Copyright (c) 2010 All rights reserved. http://works.bepress.com/alan_newman Recent documents in Alan Newman en-us Wed, 05 May 2010 01:30:57 PDT 3600 http://works.bepress.com/alan_newman/17 http://works.bepress.com/alan_newman/17 Mon, 03 May 2010 10:13:11 PDT The Uniform Trust Code (UTC) has been under study in Ohio since shortly after its approval by the National Conference of Commissioners on Uniform State Laws in 2000. See, e.g., Susan S. Locke, et. al., Uniform Trust Code, 11 PLJO 49 (Mar./Apr. 2001); David M. English, The Uniform Trust Code (2000) and Its Application to Ohio, 12 PLJO 1 (Sept./Oct. 2001); and David M. English, The Uniform Trust Code (2000) and its Application to Ohio, 30 Capital University Law Review 1 (2000). Substantial progress has been made towards the adoption of a modified version of the UTC in Ohio. At a meeting in December of 2003, a joint committee on the UTC consisting of representatives of the Estate Planning, Trust, and Probate Law Section of the Ohio State Bar Association and the Legal, Legislative, and Regulatory Committee of the Ohio Bankers League (OBL) completed the first part of its decision-making process for changes to be made to the UTC for the Ohio Uniform Trust Code (OUTC). The resulting initial draft of the OUTC is currently under review by the EPTPL section, the OBL, and the Ohio Association of Probate Judges. Based on preliminary discussions with the Legislative Services Commission of Ohio, the draft has been prepared to be enacted as part of newly created title 58 of the Revised Code, which would be devoted to trusts. The primary purpose of this article is to summarize some of the more important provisions of the OUTC, particularly those that would change existing Ohio law. Generally, this summary is presented in the order in which the topics covered appear in the OUTC. A comprehensive list and discussion of changes the OUTC would make to existing Ohio law (and changes made to the UTC in drafting the OUTC) are included in a Report the author prepared for the Joint Committee. Alan Newman http://works.bepress.com/alan_newman/16 http://works.bepress.com/alan_newman/16 Mon, 03 May 2010 09:55:17 PDT If a beneficiary of a spendthrift trust has a right to withdraw property from the trust, may the beneficiary's creditors reach the assets subject to the withdrawal power? That was the principle question recently addressed by the 1st District Court of Appeals in Great American Insurance Company v. Thompson Trust. Also of interest: the case may have involved an offset by the trustee of amounts distributable to the beneficiary to repay amounts owed by the beneficiary to the trust. Alan Newman http://works.bepress.com/alan_newman/15 http://works.bepress.com/alan_newman/15 Fri, 30 Apr 2010 14:19:04 PDT The adoption of the Ohio Uniform Trust Code (the "OUTC" or "the Code") will constitute a comprehensive codification of trust law in Ohio. Among the many subjects it covers are the modification and termination of trusts. As noted in a comment to the national Uniform Trust Code (the "UTC"), "the overall objective of these [modification and termination] sections is to enhance flexibility consistent with the principle that preserving the settlor's intent is paramount." Given such factors as the increased use of trusts in recent years (including trusts created by non-lawyers and lawyers who do not specialize in estate planning); the ability to create trusts that can last, at least theoretically, forever due to the ability of trust settlors to opt out of the Rule Against Perpetuities; the uncertain future of wealth transfer taxes; and the inevitable reality that circumstances will change during the administration of a trust in ways the settlor did not anticipate, the increased flexibility afforded by the OUTC's modification and termination provisions may result in these provisions being among the Code's most useful to beneficiaries, settlors, trustees, and the lawyers who represent them. Further, Ohio's current rules on the modification and termination of trusts are not easily located as they are found, for the most part, in case law. Thus, an additional benefit of the OUTC with respect to this subject will be making the governing rules on modifying and terminating trusts more accessible and clear. This article has two primary objectives. First, it reviews the OUTC's provisions that address the modification and termination of trusts. Second, it discusses how those provisions will affect existing Ohio law. For the most part, the OUTC's modification and termination provisions are found in Chapter 5804, and they are the focus of this article. Sections of other chapters of the Code will also affect its modification and termination