Nevada Supreme Court: Include All Trust Documents To Trigger 120-Day Trust Challenge Deadline

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In In re Estate of Horst Revocable Trust, the Nevada Supreme Court considered what a trustee must include in a notice to beneficiaries under NRS 164.021 to trigger the 120-day limitation period deadline to challenge the validity of a trust.

The Facts of In re Estate of Horst Revocable Trust

Ella E. Horst established the Ella E. Horst Revocable Trust (the “Trust”) to benefit her children and grandchildren.  Ella eventually moved to Las Vegas and began living with her granddaughter Patricia.  Ella, through the Trust, bought a home (Home) with Patricia and Patricia’s partner.  The Trust paid 50% of the purchase price and retained a 50-percent interest in the Home.

Over the next few years, the following amendments to the Trust were made by Ella:

  • Ella executed a second amendment to the Trust that removed a $20,000 specific gift to Patricia, provided Patricia with a specific gift of the Trust’s interest in the Home, and named Patricia as successor trustee.
  • Ella signed a third amendment that gave an additional specific gift of real property to Patricia.
  • Patricia’s partner conveyed her 25% interest in the Home to the Trust, and Ella purportedly executed a fourth amendment, adding a specific gift of the Trust’s recently acquired 25% interest in the home to Patricia.

 

Patricia became the successor trustee when Ella died.  On January 27, 2017, Patricia, pursuant to NRS 164.021(1), served notice to beneficiaries, heirs, and interested persons regarding the Trust’s irrevocability.  The notice included the full text of the original Trust and the first three amendments thereto, but did not include the purported fourth amendment.  None of the residuary beneficiaries timely objected to this notice.

In May 2018, Patricia petitioned the district court to confirm the fourth amendment as valid.  She sent notice to the Trust beneficiaries on May 18, 2018.

Brian Holiday, a residual beneficiary of the Trust, filed an objection to the petition on July 16, 2018, alleging that the second, third, and purported fourth amendments were the product of undue influence.

Ultimately, the district court concluded that NRS 164.021(4) barred Holiday’s objection to the second and third amendments because he filed it more than 120 days after Patricia served the initial notice of the Trust’s irrevocability, in which she included the first three amendments. However, the district court concluded that Holiday’s objection to the purported fourth amendment was timely and permitted discovery.  Holiday appealed the order regarding the second and third amendments.

120-Day Deadline To Challenge a Nevada Trust

NRS 164.021 governs the process for a trustee to provide notice to beneficiaries once a trust becomes irrevocable. The notice must contain certain information about the trust, including “any provision of the trust instrument which pertains to the beneficiary or notice that the heir or interested person is not a beneficiary under the trust…”.  See NRS 164.021(2).

A beneficiary has 120 days from service of such notice to contest the validity of the trust under Nevada law.

Here, Holiday argued that Patricia’s initial notice (which did not include the fourth amendment) did not trigger the 120-day limitation because it did not include the fourth amendment, which is a trust provision pertaining to him.

Patricia argued that a trustee has discretion to select which provisions should be included with the notice to beneficiaries, asserting that Nevada’s notice statute is voluntary and optional.  Accordingly, she contended that NRS 164.021 contemplates the trustee sending more than one notice, and Holiday’s challenge to the second and third amendments to the Trust are time-barred under NRS 164.021(4) because Holiday objected more than 120 days after her initial notice to beneficiaries.

The Term “Any” In Nevada’s Notice Statute Means “All”

After reviewing the provisions surrounding NRS 164.021(2)(c)  and the legislative history, the Nevada Supreme Court determined that the use of the word “any” means “all”, stating:

Patricia is correct that a trustee has the discretion whether to send notice to beneficiaries in order to trigger the 120-day limitation period and cut off all challenges to the trust. However, we reject her contention that NRS 164.021s legislative history suggests that a trustee also has the discretion to confirm trust instruments in a piecemeal fashion. Such a construction would not promote the Legislature’s desire for efficiency because it could allow for multiple contests to various trust provisions. Such a construction would not promote judicial economy and could increase the costs of trust administration due to successive contests. Holiday’s proffered construction of NRS 164.021(2)(c) is consistent with the Legislature’s intent because it requires a trustee to include every trust provision that pertains to a beneficiary within the notice. This, in turn, facilitates a single deadline for trust contests, as the beneficiaries will have all the information they need to review terms of the trust and decide whether they wish to litigate. Thus, consistent with the rules of statutory construction, we conclude that “any” in NRS 164.021(2)(c) means “all.”

Therefore, all trust documents must be sent, and all must be sent at the same time.

Nevada Law Requires Strict Compliance To Trigger the 120-Day Trust Challenge Deadline

The Nevada Supreme Court then addressed whether NRS 164.021 requires strict or substantial compliance, stating:

Here, NRS 164.021(2) uses mandatory language to describe the obligation of a trustee when he or she provides notice to beneficiaries. NRS 164.021(2) (“The notice provided by the trustee must contain . . . .”). Furthermore, the legislative history of NRS 164.021 suggests that the Legislature desired an expedited and efficient system for trust administration. Because only a complete disclosure of all provisions of a trust instrument pertaining to a beneficiary will further the Legislature’s goals and give a beneficiary all the information he or she needs to decide whether to contest a trust, we hold that NRS 164.021(2)(c) requires strict compliance.

Ultimately, the Nevada Supreme Court determined that Holiday’s challenge to the second and third amendments was timely.  The initial notice to beneficiaries did not include the purported fourth amendment to the Trust, and therefore did not trigger the 120-day time limitation under NRS 164.021(4) to challenge the Trust.  Patricia’s second notice to beneficiaries included the purported fourth amendment, and thereby triggered the 120-day limitation period, in which Holiday timely filed his objection to the second and third Trust amendments.

In conclusion, the Nevada Supreme Court stated:

NRS 164.021(2)(c) requires a trustees notice to beneficiaries to include “[a]ny provision of the trust instrument which pertains to the beneficiary.” After employing tools of statutory construction, we conclude that the term “any” in this context means “all.” Because only complete disclosure of all pertinent trust provisions will promote the statutes goals and adequately inform beneficiaries, we also hold that NRS 164.021(2)(c) is subject to strict compliance. Patricia failed to include the purported fourth amendment to the Trust in her initial disclosure to beneficiaries and therefore did not strictly comply with NRS 164.021(2)(c). Accordingly, this initial disclosure did not trigger the 120-day deadline for challenging the validity of the trust. Holiday’s challenge to the second and third amendments to the Trust, which was filed within 120 days of complete disclosure, was thus timely. We therefore reverse the district court’s order to the extent it concluded that Holiday was time-barred from challenging the second and third amendments to the Trust, and we remand for further proceedings consistent with this opinion.