Effective January 1, 2013, Illinois statute authorizes “decanting” of irrevocable trusts. What is decanting, you ask? Isn’t that something you do with a bottle of wine? Yes, it is, and just like you decant wine from one bottle into a new container to remove sediment and to allow the wine to breathe, when you decant a trust, you pour the trust assets from one trust into another trust, allowing flexibility in the terms of an otherwise irrevocable trust.
Illinois recently enacted a new Section 16.4 of the Trust and Trustees Act, entitled “Distribution of trust principal in further trust” (the “Decanting Statute”). The Decanting Statute allows the trustees of an irrevocable trust (the first trust), acting pursuant to their fiduciary duty (and assuming certain conditions are met), to distribute all or part of the existing trust to a different trust (the second trust).
Decanting When a Trustee Has Absolute Discretion
If the trustees have “absolute discretion” over the first trust, they are given broad discretion over the distribution to the new trust. (more…)
The U.S. District Court in Minnesota, in Hall v. Metropolitan Life Insurance Company, D. Minn., No 0:11-cv-01269-DWF-LIB, 1/15/13, declined to give any effect to the fill in the blank form Will completed at the direction of Dennis Hall (the “Decedent”) by the Decedent’s daughter that attempted to dispose of the proceeds of the group term life insurance policy provided through the Decedent’s employment.
The Decedent had designated one of his four children as the beneficiary of his employer-provided life insurance policy in 1991. He then married Jane in 2001, but did not change the beneficiary of this life insurance policy. In early 2010, Decedent was diagnosed with cancer. Sometime after being diagnosed with cancer, Decedent notified his employer that he wanted to change his beneficiary, and his employer-provided him with a change of beneficiary form, but Decedent never returned the form to his employer. (more…)
Part 3 of a 3 part series.
In a trilogy of new cases decided in the last couple of months, the courts in three states have addressed the issue of whether the trustee of a revocable trust has a duty to account to, and can be held liable to, the remainder beneficiaries of the trust, for a period during which the trust was revocable, after the death of the settlor. In reviewing the discussion of the courts in these three decisions, it is clear that, while a trust is revocable, the trustee has a duty only to the settlor, and that even after the death of the settlor when the interests of the remainder beneficiaries has vested, the trustee continues to have no duty to the remainder beneficiaries for any actions taken while the trust was revocable. In Part 1 of this series, we reviewed the case of Pennell v. Alverson and in Part 2 of this series, we reviewed the case of In re Estate of Giraldin; now, we turn to In the Matter of Trust # T-1 of Mary Faye Trimble.
In the latest case in this trilogy, the Iowa Supreme Court, in In the Matter of Trust # T-1 of Mary Faye Trimble, 2013 WL 275637 (Iowa, January 25, 2013), reviewed all the cases on this point, including the Giraldin case previously discussed, to conclude that the trustee had no duty to account to the remainder beneficiaries for the period during which the trust was revocable. (more…)
Part 2 of a 3 part series.
In a trilogy of new cases decided in the last couple of months, the courts in three states have addressed the issue of whether the trustee of a revocable trust has a duty to account to, and can be held liable to, the remainder beneficiaries of the trust after the death of the settlor, for a period during which the trust was revocable. In reviewing the discussion of the courts in these three decisions, it is clear that, while a trust is revocable, the trustee has a duty only to the settlor, and that even after the death of the settlor when the interests of the remainder beneficiaries has vested, the trustee continues to have no duty to the remainder beneficiaries for any actions taken while the trust was revocable. In this series of blogs, we review these cases. In Part 1 of this series, we reviewed the case of Pennell v. Alverson; now, we turn to In re Estate of Giraldin.
The Court in the Pennell case agreed that, to the extent that the remainder beneficiaries were raising issues concerning breaches of fiduciary duty to Cleo during her lifetime, the remainder beneficiaries have standing to pursue those claims.
This distinction was picked up and further refined in December of 2012 by the California Supreme Court in In re Estate of Giraldin, 150 Cal. Rptr. 3d, 290 P.3d 199 (Cal.2012), reversing the result in the decision of the Court of Appeals (199 Cal.App.4th 577 (2011). In that case, Bill Giraldin created a revocable trust in early 2002 and designated his son, Tim, to serve as the trustee. The trust provided that Bill was the only beneficiary during his lifetime, and in the event of Bill’s incapacity, the trustee was to make liberal distributions for Bill’s needs, and that “the rights of remainder beneficiaries shall be of no importance.” The trust also contained a provision that during Bill’s lifetime, “the trustee shall have no duty to provide any information regarding the trust to anyone other than [Bill].” (more…)
Part 1 of a 3 part series.