provisions, however, and they too are discussed. Finally, this article covers only the OUTC's provisions dealing with the modification and termination of irrevocable trusts. Alan Newman http://works.bepress.com/alan_newman/14 http://works.bepress.com/alan_newman/14 Fri, 30 Apr 2010 13:56:19 PDT In a number of states that have considered the Uniform Trust Code ("UTC"), Article 5, "Creditor's Claims; Spendthrift And Discretionary Trusts," has become a flash point of controversy. The prefatory note to the UTC states that much of the UTC is a codification of the common law of trusts, but that it also introduces a number of innovative provisions. UTC critics, on the one hand, claim that more than a hundred years of common law have been tossed aside, giving creditors greatly expanded abilities to reach through once impenetrable barriers that previously protected trust beneficiaries, while supporters, on the other hand, assert that the innovative approach of the Code actually strengthens the rights of beneficiaries in a number of important areas. Much of this rhetoric actually has little application to the Ohio Uniform Trust Code ("OUTC"), as a concerted effort has been made to codify existing Ohio law in the area of creditor remedies, stripping away or modifying those provisions of the UTC that are at odds with our current law. This article will discuss remedies that creditors of trust beneficiaries currently have in Ohio, remedies that creditors would have under the "pure" UTC, and changes that Ohio's Joint Committee has made to the UTC in the second draft of the proposed OUTC. Alan Newman http://works.bepress.com/alan_newman/13 http://works.bepress.com/alan_newman/13 Wed, 28 Apr 2010 13:49:34 PDT In Shoemaker v. Gindlesberger, decided in May of this year, the Ohio Supreme Court held that: "A beneficiary of a decedent's will may not maintain a negligence action against an attorney for the preparation of a deed that results in increased tax liability for the estate." In doing so, the Court approved and followed its 1987 decision in Simon v. Zipperstein. Under Zipperstein, an attorney who prepares a will for a client can not be liable in negligence to a third person the client intended to benefit under the will unless (i) the third person was in privity with the client or (ii) there are special circumstances present, such as fraud, bad faith, collusion or other malicious conduct. Copyright Acknowledgment: This material is reprinted from the Probate Law Journal of Ohio with permission of Thomson Reuters. Copyright permission is on file. Alan Newman http://works.bepress.com/alan_newman/12 http://works.bepress.com/alan_newman/12 Wed, 28 Apr 2010 13:31:28 PDT This article discusses the changes included in the proposed amendment. Generally, the Joint Committee decided to include in the amendment straightforward changes as to which there was a broad consensus. The discussion below addresses the proposals included in the amendment in the order of the sections of the Revised Code that are affected. Copyright Acknowledgment: This material is reprinted from the Probate Law Journal of Ohio with permission of Thomson Reuters. Copyright permission is on file. Alan Newman http://works.bepress.com/alan_newman/11 http://works.bepress.com/alan_newman/11 Wed, 28 Apr 2010 13:04:00 PDT This article is based on the author's presentations at the 20th Annual Estate Planning Conference on Wealth Transfer in Columbus on June 26, 2009.Since its enactment in 2006, effective January 1, 2007, the Ohio Trust Code ("OTC") has been amended, a number of cases have been decided under it, and a variety of issues related to or raised by it have been identified. This article will review those developments.Copyright Acknowledgment: This material is reprinted from the Probate Law Journal of Ohio with permission of Thomson Reuters. Copyright permission is on file. Alan Newman http://works.bepress.com/alan_newman/10 http://works.bepress.com/alan_newman/10 Thu, 17 Jul 2008 13:58:39 PDT Over the centuries that wills have been used to dispose of testators' property at death, the law of wills has developed to address issues that arose. Similarly, over the centuries that trusts have been used for non-testamentary purposes, the law of trusts has developed to resolve resulting issues.In recent decades revocable trusts have become the most commonly used trust in the United States. To avoid estate administration, particularly in states in which administration involves cumbersome, time-consuming, and expensive court supervision, settlors make inter vivos transfers of assets that otherwise would be subject to administration on their deaths in trust. Typically, the trust instrument provides that the settlor may revoke the trust at any