1. NEW WASHINGTON TRUST ACT & REVISED SLAYER STATUTE
The Past, Present and Future of fiduciary obligations under Washington Law
Presented by:
Stephanie R. Taylor
Randall|Danskin
A Professional Service Corporation

2. Existing Statutes Impacted by SHB 1051
RCW Definitions and Use of Terms
RCW Notice of Appointment as Personal Representative, Pendency of Probate –Proof by Affidavit
RCW Powers of Personal Representative Under Nonintervention Will – Scope – Relief from Duties, Restrictions, Liabilities by Will
RCW Attorney or Agent Granted Principal’s Powers – Powers to be Specifically Provided For – Transfer of Resources by Principal’s Attorney or Agent
RCW 11.96A.030 Definitions (TEDRA)
RCW 11.96A.050 Venue in Proceedings Involving Probate or Trust Matters
RCW 11.96A.070 Statutes of Limitation
RCW 11.96A.110 Notice in Judicial Proceedings Under this Title Requiring Notice
RCW 11.96A.120 Application of Doctrine of Virtual Representation
RCW Power of Trustor –Trust Provisions Control
RCW Application of Chapter [Trusts]
RCW Nonjudicial change of trustee – Judicial appointment or change of trustee – Liability and duties of successor fiduciary
RCW Criteria for transfer of trust assets or administration
RCW Nonjudicial transfer of trust assets or administration – Notice – Consent required
RCW Judicial transfer of trust assets or administration
RCW Power of trustee
RCW Nonliability of third persons without knowledge of breach
RCW [Investment of Trust Funds] Dealings with self or affiliate

3. New Sections Added to Existing Chapters
RCW 11.96A Trust and Estate Dispute Resolution (TEDRA)
RCW Effect of Trust Instrument
RCW Trusts
Title 11 PROBATE AND TRUST LAWS

4. Statutes affected by proposed amendments
RCW
Trustees – who may serve
RCW 11.96A.050
Venue in proceedings involving probate or trust matters
RCW 11.96A.070
Statutes of limitations
RCW 11.96A.120
Virtual Representation
RCW 11.96A.125
Mistake of fact or law in terms of will or trust – Judicial reform
RCW
Power of trustor – Trust provisions control
RCW
Trust situs and governing law
RCW
Relinquishment of powers by Trustee
RCW
Nonjudicial change of trustee – Judicial appointment or change of trustee – Liability and duties of successor fiduciary
RCW
Change of trustee- Discharge of outgoing trustee, when
RCW
Criteria for transfer of trust assets or administration
RCW
Nonjudicial transfer of trust assets or adminsitration – Notice – Right to Object
RCW
Consolidation of trusts
RCW
Trustor’s powers – Powers of withdrawal
RCW
Limitation on action contesting validity of revocable trust –Distribution of trust property

5. Proposed New RCWs Added to Existing Chapters
NEW SECTION – Definitions
RCW
NEW SECTION – Accepting or declining trusteeship
RCW
NEW SECTION – Duty to keep beneficiaries informed
NEW SECTION - Application

6. Fiduciary Obligations
Duty of Loyalty - RCW
Codifies duty of loyalty
Spells out circumstances in which trustee must provide additional information to beneficiary
Sale, encumbrance or transaction involving the investment or management of trust property entered into by the trustee for the trustee’s own personal account or
Transaction which is otherwise affected by a conflict between the trustee’s fiduciary and personal interests
Transaction is voidable by beneficiary (without further proof) unless:
Trust authorized transaction
Court approved (TEDRA Agreement)
SOL has expired
Beneficiary consented, ratified or released the Trustee
Transaction was executed prior to the fiduciary relationship

7. Fiduciary Obligations (con’t)
Transaction is “presumed” to be a conflict if it is entered into by the trustee with…a corporation or other enterprise in which the trustee, or a person that owns a significant interest in the trustee, has an interest that might affect the trustee’s best judgment
Presumption can be overcome if the trustee establishes that the conflict did not adversely affect the interests of the beneficiaries
Conflict does not exist in an investment by the trustee in securities of an investment company to which the trustee provides services in a capacity other than as trustee
Investment must comply with the prudent investor rules

