Monthly Archives: June 2013

June 24, 2013

Mediator Moment – Finis Origine Pendet

by C. Jean Stewart

I have spent the last few days at the Straus Institute for Dispute Resolution at Pepperdine University in Malibu, California participating in one of their excellent advanced mediation courses with alternative dispute resolution practitioners from around the world.  We devoted plenty of class time to the discussion and appreciation of designing dispute resolution scenarios that will yield success. 

Spending the time and effort to design an appropriate alternative dispute resolution model can pay handsome dividends. I have always observed that cases that are rushed into mediation, without adequate attention paid to the design and preparation phase, frequently yield dissatisfaction in one or more dimensions. I thought I would report here on a satisfying result that recently came from a thoughtfully planned process.

Counsel in a contested trust matter approached me to design an arbitration/mediation session that has persuaded me to encourage parties and their counsel to consider this idea when faced with a certain kind of dispute.

Here’s how it worked:  In preparation for Stage One of the session, counsel presented statements that were NOT confidential, but were shared with me and with each other.  Counsel included some stipulated exhibits and pleadings. The engagement included an understanding that there would be NO ex parte communications with me until Stage One of the session was completed. The parties had agreed to abide by whatever award/decision I made on the issues, but more importantly, agreed that before I informed them of that award/decision, they would participate in good faith mediation.

On the day the session began, Stage One was an arbitration in the form of a mini-trial complete with opening statements, direct and cross examination of a witness on each side of the case, admission of the stipulated exhibits and closing arguments. At the end of the mini-trial, I took a brief recess, recorded my decision in a brief written summary, placed it in a sealed envelope that I signed and laid aside. 

We then adjourned to Stage Two, which was a mediation, including private caucuses, where the parties made confidential disclosures to me and participated in meaningful, good faith negotiations leading to a settlement of the issues which was reduced to written form and signed by the parties. Ultimately the sealed envelope containing the award/decision was shredded without being revealed to either party or to counsel.

This model is appropriate in cases where the parties want a final and definitive resolution without additional litigation in a case with discrete, identifiable issues.  It addresses the several ethical issues that have prevented me from agreeing to participate in arbitration after a mediation session for the same parties.  Some of the other factors that contributed to the success of this model were: These attorneys were both excellent, presenting crisp and efficient arguments and witness examinations. Their clients were attentive and engaged and left me with a clear understanding of the issues. I applaud these attorneys for creating this opportunity for dispute resolution that I will surely recommend again when the occasion arises.

 

I also appreciate the opportunity to apply the Latin expression that was emphasized in our sessions at the Straus Institute, Finis Origine Pendet -  “the end depends on the beginning.”

June 17, 2013

To Consider or Not Consider A Beneficiary’s Other Resources

by Rebecca Klock Schroer

There is often debate as to whether Colorado follows the Restatement (Second) of Trusts or Restatement (Third) of Trusts.  One area where this is particularly relevant is a trustee’s duty to consider a beneficiary’s other resources when determining whether to make a discretionary distribution.  When the trust language is silent, the Second Restatement provides that the beneficiary’s other resources do not need to be considered.  The Third Restatement generally provides for the opposite inference, but with several qualifications.

Specifically, the Restatement (Second) of Trusts, § 128, cmt. e (1959) provides the following: “It is a question of interpretation whether the beneficiary is entitled to support out of the trust fund even though he has other resources. The inference is that he is so entitled.”

The overall presumption under the Third Restatement is that the trustee is to take the beneficiary’s other resources into account in deciding whether to make a discretionary distribution, unless the settlor’s intent will be better accomplished by not doing so. Restatement (Third) of Trusts § 50, cmt. e (2003).  In the same comment, the Third Restatement lists several qualifications:

  • First, if there are other resources that the trustee readily knows about, such as mandatory distributions of income from the same trust or payments from another trust that is part of a coordinated estate plan, such resources should be taken into consideration. 
  • Second, if the settlor or decedent identified a period of time during which the beneficiary was not expected to be self-supporting, then the inference is that the trustee should not deny discretionary distributions. 
  • Third, the trustee’s consideration of other resources may have a bearing on the overall reasonableness of the trustee’s exercise of discretion even when there are nonobjective distribution standards such as “benefit” and “happiness.”
  • Finally, the grant of extended discretion to the trustee (e.g. “sole” and/or “absolute” discretion) does not necessary imply one way or the other, but may suggest that the trustee has greater latitude in exercising discretion.

Many trusts include language that helps guide the trustee in determining whether to consider a beneficiary’s other resources.  For example, “only if and as needed to maintain an accustomed standard of living” suggests that the trustee should take other resources into account. Restatement (Third) of Trusts, § 50, cmt. e (2003).  Although the Third Restatement provides that the phrase “necessary for support” does not alone imply that the trustee should consider other resources, the Colorado Supreme Court held that the trustee was required to consider other resources when the trustee had discretion to distribute “as may be necessary to provide him with the necessities of life.” Dunklee v. Kettering, 225 P.2d 853 (Colo. 1950). 

There is no appellate case law in Colorado specifically adopting either Restatement (Second) of Trusts § 128 (1959) or Restatement (Third) of Trusts § 50 (2003).  Therefore, trustees should carefully consider this issue.  In our experience, the trustees that are most successful in defending against abuse of discretion claims consistently apply a process when exercising discretion and document the reasons for their decisions. 

