Print Friendly HOUSE BILL NO. 665 – Trust, nontestamentary, claims
HOUSE BILL NO. 665
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H0665................................by JUDICIARY, RULES AND ADMINISTRATION
TRUSTS - Amends existing law relating to nonprobate transfers from a
decedent's estate to specify procedure to govern settlement of claims
against a nontestamentary trust; and to provide time for claims to be
presented, manner of presentation and the effect of presentation.
02/12 House intro - 1st rdg - to printing
02/13 Rpt prt - to Jud
]]]] LEGISLATURE OF THE STATE OF IDAHO ]]]]
Fifty-seventh Legislature Second Regular Session - 2004
IN THE HOUSE OF REPRESENTATIVES
HOUSE BILL NO. 665
BY JUDICIARY, RULES AND ADMINISTRATION COMMITTEE
1 AN ACT
2 RELATING TO NONPROBATE TRANSFERS FROM DECEDENT'S ESTATE; AMENDING SECTION
3 15-6-107, IDAHO CODE, TO SPECIFY PROCEDURE TO GOVERN SETTLEMENT OF CLAIMS
4 AGAINST A NONTESTAMENTARY TRUST, PROVIDING TIME FOR CLAIMS TO BE PRE-
5 SENTED, MANNER OF PRESENTATION AND EFFECT OF PRESENTATION.
6 Be It Enacted by the Legislature of the State of Idaho:
7 SECTION 1. That Section 15-6-107, Idaho Code, be, and the same is hereby
8 amended to read as follows:
9 15-6-107. LIABILITY OF NONPROBATE TRANSFEREES FOR CREDITOR CLAIMS AND
10 STATUTORY ALLOWANCES. (1) In this section, "nonprobate transfer" means a valid
11 transfer effective at death, other than of a survivorship interest in a joint
12 tenancy of real estate, by a transferor whose last domicile was in this state
13 to the extent that the transferor immediately before death had power, acting
14 alone, to prevent the transfer by revocation or withdrawal and instead to use
15 the property for the benefit of the transferor to apply it to discharge claims
16 against the transferor's probate estate.
17 (2) Except as otherwise provided by statute, a transferee of a nonprobate
18 transfer is subject to liability to the decedent's probate estate for allowed
19 claims against the decedent's probate estate and statutory allowances to the
20 decedent's surviving spouse, minor children and dependent children to the
21 extent the decedent's probate estate is insufficient to satisfy those claims
22 and allowances. The liability of a nonprobate transferee may not exceed the
23 value of nonprobate transfers received or controlled by that transferee.
24 (3) Nonprobate transferees are liable for the insufficiency described in
25 subsection (2) of this section in the following order:
26 (a) As provided in the decedent's will or any other governing instrument;
27 (b) To the extent of the value of the nonprobate transfer received or
28 controlled by the trustee of a trust serving as the principal nonprobate
29 instrument in the decedent's estate plan as shown by its designation as
30 devisee of the decedent's residuary estate or by other facts or circum-
32 (c) Other nonprobate transferees, in proportion to the values received.
33 (4) Unless otherwise provided by the trust instrument, interests of bene-
34 ficiaries in all trusts incurring liabilities under this section shall abate
35 as necessary to satisfy the liability as if all of the trust instruments were
36 a single will and the interests were devises under it.
37 (5) A provision made in one (1) instrument may direct the apportionment
38 of the liability among the nonprobate transferees taking under that or any
39 other governing instrument. If a provision in one (1) instrument conflicts
40 with a provision in another, the later one prevails.
41 (6) Upon due notice to a nonprobate transferee, the liability imposed by
42 this section is enforceable in proceedings in this state, wherever the trans-
43 feree is located.
1 (7) A proceeding under this section may not be commenced unless the per-
2 sonal representative of the decedent's estate has received from the surviving
3 spouse or one acting for a minor or dependent child, to the extent that statu-
4 tory allowances are affected, or a creditor, a written demand for the proceed-
5 ing. If the personal representative declines or fails to commence a proceeding
6 after demand, a person making demand may commence the proceeding in the name
7 of the decedent's estate, at the expense of the person making the demand and
8 not of the estate. A personal representative who declines in good faith to
9 commence a requested proceeding incurs no personal liability for declining.