8. Notice to Beneficiaries
Prior Law – Case Law
Allard v. Pacific Nat’l Bank, 99 Wn.2d 394 (1983)
“That the settlor has created a trust and thus required the beneficiaries to enjoy their property interests indirectly does not imply the beneficiaries are to be kept in ignorance of the trust, the nature of the trust property and the details of its administration.”
A Trustee has a duty to inform beneficiaries fully of all facts which would aid them in protecting their interests
RCW
A trustee must provide written notice of any "significant non-routine transaction" to "each person who is eighteen years or older and to whom income is presently payable or for whom income is presently being accumulated for distribution as income…."
However, this statute does not abrogate the Trustee’s obligation to keep the beneficiaries reasonably informed of all facts. Flohr v. Flohr, (unpublished) 2002 Wn. App. LEXIS 590.

9. Notice to Beneficiaries (con’t)
RCW (2) – Initial Notice
Within 60 days of the acceptance of an irrevocable trust (or a revocable trust becomes irrevocable), the Trustee shall give notice of:
The existence of the trust
The identity of the trustor(s);
The Trustee’s name, address and telephone number; and
The right to request such information as is reasonably necessary to enable the enforcement of the beneficiary’s rights
Proposed Revision – RCW (2) is deleted; Replaced by New Section RCW

10. Proposed notice to beneficiaries
[Proposed] RCW – Duty to keep beneficiaries informed
(1) A trustee shall keep all “qualified beneficiaries” reasonably informed about the administration of the trust and the material facts necessary for them to protect their interests
“Qualified Beneficiaries” defined by RCW (Proposed New Section)
(2) Sixty (60) day notice of existence of trust to Qualified Beneficiaries

11. Notice to Beneficiaries (con’t)
Notice of Administration of the Trust – Revised RCW (3)
What information do they receive?
All material facts necessary for them to protect their interests
Presumption that information is sufficient if it contains:
Receipts and disbursements of principal and income
Beginning and ending values of assets and liabilities
Trustee’s compensation
Agents hired by the trustee, their relationship to the trustee, if any, and their compensation
Disclosure of any pledge, mortgage, option or lease of trust property, or other agreement affecting trust property binding for 5 years or more
Disclosure of all transactions that are affect the duty of loyalty and could be a conflict of interest
Statement that the beneficiary may petition the court to obtain a review of the statement and of the acts disclosed
Statement that claims against the trustee for breach may not be made after 3 years from the date of the statement

12. Notice to Beneficiaries (con’t)
What other information are beneficiaries entitled to?
If requested, all information related to the administration of the trustee unless “unreasonable” under the circumstances
Information must be turned over within 60 days of the receipt of the request

13. Notice to Beneficiaries (con’t)
Who receives notice?
All persons “interested in the trust” and
All persons who would be entitled to notice under TEDRA if they were a party to judicial proceedings
Virtual Representation (RCW 11.96A.120 (3)(d)
Power of Appointment - Proposed revisions to RCW 11.96A.120 change the how a holder of a power of appointment may virtually represent the permissible appointees
Minor Beneficiaries
If no guardian has been appointed, notice may be given to parents
Charitable Organizations
Attorney General if interest is future interest only
[Proposed] RCW – Only qualified beneficiaries entitled to notice

14. Proposed notice to beneficiaries (con’t)
[Proposed] RCW (3) Deleted
Replaced with:
RCW 11.96A.070 – Statutes of limitation (existing with proposed modifications) and
Proposed RCW – Duty to keep beneficiaries informed
Under the proposed legislation, obligations may be waivable by Trustor
Statute of limitations does not start to run until such time as a beneficiaries receives required information under RCW 11.96A.070

15. Proposed notice to beneficiaries (con’t)
[Proposed] RCW – Waiver
Duty to keep beneficiaries reasonably informed is waivable as follows:
(3) TT not required to provide “administration information” to any beneficiary of a trust other than spouse if (a) spouse has capacity; (b) spouse is only “permissible distributee”; and (c) all other “qualified beneficiaries” are descendants of the trustor and the trustor’s spouse
(4)No duty too keep beneficiaries reasonably informed or to inform them of the existence of a revocable trust
(5) The trustor may waive or modify the notification requirement of (2) and (3) in the trust document or in a separate writing, made at any time, that is delivered to the trustee.

