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Seattle Trust Attorney Mary Anne Vance, P.S.
Seattle Trust Attorney Mary Anne Vance, P.S.

Trust Busting: What to Do When Your Trust is No Longer Working Well

— Mary Anne Vance, Attorney at Law


What do you do when your Trust is no longer working as well as it could? A Non-Judicial Dispute Resolution Agreement can help.

Consider the following scenario: Walter died in 1990 leaving a Will which contained a Trust for the benefit of his four young nephews and nieces. The trust language provided that the $250,000 trust fund should be used to pay for the college tuition of the nieces and nephews. However, the trust failed to state what should happen with the money if none of the nieces and nephews went to college.

A friend of Walter's, Marilyn, served as trustee. Marilyn had never been a trustee before and did not consult with an attorney to advise her about her trustee duties. She simply invested the $250,000 in a bank savings account and sent the four nieces and nephews checks each year for the minimal interest paid by the bank. This year, Marilyn decided to retire from serving as trustee, but Walter did not name a successor trustee. Marilyn and the four nieces and nephews, now adults, met with an attorney to learn how they could find a new trustee.

The Non-Judicial Dispute Resolution Agreement
While this situation is hypothetical, it does call attention to the fact that there are a number of things that are often overlooked during the Trust creation and management process, such as providing alternatives in the Trust, or naming a successor. No two Trusts are identical and they should not be treated as such; each Trust uses different wording and has different people named in the Trust.

When family or loved ones are faced with complications arising from a Trust, they can consider a procedure to dissolve the Trust or amend the Trust to better suit the needs of the beneficiaries, as long as all parties agree to the changes. This is called a Non-Judicial Dispute Resolution Agreement (NJDRA) procedure. In Washington State, the governing statute is the Revised Code of Washington 11.96A.22, which is reprinted at the end of this article.

Here is how a NJDRA works: If all the parties involved with the Trust agree to make a change to the Trust document, they can legally do so, even if the change is to "bust" (dissolve) the trust, causing it to cease to exist and causing distribution of the trust funds to the beneficiaries.

In order for any change to take place, every beneficiary (including future unborn beneficiaries who have a court appointed "virtual representative") and the trustee must agree to the change. The big advantage of the NJDRA is that this procedure can be done without court approval, allowing beneficiaries to update outdated trusts to serve the beneficiaries more appropiately and to save future trustee, accountant, and attorney fees.

In the case of Walter's Trust, there were no unborn beneficiaries and the court was not involved in the dissolution of the trust. Since the four nephews and nieces agreed that none of them would have future educational expenses, they decided there was no purpose for the trust. The trustee, Marilyn, agreed with them. The attorney wrote a document in accordance with the requirements of the statute saying that the trustee's past actions were approved and that the trustee should divide the remaining $250,000 into four equal portions, one for each beneficiary, thereby dissolving the entire trust.

If you are having a problem with a Trust, know that you have options. While the person who created the Trust had good intentions and had your best interests at heart, circumstances may have changed since the Trust was first written. You are entitled to make changes so that the Trust best suits the interests of all the parties involved.


Revised Code of Washington 11.96A.220 - Binding agreement.
"RCW 11.96A.210 through 11.96A.250 shall be applicable to the resolution of any matter, as defined by RCW 11.96A.030, other than matters subject to chapter 11.88 or 11.92 RCW, or a trust for a minor or other incapacitated person created at its inception by the judgment or decree of a court unless the judgment or decree provides that RCW 11.96A.210 through 11.96A.250 shall be applicable. If all parties agree to a resolution of any such matter, then the agreement shall be evidenced by a written agreement signed by all parties. Subject to the provisions of RCW 11.96A.240, the written agreement shall be binding and conclusive on all persons interested in the estate or trust. The agreement shall identify the subject matter of the dispute and the parties. If the agreement or a memorandum of the agreement is to be filed with the court under RCW 11.96A.230, the agreement may, but need not, include provisions specifically addressing jurisdiction, governing law, the waiver of notice of the filing as provided in RCW 11.96A.230, and the discharge of any special representative who has acted with respect to the agreement.
If a party who virtually represents another under RCW 11.96A.120 signs the agreement, then the party's signature constitutes the signature of all persons whom the party virtually represents, and all the virtually represented persons shall be bound by the agreement."

[1999 c 42 § 402.]



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Seattle Trust Attorney Mary Anne Vance, P.S.

Seattle, WA Estate & Trust Lawyers

Mary Anne Vance
Reed Longyear Malnati Corwin & Burnett
801 2nd Avenue, Suite 1415
Seattle, WA 98104
(206) 624-6271


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