Today, we will discuss a fairly unique circumstance that has emerged as a result of the pending changes in the Virginia Code. Many existing Virginia wills and trusts reference specific sections of the current Virginia Code. Since many Code sections will be renumbered this October, will your existing estate documents thereafter be referring to obsolete law?
We will use the new Virginia directed trustee statute to illustrate the effects of the pending changes in Virginia law on any existing or new estate documents below.
Virginia’s New Directed Trustee Law Revisited
The new Virginia Code § 55-548.08 protecting directed trustees became effective on July 1, 2012.
For today’s purposes, all you need to know is that the new rule will only apply in trusts that incorporate subsection E of § 55-548.08 into the trust by specific reference. This is most commonly accomplished within the trust itself.
So what does all of that mean? Let’s give a hypothetical to explain.
- Say Phil decides to create a trust for his children because they are too inexperienced to handle the family finances. He names his children as co-trustees, and ABC Bank to serve as “trust director” to oversee the children’s activities.
- For the new law to apply, the trust must state the specific section within the trust language itself, as in “this trust shall be subject to Virginia Code § 55-548.08(E).”
- If the trust doesn’t include the language, then § 55-548.08(E) will not apply to his trust.
Seems easy enough – if you want the directed trustee law to apply, just include the specific Code section in your trust.
But there’s a potential problem.
Renumbering of Directed Trustee Law into new Title 64.2
As we discussed in this post, Virginia’s new law which will revise and recodify its laws related to wills, trusts and fiduciaries becomes effective on October 1, 2012. All such laws within the current Virginia Code will be repealed and immediately absorbed into the new Title 64.2. However, the wording of the current laws will, for the most part, remain completely intact.
For our purposes, § 55-548.08 will be repealed on October 1, but it will immediately be replaced by the new Virginia Code § 64.2-770, which contains virtually the same wording. In other words, our directed trustee law is simply being renumbered.
References To Repealed Virginia Code Sections
Therefore, the following questions emerge – if you specifically reference § 55-548.08(E) in a trust you create after July 1, 2012, what happens when that section no longer exists on October 1? Should you simply cross out § 55-548.08(E) and replace it? Do you need to go back to your estate planning attorney and revise the trust?
Would it be more appropriate to reference both the current and new sections, as in “this trust shall be subject to Virginia Code § 55-548.08(E) until October 1, 2012, and then this trust shall be subject to Virginia Code § 64.2-770(E) thereafter”?
So what is the best strategy moving forward?
- Cross out “§ 55-548.08(E)” in your trust and write “§ 64.2-770(E)” in its place on October 1?
- Revise the trust on or after October 1?
- Revise the trust now to reference both sections as illustrated above?
- Do nothing?
“A” is not recommended. First, any revision to a will or trust must comport with the same formalities that you used to have your original instrument validated – namely with signatures, witnesses and notarization. Usually, a specifically drafted “amendment” to the trust is the safer and more appropriate approach.
“B” is a possible solution, and may even be appropriate if you haven’t reviewed your trust in several years. However, this will likely cost at least several hours of an estate planning attorney’s time.
“C” is not recommended. While writing both sections is seemingly thorough, it is also vulnerable to a “rule of construction” that has existed for centuries. Essentially, the “rule” states that if you have gone to the trouble of writing both sections down, then you intend for it not to apply in places where you don’t go to the trouble. Two examples:
- Let’s say that in the year 2030, Virginia creates a new Title 83.3 that absorbs our directed trustee rule. At that point, your reference to § 64.2-770 may no longer apply – a court could interpret that you intended to keep the reference intact only as long as § 64.2-770 was in existence.
- Many existing Virginia trusts incorporate by reference the current section § 64.1-57 regarding certain fiduciary powers. If you include references to both § 55-548.08 and § 64.2-770 in your trust, doing so could serve to negate your reference to § 64.1-57 unless you revise THAT section to the new § 64.2-105 for October 1, 2012 and beyond.
“D” is actually the best answer. The new law states that any rights created before October 1, 2012 will not be lost by shifts of any Code sections into Title 64.2 (see Clause 10 of the Act amending the Virginia Code). In other words, your reference is “grandfathered”.
Remember that the preceding discusses just one Virginia Code section, whereas hundreds of others are being absorbed into Title 64.2. If you have a will or trust written prior to July 1, 2012, be sure to check the status of any law that is specifically referenced in your documents and whether or not some different consequence would occur by “doing nothing”.
Additionally, if you or your attorney create a Virginia will or trust on or after October 1, 2012, make sure it does not specifically reference the old sections that have been repealed. At worst, any clauses using references to obsolete law could be invalidated in probate court.
Finally, perhaps the “do nothing” conclusion from above is anti-climatic. Then again, the ideal estate plan is one that belongs to you and not the drafter. To achieve this standard, you must seek to fully understand each decision you make, even if it merely involves maintaining the status quo.
- Horror Stories in Estate Planning (lawprofessors.typepad.com)
- Reviewing Estate Plans (lawprofessors.typepad.com)
- Are You Smarter Than An Estate Planning Attorney? (wills.about.com)