Monthly Archives: October 2015

October 26, 2015

Take Time Upon Termination

by Rebecca Klock Schroer

When a trust terminates, beneficiaries are understandably anxious to receive final distributions.  They often do not understand that there is a period of time after a trust terminates to allow the trustee to wind up the administration. 

For example, we recently represented the trustee of a very old trust that terminated on a date certain.  Upon termination, the remaining trust assets were to be distributed among many remainder beneficiaries.  After receiving several phone calls, we quickly learned that the beneficiaries expected to receive final checks on the termination date.  We explained that, as with all trust administrations, the trustee had to take several steps before issuing checks for the final distributions.

First, the trustee must complete a final accounting that separates income and principal.  This is necessary to determine the final distributions, particularly if the income beneficiaries are different from the remainder beneficiaries.  Next, the final expenses need to be estimated, so that the expenses can be prepaid or a reserve can be held back for future payment.  These expenses might include preparation of the final tax return, trustee fees and attorney fees. 

In Colorado, there is a statute that helps limit liability of a trustee that has issued a final accounting.  Colo. Rev. Stat. § 15-16-307 provides that a proceeding against a trustee must be commenced within six months of receipt of a final accounting showing that the trust is terminating. 

For additional security, the trustee often wants to obtain a release from each beneficiary prior to making the final distributions.  Otherwise, the trustee runs the risk of distributing the trust assets and having no assets remaining to defend a lawsuit.  If the beneficiaries refuse to grant releases, the trustee may want to seek judicial approval of the final accounting before making the final distributions. 

The law provides that the trustee may take a reasonable amount of time to wind up the trust administration. See § 1010 of Bogert’s Trusts and Trustees. In our experience, this can take from sixty days to several months or even longer depending on the facts and circumstances.  While it is understandable that beneficiaries are anxious to receive their distributions, they have to allow the trustee to properly finalize the trust administration.

October 13, 2015

No Medical Evidence Required for Appointment of a Conservator

by Kelly Dickson Cooper

Imagine that you have just discovered that your father has received several unsolicited emails asking for money and that he has sent almost $500,000 to anonymous offshore bank accounts.  Worried for your father, you decide to seek a conservatorship to protect his assets. 

These are the facts that started the dispute resulting in a recent Colorado Court of Appeals case, In re Neher, 2015 COA 103 (July 30, 2015).

At the hearing, there was no medical evidence presented, but rather, expert testimony from a CPA.  The Court ruled in favor of son and his father appealed.  The father’s primary argument on appeal was that Colorado’s conservatorship statute requires medical evidence before a court can determine whether a conservator is necessary. 

Colorado’s conservatorship statute provides that a petitioner must prove by clear and convincing evidence that the individual is unable to manage his property and business affairs because they cannot effectively receive and evaluate related information.  In addition, a petitioner must prove, by a preponderance of the evidence, that the individual has assets that will be wasted or dissipated unless management is provided and that protection is necessary.

The Court of Appeals denied the father’s appeal and held that medical evidence is not required evidence in a proceeding requesting appointment of a conservator.  The Court of Appeals considered the following in reaching the decision:

-The language of the statute does not expressly require expert testimony like other statutes in Colorado.

-The language of the statute does not require that a petitioner show the causes of the individual’s inability to effectively receive or evaluate information.

-The Court’s interpretation is consistent with other conservatorship statutes.

-To determine legislative intent, the Court compared the Colorado statute to the Uniform Probate Code and specifically identified that the Colorado statute did not contain the language “an impairment” like the Uniform Probate Code.

The Court of Appeals rejected the father’s arguments that the judicial department forms regarding the appointment of a conservator and the termination of a conservatorship contain references to a physician’s letter or professional evaluation.  The Court of Appeals also rejected the father’s out of state case citations as unpersuasive.

Litigation in the area of conservatorships is continuing to grow and this case provides important guidance for the interpretation of the Colorado standard for the appointment of a conservator.