July 26th, 2011
On July 1, 2010, the provisions of a completely revised Georgia trust code became effective. This month we celebrate its first anniversary, so it seemed to be a good time to reflect on what were the top “attention-getters” of the new code. In thinking about this “top three” list, we’re reminded of the last time we trained a new puppy. The theme was: reward the good behavior, ignore the bad. Fortunately, the new code will help you take care of your dog and rewards good trustee behavior, but there could be serious consequences for a trustee not complying with some of the new provisions.
1. The Dog: By far and away, for better or for worse, most attention has been focused on the new provisions allowing pet trusts. In the past, we were able to (somewhat) accommodate people’s wishes to provide for their pets upon their deaths by naming an individual as beneficiary of the trust fund so long as they were caring for the pet. Now, it’s much easier because the pet itself can be a trust beneficiary.
2. The Carrot: Trustees of Georgia trusts now may take comfort in a shorter period during which a beneficiary can sue for a breach of fiduciary duty. If the trustee has provided the beneficiary a “written report” that “adequately discloses the existence of a claim against the trustee”, then a shortened two-year statute of limitations applies instead of the former six-year period. Without that “written report” the beneficiary has the normal six years to sue beginning when the beneficiary discovered, or should have discovered, the existence of the claim. Over this first year, virtually all trustees we talk to praise this new provision.
3. The Stick: As with number 2 above, the theme of the new trust code is transparency. Trustees also might suffer a stick approach by way of a claim for breach of fiduciary duty for failing to comply with other new statutory provisions such as: (1) the duty to notify certain beneficiaries when trusts are created, and (2) a new duty to provide reports and accounts to certain beneficiaries.
There are many other interesting and important provisions in the new code, such as: (1) easing of the duties owed to remote beneficiaries (the “qualified beneficiary” concept), (2) new duties for trustees regarding investment diversification, and (3) formal “trust certification” mechanisms. Our experience with the new code this first year has been uniformly favorable. However, we are carefully watching to see how some provisions are interpreted or applied by our appellate courts.