time, in which case its assets are to be returned to the settlor, and designates beneficiaries to whom the trust assets are to be distributed, or held for the benefit of in one or more now irrevocable trusts, following the settlor's death. In short, revocable trusts have become increasingly popular as substitutes for wills. Not surprisingly, issues that traditionally have arisen in connection with the use of wills frequently also are arising when revocable trusts are used as will substitutes. Because revocable trusts are, to a significant extent, the functional equivalent of wills, the trend in both statutory and case law is to subject such trusts, and persons interested in them, to the same law that would apply if the settlor had instead used a will to provide for the disposition of her property at her death. In examining that trend, this article demonstrates that, while there are many revocable trust issues that are being, and should be, resolved by reference to the law of wills, there are many others for which that is not the case. Alan Newman http://works.bepress.com/alan_newman/8 http://works.bepress.com/alan_newman/8 Fri, 26 Oct 2007 13:01:07 PDT Report on HB 416: The Ohio Trust Code As EnactedThis Report begins with a discussion of policy considerations related to the 2007 enactment of the Ohio Trust Code (OTC). Next, it discusses how the OTC will be incorporated into the Ohio Revised Code. The Report then discusses many of the OTC's provisions, in the same order as those provisions are included in the OTC. The focus of the discussion of OTC provisions is on those that will change existing Ohio law, or that are changes from the Uniform Trust Code (UTC). Thus, the Report does not provide a general explanation of the UTC. For such an explanation, see the article by the UTC Reporter, David M. English, The Uniform Trust Code (2000): Significant Provisions and Policy Issues, 67 MISSOURI LAW REVIEW 143 (2002). Alan Newman http://works.bepress.com/alan_newman/7 http://works.bepress.com/alan_newman/7 Wed, 24 Oct 2007 12:17:45 PDT This volume will be part of the third edition of the Bogert, Trusts and Trustees treatise. Among the issues it will address, the trustee's duty to inform and report to beneficiaries and the settlor's ability to waive or limit that duty, the trustee's duty to keep records, and the Uniform Trust Code's treatment of these issues. Alan Newman http://works.bepress.com/alan_newman/6 http://works.bepress.com/alan_newman/6 Wed, 24 Oct 2007 12:11:39 PDT Estate and Trust Planning This book covers the substantive rules and policies of the law of wills, trusts, and estates. Among the subjects it addresses are: how property passes when a decedent dies without a will; the requirements to validly execute a will; grounds for contesting a will; the revocation, interpretation, and construction of wills; property transfers by will substitute; limits on the freedom of property owners to dispose of property; the creation and operation of trusts; powers of appointment; future interests as used in wills and trusts; the Rule Against Perpetuities; duties of fiduciaries who administer estates and trusts; planning for incapacity; ethics for estate planners; wealth transfer taxation; and the income taxation of trusts, estates, grantors, and beneficiaries. In most instances the relevant statutory and common law rules and policies for resolving wealth transfer disputes are addressed, along with the planning implications that these controversies raise. Alan Newman http://works.bepress.com/alan_newman/5 http://works.bepress.com/alan_newman/5 Wed, 24 Oct 2007 11:54:04 PDT Incorporating the Partnership Theory of Marriage into Elective-Share Law: The Approximation System of the Uniform Probate Code and the Deferred-Community-Property Alternative With respect to marital property rights, the contemporary view of marriage is that it is an economic partnership. Spouses are viewed as equal partners with respect to property acquired during the marriage from either of their efforts, but as having no claim to property the other spouse brought to the marriage, or received by gift or inheritance during the marriage. The widespread acceptance of this theory, which has long been an underlying principle of the community-property system, is evidenced by the adoption over the last 30 years of equitable distribution as the means for the division of the property of divorcing spouses in all noncommunity-property jurisdictions. Generally, under equitable distribution property of spouses is divided in divorce proceedings in an equitable manner without regard to legal title. In most jurisdictions, only marital property of spouses is subject to such division, and in most of the jurisdictions in