Title: The Past, Present and Future of fiduciary obligations under Washington Law
1NEW WASHINGTON TRUST ACT REVISED SLAYER
STATUTE
- The Past, Present and Future of fiduciary
obligations under Washington Law
Presented by Stephanie R. Taylor
RandallDanskin A Professional Service Corporation
2Existing Statutes Impacted by SHB 1051
- RCW 11.02.005 Definitions and Use of Terms
- RCW 11.28.237 Notice of Appointment as Personal
Representative, Pendency of Probate Proof by
Affidavit - RCW 11.68.090 Powers of Personal Representative
Under Nonintervention Will Scope Relief from
Duties, Restrictions, Liabilities by Will - RCW 11.94.050 Attorney or Agent Granted
Principals Powers Powers to be Specifically
Provided For Transfer of Resources by
Principals Attorney or Agent - RCW 11.96A.030 Definitions (TEDRA)
- RCW 11.96A.050 Venue in Proceedings Involving
Probate or Trust Matters - RCW 11.96A.070 Statutes of Limitation
- RCW 11.96A.110 Notice in Judicial Proceedings
Under this Title Requiring Notice - RCW 11.96A.120 Application of Doctrine of Virtual
Representation - RCW 11.97.010 Power of Trustor Trust Provisions
Control - RCW 11.98.009 Application of Chapter Trusts
- RCW 11.98.039 Nonjudicial change of trustee
Judicial appointment or change of trustee
Liability and duties of successor fiduciary - RCW 11.98.045 Criteria for transfer of trust
assets or administration - RCW 11.98.051 Nonjudicial transfer of trust
assets or administration Notice Consent
required - RCW 11.98.055 Judicial transfer of trust assets
or administration - RCW 11.98.070 Power of trustee
- RCW 11.98.090 Nonliability of third persons
without knowledge of breach - RCW 11.100.090 Investment of Trust Funds
Dealings with self or affiliate
3New Sections Added to Existing Chapters
- RCW 11.96A Trust and Estate Dispute Resolution
(TEDRA) - RCW 11.97 Effect of Trust Instrument
- RCW 11.98 Trusts
- Title 11 PROBATE AND TRUST LAWS
4Statutes affected by proposed amendments
RCW11.36.021 Trustees who may serve
RCW 11.96A.050 Venue in proceedings involving probate or trust matters
RCW 11.96A.070 Statutes of limitations
RCW 11.96A.120 Virtual Representation
RCW 11.96A.125 Mistake of fact or law in terms of will or trust Judicial reform
RCW 11.97.010 Power of trustor Trust provisions control
RCW 11.98.005 Trust situs and governing law
RCW 11.98.019 Relinquishment of powers by Trustee
RCW 11.98.039 Nonjudicial change of trustee Judicial appointment or change of trustee Liability and duties of successor fiduciary
RCW 11.98.041 Change of trustee- Discharge of outgoing trustee, when
RCW 11.98.045 Criteria for transfer of trust assets or administration
RCW 11.98.051 Nonjudicial transfer of trust assets or adminsitration Notice Right to Object
RCW 11.98.080 Consolidation of trusts
RCW 11.103.040 Trustors powers Powers of withdrawal
RCW 11.103.050 Limitation on action contesting validity of revocable trust Distribution of trust property
5Proposed New RCWs Added to Existing Chapters
RCW 11.98.004 NEW SECTION Definitions
RCW 11.98.015 NEW SECTION Accepting or declining trusteeship
RCW 11.98.071 NEW SECTION Duty to keep beneficiaries informed
NEW SECTION - Application
6Fiduciary Obligations
- Duty of Loyalty - RCW 11.98.078
- Codifies duty of loyalty
- Spells out circumstances in which trustee must
provide additional information to beneficiary - Sale, encumbrance or transaction involving the
investment or management of trust property
entered into by the trustee for the trustees own
personal account or - Transaction which is otherwise affected by a
conflict between the trustees fiduciary and
personal interests - Transaction is voidable by beneficiary (without
further proof) unless - Trust authorized transaction
- Court approved (TEDRA Agreement)
- SOL has expired
- Beneficiary consented, ratified or released the
Trustee - Transaction was executed prior to the fiduciary
relationship
7Fiduciary Obligations (cont)
- Transaction is presumed to be a conflict if it
is entered into by the trustee witha corporation
or other enterprise in which the trustee, or a
person that owns a significant interest in the
trustee, has an interest that might affect the
trustees best judgment - Presumption can be overcome if the trustee
establishes that the conflict did not adversely
affect the interests of the beneficiaries - Conflict does not exist in an investment by the
trustee in securities of an investment company to
which the trustee provides services in a capacity
other than as trustee - Investment must comply with the prudent investor
rules
8Notice to Beneficiaries
- Prior Law Case Law
- Allard v. Pacific Natl Bank, 99 Wn.2d 394 (1983)
- That the settlor has created a trust and thus
required the beneficiaries to enjoy their
property interests indirectly does not imply the
beneficiaries are to be kept in ignorance of the
trust, the nature of the trust property and the
details of its administration. - A Trustee has a duty to inform beneficiaries
fully of all facts which would aid them in
protecting their interests - RCW 11.100.140
- A trustee must provide written notice of any
"significant non-routine transaction" to "each
person who is eighteen years or older and to whom
income is presently payable or for whom income is
presently being accumulated for distribution as
income." - However, this statute does not abrogate the
Trustees obligation to keep the beneficiaries
reasonably informed of all facts. Flohr v.
