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

Rebecca Schroer and Rich Kiely to Speak at CBA “Will Contests” Seminar

Holland & Hart Trust and Estates Litigation partner Rebecca Schroer and of counsel Rich Kiely will present at the Colorado Bar Association “Will Contests” seminar on Thursday, October 6, 2022 at the CBA office in Denver. This program, which runs from 8:30 a.m. to 4:15 p.m., will provide the probate litigator with essential information for litigating will contests, including up-to-date case law and statutory changes. Read more

A Primer on Personal Jurisdiction over a Trustee

by Richard Kiely

No trustee wants to be forced to litigate a dispute in a far-off venue.  Nonetheless, the intricate relationship that a trustee has with a beneficiary can certainly cause some concern that the trustee may have subjected themselves to a foreign jurisdiction.  What standards apply and what guidance exists for trustees on this matter?

First, a trustee may be subject to personal jurisdiction of a given forum in one of two ways: general jurisdiction or specific jurisdiction.  Personal jurisdiction is “general,” allowing the assertion of any claim against the defendant, where the defendant’s contacts with the forum state are “so ‘continuous and systematic’ as to render them essentially at home in the forum.”  Goodyear Dunlop Tires Operations, S.A. v. Brown, 564 U.S. 915, 919 (2011) (quoting Int’l Shoe Co. v. Washington, 326 U.S. 310, 317 (1945))(emphasis added). 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

Freirich v. Rabin – Confidentiality and Attorney-Client Privilege After Death

by Richard Kiely

In the midst of a global pandemic and a presidential election, the Colorado Supreme Court still found a way to make news within the legal community by addressing the application of a lawyer’s duty of confidentiality and the attorney-client privilege after the death of a client.

For some time now, practitioners have known that the attorney-client privilege and duty of confidentiality both survive a client’s death.  Wesp v. Everson, 33 P.3d 191, 194 (Colo. 2001) (“[t]he attorney client privilege generally survives the death of the client.”); Colo. Bar Ass’n Ethics Comm., Formal Op. 132 , at 1 (2017) (“A lawyer’s duty of confidentiality continues after the death of a client.”)  However, until Freirich v. Rabin, 2020 CO 77, the Colorado Supreme Court had never addressed who holds such privileges and how they are waived.  In Rabin, the Court held a deceased client’s legal files belong to the lawyer except for “documents having intrinsic value or directly affecting valuable rights, such as securities, negotiable instruments, deeds, and wills.”  The Court further held that the decedent, and not the personal representative, holds the attorney-client privilege after death.  However, by appointing a personal representative, the decedent impliedly waives the attorney-client privilege and duty of confidentiality as “necessary for the administration of the estate.” 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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Arbitration Clause Held Not Enforceable as to the Validity of the Trust Amendment

by Carol Warnick

There has been considerable discussion regarding including arbitration clauses in estate planning documents over recent years. Some estate and trust attorneys are actively pushing for the inclusion of such clauses.  Recently, an Arkansas Appellate Court held that an arbitration provision in a trust, if enforceable at all, would not be enforced to determine the validity of a trust document – in this case a trust amendment.[1]

The decedent’s revocable trust already provided an arbitration clause, but just before his death, he signed a trust amendment expanding the arbitration clause to purportedly cover all disputes and be binding on all trustees and beneficiaries. 

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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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