September 30, 2013

Contest A Trust While The Grantor Is Alive

by 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….