Washington Trust Laws' Extreme Makeover: Blending With the Uniform Trust Code and Taking Reform Further With Innovations in Notice, Situs, and Representation

• Publication year: 2021

WASHINGTON TRUST LAWS' EXTREME MAKEOVER: BLENDING WITH THE UNIFORM TRUST CODE AND TAKING REFORM FURTHER WITH INNOVATIONS IN NOTICE, SITUS, AND REPRESENTATION

Karen E. Boxx (fn*) and Katie S. Groblewski(fn**)

Abstract: Washington trust laws were comprehensively revised in 2011 and 2013, resulting in the integration of concepts from the Uniform Trust Code and the addition of some novel provisions. This article discusses in depth the evolution of Washington law regarding the duties to inform and report, the situs of a trust, and representation of interested parties. In addition, this article discusses other UTC provisions that were integrated into Washington statutes and gives an explanation of any departures from UTC language and prior Washington law.

INTRODUCTION ................................................................................ 815

I. BACKGROUND ON WASHINGTON TRUST LAW AND THE UTC ..................................................................................... 817

II. DUTIES TO INFORM AND REPORT TO BENEFICIARIES .. 819

A. Prior Washington Law ........................................................ 820

B. Duties to Inform and Report Under the UTC ..................... 827

1. General Duty to Inform ................................................ 828

2. Specific Reporting Requirements ................................. 829

3. Duties for a Revocable Trust-Statutory Exception .... 830

4. Waiver of the Duties to Inform ..................................... 831

C. Washington's 2011 Legislation .......................................... 832

1. General Duty to Inform ................................................ 832

2. Specific Reporting Requirements ................................. 835

3. Duties for a Revocable Trust-Statutory Exception .... 836

4. Waiver of the Duties to Inform ..................................... 837

D. Washington's 2013 Legislation .......................................... 837

1. General Duty to Inform ................................................ 838

2. Specific Reporting Requirements ................................. 840

3. Duties for Revocable Trusts or "Spousal Trusts"- Statutory Exceptions ..................................................... 841

4. Waiver of the Duties to Inform and the Statutory Exceptions .................................................................... 842

5. Effective Dates of the New Notice-Related

Provisions ..................................................................... 843

III. DETERMINATION OF TRUST SITUS ..................................... 844

A. Role of Trust Situs .............................................................. 844

B. Prior Washington Law ........................................................ 852

C. Situs Under Washington's New Law ................................. 852

IV. REPRESENTATION ................................................................... 857

A. General Overview ............................................................... 857

B. Prior Washington Law ........................................................ 859

1. Fiduciary Representation .............................................. 859

2. Court-Appointed Representation .................................. 860

3. Virtual Representation .................................................. 861

C. Representation Under the Uniform Trust Code .................. 864

1. Limitations to Representation ....................................... 864

2. Virtual Representation .................................................. 865

3. Fiduciary Representation ............................................. 867

4. Court-Appointed Representation ................................. 867

E. Washington's Adaptation of Representation in 2011 and 2013 .................................................................................... 867

1. Limitations on Representation ...................................... 868

2. Fiduciary Representation .............................................. 869

3. Virtual Representation .................................................. 870

a. Parent for Child ...................................................... 870

b. Representation of Minor, Unborn, Unascertainable, and Missing Beneficiaries .......... 871

c. Holder of Power of Appointment ........................... 871

d. Representation of Charities by the Attorney General ................................................................... 873

4. Court Appointed Representation .................................. 873

D. Remaining Issues in Washington Law of Representation .. 874

1. Semantic Issues ............................................................. 874

2. "Same Interest" Concept .............................................. 875

3. Timing of Determination of No Conflict ...................... 876

4. Overlap ......................................................................... 877

5. Proposed Amendment to RCW 11.96A.120 ................. 877

V. OTHER CHANGES ..................................................................... 878

A. Duty of Loyalty .................................................................. 878

B. Statute of Limitations ......................................................... 882

C. Rules of Construction ......................................................... 883

D. Consolidation of Trusts ...................................................... 884

E. UTC Definitions ................................................................. 884

F. Use of Email for Notice ...................................................... 885

G. General Trust Provisions .................................................... 885

1. Trust Creation ............................................................... 886

2. Evidence of Oral Trust ................................................. 888

3. Noncharitable Purpose Trusts ....................................... 888

4. Cy Pres .......................................................................... 889

H. Reformation of Mistakes .................................................... 890

I. Default and Mandatory Rules ............................................. 891

J. Change of Situs .................................................................. 892

K. Venue ................................................................................. 893

L. New Chapter on Revocable Trusts ..................................... 893

M. Accepting and Declining Trusteeship ................................ 895

N. Trustee Powers ................................................................... 896

O. Plan of Distribution Upon Termination of Trust ................ 896

P. Nonliability of Third Persons Without Knowledge of Breach ................................................................................. 897

Q. Exculpatory Clauses ........................................................... 897

R. Beneficiary Consent, Release, or Ratification .................... 898

S. Certification of Trust .......................................................... 898

T. Damages for Breach of Trust ............................................. 898

U. Effective Dates ................................................................... 899

APPENDIX A ...................................................................................... 900

RCW 11.96A.120 - REPRESENTATION ........................................... 900

INTRODUCTION

The Washington State legislature passed a sweeping update of the Washington trust statutes in its 2011 legislative session (the "2011 Legislation").(fn1) The 2011 Legislation was a product of a Washington State Bar Association task force formed in 2003 (the "2003 Task Force") to evaluate the Uniform Trust Code (UTC), which was approved by the National Conference of Commissioners on Uniform State Laws in 2000.(fn2) The 2003 Task Force(fn3) initially determined that instead of a wholesale adoption of the UTC, it would develop and propose a bill that incorporated aspects of the UTC but essentially preserve the structure and substance of the existing Washington trust statutes. Washington already had a well-developed statutory framework for trust law as a result of major efforts by the state bar that resulted in legislation in 1984 and 1999.(fn4) Some existing Washington law had even been used as models for UTC provisions.(fn5) The 2003 Task Force wanted to retain the groundbreaking innovations already part of Washington trust law while recognizing that there were still gaps and room for improvement. The resulting 2011 Legislation, which became law January 1, 2012, included many provisions of the UTC as written, several UTC provisions that were amended by the 2003 Task Force to better suit Washington trust practice, and some provisions that addressed issues that were not covered by the UTC but which the 2003 Task Force believed were necessary. Implementation of the 2011 Legislation raised numerous issues within the Washington practitioner community, and the Real Property, Probate, and Trust section of the state bar formed another task force (the "2012 Task Force") to consider amendments to the 2011 Legislation.(fn6) The result of the second task force was Senate Bill 5344, which was signed into law on May 16...