Flohr, (unpublished) 2002 Wn. App. LEXIS 590.
9Notice to Beneficiaries (cont)
- RCW 11.97.010(2) Initial Notice
- Within 60 days of the acceptance of an
irrevocable trust (or a revocable trust becomes
irrevocable), the Trustee shall give notice of - The existence of the trust
- The identity of the trustor(s)
- The Trustees name, address and telephone number
and - The right to request such information as is
reasonably necessary to enable the enforcement of
the beneficiarys rights - Proposed Revision RCW 11.97.010(2) is deleted
Replaced by New Section RCW 11.98.070
10Proposed notice to beneficiaries
- Proposed RCW 11.98.071 Duty to keep
beneficiaries informed - (1) A trustee shall keep all qualified
beneficiaries reasonably informed about the
administration of the trust and the material
facts necessary for them to protect their
interests - Qualified Beneficiaries defined by RCW
11.98.004 (Proposed New Section) - (2) Sixty (60) day notice of existence of trust
to Qualified Beneficiaries
11Notice to Beneficiaries (cont)
- Notice of Administration of the Trust Revised
RCW 11.97.010(3) - What information do they receive?
- All material facts necessary for them to protect
their interests - Presumption that information is sufficient if it
contains - Receipts and disbursements of principal and
income - Beginning and ending values of assets and
liabilities - Trustees compensation
- Agents hired by the trustee, their relationship
to the trustee, if any, and their compensation - Disclosure of any pledge, mortgage, option or
lease of trust property, or other agreement
affecting trust property binding for 5 years or
more - Disclosure of all transactions that are affect
the duty of loyalty and could be a conflict of
interest - Statement that the beneficiary may petition the
court to obtain a review of the statement and of
the acts disclosed - Statement that claims against the trustee for
breach may not be made after 3 years from the
date of the statement
12Notice to Beneficiaries (cont)
- What other information are beneficiaries entitled
to? - If requested, all information related to the
administration of the trustee unless
unreasonable under the circumstances - Information must be turned over within 60 days of
the receipt of the request
13Notice to Beneficiaries (cont)
- Who receives notice?
- All persons interested in the trust and
- All persons who would be entitled to notice under
TEDRA if they were a party to judicial
proceedings - Virtual Representation (RCW 11.96A.120 (3)(d)
- Power of Appointment - Proposed revisions to RCW
11.96A.120 change the how a holder of a power of
appointment may virtually represent the
permissible appointees - Minor Beneficiaries
- If no guardian has been appointed, notice may be
given to parents - Charitable Organizations
- Attorney General if interest is future interest
only - Proposed RCW 11.98.071 Only qualified
beneficiaries entitled to notice
14Proposed notice to beneficiaries (cont)
- Proposed RCW 11.97.010(3) Deleted
- Replaced with
- RCW 11.96A.070 Statutes of limitation (existing
with proposed modifications) and - Proposed RCW 11.98.071 Duty to keep
beneficiaries informed - Under the proposed legislation, obligations may
be waivable by Trustor - Statute of limitations does not start to run
until such time as a beneficiaries receives
required information under RCW 11.96A.070
15Proposed notice to beneficiaries (cont)
- Proposed RCW 11.98.071 Waiver
- Duty to keep beneficiaries reasonably informed is
waivable as follows - (3) TT not required to provide administration
information to any beneficiary of a trust other
than spouse if (a) spouse has capacity (b)
spouse is only permissible distributee and (c)
all other qualified beneficiaries are
descendants of the trustor and the trustors
spouse - (4)No duty too keep beneficiaries reasonably
informed or to inform them of the existence of a
revocable trust - (5) The trustor may waive or modify the
notification requirement of (2) and (3) in the
trust document or in a separate writing, made at
any time, that is delivered to the trustee.
