Substitute House Bill 1051 (“SHB 1051”) became effective this year, significantly impacting the administration of trusts, the duties of trustees, and the rights of trust beneficiaries. If your estate plan contains a testamentary trust, you should be aware of these new requirements. We wanted to let you know about a few key changes, primarily involving notification and reporting rules for trustees. SHB 1051 applies to all trusts, regardless of when the trust was created. The trusts written this year by our office contain language covering these new requirements. Our older trusts do not. However, regardless of whether the 2012 language is in your trust or not, when your trust goes into effect, your trustee will be required to follow the new law. Please rest assured that it’s doubtful that your estate plan will require any revisions solely to accommodate these changes. However, if you have any questions, please ask!
Initial Notice. SHB 1051 requires trustees to send out an initial notice concerning the trust. Please note that, if you have a testamentary trust in your Will, this notice does not need to be sent out until post-death, when your trust is then created and funded. Trustees now need to timely notify all persons interested in the trust of:
- The existence of the trust;
- The identity of the trustor(s);
- The trustee’s name, address, and telephone number; and
- The right to request information that would be reasonably necessary for a beneficiary to enforce his or her rights under the trust.
If a person entitled to notice is a minor, then notice must be given to the guardian or the minor’s parent if no guardian has been appointed by the court.
Reporting Requirements. SHB 1051 also requires trustees to keep all interested persons reasonably informed about the trust. Again, if you have a testamentary trust, this requirement only applies once your trust is created and funded. A trustee’s report should include:
- A statement of receipts and disbursements of principal and income that have occurred during the accounting period;
- A statement of assets and liabilities of the trust, including beginning and ending values for the accounting period;
- The trustee’s compensation;
- The 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 binding for a period of five years or more granted or entered into during the accounting period;
- Disclosure of all transactions that could have been affected by a conflict of interest between the trustee’s fiduciary and personal interests;
- A statement that the recipient of the notice may petition the court to obtain a review of the statement and acts of the trustee; and
- A statement that claims against the trustee for breach of trust may not be made after the expiration of three years from the date the beneficiary receives the statement.
Requests for Information. SHB 1051 establishes new requirements for a trustee if either a beneficiary or a non-beneficiary requests information about the trust. The requirements govern both the timing and the content of the trustee’s response. If you are serving as a trustee and receive a request for information, please contact our office for guidance.
Notification When Trust Terminates. SHB 1051 states, upon termination of a trust, the trustee may, but is not required to, send a notice to the beneficiaries of a proposed plan to distribute existing trust assets. If the notice is sent, a beneficiary must then notify the trustee of any objection within thirty days after the proposed plan was sent, but only if the notice informed the beneficiary of the right to object and of the time allowed for the objection. I recommend sending this notice. It provides helpful information, and also may help protect the trustee from liability.
Trustee Must Act in Good Faith. SHB 1051 requires, even if the trust language gives the trustees “absolute,” “sole,” or “uncontrolled” discretion, the trustee must act “in good faith and in accordance with the terms and purposes of the trust and the interests of the beneficiaries.”
If you have any questions about these new requirements, and how they might impact any trust you presently have in place, please do not hesitate to contact my office.
Stacey L. Romberg, Attorney at Law