Legislative Proposals for 2021 Legislative Session
Click here to view a report on the current status of Bar-initiated legislative proposals in the legislative process.
Missouri Revised Decanting Statute
Proposed by the Probate and Trust Division (Estate Planning & Probate Administration Law Committee)
Approved by the Board of Governors on July 16, 2021
Enacted in 2011, the Missouri decanting statute (section 456.4-419, RSMo) deals with discretionary distributions made from one trust to another trust, if certain conditions are met, affording Missourians with greater flexibility to address circumstances that may have changed since the first trust was executed. For example, the federal estate tax exemption, which was $600,000 prior to 2000, has since been increased to $12.06 million. Another example would be a second trust including provisions for a beneficiary with special needs that were not included in the first trust.
At least twenty-nine states have decanting statutes. In 2015, the Uniform Law Commission approved a Uniform Trust Decanting Act, which has been enacted in twelves states. After a subcommittee review of the Missouri decanting statute and the Uniform Trust Decanting Act, the Probate and Trust Division of The Missouri Bar submitted proposed modifications to the Missouri decanting statute to the Board of Governors, which has approved introduction of the proposal to the General Assembly in 2019, 2020, 2021, and 2022.
This revision of the Missouri decanting statute would accomplish the following:
-
- Eliminates the risk that the existence of the decanting power may cause the IRS to treat a “nongrantor trust” as a “grantor trust,” which would result in the settlor of the trust being deemed to be owner of the trust assets for income tax purposes.
-
- Provides more flexibility for the trustee of a trust to use decanting to create a special needs trust for a beneficiary with a disability.
-
- Adopts the tax provisions of the Uniform Act, which will prevent the exercise of the decanting power in a manner that has adverse tax consequences to a trust or the beneficiaries of a trust.
-
- Expands the notice requirements for the exercise of the decanting power.
-
- Provides that any rule against perpetuities that applies to the first trust will apply to the second trust (unless a beneficiary has a general power of appointment over the first trust or second trust that causes the rule to no longer apply) – although this is not a change to the current law, inclusion of this language in the statute eliminates any question as to whether the rule against perpetuities still applies to the second trust.
-
- Sets forth a “savings” provision that protects the trust and the beneficiaries from the attempted exercise of the decanting power in a manner that violates the statute.
As introduced by Senator Luetkemeyer and Representative Hardwick, the legislative measures also include additional provisions relating to trust law and familial relationships (section 456.1-114, RSMo) and the rule against perpetuities (section 456.026, RSMo). These provisions have been reviewed and approved by Executive Committee of The Missouri Bar Board of Governors for inclusion with the Bar-initiated legislative proposal.
Alternative Dispute Resolution
Proposed by Alternative Dispute Resolution Committee
Approved by the Board of Governors on July 16, 2021
The Missouri statutes on mediation were last updated in 1986, and changes to the Supreme Court rules were adopted in 1995. Over the last three decades, the practice of mediation has grown and modernized and become an essential ingredient in settling cases in litigation. These updates reflect a consensus of mediators, users, litigators, and judges to meet participant expectations in the areas of definitions, confidentiality, and due process, and provide clarity without needing court interpretation.
A new definition section (§ 435.300, RSMo) would:
-
- Replace “settlement negotiations” with the phrase "ADR communication.”
-
- Define “writing,” consistent with other statutes and case law.
-
- Define what constitutes a “written agreement.”
The courts would be vested with broad discretion to order cases to mediation or other non-binding ADR processes (in line with Supreme Court Rule 17). Parties could modify the choice and/or opt out as provided by the statute, consistent with the best practice management concerns of Missouri courts. Conflicts of interest by the neutral are identified and procedures to deal with conflicts of interest would be outlined in statute.
Specific issues concerning what should and should not remain confidential are addressed for the first time. Four specific exceptions to confidentiality, one of the most fundamental underpinnings of mediation, would be listed. The procedures a court should use to address these exceptions would be identified (§ 300.306, RSMo).
Alternative dispute resolution would be nonbinding on the parties unless there was a signed written agreement. This change would harmonize the statute with the best practices identified in Supreme Court Rule 17 (§ 300.309, RSMo).
The statute would be expanded to provide for pre-suit and post-judgment disputes, upon agreement of the parties (§ 300.312, RSMo). Pre-suit mediation is a growing and important trend that will help avoid many lawsuits from being filed.
Finally, nothing in the proposed statute would: (1) undermine the right to jury trial; (2) require the parties to settle; or (3) require a pro se party to bring an attorney to the mediation (§ 300.312).
Assignments for the Benefit of Creditors
Proposed by Bankruptcy Creditor-Debtor Rights Committee
Approved by the Board of Governors on July 16, 2021
This legislative proposal would revise and update Chapter 426 of the Revised Statutes of Missouri (Assignment for Benefit of Creditors). An ABC involves the voluntary assignment of all of an individual’s or company’s assets to a neutral third-party assignee. The assignee, who holds legal and equitable title to the company’s assets in trust by virtue of the assignment, is empowered to sell the assets and distribute the proceeds to the company’s creditors pursuant to priorities established by state law. An up-to-date ABC statute will enable individuals and small businesses to orderly liquidate their non-exempt assets to pay creditors without the stigma of bankruptcy.
The proposed legislation sets jurisdiction and venue in the circuit courts. It provides procedures for the recovery and distribution of assets to the assignor's creditors. The legislation would supplant common law assignments. The legislation would provide the required and prohibited provisions for a valid ABC. The legislation would define the rights, powers and duties of the assignor and assignee. The legislation would regulate the priority and processing of claims against the assignor for an orderly liquidation of the assignor's non-exempt assets.
The current ABC statutes were written in 1909 and have not been substantively revised since 1939. Chapter 426 of the Missouri statues is out of date and rarely used by practitioners.