Since 1892, the Uniform Law Commission (ULC) has provided states with non-partisan, well-conceived and well-drafted legislation. The ULC is working on a number of issues affecting estate-planning practitioners. Here's a round-up of some of those key issues. Management of Digital Information An unknown diary, a never-before seen stack of letters: These are staples of estate mysteries and intrigue,
Since 1892, the Uniform Law Commission (ULC) has provided states with non-partisan, well-conceived and well-drafted legislation. The ULC is working on a number of issues affecting estate-planning practitioners. Here's a round-up of some of those key issues.
Management of Digital Information
An unknown diary, a never-before seen stack of letters: These are staples of estate mysteries and intrigue, mostly imagined but, occasionally, all too real. Often, families and friends aren't disturbed by the secrets a decedent takes to the grave but, rather, by the secrets the decedent failed to take. Today, there are more of those secrets than ever before because of electronic communication. Who can access stored email and computer files after death? The family, the executor, others? Who has the right to ask service providers for usernames and passwords, and what can or must be done with the information discovered?
Fewer than half a dozen states currently have enacted statutes dealing with the issue of fiduciary management of electronic and digital information. The ULC has just begun an effort that will likely produce an act for states to consider, in two to three years, on this very issue. Because Internet service providers serve clients in multiple states, the need for uniformity is clear, and the demand for legal clarity increases every day.
POAs and Decanting
The ULC is also working on the important and timely issue of powers of appointment (POAs) and decanting. In fact, there are two separate efforts underway to address these areas. Very few states either have statutes governing the interpretation and administration of POAs or much case law covering critical issues. For example, does a power to appoint “to” include the power to appoint “for the benefit of”? If the holder of a POA may direct that property be distributed outright to a particular person, may the holder instead direct that the property be held in further trust for that person and give that person a POA that's broader than the power the original holder had? A new Uniform Power of Appointment Act that's thorough and comprehensive should be ready for enactment by the fall of 2013.
On the other hand, many states have varying statutes providing for decanting, but it's unknown what the Internal Revenue Service's position is, or will be, on the many issues posed by those statutes. The ULC hopes to create a uniform act that has reasonably clear tax consequences for those states without existing statutes and, potentially, as an amendment to those who already have them. The ULC's efforts distinguish between POAs that are exercisable in a non-fiduciary capacity and powers to decant that are exercisable in a fiduciary capacity. (For more information about state laws on trust decanting, see “Decanting: A Statutory Cornucopia,” by Rashad Wareh & Eric Dorsch in this issue, p. 22.)
Another area in which there's little current uniformity is that of pre-marital and marital agreements. For almost two years, a ULC committee, with representatives from both the family law and estate-planning bars, has been working to create a uniform act that would set standards for entering into a valid and binding agreement and enforcing its terms in the event a marriage is dissolved by divorce or death. The general direction of the proposed act is to treat pre-marital and marital agreements similarly and to follow along the lines of most states' existing law, namely that there are procedural safeguards (an enforceable agreement requires access to counsel, disclosure of assets and some explanation of the rights being modified) and substantive review at the time the agreement is entered into (no enforcement of an unconscionable agreement). One of the key issues that has proven complicated to resolve is distinguishing between agreements in which these safeguards are required and more routine marital transactions (for example, opening a joint checking account), which needn't be subject to any standards other than those generally applicable between spouses today. The final act should be ready for approval by the entire ULC at its summer meeting in Nashville, Tenn. this July.
Uniform Trust Code
About half the states now have enacted the Uniform Trust Code (UTC), and a few states continue to introduce it each year. Even though the UTC is less than 10 years old, there's already a significant body of case law interpreting its provisions. The Uniform Power of Attorney Act also is making good progress as states begin to grapple with the myriad problems presented to financial institutions, health care establishments and others by individuals who have lost capacity entirely or at least with respect to their business or financial affairs.
New Biology Definitions
Unfortunately, to date, the ULC's 2008 “new biology” definitions of children and descendants have been less widely adopted. Despite widespread awareness that children are conceived today in ways unthinkable only a generation ago, most practitioners haven't updated their form definitions beyond, for instance, dealing with adopted individuals. In a state that enacts the ULC's proposals, the need for complex definitions in routine estate-planning documents disappears. But, without statutory definitions, clients, their lawyers and the judges they appear before, have little direction to follow in determining, for instance, whether a posthumously conceived grandchild is a beneficiary in a grandmother's trust. We can expect more litigation in the years to come.
For More Information
More information about the ULC and any existing act or drafting project can be found at www.uniformlaws.org. The commissioners and observers for each project are listed, and the committee chairs welcome comments that may be helpful to produce a better act. To that end, the website also posts the various drafts of acts that are in progress so you can view and comment on the specific ideas and language that's proposed.
— The author is also the Uniform Law Commissioner from Kentucky, chair of the Power of Appointment Committee, American College of Trust and Estate Counsel's liaison to the Uniform Law Commission and a member of the Joint Editorial Board for Uniform Trust and Estate Acts.
— The author thanks David English of the University of Missouri and dean of estate and trust uniform acts, for his helpful comments.