In a trilogy of new cases decided in the last couple of months, the courts in three states have addressed the issue of whether the trustee of a revocable trust has a duty to account to, and can be held liable to, the remainder beneficiaries of the trust after the death of the settlor, for a period during which the trust was revocable. In reviewing the discussion of the courts in these three decisions, it is clear that, while a trust is revocable, the trustee has a duty only to the settlor, and that even after the death of the settlor when the interests of the remainder beneficiaries has vested, the trustee continues to have no duty to the remainder beneficiaries for any actions taken while the trust was revocable. In this series of blogs, we will review these cases.
In the first of these three cases to be decided, in September of 2012, the Arizona Court, in Pennell v. Alverson, 2012 WL 4088679 (Ariz.App. Div 1, September 18, 2012) interpreted the revocable trust created by Cleo Hubbard (the “Cleo Trust”) during her lifetime under Michigan law, and held that Angella Alverson, one of Cleo’s daughters, as a co-Trustee and ultimately a sole Trustee, did not owe any fiduciary duty during Cleo’s lifetime to the remainder beneficiaries. In this family dispute brought by Angella’s sister and her children and one of Angella’s grandsons, the Court first found that under Michigan law, the duties of the trustee and the rights of the beneficiaries are governed solely by the terms of the trust. (more…)
The 7520 rate for May 2013 has dropped back to 1.20%.
The Federal Interest Rates for April can be found here.
On Wednesday, President Obama released his FY 2014 budget which calls for $3.8 trillion in spending over the next fiscal year and $1 trillion in tax increases over the next 10 years.
Among the proposals in the budget plan, President Obama proposes a return of the estate tax to the law in effect in 2009, which changes would go into effect beginning in 2018. If this proposal is adopted, it would be a quick end to the “permanency” of the transfer tax law that was enacted at the end of last year.
Update: The United States Supreme Court heard oral arguments today in Windsor v. United States.
Update: On Friday, December 7, 2012, the Supreme Court announced that it would hear arguments in Windsor v. United States and Hollingsworth v. Perry. These cases, addressing the Defense of Marriage Act (DOMA) and California’s Proposition 8 will mark the first time the Supreme Court has addressed the question of same-sex marriage.
Update: On October 18, 2012, the Second Circuit Court of Appeals issued an opinion striking down the so-called “Defense of Marriage Act” (“DOMA”) in the ACLU and NYCLU’s Windsor v. United States case. The Court decided that when government discriminates against lesbians and gay men, the discrimination should be presumed to be unconstitutional. The Second Circuit was not the first appeals court to strike down DOMA, however. The First Circuit Court of Appeals found DOMA unconstitutional in May of 2012. But, the significant difference between the two legal opinions may mark the beginning of an important legal shift in the way DOMA cases are decided. The First Circuit evaluated DOMA under what is known as “rational basis review.” This test requires that the government action be “rationally related” to a “legitimate” government interest. In spite of this, the Second Circuit became the first federal appeals court to decide that a higher standard of review, intermediate scrutiny, applies to decisions of discrimination based on sexual orientation. In order to overcome the intermediate scrutiny test, it must be shown that the law or policy being challenged furthers an important government interest in a way that is substantially related to that interest. This legal standard, if ultimately accepted by the Supreme Court, would dramatically raise the burden on government to defend the constitutionality of laws that discriminate on the basis of sexual orientation, like same-sex marriage, as seen in Windsor v. United States. (more…)
Today and tomorrow, the U.S. Supreme Court will be hearing oral arguments in two cases that could change the scope of marriage in the United States. Today, the Court is hearing oral arguments in Hollingsworth v. Perry, and tomorrow, the Court will be hearing oral arguments in the case of United States v. Windsor.
The cases contain a myriad of questions, but if the Court decides to get past the procedural questions and issue rulings on the substance, significant changes could be in store regarding the Defense of Marriage Act (“DOMA”) and the federal treatment of same-sex marriages. For a discussion of all of the various constitutional issues the Court may address in these cases, see Erwin Chemerinsky’s article, “Chemerinsky: Same-sex marriage battle goes before the Supreme Court“. (more…)
The 7520 rate for April 2013 has stayed level at 1.40%.
The Federal Interest Rates for April can be found here.