which separate property also may be divided, the clear preference is not to do so. In 1990, the spousal elective-share provisions of the Uniform Probate Code were revised to bring elective-share law into line with the partnership theory of marriage. The new UPC system, however, Incorporating the Partnership Theory of Marriage into Elective-Share Law: The Approximation System of the Uniform Probate Code and the Deferred-Community-Property Alternative does not determine the surviving spouse's elective-share claim by direct reference to the marital property the spouses accumulated during the marriage. Rather, it uses a mechanically applied "approximation system" to estimate the amount of the spouses' property that is marital, and the amount that is separate, based solely on the length of their marriage. When a spouse brings property to the marriage, as often is the case in second and subsequent marriages, or receives property during the marriage by gift or inheritance, the approximation system often will allow a surviving spouse's elective-share claim to reach that separate property. The result will be elective-share claims that are inequitable and inconsistent with the partnership theory of marriage.The purposes of this article are (i) to examine how well the approximation system will accomplish its intended objective of incorporating the marital partnership theory into elective-share law, and (ii) to propose a deferred-community-property system as an alternative means of doing so. Under such a system, the surviving spouse's elective share would be half of the couple's actual marital property, rather than half of an estimate of their marital property that is determined solely by the length of their marriage. A deferred-community-property elective-share system would produce results that are more consistent with the partnership theory of marriage and with the manner in which the property of spouses is divided when their marriage ends in divorce. Alan Newman http://works.bepress.com/alan_newman/4 http://works.bepress.com/alan_newman/4 Wed, 24 Oct 2007 11:47:30 PDT The Rights of Creditors of Beneficiaries under the Uniform Trust Code: An Examination of the CompromiseThe new Uniform Trust Code (the "UTC"), which recently has been introduced in the District of Columbia and six states but has not yet been enacted in any jurisdiction, is described in its prefatory note as "the first comprehensive national codification of the law of trusts." According to its Reporter: Crafting the provisions of Article 5 on spendthrift protection and the rights of a beneficiary's creditors to reach the trust proved to be the most difficult task in drafting the Act. The area is controversial and conflicting policy directions yield different results. The result was a compromise, responding at least in part to the concerns of the different factions.The ability of a creditor to reach a debtor's interest in a trust may be affected by one or more of the following factors: (i) whether the instrument includes a spendthrift provision, (ii) whether the beneficiary's interests in the income and principal of the trust are mandatory or discretionary, (iii) whether the beneficiary is a settlor or trustee of the trust, (iv) the identity of the creditor and the nature of the creditor's claim, (v) the needs and circumstances of the beneficiary, the beneficiary's dependents, and the creditor, and (vi) the size of the trust. At issue are the claims of such creditors as providers of public assistance to the needy, other providers of necessities, alimony and child support claimants, and tort claimants, as well as the claims of "ordinary" personal or commercial creditors. Closely related to the question of whether a public support provider may reach a trust beneficiary's interest to reimburse it for the costs of care supplied to the beneficiary, is whether the interest of a beneficiary in a trust will disqualify the beneficiary from receiving public assistance.This Article examines the protections the UTC affords beneficiaries of trusts from the claims of their creditors, the limitations on those protections, and the policies supporting the protections and their limitations. Emphasis is given to the treatment of the claims of child support and alimony claimants; the claims of public assistance providers; the claims of persons injured by a trust beneficiary's tortious conduct; and the UTC's rejection of the recent "trend" allowing settlors who are beneficiaries of the trusts they create to protect the trust assets from the claims of their creditors.Two recommendations are made for states considering adoption of the UTC. First, a significant concession to creditors' rights made by the UTC is to allow child support