4/25/2014

Bill Before NH Legislature Would Impact Estate Plans

The New Hampshire Legislature is considering (and seems likely to pass) Senate Bill 289, a fairly sweeping piece of legislation that has among its objectives:
  • clarification of the extent to which creditors may assert claims against a decedent’s revocable trust
  • reduction of post-mortem litigation concerning the validity of a decedent’s estate planning documents
  • refinement of the Uniform Trust Code. 

 

Decendent's Creditors

New Hampshire’s probate statutes provide an executor with fairly robust procedures for dealing with the claims of a decedent’s creditors. Generally, creditors must file a notice of a claim against a New Hampshire probate estate within six months after the appointment of an executor by the court, and must follow up that notice with a formal suit against the executor within one year from the date of the executor’s appointment. This relatively short statute of limitations arms executors of probate estates with the ability to address claims of creditors quickly, which in turn positions them to make distributions to beneficiaries on a reasonably expeditious schedule (which helps reduce frustration that can sometimes escalate to litigation).

With the increased use of revocable trusts to avoid probate court involvement in the distribution of decedents’ estates, the process for dealing with creditors’ claims became ambiguous. The New Hampshire Uniform Trust Code contains provisions that expressly subject the assets of a decedent’s revocable trust to the claims of the decedent’s creditors, but the Code currently does not contain procedural mechanisms for vetting those claims, leaving trustees of revocable trusts without the protection of the robust limitations periods that protect executors of probate estates (for brevity, the term executor is used to denote both executors of probate estates in which the decedent left a Will, and administrators of probate estates in which the decedent died intestate). Senate Bill 289 seeks to address this gap in procedure by providing trustees of revocable trusts with a non-judicial notice procedure for limiting to one year the period of time within which a decedent’s creditors may file claims against the trustee (similar provisions are incorporated to protect the trustees of certain irrevocable trusts).

Post-mortem Litigation

Continuing this theme of reducing estate-related litigation, SB 289 sets forth a new judicial procedure for proving the validity of a testator’s Will while the testator is alive. If a testator anticipates that someone in his or her family may challenge the validity of his or her Will, he or she would be able to petition the Probate Division of the Circuit Court seeking to have the court determine that the Will is valid while the Testator is alive and capable of testifying as to his or her intentions (and also present evidence regarding his or her mental capacity). The bill would also bolster the enforceability of no-contest clauses in Wills and trusts.

Uniform Trust Code

However, the lion’s share of SB 289’s 40 sections (as currently revised) are devoted to technical revisions to New Hampshire’s Uniform Trust Code. Among these are provisions reinforcing the application of New Hampshire’s statutory scheme to trusts that migrate to New Hampshire from other states, some broadening a trustee’s power to effect modifications of irrevocable trusts via decanting and other forms of amendment, and some that clarify the roles and relative responsibilities of trustees, trust protectors, and trust advisors.

Much of this portion of the bill is designed to enhance the attractiveness of New Hampshire as a jurisdiction to administer trusts, is highly technical, and is beyond the scope of this blog post.

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