16. Result of Breach of Fiduciary Duties
Damages for Breach of Trust (new section to RCW 11.98)
Prior law – discretion with the court
Current Law – A trustee who commits a breach of trust is liable for the greater of:
The amount required to restore the value of the trust property and trust distributions to what they would have been had the breach not occurred; or
The profit the trustee made by reason of the breach

17. Waiver of fiduciary obligations
RCW
The Trustor of a trust may by the provisions of the trust relieve the trustee from any or all of the duties, restrictions and liabilities which would otherwise be imposed by law
Exceptions:
A trustee cannot not relieved of its duty of good faith and honest judgment
A trustee cannot be relieved of its duty to account (See, Estate of Hitchcock, 140 Wn.App. 526 (2007)).
Exculpatory Clauses
A savings clause may save the trustee from liability for
Mistake or error of judgment;
Losses not intentionally or voluntarily incurred; or
Negligence.

18. Waiver of fiduciary obligations (con’t)
Non-Waivable Duties and Obligations –
It is against public policy to remove the trustee from all accountability
A provision in a trust instrument is not effective to relieve the trustee of liability for a breach of trust committed in bad faith, or of liability for any profit for which the trustee has derived from a breach of trust.
A saving or exemption provision will not save or limit the trustee from liability for –
Bad faith;
An excess of authority;
An abuse by the trustee of a fiduciary or confidential relationship to the settlor;
Breaches committed intentionally or with reckless disregard to the beneficiary’s interest.

19. Waiver of fiduciary obligations (con’t)
RCW
In no event may a trustee be relieved of the duty to act in good faith and with honest judgment or the duty to provide information to beneficiaries
Exculpation of Trustee RCW 11.98
An exculpatory “term” which was inserted as the result of an abuse of a fiduciary relationship is unenforceable
An exculpatory “term” drafted or caused to be drafted by the trustee is invalid as an abuse of a fiduciary relationship unless the trustee proves that the exculpatory “term” is fair under the circumstances and that its existence and contents were adequately communicated to the trustor
Beneficiary may consent, ratify or release trustee

20. Statute of limitations
Revocable Trusts
Prior Law – Uncertain
RCW
Challenge to validity of revocable trust must be made at the earlier of
2 years (24 months) after Trustor’s death or
4 months after the Trustee provides notice of trusts’ existence and notice of the time allowed for commencing a challenge

21. Statute of limitations (con’t)
Irrevocable Trusts
Challenges to Administration
Prior Law – RCW 11.96A.070(1)(a)(i)
An action against the trustee for breach of fiduciary duty must be brought within 3 years from the earlier of:
The time the alleged breach was discovered or
The time the alleged breach reasonably should have been discovered
The trustee has the burden of establishing when the beneficiary knew or should have known

22. Statute of limitations (con’t)
Irrevocable Trusts (con’t)
RCW (3)
If the Trustee provides the written statement required herein, the statue of limitations expires 3 years from the date the beneficiary receives the statement
If the Trustee does not provide the written statement, the statute of limitations is 3 years from the first to occur of:
The removal, resignation, or death of the trustee;
The termination of the beneficiary’s interest in the trust; or
The termination of the trust
Proposed Changes – Delete RCW (3); replace with existing RCW 11.96A.070

23. Miscellaneous New Provisions
Certification of Trust (New Section to RCW 11.98)
Date Trust came into existence
Identity of the Trustor
Identity and address of current Trustee
Relevant powers of Trustee
Revocability or Irrevocability
Authority of the cotrustees to sign or otherwise authenticate and whether all or less than all are required in order to exercise powers of the trustee
Name of the trust or the titling of the trust assets