and alimony claimants to compel distributions from a discretionary trust that they can reach. To do so, however, such a creditor must be able to show that in not making the distribution, the trustee has abused its discretion or failed to comply with a standard of distribution. This Article argues that no such showing should be required. Rather, subject to the court's ability to consider the needs of the beneficiary as well as the needs of the child support and alimony claimants in determining what would be an equitable award under the circumstances, such a creditor should be able to compel a distribution of the maximum amount the trustee could distribute to the debtor/beneficiary in the proper exercise of its discretion.Second, spendthrift provisions generally prohibit creditors of trust beneficiaries from reaching their interests without regard to the size of the trust or the needs and circumstances of the beneficiary and the creditor. Under the UTC, the only creditors whose claims are not barred by such a provision are child support and alimony claimants, the state or federal government, and creditors who provided services for the protection of the beneficiary's interest in the trust. Absent from the list are tort claimants. Unlike the Restatement of Trusts, the UTC allows a spendthrift provision to bar the claims of tort claimants without regard to the nature of the tortfeasor/beneficiary's conduct. In the context of two recent cases raising this issue, this Article argues that at least when the beneficiary's conduct is grossly negligent, reckless, or intentional, a spendthrift provision should not protect the beneficiary's interest from tort claimants. Alan Newman http://works.bepress.com/alan_newman/3 http://works.bepress.com/alan_newman/3 Wed, 24 Oct 2007 11:22:36 PDT The Intention of the Settlor Under the Uniform Trust Code: Whose Property Is It, Anyway?The question of the extent to which the owner of property may transfer it gratuitously, subject to enforceable restrictions on alienability and use, has a long history. To protect the living from control by the dead, as well as the alienability of property, the law traditionally has refused to enforce some such restrictions. Opposing those interests, however, is the interest in respecting the freedom of the owner of property to dispose of it subject to whatever restrictions he or she chooses to impose. The Uniform Trust Code ("UTC"), promulgated in 2000, is the first comprehensive national codification of the law of trusts. As such, it provides an excellent opportunity to examine current thinking on how the balance should be struck between the property rights of trust settlors who wish to control the future enjoyment of their property by others, and the interests of trust beneficiaries whose enjoyment of the property is limited by settlor imposed restrictions. The purpose of this Article is to engage in that examination.Generally, the UTC provides default rules that apply only if and to the extent that the settlor does not provide otherwise in the instrument. The settlor's ability to override the UTC's rules, however, is expressly limited by mandatory rules, on fundamental subjects, that apply regardless of the settlor's express intent to the contrary. Although the UTC's mandatory rules will serve as an important focus of this Article, the issue of the extent to which the settlor's intent will be respected under the UTC arises in a variety of other contexts that also will be analyzed.The tension between the property rights of settlors and the interests of beneficiaries exists with respect to many subjects addressed by the UTC, including (i) the modification and termination of trusts, (ii) the alienability of the beneficiary's interest, (iii) the rights of beneficiaries to receive information about the trust, (iv) the ability of the beneficiaries to change the trustee, (v) the ability of the settlor to impose value limiting restrictions on the management and investment of trust assets, and (vi) the ability of the settlor to relieve the trustee from the duty to act in good faith and to exculpate the trustee from liability for breaching a fiduciary duty. UTC provisions with respect to the settlor's ability to control property transferred in trust also involve the settlor's ability to fix the trustee's compensation or to waive or require a trustee's bond; the requirements for creating a valid trust, including that its purposes not violate public policy; the ability of the beneficiaries and the trustee to act collectively in ways that circumvent the settlor's intent; and the court's overriding ability to act as necessary in the interests of justice. The Article will demonstrate that the UTC has taken modest steps