Many individuals first consider consulting an estate planning attorney after they have children or accumulate wealth, and wish to make a will.  Typically, an attorney’s will package includes Advance Directives, which are among the most important estate planning documents.  Advance Directives allow for the handling of an individual’s financial affairs and medical decisions in the event the individual is unable to do so, and should be considered by all persons once they become adults. 

The Guardianship process is focused on protecting the person who is under Guardianship, who is known as the Ward.  When a petition for Guardianship is filed, the Court must appoint an attorney to represent the Ward.   If a Guardian of the Person is appointed, the Guardian must file Annual Reports informing the Court of the Ward’s physical condition, and any changes in the Ward’s living arrangements over the preceding year.  If a Guardian of the Estate is appointed, the Guardian must file a corporate surety bond and Annual Accounts that report every financial transaction that occurred during the preceding year.

Everyone over the age of 18  should execute Durable Powers of Attorney to avoid the time, expense, and intrusion of a Guardianship.  Although some young adults are ready to sign Living Wills, which are documents that state that the Principal does not wish to be kept alive by artificial means if near death or permanently unconscious, most are not ready to make that type of decision.  They do not have to do so.  If the young adult executes a Durable Power of Attorney for Health Care and authorizes his or her agent to make those terminal care decisions, the agent will be able to decide what is best if and when the time comes.  

If you have children or grandchildren who have reached the age of 18 and who have not executed Durable Powers of Attorney, you should encourage them to do so.  A young adult who executes Durable Powers of Attorney becomes the client of the attorney.  His or her communications with the attorney are subject to attorney-client privilege, and cannot be shared by the attorney with any third party, including the child’s parents.  Of course, as is the case with any other client, the young adult is free to share any information that he or she wishes to disclose.

Changes affecting no contest provisions

In order to deter litigation over an estate plan, individuals may incorporate a no-contest, or in terrorem, provision into their will or trust.  Such provisions usually provide that a beneficiary who acts in a manner considered by the person making the will or trust to be a contest is deemed to forfeit his or her interest in the will or trust.  On September 11, 2011, a new law regarding the definition and enforcement of no-contest, or in terrorem, provisions in wills and trusts will come into effect.  The new law allows individuals to incorporate into their wills and trusts provisions that make the following actions by a beneficiary subject to forfeiture of the beneficiary’s gift:

            Any action to contest the validity of the will or trust;

            Any action to set aside or vary the terms of the will or trust;

            Any action to challenge the acts of the fiduciary (executor or trustee) in the performance of his or her fiduciary duties; or

            Any action or proceedings that frustrate or defeat the intention of the person who created the will or trust.

The new law also changes the legal standard in New Hampshire for avoiding the forfeiture clause.  Until now, a challenge to a will or trust containing a no-contest provision would not result in forfeiture if the challenge was brought in good faith and for probable cause.  Under the new law, the forfeiture will occur upon any action contesting the validity of a will or trust unless the beneficiary is ultimately successful in proving that the will or trust is invalid.  Forfeiture will also occur upon any action challenging the fiduciary’s performance of his or her duties unless the beneficiary is ultimately successful in proving that the fiduciary breached his or her duties.  The new law implies that forfeiture will result, without exception, from:  1) any action to set aside or vary the terms of a will or trust; or 2) any action other than a challenge to the validity of a will or trust, or a challenge to the fiduciary’s conduct, that frustrates or defeats the intention of the person who created the will or trust.

The forfeiture provision applies to actions undertaken by a fiduciary if the fiduciary is also a beneficiary of the will or trust, unless the person creating the will or trust makes an exception for the fiduciary.  All of the changes apply to any contest brought after September 11, 2011, regardless of when the no contest provision was created.  If you have included a no-contest clause in your will and/or trust, we recommend that you review the clause with your attorney to discuss how the changes in the law affect your estate plan.

Changes regarding the creation of testamentary trusts

The use of testamentary trusts (trusts created within wills) has declined in recent years, largely due to the increased privacy and lower administrative expense associated with the use of inter vivos trusts (trusts created during the grantor’s lifetime).  Testamentary trusts have historically been subject to probate court supervision, and require the posting of a bond to protect the trust property.  Effective January 1, 2012, a will may establish a testamentary trust and waive the annual probate court accounting requirements.  However, accountings must still be provided to the beneficiaries, the trust filings would be a matter of public record, and the trust would incur the expense of a probate bond is required by the court. 

Codification affirming that the grantor’s intent is paramount

Several sections of the Uniform Trust Code have been amended to affirm that the interests of the beneficiaries are determined by referencing the grantor’s intention.  There have been cases from other states that made changes to a trust instrument based upon the arguments that the changes would be better for the beneficiaries than the provisions made by the grantor.  The new laws solidify New Hampshire’s long-standing common law that the grantor’s intent must be honored.