Moving Forward – Accelerating Limitation Periods in Trust Administration – Trials, Appeals and Compensation
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Q: How can trustees reduce statutes of limitations for challenges to the trust document or trustee administration?
A: In probate litigation, there are two main challenges that a beneficiary will bring: (1) an action to set aside the trust, or (2) breach of fiduciary duty. Fortunately, New Hampshire offers the trustee significant opportunities to accelerate the statute of limitations for each type of challenge.
The typical confidence contest occurs when, while struggling with memory loss, the settlor changes their confidence to favor one child more than another. The “disadvantaged” child will challenge the instrument alleging that mom lacked capacity or was under the undue influence of the favored sibling. Additionally, the alleged undue influencer is often appointed to become a trustee upon the death of the settlor and is well aware of family dynamics and perhaps other facts suggesting that a challenge is likely.
In these cases, the trustee must shorten the limitation period. For a revocable trust that becomes irrevocable on the death of the settlor, a nominee has three years from the death of the settlor to contest. The trustee may, however, reduce this period to 180 days from the date the trustee provides the prospective claimant with the following: (1) a copy of the deed of trust; (2) a notice of existence of the trust; (3) the name and contact information of the trustee; and, (4) the time allowed to start a contest (that’s to say180 days from the date of notification).
Especially when the favored child takes over as successor trustee, he does so with a target on his back. The disgruntled brother will seek that the trustee “slips” so that she can file a complaint for breach of duty. For these actions, the default three-year statute of limitations only kicks in if the beneficiaries have “sufficient information that the beneficiary … knew of the potential claim or should have inquired about its existence.”
Just as a trustee should expedite the dispute period, a trustee should also reduce the statute of limitations for breach of duty claims. The trustee may shorten the three-year period to one year by sending the beneficiary “a report that adequately discloses[s] the existence of a potential claim. . . and inform[s] the beneficiary of the time limit for initiating proceedings. Thus, the onus is on a trustee to provide clear and complete reports, and by simply adding boilerplate notice wording to those reports, the trustee can reduce the statute of limitations to just one year.
Being a fiduciary is hard, don’t make it difficult for yourself. Reduce limitation periods where possible.
Published in the Manchester Union Leader, 07 August 2022.
The content of this article is intended to provide a general guide on the subject. Specialist advice should be sought regarding your particular situation.
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