Welcome to the Trusts & Estates Bulletin

By:  David W. Woodburn

Welcome to the first issue of Trusts & Estates Bulletin, the new newsletter of the Buckingham, Doolittle & Burroughs, LLP Trusts & Estates Practice Group. Our purpose in assembling this newsletter is to provide updates on developments, tips, and planning opportunities in all areas of trusts and estates law.

This first issue addresses a wide variety of topics but places particular emphasis on the new Uniform Trust Code adopted in both Florida and Ohio. This new trust code goes into effect in 2007 and significantly impacts the ways in which living trusts will be administered throughout each state. The Uniform Trust Code resolves numerous issues involving trusts by providing specific guidelines on how to form trusts, modify revocable and irrevocable trusts, protect assets against creditors, and even direct trustees on legal duties and reporting requirements.

This newsletter also allows us to introduce you to the many new members of our practice group. In the past year, we have added several new lawyers to our Canton, Columbus, and Akron offices. These additions have allowed our group to nearly double in size. These new members bring with them particular strengths in Medicaid planning, disability and special needs planning, guardianship administration, and probate litigation. When combined with our existing expertise in these areas and sophisticated estate planning and estate administration, there is no doubt that we have set ourselves apart as one of the premier trusts and estates groups in Ohio and Florida. Our attorneys are well known for their professional skills and dedication to their clients, as well as for their cutting-edge planning techniques.

We hope that you enjoy this newsletter and those that will follow. Please call one of our practice group members if you have a question concerning one of the articles or any other trusts and estates matter.

David Woodburn is a Shareholder and Chair of the Trusts & Estates Practice Group.  He can be contacted at dwoodburn@bdblaw.com or 330.258.6506.

Florida's New Trust Code - A Brief Summary

By: Christopher Gagic

During the session for 2006, Florida’s legislature passed a significant piece of legislation, which will have an impact on almost all of our clients who have created trusts or are currently serving as trustees. In a nutshell, a significant portion of Florida’s Trust Code will be replaced or modified effective July 1, 2007. Importantly, the Code does not affect any act taken prior to the effective date.

While Florida already has a fairly extensive body of statutory trust law, an ad hoc committee consisting of various sections of Florida’s bar, the Florida Bankers Association and the Florida Institute of CPAs concluded that Florida would benefit from a more comprehensive trust code to, among other things, simplify language found in the current Code, cover areas not dealt with, modernize antiquated sections and adopt a cohesive and comprehensive code that would be in harmony with other states’ trust code sections. So, what are the most significant changes to Florida’s Trust Code?

Trust Creation: The requirement that the testamentary aspects of trusts be signed with the formalities of a will in Florida is now limited to revocable trusts of Florida domiciliaries, regardless of the law of the place of execution or the location of the property held in the trust. The capacity needed to create a revocable trust is now specified to be the same as that of a will. This clarifies the applicability of case law, which has discussed testamentary capacity in the context of a will but not of a revocable trust.

Charitable Trusts: The authority the attorney general had at common law to enforce charitable trusts was formally codified in the new Code. The new Code expanded the list of individuals with standing to enforce charitable trusts to include the grantor who created the trust and to the charitable organizations that are beneficiaries under the trust document.

Revocable Trusts: The Code now provides that all trusts are revocable by default unless otherwise stated in the document. In addition, the method of revocation expressed in the instrument is exclusive, and while the trust is revocable the trustee owes duties to the grantor only. The holder of an unlimited right of withdrawal (for example, a surviving spouse) is treated as the grantor while the power is exercisable.

Trustee Powers: A trustee’s powers are extended to cover additional powers not specified under the old Code. For example, the Code now authorizes a trustee to exercise federal, state and local tax elections; to select payment options with respect to retirement plans, annuities and insurance contracts; to make loans, including loans to a beneficiary on fair and reasonable terms and conditions; and to exercise necessary powers to wind up and distribute the trust property.

Of course, the changes to the Trust Code are too numerous to outline in this article. We strongly encourage our readers to contact us with any questions regarding Florida’s new Trust Code or any other estate planning issues.

Christopher Gagic is a Shareholder in the Trusts & Estates Practice Group.  He can be reached at cgagic@bdblaw.com or 561.241.0414. 

Ohio's New Trusts Code - A Controversial Provision

By: Hillary B. McLean

Most provisions of the new Ohio Trust Code are default provisions. In other words, they apply unless the creator of the trust indicates that he or she does not want them to apply. There are, however, fourteen, mostly common sense, mandatory provisions that cannot be changed by the settlor.

Two of these provisions are already creating controversy in the legal community. Both have to do with the trustee’s duty to keep current beneficiaries of irrevocable trusts informed of trust assets and activities.

An irrevocable trust is one that may not generally be changed once it is created. The beneficiaries’ rights are generally fixed upon the creation of the trust. Even revocable living trusts usually become irrevocable upon the death of the creator of the trust.

Under the Ohio Trust Code the trustee of an irrevocable trust is required to do all of the following, whether a beneficiary knows of the existence of the trust or not: The trustee must inform current beneficiaries, age 25 or more, of the existence of the trust, of the identity of the trustee and of their right to receive annual trustee reports and other information about the trust. If requested to furnish such information, the trustee must respond to the request within a reasonable time. The information would probably include the amount and nature of the assets in the trust and the beneficiary’s share of the trust. The names of other beneficiaries can likely be withheld.

What makes this provision controversial is that trusts are often created to protect assets for a beneficiary who has various problems, such as substance abuse or a gambling addiction. Under the Ohio Trust Code, a settlor’s only alternative to disclosing this information to the distressed beneficiary is to designate a “beneficiary surrogate” to receive this information instead of providing it directly to the beneficiary.

What makes the “beneficiary surrogate” provision controversial is that it is unclear who would ever be willing to undertake this thankless duty. Nor does the provision state what obligations the surrogate has to the beneficiary. It is unclear why a settlor should not be able to provide in his instrument that this provision of the Code does not apply to his trust.

As a result of these provisions in the new law, the traditional protections afforded by “spendthrift” provisions (designed to protect an imprudent beneficiary from his own indiscretions) and discretionary provisions (which give the trustee great discretion in determining whether a distribution should be made to a beneficiary) will become more important than ever.