June 10, 2013

2013 Colorado Probate Code Omnibus Bill

by Morgan Wiener 

On May 11, 2013, Governor Hickenlooper signed the 2013 Colorado Probate Code omnibus bill into law.  This legislation will become effective on August 8, 2013.  An omnibus bill is typically proposed by the Trusts & Estates Section of the Colorado Bar Association every other year and is designed to make non-controversial amendments to the Colorado Probate Code.  These amendments address issues raised by both the courts and attorneys practicing in this area and help keep the provisions of Colorado’s Probate Code consistent with those of the Uniform Probate Code.

Some highlights from this year’s bill include the following:

1.  Revisions to the Dead Man’s Statute (§ 13-90-102) to elaborate on when oral statements made by a decedent are or are not admissible into evidence.

2.  The addition of “special skills” as a factor to be considered in determining the reasonableness of compensation and costs under § 15-10-603.

3.  The addition of §§ 15-12-703(6)-(8) to govern the role that a personal representative may take in proceedings concerning the probate of a will, the identity of heirs and beneficiaries, the validity of a marital agreement, and a claim for the elective share.  Prior to the enactment of these sections, this area of law was primarily governed by Risbry v. Swan, 239 P.2d 600 (Colo. 1951).

4.  The addition of § 15-16-601, which addresses the scope of liability of the trustee of an irrevocable life insurance trust.  The addition of this section is designed to encourage more corporate fiduciaries to accept trusteeships of this type of trust.

5.  The addition of §§ 15-16-701 et seq.  These sections address revocable trusts, including the revocation and amendment of revocable trusts, the settlor’s powers, and limitations on actions challenging the validity of a revocable trust.  These sections are designed to help address recurring questions that are not clearly resolved in Colorado’s relatively sparse common law.

 You can find the full text of the omnibus bill here.

June 3, 2013

Practicing Law in Three States

by Carol Warnick

I practice law in three Rocky Mountain states, Colorado, Utah and Wyoming.  As would be expected, there are significant differences among them, but also significant similarities.  It does provide a useful perspective with regard to the trends in estate, trust and fiduciary law — at least in the western United States.

We were living in Wyoming when my youngest of four children was ready to start school full-day, which was when I finally had the opportunity to go to law school.  Naturally, after graduating from law school, Wyoming was the first state in which I applied for admission to the bar and was admitted in 1990.  After successfully passing the Wyoming bar exam, I was surprised and pleased to be invited to apply for admission in Colorado.  Of course, I did so and waived into Colorado in 1992.  Interestingly enough, about 7 years after waiving into Colorado, we moved to Denver.  I kept some of my Wyoming clients and began building up a new practice in Colorado.  How convenient it was to already be admitted in Colorado!  I happily worked in both states, and for a while we even had a small Holland & Hart office in Casper, WY. 

After working at Holland & Hart LLP in Denver for several years, it became apparent that there was an unmet demand for an attorney with estate and gift planning expertise, as well as fiduciary litigation expertise, in our Salt Lake City Office.  The firm was willing to fly me back and forth to Salt Lake as needed to meet those needs.  I was pretty familiar with Utah since I had attended college there, so it seemed to make sense.  I actually had 3 children attending college there at the time I applied, and I was allowed to waive into Utah in 2004.  Now the stage was set.  I found myself with work in all three states and having to learn not only the differences in the law but also the variations in the accepted methods of doing things in all three states. 

As I mentioned, there are similarities and differences.  Both Colorado and Utah have adopted the Uniform Probate Code, but Wyoming has not.  Both Utah and Wyoming have adopted the Uniform Trust Code, but Colorado has not.  Colorado has had a beneficiary deed statute for several years, and the Wyoming legislature has just adopted one, but Utah does not have such a statute.  Of course, the specifics of these supposedly uniform laws as adopted by these states contain numerous variations. 

When going into court in a fiduciary litigation case, I have found the practices in the different states related to filing pleadings, getting courts to act, and what to expect at various court proceedings to be notably different from one another.  When I first started practice in Wyoming, I could simply walk over to the courthouse, visit with the judge about an uncontested matter, and get his signature on an order right then and there.  I’m not sure that can still be done, even in Wyoming, but it is certainly not an acceptable practice in Denver where we use the nonappearance docket for such uncontested matters, or in the Third District Court in Salt Lake City where the probate docket is heard every Wednesday morning.  Of course, there are significant variations in all three states between rural counties and the more populated ones.

It definitely keeps me on my toes to adapt to the setting I am in and go with the flow in the various jurisdictions in which I represent clients.  Thankfully, one constant is that there are honest and highly professional lawyers with which I have worked in each jurisdiction. 

I keep copies of the court rules and the probate and trust statutes for all three states in my office and I have learned not to rely on my memory.  I always look it up, whether it be a variation in a court rule or a difference in one of the provisions of a statute such as the probate code.  Even if I think I know, I don’t trust my memory to keep all the nuances straightened out and in the right state box in my mind.  

I have heard people say they like the practice of law because it is never the same — the issues are always new.  I agree wholeheartedly with that and when you add the complexity of practicing in three states, nothing about such a practice is boring!  My knowledge of the laws in the three states has also brought up some interesting issues for my clients who have ties to more than one of my states with regard to where to situs a trust and also possibly changing situs down the road after a trust has been established.   It is also an interesting analysis to look at where best to bring an action in those few cases where circumstances would allow them to be brought in a couple of states. 

I didn’t start out to be an attorney actively practicing in three states, it just worked out that way.  But I wouldn’t change anything about it.