New legislation affecting the administration of trusts, the obligations of trustees, and the rights of trust beneficiaries was recently signed into law. The new law took effect on January 1, 2012, and, with one exception, will apply to all trusts regardless of when the trust was created.
The new law does not require individuals to execute new trust documents, but in light of the changes, a review of personal estate planning documents is advisable. Furthermore, individuals serving as trustees should seek advice on whether their duties have changed under the new law. Additionally, some of these changes may affect the administration of existing trusts that have been established and ongoing for many years.
Here is a brief summary of the main changes and the related action items.
Main Changes Under New Law
The new law includes a notice requirement for all irrevocable trusts created after December 31, 2011 and all revocable trusts that become irrevocable after December 31, 2011. Now, within 60 days of accepting a trustee position for an irrevocable trust or within 60 days of the date that the trustee of a formerly revocable trust acquires knowledge that the trust has become irrevocable, the trustee must give notice to the persons interested in the trust and provide them with specific information concerning the trust. The trustee may not be relieved of this duty.
Note: If you are a trustee of a new trust, you must give notice regarding the trust to the beneficiaries. Your attorney can provide you with the required form of notice.
The new law also requires the trustee to keep beneficiaries of the trust reasonably informed about the administration of the trust, including any material facts that will allow them to protect their interests in the trust. The statute provides a safe harbor provision if the trustee has reasonably satisfied the notice requirement by providing certain information listed in the statute to those persons interested in the trust.
The requirement to keep beneficiaries reasonably informed is particularly important because of the way it relates to the statute of limitations provision also provided under the new law. Under the previous law, the commencement of the statute of limitations period was uncertain. The new law establishes a bright-line rule as to when the statute of limitations period commences: the statute of limitations is three years and begins on the date the beneficiary is sent a report containing certain information. The information that must be disclosed in this statement is the same as what must be disclosed under the new reasonable notice provision. Therefore, when a trustee satisfies the safe harbor by keeping the beneficiary reasonably informed, the trustee will also trigger the commencement of the statute of limitations.
Note: If you are a trustee of an existing Washington trust, you should confer with your attorney regarding to whom accounting information should be given and in what format. Arrangements could also be made with a professional trustee or other professional to assist as either an advisory or custodial agent to the trustee in providing the annual trust accounting.
Under the new law, a trustee must promptly respond to any beneficiary's request for information that is related to the administration of the trust unless the request is unreasonable. In addition, if a person who is entitled to notice of the existence of the trust requests information about his or her rights under the trust, then the trustee must provide such information within 60 days of receiving such request. The trustee can satisfy this obligation by delivering the entire trust instrument to the interested party.
Note: If you are acting as trustee, your attorney can advise you about your duty to provide trust administration information, or if you are a beneficiary, your attorney can advise you about your right to receive trust administration information.
These changes clarify what information must be provided by the trustee to the beneficiary, increase the statutory duties of trustees and provide more certainty about when the statute of limitations commences. The beneficiaries who receive notice will include the current beneficiaries and may include those who will be beneficiaries in the future.
In addition to the new notice requirements and the statute of limitations provision, the new law also impacts many other areas of trust administration, including the formalization of the revocable trust laws, confirmation of the trust's situs, and codification of a trustee's duty of loyalty and conflict of interest position. The law further defines when trusts can be reformed and provides greater detail about notice requirements.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
