The 2018 GA Legislative Session turned out to be a very big deal for those living in GA. This new legislation was enacted at the end of March 2018, but the GA Governor had until the end of May 8, 2018 to veto any legislation he did not like. This time has now passed, and all of the 2018 legislation (with one exception discussed below) impacting the estate planning world will now officially become effective on July 1, 2018.
So, what was changed? First, the GA Trust Code underwent its first major update since 2010, and this will make GA trust law much more flexible and beneficial. Second, the GA Power of Attorney Act, which became effective on July 1, 2017, is being modified and improved. Third, a parent may now, without court involvement, transfer the care and custody of their minor child to a relative or other appropriate agent (with certain exceptions) for up to year, but if the agent is a grandparent, the term is not limited. Fourth, Antenuptial Agreements (pre-marital and post-martial agreements) have new signing requirements in order to be legally valid. Fifth, we now have rules as to what needs to be done for a fiduciary (Executor, Trustee, Conservator or agent under POA) to access an individual’s digital assets.
The GA legislature got very close to enacting Self Settled Spendthrift Trust legislation (HB 441), which would have been a very big deal. However, the GA Governor vetoed this legislation on the last possible day, May 8, 2018, with Veto Number 3.
This News Alert will provide a summary of these changes. However, because these changes are so significant, we plan to provide further education and assistance in considering these changes in your or your client’s situation. In this regard, we plan to take the following steps: (1) send out more in-depth newsletters on some of these subjects over the coming months; (2) hold Lunch & Learns on these subjects; and (3) launch a new Will & Trust Improvement Service.
The following is a summary of the various changes:
- The Power to Change an Otherwise Irrevocable Trust and Other Important Changes to the GA Trust Code (HB 121).
- GA Uniform Statutory Rule Against Perpetuities (GA RAP). While the wording sounds like legalese, its meaning is significant. The GA RAP effectively limits how long a trust can continue. The current safe harbor limit of 90 years is being extended to 360 years. The benefit of this change will be to enable longer term trusts that can continue to benefit an individual’s family members for as long as desired. The primary benefits of trusts are asset protection (protection from a beneficiary’s creditors, including spouses in divorce situations), potential tax benefits and, to the extent desired, control over who and how the beneficiaries can benefit from the trust’s assets. So, instead of forcing trusts to terminate during the grandchild’s generation, trusts can now either be structured to continue for much longer, or the beneficiaries can be given the power to significantly extend their trust shares for the benefit of their descendants / families.
- Significant Expansion of the Ability to Modify or Terminate an Otherwise Irrevocable Trust. Under current law, the ability to modify or terminate an irrevocable trust is very limited to the extent the desired modification or termination is not already permitted under the terms of the irrevocable trust itself. These new laws will: (a) greatly increase the types of permitted modifications to a trust and the ability to terminate a trust through a court based process; (b) significantly decrease the cost and hassle of notifying all proper parties, including the unknown and unborn, by making it easier to have one party receive notice and give consent on behalf of another, either through court appointment or virtual representation; (c) enable non-judicial settlements, which effectively enable the parties to do what a judge could do, but without going through a court based process, as long as all the proper parties are notified and consent; (d) enable “decanting” where the Trustee acts to indirectly modify the trust by making a distribution in further trust, even by continuing to use the same trust document, albeit in somewhat modified form; and (e) provide greater statutory authority to terminate small trusts. We will be sending out a more detailed Newsletter on this subject in the coming months.
- Other Important Improvements.
- Directed Trusts. Trusts in GA will now have statutory authority to split up the Trustee’s duties among multiple parties, with each only being liable for their duties / powers. For example, one or more parties can serve as the Trustee with administrative duties, one or more other parties can control investments in general or as to specific assets, and one or more other parties can control distributions to the beneficiaries. These new provisions set up the legal framework, while your imagination can be your guide as to how to split up the various duties / powers among various parties.
- Beneficiary Asset Protection Clarified / Enhanced as to Trusts Utilizing Ascertainable Distribution Standards Rather Than Full Discretion Standards. The law has historically been fairly clear that a Trustee’s full discretion standard to benefit a beneficiary does not provide the beneficiary with a “property right” to which a creditor of the beneficiary can attach. However, this legal clarity did not exist as to a Trustee’s discretion to make distributions to a beneficiary under an ascertainable standard, such as health, education, maintenance and support (“HEMS” standard). This change to GA law now helps clarify that the beneficiary has no property right for a creditor to attach regardless of which discretionary distribution standard is used.
