Private Client Services Update – Alternatives for Waiver of Testamentary Trust Accountings
By Edward R. Stolle, Estate, Trust & Wealth Transfer
Even though there are good estate planning approaches available under Virginia law for clients who wish to avoid probate and court supervision of the administration of their estate and trusts, there are many who still prefer to have a will as their main testamentary document. Often these clients wish to include one or more trusts (testamentary trusts) in their wills to meet their planning needs.
Testamentary trusts are subject to court supervision in Virginia, with requirements that include qualification of the trustee with the clerk of the circuit court, and filing of an inventory and annual accountings of the trust assets with a Commissioner of Accounts. Although avoiding court supervision is often the default recommendation, some clients, when fully informed of the considerations, will opt for the protections that court supervision offers, especially for minor or disabled beneficiaries.
But what if the client, when preparing their estate plan, or a trustee of a testamentary trust at the beginning or during the administration of the trust, decides that court supervision is not necessary or desired for a particular testamentary trust, and they wish to have these requirements waived? The applicable law is set forth in Virginia Code Section 64.2-1307. This Section has been amended a number times over the years and on first reading, it is a bit confusing. Hopefully, the information below will help highlight the options.
There are three main options that may be available depending on wording of the will and the date of probate of the will, and there are certain requirements that must be satisfied by the trustee to obtain a waiver of the inventory and accounting requirements.
- If the will is probated after 7/1/1993, and if the will contains the waiver language (discussed below), the trustee may obtain a waiver if, within 90 days of the trustee’s qualification with the court, the trustee provides written notice to the current beneficiaries (discussed below) and satisfies the other requirements of the statute.
- Whenever probated, if the will contains the waiver language, the trustee may obtain a waiver if the trustee obtains the written consent of the current beneficiaries and satisfies the other requirements of the statute.
- If the will is probated after 7/1/2010, and if the will does not direct that an inventory and accountings must be filed, the trustee may obtain a waiver if the trustee obtains the written consent of current beneficiaries, including written consent by the representatives of incapacitated beneficiaries, and satisfies the other requirements of the statute.
In the first two alternatives, the will must include the waiver language for the waiver option to apply. A provision in the will substantially similar to, “I hereby direct that my trustee(s) shall not be required to file annual accounts with a court as otherwise required by Virginia law,” will satisfy the waiver language requirement.
In the third alternative, no waiver language is required in the will, and a waiver may be obtained unless the will contains a provision that substantially provides, “I hereby direct that my trustee(s) shall be required to file annual accounts with a court as otherwise required by Virginia law.”
The notification and consents must be in writing to or from all adult beneficiaries to whom income or principal of the trust could be currently distributed (current beneficiaries). The third alternative also requires the written consent of representatives of incapacitated beneficiaries as further detailed in the statute.
For all of the alternatives, the statute requires the trustee (i) to provide the beneficiaries with copies of the applicable provisions of the will, (ii) advise each beneficiary of his or her right to require an annual accounting, (iii) provide each beneficiary with a copy of Section 64.2-1307, and (iv) annually thereafter provide each beneficiary with an accounting of the trust assets upon request. Additionally, the trustee must file evidence of satisfaction of the requirements of the statute with the Commissioner of Accounts.
Section 64.2-1307 also provides that in spite of any prior waiver or consents by beneficiaries under the statute, any beneficiary may at any time during the administration of the trust demand in a writing delivered to the trustee and the Commissioner of Accounts that the trustee settle his or her accounts annually with the Commissioner of Accounts and, following the transition approach indicated in the statute, the trustee must comply with that demand.
For those who wish to use a will for planning and administration of their estate and trusts, with thoughtful discussion, planning and drafting, Section 64.2-1307 can provide the flexibility of utilizing the protection of court supervision for certain trusts or during certain periods of trust administration or waiving such requirements as deemed appropriate by the client.
Edward R. Stolle is a member of Kaufman & Canoles’ Virginia Beach office. He is a Commissioner of Accounts for the Virginia Beach Circuit Court and is current Chairman of the Virginia Judicial Council, Standing Committee on Commissioners of Accounts. Ed’s practice focuses on estate and trust administration and planning, business formation and transactions, and commercial real estate transactions.
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.