16Result of Breach of Fiduciary Duties
- Damages for Breach of Trust (new section to RCW
11.98) - Prior law discretion with the court
- Current Law A trustee who commits a breach of
trust is liable for the greater of - The amount required to restore the value of the
trust property and trust distributions to what
they would have been had the breach not occurred
or - The profit the trustee made by reason of the
breach
17Waiver of fiduciary obligations
- RCW 11.97.010
- The Trustor of a trust may by the provisions of
the trust relieve the trustee from any or all of
the duties, restrictions and liabilities which
would otherwise be imposed by law - Exceptions
- A trustee cannot not relieved of its duty of good
faith and honest judgment - A trustee cannot be relieved of its duty to
account (See, Estate of Hitchcock, 140 Wn.App.
526 (2007)). - Exculpatory Clauses
- A savings clause may save the trustee from
liability for - Mistake or error of judgment
- Losses not intentionally or voluntarily incurred
or - Negligence.
18Waiver of fiduciary obligations (cont)
- Non-Waivable Duties and Obligations
- It is against public policy to remove the trustee
from all accountability - A provision in a trust instrument is not
effective to relieve the trustee of liability for
a breach of trust committed in bad faith, or of
liability for any profit for which the trustee
has derived from a breach of trust. - A saving or exemption provision will not save or
limit the trustee from liability for - Bad faith
- An excess of authority
- An abuse by the trustee of a fiduciary or
confidential relationship to the settlor - Breaches committed intentionally or with reckless
disregard to the beneficiarys interest.
19Waiver of fiduciary obligations (cont)
- RCW 11.97.010
- In no event may a trustee be relieved of the duty
to act in good faith and with honest judgment or
the duty to provide information to beneficiaries - Exculpation of Trustee RCW 11.98
- An exculpatory term which was inserted as the
result of an abuse of a fiduciary relationship is
unenforceable - An exculpatory term drafted or caused to be
drafted by the trustee is invalid as an abuse of
a fiduciary relationship unless the trustee
proves that the exculpatory term is fair under
the circumstances and that its existence and
contents were adequately communicated to the
trustor - Beneficiary may consent, ratify or release
trustee
20Statute of limitations
- Revocable Trusts
- Prior Law Uncertain
- RCW 11.103.050
- Challenge to validity of revocable trust must be
made at the earlier of - 2 years (24 months) after Trustors death or
- 4 months after the Trustee provides notice of
trusts existence and notice of the time allowed
for commencing a challenge
21Statute of limitations (cont)
- Irrevocable Trusts
- Challenges to Administration
- Prior Law RCW 11.96A.070(1)(a)(i)
- An action against the trustee for breach of
fiduciary duty must be brought within 3 years
from the earlier of - The time the alleged breach was discovered or
- The time the alleged breach reasonably should
have been discovered - The trustee has the burden of establishing when
the beneficiary knew or should have known
22Statute of limitations (cont)
- Irrevocable Trusts (cont)
- RCW 11.97.010(3)
- If the Trustee provides the written statement
required herein, the statue of limitations
expires 3 years from the date the beneficiary
receives the statement - If the Trustee does not provide the written
statement, the statute of limitations is 3 years
from the first to occur of - The removal, resignation, or death of the
trustee - The termination of the beneficiarys interest in
the trust or - The termination of the trust
- Proposed Changes Delete RCW 11.97.010(3)
replace with existing RCW 11.96A.070
23Miscellaneous New Provisions
- Certification of Trust (New Section to RCW 11.98)
- Date Trust came into existence
- Identity of the Trustor
- Identity and address of current Trustee
- Relevant powers of Trustee
- Revocability or Irrevocability
- Authority of the cotrustees to sign or otherwise
authenticate and whether all or less than all are
required in order to exercise powers of the
trustee - Name of the trust or the titling of the trust
assets
24Miscellaneous New Provisions (Cont)
- Venue - Revised RCW 11.96A.050
- Venue for trusts shall be
- For testamentary trusts, in the superior court of
the county where the probate of the will is being
administered, where any beneficiary resides or
has a place of business, the county where any