- Clarification that Trustee’s Discretion to Reimburse Grantor for Income Tax Liability Owed on Income Earned by a Grantor Trust is Not to be Considered as an Amount That Can be Distributed To or For the Grantor’s Benefit. This provision makes GA law consistent with Federal Tax law. When an individual gifts assets to an irrevocable trust during life, the trust is often structured as a grantor trust, which means the creator (Grantor or Settlor) pays tax on any income earned by the trust, even though the creator does not have access to the income being taxed. After this change, GA trusts can now provide the Trustee with the authority, consistent with Federal Tax Law, to reimburse the creator for any income tax liability on the Trust’s income without causing negative tax or asset protection implications.
- Inter Vivos QTIP Marital Trusts Are Now a Viable Planning Alternative in GA. An advanced estate planning alternative is the use of an inter vivos (created during life) QTIP Marital Trust. This type of trust is set up by one spouse for the benefit of the other spouse. If the other spouse dies first, the trust can then come back to benefit the spouse who initially set it up. While this type of trust has had tax benefits based on Federal Tax Law, it did not necessary work in GA because state law provided that any trust that eventually benefitted the party who set it up was considered self-settled (which is traditionally a no-go status from an asset protection perspective, and could thereby indirectly cause estate tax issues). GA law will now provide a specific exception for this type of trust, so that it will not be considered as a self-settled trust if it comes back to benefit the trust’s creator. As a result, inter vivos QTIP Marital Trusts now become a viable alternative for estate and tax planning in GA.
- Trustee Powers. Trustee powers were somewhat broadened under GA law.
- Deemed Correction of Deeds Which Use Improper Language to Transfer Real Estate to the Trustee of a Trust. The legally proper way to transfer assets to a trust is to transfer legal title to the Trustee of the trust, and not to the name of the trust itself. It is believed that this legal requirement is not necessarily well understood. So, for real estate Deeds executed on or after July 1, 2018, using improper wording to transfer the property to the trust rather than correctly to the Trustee of the trust will be deemed to transfer the property to the Trustee of the trust. Deeds executed before this date that did not use the proper language will still need to be legally corrected. A failure to fix this type of deed drafting error could result in significant negative consequences in the future, depending on the facts in the particular situation.
- GA Power of Attorney Act (HB 897). This legislation serves to provide both technical corrections and improvements to the GA Uniform Power of Attorney Act that became effective on July 1, 2017. We will be sending out a more detailed Newsletter on this subject in the coming months. In the meantime, you should be aware that the onerous requirements to revoke a POA executed on or after July 1, 2017 will no longer be mandatory beginning on July 1, 2018.
- Supporting and Strengthening Families Act (HB 159). GA adopted major legislation to update and modernize its adoption laws. As part of this legislation, O.C.G.A. Sections 19-9-120 to 19-9-134 create a new and powerful tool to enable a parent to transfer the care and custody of their minor child to a family member or other qualified agent for up to a year, or to a grandparent with no stated time limit. This transfer is carried out via a special Power of Attorney, with the statutory form being set out under O.C.G.A. Section 19-9-134. This new powerful Power of Attorney option will likely become favored over the more traditional Temporary Guardianship process, which comes with the costs and hassles of a court based process.
- Antenuptial Agreements (HB 190). Pre-nuptial and post-nuptial agreements must now be signed in a particular manner to be legally effective. Specifically, they must be in writing, signed by both parties, and attested to by a notary and at least one witness.
- Revised Uniform Fiduciary Access to Digital Assets Act (SB 301).
- In General. Fiduciaries have been getting frustrated in trying to access a user’s electronic information from the custodian holding such information. GA just adopted the relatively new Uniform Act that provides a set of rules to regulate a fiduciary’s ability to access a user’s electronic information. Under these rules, a distinction is made between the “catalogue” and “content” of electronic communications. The “catalogue” consists of the identity of who the user was communicating with, their electronic address, and the time and date of the communication. Whereas the “content” relates to the substance or meaning of the communication. In general, access is determined in the following order: (1) custodian’s online tool; (2) user’s Will, Trust, POA or other record; and (3) custodian’s terms-of-service agreement.
- For Deceased Users. The custodian must provide access to the catalog and content to the user’s Personal Representative (PR) if requested by the user (e.g., via Will) or ordered by a court. Otherwise, the custodian must only provide the PR with access to the catalog if the deceased user did not prohibit it.
- For Living Users via POA. The custodian must provide access to the catalogue if the POA grants a power over digital assets or a general power to do all acts the principal can do. However, in order for the agent to get access to the content, the POA must specifically grant authority over the content of the principal’s digital assets.
- Trustees. If the Trustee is the original user of the account, the custodian must provide access to both catalogue and content. If the Trustee is not the original user, the custodian must only provide access to the catalogue.
- For Living Users via Conservator. A conservator needs a court order to access the ward’s digital assets. However, if good cause can be shown, a conservator may request suspension or termination of the ward’s account.
If you have questions about the trust code changes, we are here to help. Contact our office administrator at (678) 720-0750 or email@example.com to schedule an estate planning consultation where you can discuss your questions with one of our attorneys.