Bar News - March 22, 2017
Elder, Estate Planning & Probate Law: Busy Year for Trust and Estate Legislative Proposals
By: Michael Panebianco and Michelle Arruda
This year, New Hampshire has seen a flurry of legislative proposals concerning estate planning, fiduciaries, and other trust and estate matters. Below is a summary of the pending bills.
SB 93 – Revised Uniform Fiduciary
Access to Digital Assets Act
Currently, New Hampshire law does not expressly authorize fiduciaries to manage a person’s digital property as they can with other personal property. Recognizing this need, the NH Bar Association Trust and Estate Law Section was the driving force behind this legislation, and the NHBA Board of Governors has voted to support it.
The Revised Uniform Fiduciary Access to Digital Assets Act (“Revised UFADAA”) has two purposes: to give fiduciaries legal authority to manage a “user’s” digital assets and electronic communications in the same way they manage tangible personal assets and financial accounts (to the extent possible), and to give custodians of such digital assets and electronic communications legal authority to deal with the fiduciaries of their users.
The Revised UFADAA has been adopted in 21 states and has been introduced in 12 additional states, not including New Hampshire. The Revised UFADAA has been endorsed by the Association of Retired Persons, the Center for Democracy and Technology, Facebook, Google, and the National Academy of Elder Law Attorneys.
The NH Senate Commerce Committee held a public hearing on Feb. 7, where co-author Michael Panebianco testified in support of the act on behalf of the Trust & Estate Law Section.
SB 230 – Uniform Power of Attorney Act (UPOA)
With provisions that encourage acceptance of powers of attorney by third parties, safeguard principals, specify an agent’s duties and potential liability, and specify execution requirements, the UPOA Act seeks to enhance the power of attorney as a low-cost, flexible, and private form of surrogate decision-making, while deterring its use as a tool for financial abuse of incapacitated individuals.
The UPOA Act is based on the Uniform Law Commission’s model UPOA act, but was tailored to incorporate much of the existing New Hampshire law. For example, it retains the statutory notice to the principal and the statutory agent acknowledgment. It also retains most provisions of RSA 506:6 and 506:7 (which will be repealed), including those related to an agent’s authority to make gifts on behalf of the principal, the agent’s duty to provide an accounting to certain interested parties, and certain interested parties’ standing to ask the court to review an agent’s actions.
The UPOA Act is comprised of four articles.
Article 1 contains definitions, execution requirements, general provisions that pertain to the validity and use of a power of attorney, agent duties and liabilities, the termination of an agent’s authority of a power of attorney, acceptance and reliance by third parties, and judicial review and relief.
Article 2 contains provisions concerning the parameters of an agent’s authority under a power of attorney, with regard to various subject matters, such as real estate, stocks and bonds, tangible personal property, maintenance of the principal and his or her family, and so forth. It also specifies those powers that must be expressly granted to an agent in order for the agent to have those powers – sometimes referred to as “hot powers” – such as the power to make gifts and the power to change beneficiary designations.
Article 3 contains an optional statutory form, designed for use by lawyers as well as lay persons, and also a sample agent certification form, designed to be relied upon by third parties under certain circumstances.
Article 4 contains miscellaneous provisions concerning the relationship of the Act to other law and pre-existing powers of attorney.
There are five categories of revisions being made by an amendment to the bill. First, the amendment corrects typographical and formatting problems contained in the bill. Second, it makes important changes to the definitions section. Third, it reinstates a provision contained in RSA 506:7 concerning the court’s ability to order an agent to pay attorney’s fees (inadvertently was omitted from the original bill) and clarifies that imposing liability for attorney’s fees on a third party who wrongfully refuses to honor a power of attorney is within the discretion of the court. Fourth, it adds a provision allowing authority over electronic communications to be expressly granted to an agent, for which express authorization is necessary under Revised UFADAA. Finally, it eliminates the repeal of various statutes that needed only cross-reference corrections.
The Senate Judiciary Committee held a public hearing Feb. 14, where attorney Robert Wells and co-author Michelle Arruda testified in support of the act on behalf of themselves.
SB 40 – New Hampshire
Electronic Wills Act
In New Hampshire, a person (referred to as a “testator”) of sane mind and at least 18 years of age (or married persons under that age) may create a valid will (RSA 551:1). A testator’s will is valid if it is 1) in writing, 2) signed by the testator, or by another person at his or her express direction in his or her presence, and 3) signed by two or more credible witnesses, who, at the request of the testator and in the testator’s presence, attest to the testator’s signature (RSA 551:2). In addition, common law requires the witnesses to be in the same physical location as the testator when the will is signed by the testator.
