Night of the Living Trust

What seemed like a good idea at one point often becomes an unwanted “person” that lives on and makes everyone miserable.  Like Zombies, trusts that have outlived their usefulness need to die, but because the residual beneficiaries may not like the idea of a trust being killed off in favor of the person who wrote it to begin with, the Trustor, the resolution of its life moves slowly and infects people with despair. It also infects them with a dislike of lawyers and the entire complex business of dying. Why cant it just be simple? Because it isn’t.

Often the lawyer wrote this thing but they had good reason to; the client came in certain this is what they wanted. Just as often and perhaps more likely they never consulted a lawyer who might have persuaded them that the effort of a living trust is too much. For example usually people forget to put everything they buy into the trust defeating a purpose of avoiding probate.

Most tragically the do it yourself Trustor may forget to make this a revocable trust, meaning the family members obtain a real interest in the property they are residual beneficiaries of when he funds the trust, even before the Trustor dies. This means they all own a piece of the living trust. The remedy is to get everyone to agree to give the property back to the man who made the mistake in the first place.

But lo, there may be a beneficiary out there not willing to let go and hence, we experience the horror of the Zombie Trust.

Be afraid, be very afraid.

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Dog Trusts

We are so wealthy we leave our money to our pets when we die. Washington is one of 46 states and the District of Columbia at last count that expressly allow people to erect trusts for animals. This is not just for dogs or cats, the statute allows a person to leave a trust for the benefit of any non-human animal as long as it has a vertebrae.

So dont try to sneak in a worm trusts, do you hear?

The Settlor doesn’t even have to have any particular animals in mind when the trust is drafted. I was briefly associated with one trust where the old fella had a large tract of land near the mountains during his life and left the whole thing to the woodland creatures that lived there, so they would have a refuge for as long as the trust could last, which according to our Rule Against Perpetuities is 150 years.

But the Rule of Ugly Facts intervened to shorten it’s life dramatically. The Woodland Creature Trust immediately ran into trouble as it didnt have a person or society lined up to take care of it, pay the taxes and insurance or otherwise protect the trust. Several nature societies were approached but there were no takers. It looked like the Trust would fail, and the land be sold off.

Of course if this were a Disney film the woodland creatures would all speak English, and a badger like individual who is also a licensed member of the bar would file an action entitled Bambi et. al. vs. Woodland Creature Trust in our Superior Court. The nadir moment of the film would feature the human vertebrae on the bench ruling against the non-human vertebrae and sending the human vertebrae tax collector out to auction off the woodland for back taxes.

Disney’s formula film always has a villain with a pencil thin mustache ( c.f. Jaffar in Aladdin or John Clayton in Tarzan ) and the tax collector would look like either. Of course the cute Disney non-human vertebrae would somehow prevail and we would all leave the theater humming the theme song.

But this scenario belongs in Never Never Land. My last experience with the case at bar was to be fired by the decedants sisters because I had to tell them the only way for this woodland trust to work was to sell some of it to a developer to finance the thing. But that is not what our brother wanted….

Why is it people expect they can have at death what they cannot have during life?

It’s Not Your Money

Sometimes even the most seasoned lawyer is shocked by the conduct of people, often those in their own family.

I am just fresh from the probate and guardianship calendar where I witnessed an institutional trustee, a bank no less, hand up an order approving expenditures from a child’s special needs trust that was rejected immediately by the bench.  Instead our Court had lots of questions about why it was necessary to spend in increasing amounts tens of thousands of dollars taking the extended family on fabulous trips to Mexico and the Caribbean.

Meanwhile the needs of this special needs child who apparently had been left quite a bit of money in a will seem to be glossed over.

The really remarkable thing was the bank seemed unphased by this spending. Usually I see this kind of conduct from individuals named as trustee, because the term “fiduciary” is not part of their lexicon. Webster defined fiduciary as one who holds the trust or confidence of another. The first known use of the term is from 1641, and derived from the Latin fiduciarius which sounds a lot like fidelity to me.

I wonder what the Latin is for “taking advantage of the helpless”? And what about the bank, what Latin term can we assign them? There is no Latin term for “clueless”.

Cat Seizure in Bankruptcy

One reason we revolted from Britain: Debtors prison. When you couldn’t pay your debts they put you in jail until you could. Seems really strange, doesn’t it? So, well, foreign.

So the concept that one could not be jailed for his debts and has a right to discharge debts in bankruptcy has been with us from the beginning.

And how have Americans reacted to this freedom? They exercise it regularly. Even after the “get tough” Reform Act of 2005 there is a lot a debtor gets to keep in terms of assets notwithstanding declaring bankruptcy. Check out Title 11 section 522 of the United States Code. You get to keep your retirement, 401(k) and IRA. All of it. Such a deal.

Of course various Federal Court Districts around the country have interpreted things differently here and there, sometimes as close as from the Eastern District of Washington ( a closet Red State ) to the Western District of Washington ( which makes this a Blue State in every  Presidential election ). Sometimes within the District decisions vary from Trustee to Trustee.

Once in a recent 341 meeting of creditors the Trustee was examining my client as to her statement of debts and monthly budget. He noted she was discharging veterinary bills and had pet food in her budget. “But”, he triumphantly noted, “you have not listed any pets in your list of assets! Where are your pets!?!”

“I have three cats”, my client confessed, then added “Do you want my cats?”

The Trustee relented, but I had visions of him selling pelts to pay her debts. I am not making this up.