Notices under PA UTA

On June 2, 2008, Vincent B. Lackner, Esq., of Pittsburgh, PA, reminded PBA RPPT Section P&T listserv members about a two-hour seminar entitled "Uniform Trust Act Notices: Only Five Months To Go!" to be held on Tuesday, June 3, 2008, from 12:30 - 2:30 p.m., both in person (in Philadelphia) and online.

Previously, on May 22, 2008, Vince had posted some questions about the multi-faceted Notice requirements of the Pennsylvania Uniform Trust Act on that same listserv, the Probate & Trust Listserv, of the Real Property, Probate & Trust Law Section, of the Pennsylvania Bar Association.

I'm boning up a bit on potential issues surrounding the Notice of Trust Administration now required by Section 7780.3 of the PA Uniform Trust Act.

I thought that I would share the little bit that I have learned, and seek clarification, correction, amplification, or general feedback on these issues from members of this forum.

This Notice will become even more important as we approach November 6, 2008 (two years after the effective date of the Act). That is the date by which Notice must be given in the case of settlors who died or were adjudicated incapacitated before November 6, 2006. For settlors who died or were adjudicated incapacitated on or after November 6, 2006, the deadline is generally 30 days after the trustee learns of either event.

At first glance, it appears that there are at least two reasons why trustees need to make sure that they comply with this requirement for all trusts, regardless of when these trusts were created:

1) Required by the Act. Failure to send the timely Notice would constitute a breach of trust, with remedies and damages as spelled out in Sections 1781-1782 (removal of trustee, denial of compensation, etc.).

2) Start the five-year clock that limits actions by beneficiaries against trustees. Section 1785(a).

On closer reading, however, it is apparently not the sending of the Notice that starts the clock. It's taking all four of the following steps (none of which includes sending the Notice):

a) Send the beneficiary a written report for the year in which the transaction occurred and for each of the four subsequent years.

b) Disclose the transaction in the report.

c) Receive no written objection from the beneficiary within six months after the beneficiary receives the fifth annual report.

d) Include a conspicuous written statement in the report describing the effect of nonobjection.

Two questions arise:

A) Timetable for sending reports. It appears that a trustee could send all five annual reports (which must be based on a calendar year) after the end of the fifth year, wait six months, then achieve protection against any claims based on a transaction that was disclosed on the first year's report. There appears to be no specific requirement of how soon after the close of the calendar year that the report must be sent.

B) Conspicuous Written Statement. Is there any generally accepted language floating out there for this statement?

Anyone who has read the Act (light bedtime reading) or attended any of the PBI seminars on this topic, starting in 2006, knows that the Act involves lots of variables with lots of deadlines.

One of them is tracking birth dates for children and grandchildren, so that you can be sure when a trust beneficiary becomes a "current beneficiary" (age 18 or 25, depending on whether distributions are mandatory or discretionary).

Thus, the trustee might satisfy the rules for sending Notices to then-current beneficiaries within 30 days of death or adjudication of incapacity, but will need to track ages for beneficiaries who become "current' at a later date.

Even though Section 7780.3 is worded in terms of the date when the "trustee learns that a person...is a current beneficiary", trustees should probably be collecting the birth date information up front so that there won't be disputes about when they "learned" that the beneficiary suddenly became 18 or 25.

The next day, he reported about an upcoming seminar sponsored by the Pennsylvania Bar Institute that, hopefully, would address just such issues:

I just learned (thanks to Wendy Fein Cooper) that on Tuesday, June 3 (12:30 - 2:30 pm), the PBI is putting on a seminar in Philadelphia entitled: "Uniform Trust Act Notices: Only Five Months to Go!"

Looks like a very worthwhile and extremely timely seminar. PBA members can pay $99 to attend (live in Philadelphia; webcast otherwise).

On the morning of the seminar (or possibly the day before), you'll be able to download the course materials as part of the $99 registration fee.

For an extra $20, paid webcast registrants can have a hard copy of the course materials shipped by the PBI.

On the eve of the seminar, Vince had obtained & reviewed the seminar materials, as prepared by the presenters:

• Christina G. Alt, Esq., Schnader Harrison Segal & Lewis, LLP, Philadelphia
• Michelle J. Hong, Esq., Brown Brothers Harriman Trust Company, N.A., Philadelphia
• David R. Schwartz, Esq., The Glenmede Trust Company, N.A., Philadelphia
• Bruce Rosenfield, Esq., Schnader Harrison Segal & Lewis LLP, Philadelphia
• Perry Teillon, Esq., Heckscher Teillon Terrill & Sager, P.C., Philadelphia

Vince then posted his follow-up message to the P&T Listserv, which I copy with his permission.

Tomorrow, Tuesday, June 3, 2008, starting at 12:30 pm, the Philadelphia Bar Association and the Pennsylvania Bar Institute will be presenting a two-hour seminar entitled: "Uniform Trust Act Notices: Only Five Months to Go!"

The live presentation takes place at the CLE Conference Center, Wanamaker Building, Suite 1010, Philadelphia [and also as a simulcast at the PBI Center in Mechanicsburg, PA].

At the same time, the PBI will be broadcasting this seminar over the web. Here is a link to the PBI registration page (takes just a couple of minutes to register).

The cost is $99 for [Pennsylvania Bar Association] members. There are seven other categories with registration fees that range from $40 to $119.

I have now reviewed the course materials (including a supplementary "Handout" that has a survey of practitioners and professional trustees, as well as other useful information).

This seminar (and its related materials) struck me as unusually important and timely for the following reasons:

1) Notice for "Current Beneficiaries" under 7780.3. The materials contain two samples (one based on current law, another based on the law as it will be once technical corrections are enacted).

2) Definitions. Lots of them, including "current beneficiary", "qualified beneficiary", and more.

3) Deadlines. Lots of them. There are 30-day deadlines, six-month deadlines, five-year deadlines, deadlines triggered by birthdays of beneficiaries who suddenly turn 18 or 25, and more.

4) November 6, 2008. There is a two-year grace period for trusts whose settlors died or were adjudicated incapacitated before November 6, 2006. Trustees of all such trusts have until November 6, 2008, to send the required notice to all specified beneficiaries, relatives, charities, and/or the Attorney General (depending on the type of trust and various other factors).

5) Perpetual Record-Keeping Requirements. Under 7709(b), a trustee must "create and maintain indefinitely a written record of the steps the trustee took to identify or locate" people who are entitled to notice under the statute.

6) Penalties for Non-Compliance. Although no direct penalties are set forth for failure to send the required notices, there are indirect penalties spelled out in 1781-1782 (breach of trust, removal of trustee, denial of compensation, etc.).

7) Protection for Trustees. There is a specific procedure that triggers a five-year statute of limitations on actions against a trustee. But the trustee must take precise steps to gain this protection, including preparation and delivery of annual reports of assets/liabilities/receipts/disbursements. Each report must also contain a "conspicuous written statement describing the effect of this paragraph" [7785(a)(1)]. The seminar materials contain a sample "conspicuous written statement".

If you represent any trustees, and your schedule permits, tomorrow's two-hour seminar is probably a must.