NEW WASHINGTON TRUST ACT
&
REVISED SLAYER STATUTE
T H E PA S T, P R E S E N T A N D F U T U R E O F
F IDUCIA RY OB LIGATIONS UNDE R
WA S H I N G T O N L A W
Presented by:
Stephanie R. Taylor
RANDALL|DANSKIN
A Professional Service Corporation
Existing Statutes Impacted by SHB 1051
• RCW 11.02.005
• RCW 11.28.237
• RCW 11.68.090
• RCW 11.94.050
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RCW 11.96A.030
RCW 11.96A.050
RCW 11.96A.070
RCW 11.96A.110
RCW 11.96A.120
RCW 11.97.010
RCW 11.98.009
RCW 11.98.039
• RCW 11.98.045
• RCW 11.98.051
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RCW 11.98.055
RCW 11.98.070
RCW 11.98.090
RCW 11.100.090
Definitions and Use of Terms
Notice of Appointment as Personal Representative, Pendency of
Probate –Proof by Affidavit
Powers of Personal Representative Under Nonintervention Will – Scope –
Relief from Duties, Restrictions, Liabilities by Will
Attorney or Agent Granted Principal’s Powers – Powers to be Specifically
Provided For – Transfer of Resources by Principal’s Attorney or Agent
Definitions (TEDRA)
Venue in Proceedings Involving Probate or Trust Matters
Statutes of Limitation
Notice in Judicial Proceedings Under this Title Requiring Notice
Application of Doctrine of Virtual Representation
Power of Trustor –Trust Provisions Control
Application of Chapter [Trusts]
Nonjudicial change of trustee – Judicial appointment or change of
trustee – Liability and duties of successor fiduciary
Criteria for transfer of trust assets or administration
Nonjudicial transfer of trust assets or administration – Notice – Consent
required
Judicial transfer of trust assets or administration
Power of trustee
Nonliability of third persons without knowledge of breach
[Investment of Trust Funds] Dealings with self or affiliate
New Sections Added to Existing Chapters
• RCW 11.96A
• RCW 11.97
• RCW 11.98
• Title 11
Trust and Estate Dispute Resolution
(TEDRA)
Effect of Trust Instrument
Trusts
PROBATE AND TRUST LAWS
STATUTES 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
Trustor’s powers – Powers of withdrawal
RCW 11.103.050
Limitation on action contesting validity of revocable trust –Distribution of
trust property
Proposed 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
FIDUCIARY 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
trustee’s own personal account or
• Transaction which is otherwise affected by a conflict between the
trustee’s fiduciary and personal interests
• Transaction is voidable by beneficiary (without further proof) unless:
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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
FIDUCIARY OBLIGATIONS (con’t)
• Transaction is “presumed” to be a conflict if it is entered into
by the trustee with…a 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
trustee’s 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
NOTICE TO BENEFICIARIES
• Prior Law – Case Law
• Allard v. Pacific Nat’l 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 Trustee’s obligation to
keep the beneficiaries reasonably informed of all facts. Flohr v.
Flohr, (unpublished) 2002 Wn. App. LEXIS 590.
NOTICE TO BENEFICIARIES (con’t)
• 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:
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The existence of the trust
The identity of the trustor(s);
The Trustee’s name, address and telephone number; and
The right to request such information as is reasonably necessary
to enable the enforcement of the beneficiary’s rights
• Proposed Revision – RCW 11.97.010(2) is deleted;
Replaced by New Section RCW 11.98.070
PROPOSED 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
NOTICE TO BENEFICIARIES (con’t)
• 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:
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Receipts and disbursements of principal and income
Beginning and ending values of assets and liabilities
Trustee’s 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
NOTICE TO BENEFICIARIES (con’t)
• 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
NOTICE TO BENEFICIARIES (con’t)
• 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
PROPOSED NOTICE TO BENEFICIARIES
(con’t)
• [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
PROPOSED NOTICE TO BENEFICIARIES
(con’t)
• [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 trustor’s 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.
Result 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
WAIVER 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.
WAIVER OF FIDUCIARY OBLIGATIONS
(con’t)
• 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 beneficiary’s interest.
WAIVER OF FIDUCIARY OBLIGATIONS
(con’t)
• 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
STATUTE 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 Trustor’s death or
• 4 months after the Trustee provides notice of trusts’ existence and
notice of the time allowed for commencing a challenge
STATUTE OF LIMITATIONS (con’t)
• 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
STATUTE OF LIMITATIONS (con’t)
• Irrevocable Trusts (con’t)
• 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 beneficiary’s 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
Miscellaneous 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
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Miscellaneous New Provisions (Con’t)
• 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”
Miscellaneous New Provisions (Con’t)
• 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))
TRUST 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
TRUST 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
APPLICATION
• 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
Revisions to Washington’s Slayer Statute
• Washington’s “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
Revisions to Washington’s 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 VA’s 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
QUESTIONS???
RANDALL|DANKSIN
A Professional Service Corporation
601 W. Riverside Avenue, Suite 1500
Spokane, WA 99201
(509) 747-2052 – Fax: (509) 624-2528
www.randalldanskin.com