This year’s Heckerling Institute brought no shortage of thought‑provoking sessions, but few hit as close to home as “The Day, that Duty … Died.” The presentation explored how today’s “modern” trust toolbox can dilute the traditional, beneficiary‑centric fiduciary model.
Philip Hayes, Lauren Hunt, Stephanie Lipson and Carol Harrington not only sang beautifully, but they also perfectly highlighted how laws, especially in states such as Nevada, South Dakota, Tennessee, Delaware and Alaska, along with trust language, can now permit trustees to limit or even avoid liability through mechanisms that can all but eliminate fiduciary duties.
They discussed sweeping exculpatory clauses that go beyond the traditionally high thresholds of willful misconduct; while “silent or quiet trusts” that allow settlors to waive or defer notice keep beneficiaries in the dark about their own rights, thereby potentially negating the existence of a trust structure. They also discussed the growing use of directed trusts, which further complicate the landscape by dividing authority among trustees and advisors, leaving no one clearly accountable.
The speakers were thought-provoking and correctly posed the question of whether trusts with provisions and under such statutes that eliminate essential components of a trust can even be considered trusts, and what that could mean for income tax, estate, gift and generation-skipping transfer tax planning purposes.
The session served as a wake-up call for practitioners: As statutory reforms and drafting trends continue to reshape the contours of duty and disclosure, it’s more important than ever for fiduciaries to stay informed, carefully read boilerplate language, exercise vigilance and keep the spirit of good faith at the heart of their practice.