24. Miscellaneous New Provisions (Con’t)
Venue - Revised RCW 11.96A.050
Venue for trusts shall be:
For testamentary trusts, in the superior court of the county where the probate of the will is being administered, where any beneficiary resides or has a place of business, the county where any trustee resides or has a place of business, or the county where any real property that is an asset of the trust is located
For all other trusts, in the superior court where any beneficiary resides, the county where any trustee resides or has a place of business, the county where any real property that is an asset of the trust is located
Upon request for change, the court may change to the county with the “strongest connection”

25. Miscellaneous New Provisions (Con’t)
Situs – New Section to RCW 11.98
If trust designates WA as situs or that WA law governs, then the situs is WA if one of the following conditions are met:
Trustee has place of business in WA or is a resident of WA; or
More than an insignificant part of the trust administration occurs in WA; or
Trustor resides in WA at the time situs is established or at the time the trust became irrevocable; or
One or more beneficiary resides in WA; or
Real property owned by the trust is located in WA
Trustee may register trust in WA
Must provide notice to beneficiaries who have 30 days to object to such registration
Transfer of trust administration to a foreign trustee does not change situs (Revised RCW (6))

26. TRUST MODIFICATIONS TEDRA – RCW 11.96A.030
Trust and estate attorneys have taken this section to allow any modifications or terminations of trusts
However, RCW 11.96A.030(2)(h) and RCW A.125 creates a new category under “matter” to provide that a “matter” is
The reformation of a will or trust to correct a mistake under Section 11 of the new Act
Section 11 of the Act provides that the terms of a will or trust, even if unambiguous, may be reformed to conform the terms of the intention of the testator/trustor if it proved by clear, cogent and convincing evidence, or the parties to a TEDRA Agreement agree that there is clear, cogent and convincing evidence, that both the intent of the testator/trustor were affected by a mistake of fact or law, whether in expression or inducement

27. TRUST DISTRIBUTIONS New Section is added to RCW 11.98.145
Distribution upon Termination
Trustee may send a plan of distribution
Must include notice that the beneficiary has a right to object to the plan, including any non pro rata distributions
Must include the time period within which to object
The beneficiaries right to object terminates if the beneficiary does not object within 30 days

28. APPLICATION Application
Act applies to all trusts created before, on or after 1/1/2012;
Act applies to all judicial proceedings concerning trusts commenced on or after 1/1/2012;
Any rule of construction or presumption provided in this act applies to trust instruments executed before 1/1/2012, unless there is a clear indication of a contrary intent in the terms of the trust;
An action taken before 1/1/2012 is not affected by this act;
If a right is acquired, extinguished or barred upon the expiration of a prescribed period that has commenced to run under any other statute before 1/1/2012, that statute continues to apply to the right even if it has been repealed or superceded

29. Revisions to Washington’s Slayer Statute
Washington’s “Slayer Statute” (RCW and RCW 11.84)
Impact of Revisions
A slayer or abuser is deemed to have predeceased the decedent as to property which would have passed from the decedent to the slayer or abuser
Abuser is defined as one who participates in the willful and unlawful financial exploitation of a vulnerable adult

30. Revisions to Washington’s Slayer Statute
Financial Exploitation
Use of deception, intimidation or undue influence by a person in a position of trust and confidence to obtain or use the property, income, resources, or trust funds for the benefit of a person other than the vulnerable adult
Breach of a fiduciary duty (including the misuse of a trust) that results in the unauthorized appropriation, sale or transfer of property, income, resources or trust funds for the benefit of a person other than the vulnerable adult
Obtaining or using the VA’s property, income, property or trust funds without lawful authority, by a person or entity who knows or clearly should know that the VA lacks the capacity to consent to the release or use of such property.
Vulnerable Adult
An incapacitated person or a person who is otherwise unable to care for his or herself

31. Questions??? RANDALL|DANKSIN 601 W. Riverside Avenue, Suite 1500
A Professional Service Corporation
601 W. Riverside Avenue, Suite 1500
Spokane, WA 99201
(509) – Fax: (509)