SB 500 - This act modifies various provisions relating to trusts.
QUALIFIED SPOUSAL TRUSTS
The act specifies that property held in some form of joint ownership with a right of survivorship by a husband and wife shall be treated as being held as tenants by the entirety upon the property's transfer to a qualified spousal trust (456.950).
This provision is identical to HCS/SB 499 (2014), HB 1428 (2014,) and to provisions contained in the truly agreed to and finally passed version of HB 1231 (2014).
MEDIATION PROVISION IN A TRUST INSTRUMENT
This act provides that a provision in a trust instrument requiring mediation or arbitration is enforceable. However, provisions requiring mediation or arbitration of disputes relating to the validity of the trust are not enforceable unless all interested parties consent to the mediation or arbitration (456.2-205).
This provision is identical to SB 654 (2014), HB 1135 (2014), and provisions contained in HCS/SB 499 (2014).
NO CONTEST CLAUSES
Currently, "no-contest" or "in terrorem" clauses are enforceable. These types of provisions in a trust or will generally provide that a beneficiary forfeits interest in the trust or will property if the beneficiary contests the trust or will.
This act provides that when an irrevocable trust contains a no-contest clause, as defined in the act, then an interested person may still file a petition with a court for a ruling on whether a particular claim for relief would trigger forfeiture. The petition for such a ruling may be filed either as a separate judicial proceeding or along with other claims for relief. The act specifies that when ruling on the petition, the court shall consider the text of the clause, and the context of the terms of the trust and factual allegations in the petition. The court shall not accept evidence beyond what is provided in the pleadings and the trust instrument.
The act states that the judgment on the application of a no-contest clause is appealable. Following the ruling, if claims are subsequently filed in which differing facts are asserted from those which the no-contest clause judgment was based upon, then the party in whose favor the judgment was rendered shall have no protection from enforcement of the no-contest clause provided under this act.
The act also provides the types of circumstances in which a no-contest clause is not enforceable such as objections to venue or a claim for relief concerning an accounting error. In these situations the court may award attorneys' fees and costs (456.4-420).
Similar to a trust, the act states that if a will contains a no-contest clause an interested person may file a petition with the court for determination on whether a court action would trigger the application of the no-contest clause or trigger forfeiture (474.395).
This provision is identical to HCS/SB 499 (2014), HB 1429 (2014), and to provisions contained in the truly agreed to and finally passed versions of HB 1231 (2014) and SB 621 (2014).