Trust Disclosure Requirements and Quiet Trusts

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

Why Trust Situs is Important

by Richard Kiely

When does a trust’s situs, also known as principal place of administration, move?  What is enough to trigger a move?  Should a trustee be concerned about their trust’s situs?  These are all great questions that often get overlooked in the years and decades after a trust is created and well into its administration by a trustee.

Trust situs is an important issue for several reasons.  Situs can dictate which state’s income tax applies, e.g., California vs. New York vs. Wyoming; situs is a factor in determining what law governs the administration of the trust; and situs often determines where a trustee or beneficiary might seek judicial relief.  Accordingly, determining and possibly relocating trust situs is a significant decision for a trustee’s consideration. Read more

Pitfalls of Naming Minors as Beneficiaries

by Jody H. Hall

It is natural for clients to want to name their children or grandchildren to receive their assets after their death  However, the naming of a beneficiary directly on an account, especially if they are a minor, can derail an otherwise well-thought out estate plan.

Often clients assume that their estate planning is complete once they have signed their Will and Trust.  Then either immediately or through various changes in their assets, they name the same persons listed in their estate planning documents as the direct beneficiaries on their accounts.  If the designated beneficiary is a minor at the time of the account owner’s death, significant and unintended consequences can, and often do, occur. Read more

What Happens When a Settlor Loses Capacity?

by Richard Kiely

As our population ages, trustees of revocable trusts will be faced with an increasingly common predicament: what happens after my settlor loses capacity?[1]  This question gives rise to many other questions – Is the trust now “irrevocable”? What duties do I owe and to whom? What if the loss of capacity is only temporary?

Before considering these questions, it’s important to first understand a trustee’s duties under a revocable trust before the loss of capacity.  When a settlor has capacity, the “rights of the beneficiaries are subject to the control of, and the duties of the trustee are owed exclusively to, the settlor.”  Colo. Rev. Stat. § 15-5-603(2).  This small sentence has big consequences. Read more

Options for Transferring Vehicle Titles – Before or After the Owner’s Death

by Jody H. Hall

Navigating the DMV can make anyone skittish, but in the specialized area of trusts and estates, it makes people downright nervous.  In addition, the Colorado DMV generally requires their own forms for transfers before or after death.  As with all other assets, the name or names on the actual vehicle title is going to control how we need to dispose of or transfer that vehicle when needed.  Below are a few forms specific to the unique needs of trust and estate practitioners and their clients and links for your convenience. Read more

What Law Governs Your Trust?

by Richard G. Kiely

Now more than ever, the situs and principal place of administration of a trust has become a fluid concept.  Trustees change, move, or open and close offices.  As situs changes, the question often becomes “what law governs the meaning and effect of terms of the trust?” Fortunately, the Colorado Uniform Trust Code (CUTC) provides a clear answer to this question — “it depends.”

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A Prudent Investor Reminder

by Richard G. Kiely

Over the last several weeks, financial markets have seen some of the largest swings in history, and as a result, fiduciaries have seen dramatic shifts in the value of trust investments.  Accordingly, fiduciaries should take a moment to revisit the Prudent Investor Rule as they look to manage risk and beneficiaries’ concerns. 

The Prudent Investor Rule requires a trustee to “invest and manage trust assets as a prudent investor would, by considering the purposes, terms, distribution requirements, and other circumstances of the trust. In satisfying this standard, the trustee shall exercise reasonable care, skill, and caution.”  Colo. Rev. Stat. § 15-1.1-102.  The Prudent Investor Rule incorporates elements of Modern Portfolio Theory by requiring diversification of trust investments (absent special circumstances) and further emphasizing that “[a] trustee’s investment and management decisions respecting individual assets must be evaluated not in isolation but in the context of the trust portfolio as a whole and as a part of an overall investment strategy having risk and return objectives reasonably suited to the trust.”  Colo. Rev. Stat. § 15-1.1-102 & 103.

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When are Termination Fees Reasonable?

by Rich Kiely

Professional trustees and financial institutions acting as trustees often include a “termination fee” as part of their published fee schedules.  Contrary to the name’s suggestion, a trustee might charge the fee not only at trust termination but also upon the transfer to a successor trustee after the original trustee has resigned or been removed.  Even when fully disclosed, a termination fee often comes as a surprise to beneficiaries, who view the fee as unjustified and unfair, making the trustee’s termination fee a hotly litigated and contested issue.

As with other types of compensation received by a trustee, the overriding consideration when charging a termination fee is the reasonableness of the fee in light of all relevant facts and circumstances.  Colorado statutes and official comments to the Uniform Trust Code indicate that a trustee should consider, among other things, the following factors when charging a termination fee:

  • whether the trust authorizes a termination fee;
  • whether the published fee schedule specified how and when a termination fee would be charged;
  • the complexity and amount of work required to be performed;
  • customary fees and practices in the community; and
  • the reasonableness of the trustee’s overall compensation, including the termination fee.
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Trustees Beware: Provide Timely Information to Beneficiaries

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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New IRS Addresses for Filing Estate Tax Returns

by Jody H. Hall, Paralegal

The Instructions for Form 706 released in November 2018 included new addresses; however, we felt a reminder could be useful since the filing address changed mid-year.  Effective for United States Estate (and Generation-Skipping Transfer) Tax Returns (Form 706) filed after June 30, 2019, Form 706’s should no longer be sent to the Cincinnati campus for filing, but should instead be sent to:

Department of the Treasury
Internal Revenue Service
Kansas City, MO  64999

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