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Trust Disclosure Requirements and Quiet Trusts
/in Administration of Trust, Fiduciary Discretion, Fiduciary Duties, Fiduciary Litigation, Removal of Fiduciary, Surcharge of Fiduciary, Trusteeby 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
Wyoming Chancery Court Has Launched
/in Court Proceduresby Carol Warnick
The Chancery Court is now up and running in Wyoming. Its stated purpose is “to provide a forum for streamlined resolution of commercial, business and trust cases.” The goal is to resolve business and trust cases in a more expeditious manner with bench trials and a limited motions practice. It will also utilize electronic filings with remote public access, which isn’t prevalent yet in all Wyoming courts.
The Chancery Court has jurisdiction to decide actions for either equitable or declaratory relief and for actions where the requested pecuniary relief exceeds $50,000 (exclusive of claims for punitive damages, interest, and attorneys’ fees and costs.) The court’s statutory jurisdiction covers a variety of transactional matters, but of interest to readers of this blog is the fact that it will deal with transactions governed by the Wyoming Uniform Trust Code. Read more
Clients’ Failure to Keep Estate Plans Current Can Sabotage the Entire Estate Plan
/in Estate Planningby Carol Warnick
Estate planners work hard to set up estate and wealth transfer plans that fit a client’s needs and ensure that everything works together for the client. Unfortunately, as the client’s situation changes, they often don’t inform the estate planning attorney so appropriate changes can be made to the estate planning documents.
Common examples are divorce, having additional children, or even a changing relationship with a child or children who may be named as successor trustee. A child could also encounter difficulties in his or her life that change the way the parent may want the assets to go to the child. A change in a child’s life could also change the suitability of that child to act as an agent or a trustee in the parent’s estate plan. Read more
The Disappearing Deduction for Colorado State Income Tax Purposes
/in Taxesby Kami Pomerantz
On June 23, 2021, Governor Polis signed Colorado House Bill 21-1311 into law. The Bill makes significant changes to a number of Colorado state income tax laws. One change of note is an amendment to C.R.S. § 39-22-104. The amendment limits the amount of itemized deductions under Section 63(d) of the Internal Revenue Code that a high-income taxpayer may claim for Colorado state income tax purposes. The law is effective for tax years beginning on January 1, 2022. The limit applies to taxpayers who have a federal adjusted gross income of $400,000 or more in the tax year. For a taxpayer who files a single return, the taxpayer’s itemized deductions are capped at $30,000 for state income tax purposes. For taxpayers who file a joint return, the taxpayers’ itemized deductions are capped at $60,000. This limitation does not apply to taxpayers who take the standard deduction for federal income tax purposes. Read more
Pitfalls of Naming Minors as Beneficiaries
/in Administration of Estate, Administration of Trust, Conservator, Court Procedures, Fiduciary Duties, Guardian, Life Insurance, Testamentary Intent, Will & Trust Constructionby 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
Discounted Assets and Funding Challenges in Estate Administration
/in Administration of Estate, Administration of Trust, Estate Planning, Fiduciary Discretion, Personal Representative, Trusteeby Kami Pomerantz
Estate of Miriam M. Warne, T.C. Memo 2021-17 (February 18, 2021) (“Warne”), a recent Tax Court case, illustrates a potential mismatch between the value of an asset for estate tax purposes and the value of the asset for purposes of the marital or charitable deduction from estate tax. This mismatch can lead to a phantom loss of estate value for purposes of such deductions and cause an inadvertent estate tax surprise. Although this mismatch can be avoided, it requires those drafting specific gifts and administering an estate to choose assets carefully when making bequests and funding decisions.
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