10 (8) A proceeding under this section must be commenced within two (2)
11 years after the decedent's death, but a proceeding on behalf of a creditor
12 whose claim was allowed after proceedings challenging disallowance of the
13 claim may be commenced within sixty (60) days after final allowance of the
15 (9) Unless a written notice asserting that a decedent's probate estate is
16 insufficient to pay allowed claims and statutory allowances has been received
17 from the decedent's personal representative the following rules apply:
18 (a) Payment or delivery of assets by a financial institution, registrar
19 or other obligor to a nonprobate transferee in accordance with the terms
20 of the governing instrument controlling the transfer releases the obligor
21 from all claims for amounts paid or assets delivered.
22 (b) A trustee receiving or controlling a nonprobate transfer is released
23 from liability under this section on any assets distributed to the trust's
24 beneficiaries. Each beneficiary to the extent of the distribution received
25 becomes liable for the amount of the trustee's liability attributable to
26 that asset imposed by subsections (2) and (3) of this section.
27 (10) After the death of a settlor, the trustees of a nontestamentary trust
28 may notify known creditors and publish notice to creditors in the same manner
29 as the personal representative of a probate estate may do under the provisions
30 of section 15-3-801, Idaho Code. The trustee is not liable to a creditor or to
31 any beneficiary of the trust for giving or failing to give notice under this
32 section. If notice to creditors is so given or published:
33 (a) A claim against the trust estate that arose before the settlor's
34 death, including claims of the state or any of its political subdivisions,
35 whether due or to become due, absolute or contingent, liquidated or unliq-
36 uidated, founded on contract, tort or other legal basis, if not barred by
37 any other statute of limitations or nonclaim statute, are barred against
38 the trust estate, the trustee and the beneficiaries of the trust, unless
39 presented within the earlier of the following dates:
40 (i) Two (2) years after the decedent's death; or
41 (ii) Within the time provided in section 15-3-801, Idaho Code, for
42 creditors who are given actual notice, and within the time provided
43 in section 15-3-801(a), Idaho Code, for all creditors barred by pub-
45 (b) A claim under this section must be presented as follows: The claimant
46 shall deliver or mail to the trustee, at the address stated in the notice
47 to creditors, a written statement of the claim indicating the information
48 prescribed in section 15-3-804(a), Idaho Code. Presentation of a claim
49 under this section is not required if the claimant commences a proceeding
50 against the trustee in the same manner as a proceeding against a personal
51 representative pursuant to section 15-3-804(b), Idaho Code.
52 (c) If a claim is presented in a timely manner, section 15-3-804(c),
53 Idaho Code, applies.
54 (d) If the trustee has distributed the trust estate to beneficiaries of
55 the trust prior to receipt of a creditor's claim, the trustee shall mail
1 or deliver a copy of the claim to any beneficiary that may be liable for
2 the claim under the provisions of subsection (9)(b) of this section.
STATEMENT OF PURPOSE
Section 15-6-107, Idaho Code, was enacted in 2003 for the purpose of
preventing individuals from avoiding their just debts by using various
methods for nonprobate transfer of property after death, such as "POD"
accounts and living trusts. The statute imposes personal liability
upon the transferees of property through nonprobate transfers for
proper probate claims that were not fully paid by the decedent's
probate estate. If the trustee of a living trust makes distributions
to beneficiaries without knowledge of the unpaid claims, the personal
liability shifts to the persons to whom distributions were made.
Unlike other states that have adopted similar laws, Idaho failed to
provide a way for the trustee of a living trust to determine, prior to
making distributions, the existence of claims for which trust
beneficiaries may have a personal liability. Because a probate
proceeding may be commenced, and claims allowed, within three years
after a person's death, beneficiaries receiving distributions from the
trustee have no way of knowing whether they will be able to retain
their gifts until expiration of the time for probate. The proposed
amendment permits the trustee to publish a Notice to Creditors, in
exactly the same manner as the Personal Representative of a probate
estate, and provides that creditor claims that are not presented
within the specified time after publication of the notice are
permanently barred. The procedure for publishing notice, time for
making of claims, and barring of claims not presented within the
statutory period, are all identical to the procedures for probate
estates provided by the Uniform Probate Code.
These provisions for trustee publication of notice to creditors are
patterned after Section 14-6103, Arizona Revised Statutes. Similar
provisions are found in Section 11.42.030, Revised Code of Washington;
Section 19040, California Probate Code; and Section 456.610, Missouri
None to the General Fund.
Name: Representative Peter Nielsen
STATEMENT OF PURPOSE/FISCAL NOTE H 665