Are you the creator, administrator or beneficiary of a trust? Or are you considering initiating a trust as part of an overall estate plan? Then you need to know that the Washington Trust Act ("The Act"), signed into law last May and which became effective January 1, 2012, may require you to alter your standard best practice regarding beneficiary notification.
The Act governs estate and trust administration in Washington State in tandem with the trust document and the Washington Principal and Income Act.
Much of The Act is codification of prior law and practices. Key highlights:
1) No longer can you create a trust for someone else and leave them unaware of it. They must be notified of the creation, and given trustee contact information. These new notification requirements are for irrevocable trusts established on or after January 1st, 2012 and for revocable trusts that become irrevocable after December 31, 2011.
2) The Act now requires that beneficiaries be kept "reasonably informed." The prior act required an accounting be provided by the trustee/executor only if a beneficiary requested it. Since "reasonably informed" is vague, the new law includes safe harbor rules to assist in meeting the "reasonably informed" standard. Safe harbor information includes:
- A statement of receipts and disbursements
- A statement of assets and liabilities of the trust
- Trustee and agent compensation
- Any pledges of trust property
- Disclosure of any transaction that may contain a potential conflict of interest.
For some trusts, reaching a reasonably informed standard will be met fairly simply. Trusts holding marketable securities, real estate, or partnership interests tend to be more complex. The nature of the assets in the trust and beneficiary dynamics may influence the type of information you ultimately provide to the beneficiaries. Judgment should be exercised to determine litigious situations. In these types of situations, we recommend you rely on the safe harbor accounting.
Berntson Porter has a standard format to assist our trustor and trustee clients to meet these safe harbor requirements. For assistance, please contact Karen Nierescher at 425.289.7673 or firstname.lastname@example.org. For overall estate tax questions and service, please contact Gary Holcomb at 425-289-7636 or email@example.com.