Private Client Services Update – 2012 Virginia Legislative Update – Trusts & Estates Law
The 2012 session of the Virginia General Assembly resulted in several important changes to trusts and estates law, most of which became effective July 1, 2012. Below are some of the more notable changes.
Self-Settled Spendthrift Trusts – Senate Bill No. 11
Enacts Virginia Code § 55-545.03:2 and 55-545.03:3 allowing individuals to establish irrevocable discretionary self-settled spendthrift trusts that can hold assets for their benefit without being subject to creditor claims. For more information on this topic, please see the recent Private Client Services newsletter prepared by Larry Cumming on self-settled spendthrift trusts.
‘Decanting’ Trusts – Senate Bill No. 110
Enacts Virginia Code § 55-548.16:1 authorizing ‘decanting’ trusts, which allow the trustee of an irrevocable trust to appoint trust assets into other trusts for further distribution according to the terms of the second trust. This legislation provides a very beneficial tool for trustees. For more information on this topic, please see the recent Private Client Services newsletter prepared by Bob Powell on ‘decanting’ trusts.
Notice of Preexisting Death Benefits After Divorce – House Bill No. 282
Amends Virginia Code § 20-111.1 such that divorce decrees and annulment decrees entered after July 1, 2012 must contain a conspicuous warning that the decree may not revoke certain beneficiary designations of the prior spouse as beneficiary to a death benefit, alerting the parties that further action may be required in such circumstances to amend such beneficiary designations.
Automatic Cancellation of Power of Attorney in Certain Circumstances – House Bill No. 677
Amends Virginia Code § 26-81 to provide that an agent under a power of attorney has no authority to act for the principal upon the filing of the following actions between the principal and agent: divorce, annulment, legal separation, separate maintenance, or custody or visitation of their child.
Non-Virginia Executors & Trustees – House Bill No. 763
Amends Virginia Code § 64.1-150 to provide that a non-Virginia resident executor or trustee under a will probated in another state is authorized to transfer title to real estate located in Virginia, even though the executor or trustee did not qualify in Virginia. The non-Virginia executor or trustee must have qualified in the state where the will was probated, the will must be considered valid under Virginia law, the will must give the executor or trustee the right to convey the property and an authenticated copy of the will must be admitted to probate in the Virginia jurisdiction where the property is located. This legislation creates a very efficient and user-friendly rule in Virginia, but will mainly benefit non-Virginia residents. Hopefully, other states will follow suit, easing the administrative burden involved in interstate estate administrations.
Extension of Tenants by the Entirety Protection – House Bill No. 229
Amends Virginia Code § 55-37 to provide that a lien for a judgment under the doctrine of necessaries (spousal liability for certain debts of the other spouse) will not attach to a home previously held by spouses as tenants by the entirety if the tenancy ended only as a result of the death of one of the spouses.
Real Estate Tax Exemption for Disabled Veterans – House Bill No. 922 Amends Virginia Code § 58.1-3219.5 to confirm that disabled veterans and their spouses are exempt from real estate taxes on their principal residence. The exemption is applicable to the following types of ownership by the veteran (and spouse, if applicable): fee simple, tenancy for life, revocable trusts, and irrevocable trusts with life estate or continuing right of use and support. If the property is owned by the veteran (and spouse) and others, then the exemption is prorated based on the ownership interests.
Settlor Income Tax Obligations – Senate Bill No. 432
Amends the Virginia Uniform Principal and Income Act and the Virginia Uniform Trust Code to authorize a trustee to use trust principal to pay the income tax incurred on income of the trust not distributed to the settler without causing other trust income or principal to be subject to the claims of the settlor’s creditors.
Notary Conflicts – Senate Bill No. 270
Amends Virginia Code § 47.1-30 to clarify that a person named in a document as executor or trustee, or as a person to receive notices, is not precluded from notarizing the document.
Increase of Certain Statutory Limits – House Bill No. 134
Amends Virginia Code § 8.01-606 to increase the statutory limits from $15,000 to $25,000, for certain distributions in the following circumstances without appointment of a separate fiduciary and/or without requiring further accounting:
- Amounts due to a person which are paid into court and later paid by the court to such person.
- Amounts paid to a third party for the benefit of a disabled person’s education, maintenance and support pursuant to court order or pursuant to approval of the Commissioner of Accounts.
- Amounts paid directly to a minor child who is of sufficient age to use it judiciously pursuant to court order or pursuant to approval of the Commissioner of Accounts.
- Amount that a fiduciary can continue administering without further accountings and without continuing surety, pursuant to court authorization, regardless of whether the fiduciary resides in the State of Virginia.
Protection of Trust Director Instructions – Senate Bill No. 180
Amends Virginia Code § 55-548.08 to protect trustees from liability when they follow the actions of a trust director when the trust document gives a trust director the power to direct the trustee. Protection under the statute requires the trust instrument to incorporate the statute by reference. This code section also imposes a fiduciary duty on a trust director to act in good faith with respect to the purpose of the trust and the beneficiaries’ interests. A trust director is liable for loss resulting from a breach of this duty. A trustee has no duty to monitor the trust director’s conduct, to provide the trust director with information beyond that which is requested in writing, or to do anything to prevent the trust director from acting.
Re-codification of Title 64.1 – Senate Bill No. 115
Results in a complete re-codification of Virginia Code Title 64.1 under new Title 64.2, which will combine current Titles 26 (Fiduciaries Generally), 31 (Guardian and Ward), 64.1 (Wills and Decedent’s Estates) and portions of Title 37.2 (provisions related to medical directives) and Title 55 (provisions related to uniform acts) to create a more comprehensive Title 64.2. Existing documents will not be affected. This legislation will become effective on October 1, 2012.
Will Holt is an associate attorney at Kaufman & Canoles, where his practice focuses on estate planning, business law, and real estate matters. Will is a member of the firm’s Private Client Services Group and the Real Estate Strategies Group. Will is a graduate of the College of William & Mary’s Marshall-Wythe School of Law. He can be reached at (757) 259.3885 or email@example.com.
Sarah Messersmith is an associate attorney at Kaufman & Canoles, where her practice focuses on wills, trusts and estates. Sarah’s work with clients ranges from the initial structuring and implementation of their estate plans to the resulting estate and trust administration. Her practice also includes working with owners of closely-held businesses and representation of clients in all aspects of real estate transactions. Sarah serves on the Board of Trustees of the Sarah Bonwell Hudgins Foundation and the Executive Council of the Virginia Bar Association Young Lawyers Division and is a member of the Peninsula Estate Planning Council. She is a Peninsula native and works in the firm’s Hampton office. Sarah can be reached at (757) 224.2950 or firstname.lastname@example.org..
The contents of this publication are intended for general information only and should not be construed as legal advice or a legal opinion on specific facts and circumstances. Copyright 2023.