2004 Legislation
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HOUSE BILL NO. 665 – Trust, nontestamentary, claims


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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

Bill Text

  ]]]]              LEGISLATURE OF THE STATE OF IDAHO             ]]]]
 Fifty-seventh Legislature                 Second Regular Session - 2004
                              IN THE HOUSE OF REPRESENTATIVES
                                     HOUSE BILL NO. 665
  1                                        AN ACT
  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:
 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-
 31        stances;
 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
 14    claim.
 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-
 44             lication.
 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 / Fiscal Impact

                       STATEMENT OF PURPOSE
                             RS 13865
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
Revised Statues.

                          FISCAL IMPACT
None to the General Fund.

Name: Representative Peter Nielsen 
Phone: 332-1000

STATEMENT OF PURPOSE/FISCAL NOTE                         H 665