that person constitutes receipt by that person.
The statute makes it clear that a person failing to commence a judicial proceeding contesting the validity of the trust within the time frames listed in the statute is forever prohibited from commencing any judicial proceeding contesting the validity of the trust.
The Wyoming legislature has now given Wyoming settlors the opportunity to make sure their estate plan can’t be contested by a disgruntled child after their death. Instead, the settlor can have the trustee send copies of the trust and the notice described above out to their beneficiaries while the settlor is still alive. It is much less likely that the would-be-disgruntled child will decide to bring a contest while their parent is still alive and can testify about intent. However, the settlor will have to be willing to let the children see their estate plan in order to bring this about. Dad won’t be able to hide behind the fact that he will be dead when the kids see how dad distributed his assets among the children.
It will be interesting to see what happens in Wyoming over the next few years and see who takes advantage of this statute to be proactive and to preclude having their revocable trust challenged after death. Stay tuned….
Where Art Jurisdiction?
/in Administration of Estate, Court Proceduresby C. Jean Stewart
Because Colorado is a "hybrid" state in that only one judicial district has a specialized probate court (a distinction we share with only Indiana and Missouri), confusion about jurisdiction can sometimes contribute to discussion and debate. I have collected here several articles and a case relating to jurisdiction to assist in understanding the subject. One is an article I wrote for The Colorado Lawyer in 2004 about how probate courts are identified around the state. Subsequently, I wrote an article for Council Notes more specifically directed to how cases are assigned and coordinated between the Denver District Court and Denver Probate Court. Finally, the Colorado Court of Appeals, in reversing me in the Estate of Edna Murphy, provided substantial helpful guidance to all probate courts in determining what subjects fall within the meaning of the Colorado Probate Code and are appropriate for designation as "probate" cases to be heard by Colorado district court judges "sitting in probate."
Charities are Beneficiaries Too!
/in Administration of Estate, Administration of Trust, Charities, Fiduciary Duties, Personal Representative, Trusteeby Jody H. Hall, Paralegal
“No, you cannot have it. The trust is a private document” – Well, maybe, but not to the exclusion of the beneficiaries, and I mean ALL of the beneficiaries, named in that testamentary instrument.
Prior to returning to Colorado a few months ago, I worked in the Legal Department for a national charity where the responsibility of my team (totaling more than 8 attorneys, paralegals and staff) was to represent the charity’s interests in trust and estate matters around the country.
Coming from a background as a trusts and estates paralegal for well-respected law firms, I was absolutely shocked at the number of times that attorneys or fiduciaries (both professional and individual) would respond in the negative to a request for a copy of the will or trust or financial information regarding the gift of which we had just received notice. There seemed to be this prevailing attitude that, because we were a non-profit organization, we would simply take whatever we were given or what was left over and be grateful for it, even in large trusts or estates where the designated gift was a portion or entirety of the residuary estate. Unfortunately there was not a consistent understanding that if Charity XYZ and Cousin Sue are each to receive one-half of the residuary estate, they need to be treated equally.
Most charities do not intend to be adversarial or difficult. Any money spent on legal fees reduces the ultimate charitable gift of the donor; however, they have a fiduciary obligation to the ultimate beneficiaries of their particular mission to ensure they receive everything to which they are ENTITLED! In Colorado, that means a copy of the terms of the trust which affect the interest; other jurisdictions require a complete copy of the instrument, including codicils and/or amendments. Almost every jurisdiction requires providing at least some information about the assets or accountings.
As with many things in life, upfront communication is usually the best policy. My experience working for a “professional beneficiary” has reinforced and taught me several things about good estate and trust administration communications. Provide an initial notification as soon as possible at the beginning of the trust or estate administration. Provide periodic updates. If there are assets that may take some time to sell, litigation or any other factors that may delay the distribution, let your contact know and they will calendar their system accordingly. I know that I was less likely to question or challenge things when I received regular contact from the attorney or fiduciary.
So if the Decedent has been deceased for several years and you are just now sending a check for several hundreds of thousands of dollars as their first notification of the gift under a will or trust, do not be surprised if the charity requests additional information (including, but not limited to, the testamentary documents, an inventory or list of assets and an accounting) before signing a waiver or release. After all, charities are beneficiaries too!