Legislative Proposals for 2020

Mediation (2020-02)

Proposed by Alternative Dispute Resolution Committee
Approved by the Board of Governors Nov. 21, 2019   

The Missouri statutes on mediation were last updated in 1986, and Supreme Court Rule changes 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. There updates would help ensure that party expectations are met  with regard to confidentiality and due process. Additional, attorneys will be able to provide clarity to questions from clients regarding a wide range of Alternative Dispute Resolution processes. 

A new definition section:
a. Replaces the problematic language of "settlement negotiations" with the more modern phrase "ADR communication";
b. Defines "writing" consistent with other statutes and rules;
c. Defines what constitutes a "written agreement," so the parties will know what is a valid agreement.

The courts would be vested with broad discretion to order cases to mediation or other non-binding ADR processes. Parties could modify that choice and/or opt out as provided by the statute, consistent with good case management concerns of the court. Conflicts of interest by the neutral are addresses, and procedures to deal with same are outlined.

Specific issues concerning what should and should not remain confidential are addressed for the first time. Five specific and important exceptions are listed. Procedures on how the court should address these exceptions are identified.

A signed written agreement is required, consistent with best practices. 

The statute is expanded to include pre-suit and post-judgement disputes, when the parties agree. Pre-suit mediation is a growing and important trend and will help avoid many lawsuits from even being filed. Nothing in these proposed sections is intended to: (1) undermine the right to jury trial; (2) require parties to settle; or (3) require a pro se party to bring an attorney to the mediation.            

Draft Legislative Proposal (2020-02)

Assignments for Benefit of Creditors (2020-03)

Proposed by Bankruptcy Creditor-Debtor Rights Committee
Approved by the Board of Governors Nov. 21, 2019

This legislative proposal would revise and update Chapter 426 of the Revised Statutes of Missouri (Assignment for Benefit of Creditors). An ABC involves the assignment of all of an individual's or company's assets to a 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.

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. Other states, such as Florida, California, and New York, have drafted and adopted comprehensive and modern statutory schemes for ABCs. Chapter 426 of the Missouri statues is out of date and rarely used by practitioners.  

Missouri Revised Decanting Statute (2020-04)

Proposed by the Probate and Trust Division (Estate Planning & Probate Administration Law Committee)
Introduced during the 2019 Regular Session

The Missouri decanting statute was enacted in 2011, permitting discretionary distributions that are made from one trust (the "First Trust") to another trust (the "Second Trust") if certain conditions are met. The Missouri decanting statute has been very useful to the citizens of Missouri because it allows greater flexibility to address circumstances that have changed since the First Trust was executed. One example of where decanting is useful is where the First Trust does not include provisions that are desirable due to the dramatic increases in the federal estate tax exemption (which was only $600,000 prior to the year 2000 and is now $11,400,000) and the Second Trust does include those provisions. Another example of where decanting is useful is where the First Trust does not include provisions for a beneficiary with special needs and the Second Trust does include those provisions.
There are currently 28 states with a decanting statute. In 2015, the Uniform Law Commissioners approved and recommended enactment of the Uniform Act. The Uniform Act has now been enacted in seven states.  

In 2017, the Estate Planning, Trust and Probate Committee of The Missouri Bar formed a Decanting Subcommittee to study the Uniform Act and recommend whether Missouri should make any changes to the Missouri decanting statute or replace it with the Uniform Act. The Subcommittee recommended that the Missouri decanting statute be amended to adopt some, but not all, of the provisions of the Uniform Act.  

The revised decanting statute would make the following primary changes:
1. Subsection 2 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.
2. Subsection 3 provides more flexibility for the trustee of a trust to use decanting to create a special needs trust for a beneficiary with a disability.
3. Subsection 4 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.
4. Subsection 5 expands the notice requirements for the exercise of the decanting power.
5. Subsection 8 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.    
6. Subsection 9 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.

Draft Legislative Proposal (2020-04)