trustee resides or has a place of business, or
the county where any real property that is an
asset of the trust is located - For all other trusts, in the superior court where
any beneficiary resides, the county where any
trustee resides or has a place of business, the
county where any real property that is an asset
of the trust is located - Upon request for change, the court may change to
the county with the strongest connection
25Miscellaneous New Provisions (Cont)
- Situs New Section to RCW 11.98
- If trust designates WA as situs or that WA law
governs, then the situs is WA if one of the
following conditions are met - Trustee has place of business in WA or is a
resident of WA or - More than an insignificant part of the trust
administration occurs in WA or - Trustor resides in WA at the time situs is
established or at the time the trust became
irrevocable or - One or more beneficiary resides in WA or
- Real property owned by the trust is located in WA
- Trustee may register trust in WA
- Must provide notice to beneficiaries who have 30
days to object to such registration - Transfer of trust administration to a foreign
trustee does not change situs (Revised RCW
11.98.039(6))
26TRUST MODIFICATIONS
- TEDRA RCW 11.96A.030
- Trust and estate attorneys have taken this
section to allow any modifications or
terminations of trusts - However, RCW 11.96A.030(2)(h) and RCW 11.96A.125
creates a new category under matter to provide
that a matter is - The reformation of a will or trust to correct a
mistake under Section 11 of the new Act - Section 11 of the Act provides that the terms of
a will or trust, even if unambiguous, may be
reformed to conform the terms of the intention of
the testator/trustor if it proved by clear,
cogent and convincing evidence, or the parties to
a TEDRA Agreement agree that there is clear,
cogent and convincing evidence, that both the
intent of the testator/trustor were affected by a
mistake of fact or law, whether in expression or
inducement
27TRUST DISTRIBUTIONS
- New Section is added to RCW 11.98.145
- Distribution upon Termination
- Trustee may send a plan of distribution
- Must include notice that the beneficiary has a
right to object to the plan, including any non
pro rata distributions - Must include the time period within which to
object - The beneficiaries right to object terminates if
the beneficiary does not object within 30 days
28APPLICATION
- Application
- Act applies to all trusts created before, on or
after 1/1/2012 - Act applies to all judicial proceedings
concerning trusts commenced on or after 1/1/2012 - Any rule of construction or presumption provided
in this act applies to trust instruments executed
before 1/1/2012, unless there is a clear
indication of a contrary intent in the terms of
the trust - An action taken before 1/1/2012 is not affected
by this act - If a right is acquired, extinguished or barred
upon the expiration of a prescribed period that
has commenced to run under any other statute
before 1/1/2012, that statute continues to apply
to the right even if it has been repealed or
superceded
29Revisions to Washingtons Slayer Statute
- Washingtons Slayer Statute (RCW 74.34 and RCW
11.84) - Impact of Revisions
- A slayer or abuser is deemed to have predeceased
the decedent as to property which would have
passed from the decedent to the slayer or abuser - Abuser is defined as one who participates in the
willful and unlawful financial exploitation of a
vulnerable adult
30Revisions to Washingtons Slayer Statute
- Financial Exploitation
- Use of deception, intimidation or undue influence
by a person in a position of trust and confidence
to obtain or use the property, income, resources,
or trust funds for the benefit of a person other
than the vulnerable adult - Breach of a fiduciary duty (including the misuse
of a trust) that results in the unauthorized
appropriation, sale or transfer of property,
income, resources or trust funds for the benefit
of a person other than the vulnerable adult - Obtaining or using the VAs property, income,
property or trust funds without lawful authority,
by a person or entity who knows or clearly should
know that the VA lacks the capacity to consent to
the release or use of such property. - Vulnerable Adult
- An incapacitated person or a person who is
otherwise unable to care for his or herself
31Questions???
- RANDALLDANKSIN
- A Professional Service Corporation
- 601 W. Riverside Avenue, Suite 1500
- Spokane, WA 99201
- (509) 747-2052 Fax (509) 624-2528
- www.randalldanskin.com