PBA Supports SB 1203 on PA UTA

On September 23, 2008, the PA House Judiciary Committee cleared Senate Bill 1203, as amended previously in the PA Senate, for further consideration by the full House. In a letter sent September 22, 2008, the Pennsylvania Bar Association urged its passage this session, during the few days of legislative activity that remain.

Adoption during this legislative session by the House of SB 1203 without further amendment is important.

[UPDATE: 12/01/08 -- As indicated in the "Update" at the end of this posting, despite valiant efforts by proponents of SB 1203, in the crush of other matters under consideration, it was not adopted by the House during this Legislative Session. It will be re-introduced as a new bill for consideration in the 2009-2010 Legislative Session.]

Originally, SB 1203, PN 1633 (PDF) was introduced into the Senate on Friday, December 7, 2007. Generally it proposed "omnibus" changes to the PA Probate, Estates & Fiduciaries Code, summarized in its caption as follows:

An Act amending Title 20 (Decedents, Estates and Fiduciaries) of the Pennsylvania Consolidated Statutes, further providing for forfeiture, for modification of wills, for advertisement of grant of letters, for duty of personal representative, for enforcement of contribution or exoneration of Federal estate tax, for implementation of power of attorney, for applicability of rule against perpetuities, for modification of conveyance by divorce, for effect of divorce on designation of beneficiaries, for notice of representation, for creditor's claim against settlor, for actions contesting validity of revocable trusts, for claims and distribution after settlor's death, for trustee's duty to inform and report, for illustrative powers of trustee, for limitation of action against trustee, for power to convert to unitrust and for retirement benefits, individual retirement accounts, deferred compensation, annuities and similar payments; and making conforming amendments to Title 15.

That form of the bill implemented recommendations presented in the October 2007 Advisory Committee Report addressed to the Legislature by the Joint State Government Commission's Advisory Committee on Decedents' Estates Laws. The full Report remains available here (PDF, 64 pages).

For background and overview, see: PA EE&F Law Blog postings "PA PEF Code Revisions Proposed" (10/25/07) and "Omnibus Bill re PEF Code Introduced" (12/07/07).

Most of the recommendations were technical or corrective, and therefore not controversial. In these aspects, SB 1203 represents an evolution of fiduciary law that is very desirable.

Recommendations address uncertainties highlighted by recent court decisions, or sharpen provisions of the PA Uniform Trust Act (which took effect on November 6, 2006), and the PA Principal and Income Act, among other chapters of the PEF Code. Other recommendations clarified the interplay of domestic law versus estate law in divorce settings interrupted by death of a party, and the allocation of death taxes.

But, to me, the most urgent changes were amendments to Chapter 56 of the PEF Code that would limit the ability of an agent, appointed under a power of attorney, to change insurance beneficiary designations under §5603(p), or to engage in retirement plan transactions, including beneficiary changes, under §5603(q). These changes would allow the courts to correct financial abuse perpetrated by an agent's self-serving interference with a principal's existing testamentary intentions.

On May 13, 2008, the Senate Judiciary Committee reported amended SB 1203, PN 2048 (PDF) back to the Senate.

Then, the Real Property, Probate & Trust Law Section of the Pennsylvania Bar Association recommended passage of SB 1203, which was endorsed at its Annual Meeting during the first week of June, 2008.

The Pennsylvania Banker's Association raised concerns while SB 1203 was further considered by the Senate's Appropriate Committee. The main issues were a reduction for the time limit in the laches provisions of the PA UTA from its present five years under Section 7785(a)(1), and clarification of the contents of an annual report upon which that time-bar was premised under Section 7780.3(i)(5). See: Senate Passes Legislation Making Important Corrections and Improvements to the Pennsylvania Uniform Trust Act (UTA) with PBA Supported Amendment, posted by the bankers' association.

The compromise resulted in a further amended form sent to the Senate as SB 1203, PN 2293 (PDF format), which was adopted 50-0 on July 2, 2008. That is the current version of the bill.

It is this form of the bill that must be approved without further amendment by the House during this session. There is no time for "concurrence" in any House amendment, since the Senate will not reconvene during this session.

Earlier this week, the current President of the PBA, C. Dale McLaine, Esq., sent the following letter to each Representative, urging adoption of SB 1203:

The Pennsylvania Bar Association is on record in support of Senate Bill 1203, which makes important technical corrections and other changes to the Uniform Trust Act and the Probate, Estates and Fiduciaries Code. On behalf of the Association and its 29,000 members, I am writing to confirm that the PBA continues to endorse the enactment of Senate Bill 1203 in a form that will allow for its enactment this legislative session.

We believe that this bill takes on particular importance in light of the recent tumult in the financial sector, which has disproportionately impacted banking and trust institutions, many of which act as fiduciaries of trusts and estates. We view the immediate passage of this legislation as a step toward providing certainty in the law for individual and institutional fiduciaries, as well as for beneficiaries. Accordingly, we respectfully request your support of its passage in this legislative session.

The PBA will continue to monitor the impact of the Uniform Trust Act (and its implementation) on our constituents and the clients whom we serve, and when necessary, will weigh in on further adjustments or modifications to the law that may be advisable.

At the hearing on Tuesday, September 23rd, the Chair of the Advisory Committee on Decedents' Estates Laws, Edward ("Ted") M. Watters, III, responded to questions from House Judiciary Committee members, who then reported it favorably, without amendment, to the House, where it received first consideration. As customary, the bill was referred to the House Appropriations Committee.

At this pace, and with such cooperation, SB 1203 can be adopted by the House, and sent to the Governor, during this legislative session; and it should be.

The most recent national (even international) financial events demonstrate what can happen when laws & regulations are not routinely reviewed, modernized, and refined. That is what SB 1203 would do in the areas that it touches -- fiduciary duties, beneficiary rights, and two egregious forms of financial elder abuse.

Both PBAs -- both the lawyers and the bankers -- urge adoption now.

Update: 12/01/08:

In an email message sent on December 1, 2008, by Edward Watters, Esq., as Chair, to fellow members of the Decedents' Estates Law Advisory Committee of the Joint State Government Commission, he advised:

The Legislature has adjourned and SB 1203 did not pass.

All provisions need to be re-introduced in some form next session.