towards accommodating the interests of beneficiaries when those interests will not be served by strict adherence to the settlor's intent as set forth in the terms of the trust. In other respects, consistent with the common law, the UTC continues to honor the settlor's intent. Finally, in some respects the UTC provides greater protection to the settlor's intent than under common law. Alan Newman http://works.bepress.com/alan_newman/2 http://works.bepress.com/alan_newman/2 Wed, 24 Oct 2007 11:12:00 PDT Spendthrift and Discretionary Trusts: Alive and Well under the Uniform Trust CodeAmong the provisions of the Uniform Trust Code ("UTC" or the "Code") that have attracted the most attention are those of Article 5: Creditor's Claims; Spendthrift and Discretionary Trusts. Although much of the UTC is a codification of the common law of trusts, there are many differences among the states in their handling of various creditors' rights issues, and many jurisdictions have no law on some of those issues. As a result, there is no well-accepted, established common law on some of the issues addressed by Article 5. Further, while the UTC's approach to many creditors' rights issues is consistent with the common law in many states, in other respects the UTC's approach is innovative and differs from existing law in many states. In some ways, Article 5 enhances the asset protection planning traditionally afforded by trusts, while at least in the context of the right of a child, spouse, or former spouse of a beneficiary of a discretionary trust to compel distributions he or she can reach, in many states the UTC would enhance creditors' rights.This Article addresses spendthrift and discretionary trust issues under the UTC in a question and answer format that is intended to respond to concerns, issues, and claims that have been raised or made with respect to the UTC's creditors' rights provisions. As it demonstrates, much of the criticism the UTC has received over this subject is unwarranted. Some of the criticism, however, has been instrumental in recent revisions to creditors' rights provisions of the Code and its comments. While those revisions may not have satisfied all of the concerns of some of the UTC's critics, they clarify that the Code will not have the adverse effects on the protections trusts have traditionally provided that its critics predict. Alan Newman http://works.bepress.com/alan_newman/1 http://works.bepress.com/alan_newman/1 Wed, 24 Oct 2007 10:53:39 PDT THE UNIFORM TRUST CODE: AN ANALYSIS OF OHIO'S VERSIONThe Uniform Trust Code (UTC), which was promulgated in 2000, is the first national codification of the law of trusts. It has been adopted, with modifications, in 19 jurisdictions and is under consideration for adoption in many others. The Ohio Trust Code (OTC), which includes many significant modifications from the UTC, was enacted in June 2006, with an effective date of January 1, 2007.The OTC is the product of extensive study of the UTC by a joint committee of members of the Estate Planning, Trust, and Probate Law Section of the Ohio State Bar Association and members of the Legal, Legislative, and Regulatory Committee of the Ohio Bankers League. Members of the Ohio Probate Judges Association also participated in the process. Input also was received by the Family Law Section of the Ohio State Bar Association, the Ohio Attorney General's office, and many lawyers and bankers across the state. It is a comprehensive codification of trust law in Ohio.This Article examines the OTC, changes it has made to existing Ohio law, changes made to it from the UTC, policy considerations with respect to its enactment, and various issues it raises, and makes recommendations for changes to it by amendment. Considerable attention is directed to its creditors' rights provisions. The UTC's provisions on that subject have been among its most controversial (and played a significant role in its defeat in Colorado and Oklahoma, and in its repeal in Arizona). The OTC's creditors' rights provisions depart significantly from the UTC's and include innovations (for example, a statutory "wholly discretionary trust" and provisions designed to address issues peculiar to special needs trusts for incapacitated persons who are receiving, or anticipate receiving, public assistance) that have received considerable attention. Among the other provisions of the OTC that depart in significant ways from the UTC that the Article addresses are those on the trustee's duty to keep beneficiaries informed about the trust and the settlor's right to modify that duty; the ability of persons interested in a trust to enter into "private settlement agreements;" and the modification and termination of trusts. Alan Newman