The MA and NH Trust Codes offer trustees important opportunities to reduce the statutes of limitations for actions to contest trust validity and the NH Code offers trustees an opportunity to reduce the limitations period governing claims of breach of fiduciary duty against them. Although some of my colleagues worry that taking the steps outlined below might precipitate a disgruntled beneficiary to bring a claim, my own view is that the benefits of the shortened limitation periods are worth that risk.
The Statutes of Limitations For Contesting Trust Validity
In a typical trust contest, a child of the settlor contends that a revocable trust established by the parent was signed with incapacity or was procured by the undue influence of another child, a caregiver, or the spouse of the settlor. Often, the alleged undue influencer is nominated in the trust to become the successor trustee on the death of the settlor and is well aware of family dynamics and perhaps other facts that make a challenge likely. In such a case, the successor trustee wants the limitations period to be as short as possible.
For a revocable trust that becomes irrevocable at death, the default limitations period for contesting trust validity is one year in MA and three years in NH, both running from the settlor’s date of death. The trustee can shorten this period to 60 days in MA and 180 days in NH from the date the trustee provides to the potential claimant the following: 1) a copy of the trust instrument; 2) notice of the trust’s existence; 3) the trustee’s name, address, (and telephone number in NH); and 4) the time allowed for commencing a proceeding to contest the validity of the trust. When providing notices for client trustees, I always provide my firm’s address and telephone number as the relevant contact information. Here are sample notices for Massachusetts and New Hampshire.
The Statutes of Limitations For Breach of Fiduciary Duty Claims
Trustees owe beneficiaries fiduciary duties of loyalty and care and are well served by being transparent in trust administration matters by providing beneficiaries fulsome reports as limitations periods only begin to run if beneficiaries have in the words of the NH statute “sufficient information so that the beneficiary… knows of the potential claim or should have inquired into its existence.” In both states, the default limitations period is three years which in MA runs from “the date the beneficiary… knew or reasonably should have known of the existence of the potential claim for breach of trust” and in NH from the “date on which the beneficiary… was sent a report that adequately disclosed the existence of the potential claim for breach of trust.”
As is often the case, NH law provides trustees (and settlors) greater opportunities for flexibility and liability protection as compared with the law of other states, including in this instance MA. In MA, a trustee cannot shorten the default three year limitations period. In NH, the period can be reduced to one year running from “the date the beneficiary… was sent a report that adequately disclosed the existence of a potential claim for breach of trust and informed the beneficiary of the time allowed for commencing a proceeding.” Thus, by simply adding to a trust report some boilerplate that the limitations period is one year, the trustee can make that the effective period rather than the default three year period. Here is a NH sample notice.
My personal view is that trustees should take advantage of these opportunities to reduce the limitations periods. While telling a potential claimant that he has a specific period of time to bring a claim might motivate him to sue, I believe the benefits of shortening the limitations period are generally worth it.
(Note: Ralph Holmes is currently retired from McLane Middleton. For information on this or other probate litigation issues, please contact Alexandra Cote at alexandra.cote@mclane.com.)