If enacted, SB 40 would amplify the “in writing” requirement to permit the will to exist in an electronic record, allow for the electronic signature of the testator, and allow it to be electronically signed by either a notary public or at least two credible witnesses, who, at the request of the testator and in the testator’s presence, attest to the testator’s electronic signature by placing their electronic signature on the electronic will. However, in a departure from common law, this Act would allow the witnesses to be at a different location than the testator, provided the parties can communicate with each other by means of live video and audio conference.
In addition, the electronic will must designate a “qualified custodian” to control the electronic record of the electronic will. Finally, the Act would also permit powers of attorney and advance directives for health care to be executed with an electronic signature.
The Senate Commerce Committee held a public hearing Jan. 31, 2017, where a proponent of SB 40, a company that enables an individual to create a will via their website and can serve as a qualified custodian, testified in support of the bill. Several attorneys testified against the bill: John Laboe, on behalf of the NH Chapter of NAELA; Elise H. Salek and Panebianco, on their own behalf.
SB 225 – Relative to NH Trust Code, Trust Companies, and New NH Foundation Act
Through SB 225, the New Hampshire Trust Council seeks to revise the New Hampshire Trust Code and the laws governing trust companies and family trust companies. SB 225 also seeks to adopt the New Hampshire Foundation Act.
The proposed revisions to the New Hampshire Trust Code (RSA 564-B) include correcting typographical errors, clarifying definitions, adding a definition for “incapacity” that mirrors the definition contained in SB 230 (Uniform Power of Attorney Act), and revisions designed to enhance and clarify existing law.
Proposed changes to the Trust Company Act (RSA 383-C) include allowing a trust company to obtain an irrevocable letter of credit in favor of the bank commissioner, rather than the current requirement of pledging cash or permissible securities, and adding two new articles: article 13, which addresses a trust company’s obligation to file reports and other information with the bank commissioner, and article 14, which clarifies the timing of examinations of trust companies by the bank commissioner.
Changes proposed for the Family Trust Company Act (RSA 383-D) include 1) reducing the minimum amount of required capital from $250,000 to $50,000, 2) eliminating the requirement of an annual financial audit, instead allowing the bank commissioner to require an audit if it determines the family trust company may pose a harm to the general public, 3) reducing the frequency of examinations from every 18 months to every 36 months, and 4) adding a new article 14 that allows for the creation of an unregulated family trust company, which could serve as trustee or otherwise provide fiduciary services, without being subject to ongoing examination and supervision by the banking department.
Finally, the New Hampshire Foundation Act would allow the creation of a civil-law foundation. This type of legal entity is used in countries that do not have a legal tradition of trusts and is designed to operate like a trust. If enacted, New Hampshire would likely be the first state to recognize this entity and may be attractive to residents of countries that use foundations rather than trusts who want to invest in the United States.
The Senate Commerce Committee held a public hearing March 7 on SB 225.
NOTE: It was anticipated that we would see another bill regarding changes to the New Hampshire Trust Code (RSA 564-B) not included in SB 225. However, after the article went to press, an amendment to SB 225 was submitted that effectively incorporated these additional changes. Accordingly, SB 225, as amended, now includes the following proposed amendments to RSA 564-B: (1) amend RSA 564-B:5-501 to prevent so that a beneficiary’s creditor cannot compel a beneficiary to exercise any power that it has under the terms of the trust (but a beneficiary’s creditor can still reach the beneficiary’s interest in the trust to the extent the beneficiary has a presently exercisable power of withdrawal), (2) amend RSA 564-B:5-502 to provide that marital property does not include a beneficiary’s interest in a trust to the extent such interest is subject to a spendthrift provision; (3) repeal and reenact RSA 564-B:5-504 to eliminate a beneficiary’s spouse or former spouse and a beneficiary’s child to the extent of child support as “exception creditors” in discretionary trusts, and (4) enact a new section, RSA 564-B:5-505A, which would incorporate the provisions of RSA 564-D (Qualified Dispositions in Trust Act), create the general rule that a settlor’s creditors cannot reach a settlor’s interest in an irrevocable trust if the interest is subject to a spendthrift provision (with no exception creditors), and reduce the statute of limitations period from one year to six months following the transfer to the trust for pre-existing creditors and from four years to one year following the transfer to the trust for other creditors. Finally, the amendment to SB 225 also includes revisions to other statutes, including RSA 383-C and RSA 383-D.
Michael P. Panebianco is a vice president at Cambridge Trust Company of New Hampshire and chair of the NH Bar Association Trust & Estate Law Section.
Michelle M. Arruda is a shareholder of Devine, Millimet & Branch and practices primarily out of the firm’s Concord, NH, office. She is a past chair of the NHBA Trust & Estate Law Section.