Law Office of John S. Palmer Attorney at Law

Trust/Estate Law Changes

Posted Thursday, June 27, 2013 by John S. Palmer

Several changes to Washington’s statutes governing trusts and estates will take effect on July 28. Here is a summary of some of the more significant changes.

“Permissible Distributees” and “Qualified Beneficiaries”

A new section is being added to RCW 11.98, formally adopting the Uniform Trust Act’s definition of the terms “permissible distributee” and “qualified beneficiary”:

“Permissible distributee” means a trust beneficiary who is currently eligible to receive distributions of trust income or principal, whether the distribution is mandatory or discretionary.

“Qualified beneficiary” means a trust beneficiary who, on the date that such beneficiary’s qualification is determined: (a) Is a permissible distributee; (b) Would be a permissible distributee if the interests of the distributees described in (a) of this subsection terminated on that date; or (c) Would be a permissible distributee if the trust terminated on that date.

These definitions were adopted to help clarify to whom a trustee owes various duties. For example, a statute requiring trustees to keep “all persons beneficially interested in the estate or trust” reasonably informed about administration of the trust and of the material facts for them to protect their interests is being amended to state this duty is only owed to qualified beneficiaries. (However, if the trustor’s spouse or registered domestic partner is the only permissible distributee and all other qualified beneficiaries are descendants of the trustor and his or her spouse/domestic partner, only the spouse/partner is entitled to be kept informed; and if the trust is revocable, only the trustor is entitled to be kept informed, while he or she is still living.) And a section of the Trustees’ Accounting Act that currently requires a trustee to provide an annual statement of receipts and disbursements to “adult income trust beneficiaries” is being amended to require the statement to be provided to all permissible distributees.

Trust Consolidation

Another change affects the manner in which two or more trusts may be consolidated. Pursuant to RCW 11.98.080, two or more trusts may be consolidated if the trusts explicitly permit it, or if certain other criteria are met, including that the dispositive provisions of the trusts are substantially similar; consolidation would be consistent with the trustors’ intent; would facilitate administration; and would not impair the beneficiaries’ interests. If these criteria are met, consolidation may occur if agreed to in a binding settlement agreement signed by all interested parties or authorized by court order.

Effective July 28, trust consolidation will also be permitted if a trustee delivers 60 days’ advance written notice of a proposed consolidation to the “qualified beneficiaries” of every trust affected by the consolidation and to any trustee of such trusts who does not join in the notice. The notice must indicate that the recipient has thirty days to object to the proposed consolidation. If a timely objection is not made, the trustee may consolidate the trusts “and such will be deemed the equivalent of an order entered by the court declaring that the trusts were combined in the manner provided in the initial notice.” If an objection is received, the trustee may still seek a court order permitting consolidation.

Special Representatives

Washington’s Trusts and Estates Dispute Resolution Act (TEDRA) permits the resolution of any question or dispute pertaining to a trust or estate to be resolved by court order, mediation, arbitration, or written settlement agreement by all interested parties. When an interested party is a minor, an incapacitated person, cannot be located, or “who is yet unborn or unascertained,” a Special Representative may be appointed to protect their interests and act on their behalf.

Currently, a Special Representative may only be appointed upon the motion of the personal representative of an estate or trustee of s trust. As of July 28, any party, or the parents of a minor or unborn party will be permitted to seek the appointment of a Special Representative.

TEDRA Petitions

Currently, a petition filed under TEDRA to resolve a question or dispute may be filed as an independent action, or as an action incidental to an existing judicial proceeding relating to the same trust or estate. Effective July 28, TEDRA petitions will have to be commenced as a new action, but may be consolidated with an existing proceeding upon the motion of a party for good cause shown, or by the court on its own motion.

Virtual Representation

Finally, the circumstances under which one person with an interest in a trust or estate may “virtually represent” other interest holders in a TEDRA proceeding are changing. These changes are explained in more detail in this prior blog post.

If you have any questions or would like to schedule an appointment, please call us at (425) 455-5513, toll free at (877) 455-5513, or info@palmerlegal.com.