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Limits Of Exculpatory Clauses In Trusts

August 12, 2015

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Many trustors want to give their trustees wide berth to administer the trust.  In a lot of cases that makes sense because the trustee does not need someone second guessing every discretionary act taken during the life of a trust.  One way a trustor may try to give a trustee room in administering the trust is by including an exculpatory clause in the trust that relieves the trustee from liability for actions that might otherwise be considered a breach of duty.  Of course, trustees appreciate these kind of clauses.  Some jurisdictions defer to these clauses; some do not.  In Rafert v. Meyer, the Supreme Court of Nebraska invalidated a provision in a trust that provided that the trustee had no duty to pay the insurance premiums on 3 insurance policies that constituted the corpus of

Could Trust Protector Amend Procedure For Removing Himself?

July 2, 2015

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We have looked at a number of chapters of the Wellin trust disputes in South Carolina and how they are shaping trust protector law.  A recent district court opinion in one of the cases, McDevitt v. Wellin, digs a little deeper into the authority of the trust protector, namely if the trust protector had the authority to amend the procedure for his own removal.  Not surprisingly, the opinion turned on the language used by the trustor in the trust when describing the trust protector’s powers.

The trust protector purported to amend the trust and to change the procedure for his own removal.  It was argued that the amendment was invalid because, through the amendment, the trust protector was increasing his

Trust Reformation Was Not A Remedy For Failing To Complete An Estate Plan

June 24, 2015

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With several recent cases in which Massachusetts courts have permitted trust modification, we might have started to think that trusts would be liberally reformed in Massachusetts.  The Appeals Court of Massachusetts’ decision in Lesanto v. Lesanto (Rule 1:28 decision), however, reminds us that certain requirements must be met to reform a trust.

In October 2005, Paul Lesanto executed a will and the Paul Lesanto 2005 Revocable Trust (“First 2005 Trust”).  The bulk of Lesanto’s estate would pour over into the First 2005 Trust.  In 2010, however, Lesanto executed a new trust document that retained the name “The Paul Lesanto 2005 Revocable Trust” (“Second 2005 Trust”), but specifically provided that “[t]he Grantor wishes to establish a Trust which may receive property which the Grantor may transfer to it.  The Grantor

Mission: Possible–Saving Estate Taxes on Life Insurance

The trailers for the newest installment in the Mission: Impossible franchise, Mission: Impossible Rogue Nation, are being released and, as always when we see actors performing daredevil stunts, it makes us think about life insurance.  Hazard (I use the term loosely, in light of what these guys do) of the job, I guess.  So, once again, we thought we’d remind everyone about the use of life insurance trusts to reduce estate tax by re-posting the blog we wrote in after seeing his stunts for Ghost Protocol.

And, for your viewing pleasure, share another video of Mr. Cruise’s stunts.  (I’m starting to think Tom Cruise or Mission: Impossible should start sponsoring our blog!)

It’s true, it is possible to transfer life insurance proceeds to your beneficiaries without having to pay estate tax on those proceeds.  An insured can create an irrevocable trust that is designed to be the owner and beneficiary

Will New York State Join the List of Directed Trust States?

Will New York State Join the List of Directed Trust States?

May 26, 2015

Authored by: Stacie J. Rottenstreich and Karin Barkhorn

statuteoflibertyThe New York State legislature is considering becoming a directed trust state. In a directed trust, the trustee is allowed to act under the advice or direction of someone else, an advisor or protector, who could make decisions regarding investments, distributions or other trust matters. Earlier this year, the New York State Senate referred a bill to its Judiciary Committee which would expressly allow grantors to establish directed trusts in New York State and sets out general parameters for such trusts.

Does A Trustee’s Lawyer Owe A Fiduciary Duty To The Trust Beneficiaries?

May 20, 2015

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There is seemingly a line – at least under Florida law – that will not yet be crossed in the expanding world of third parties who purportedly owe duties to trust beneficiaries.  In Walther v. Kane (unpublished), the United States Court of Appeals for the Eleventh Circuit affirmed a federal district court’s ruling that, under Florida law, an attorney retained to represent only the trustee does not owe a fiduciary duty to the beneficiaries of the trust.  This decision stands in contrast to the trend in jurisdictions, including Florida, to chip away at the privity requirement when it comes to legal malpractice claims against estate planning attorneys.

Lawyers representing Florida trustees can rest a little easier for two reasons.  First, although unpublished, a federal appellate court has

Actions Taken In Partnership May Affect Fitness To Serve As Trustee

April 29, 2015

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For how long estate planners have been using interconnections between trusts and family entities as estate planning techniques, only recently have appellate courts outside of New York started to tackle these issues in reported decisions.  In In re Estate of Stuchlik (as modified, in part, here), the Supreme Court of Nebraska addressed – but did not answer – a question left open by the Supreme Court of Georgia in Rollins v. Rollins: what’s the appropriate standard of care when a trust holds a controlling interest in a family entity?

Edward J. Stuchlik, Jr. and his wife, Margaret, had a pretty common estate plan.  They formed a limited partnership into which they conveyed all the farm real

Power Of Attorney Amended Revocable Trust

April 1, 2015

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Georgia makes it easy to amend a trust if the settlor expressly reserves such a power: it needs to be in writing and signed by the settlor.  In Strange v. Towns, the Georgia Court of Appeals showed us how leniently courts should interpret that power to amend.

Pauline Strange created an inter vivos trust naming herself as the initial trustee and three people, including her son Tony, as successor trustees.  Years later, Pauline executed a “General Durable Financial Power of Attorney,” and in the power of attorney Pauline stated that she wanted Tony to be the “executor” of her estate and the trust.  Pauline and Tony both signed the power of attorney.

This was good enough to amend Pauline’s trust because she reserved the right to amend in

Treasury Green Book Proposal: Limit Duration of GST Tax Exemption

459482489The Treasury Green Book provides explanations of the President’s budget proposals.  One such proposal (remember…these are just proposals, not actual changes in the law) that may affect your estate planning is found on page 200 of the Green Book and is re-printed here for your convenience:


Current Law

GST tax is imposed on gifts and bequests to transferees who are two or more generations younger than the transferor. The GST tax was enacted to prevent the avoidance of estate and gift taxes through the use of a trust that gives successive life interests to multiple generations of beneficiaries. In such a trust, no estate tax would be incurred as beneficiaries died, because

Beneficiary Ratification Of A Trustee’s Unauthorized Act

March 12, 2015

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The trustee-beneficiary relationship can be a little bit like a marriage, so perhaps it’s not surprising that the phrase “speak now or forever hold your peace” has meaning for both.  If a trustee commits a breach of trust, a beneficiary may expressly or impliedly demonstrate satisfaction with the wrongful act thereby preventing that beneficiary from later challenging the act.  In other words, the beneficiary may ratify the trustee’s wrongful or unauthorized act by expressly agreeing to it or by failing to object to it.  In order for a beneficiary to ratify a breach of fiduciary duty, typically there must be proof that the beneficiary had full knowledge of all material facts.  All the more reason for trustees to consider giving beneficiaries more information about the trust administration and the trustee’s actions.  If the beneficiary gets the material information and

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