Chapter 593 Oregon Laws 2001

AN ACT

SB 120

Relating to claims against nontestamentary trusts.

Be It Enacted by the People of the State of Oregon:

SECTION 1. General statute of limitations for claims against certain nontestamentary trusts. (1) Claims against a nontestamentary trust described in subsection (2) of this section that are not presented within the time limitations established under section 2 of this 2001 Act or within the statute of limitations applicable to the claim, whichever is earlier, are barred from payment from the trust estate.

(2) Sections 1 to 15 of this 2001 Act apply only if:

(a) A claim is made against assets of a trust, as defined in ORS 128.005;

(b) The trust came into existence during the grantor’s lifetime and was revocable by the grantor at any time after the trust was created and before the death of the grantor;

(c) The claim is based on the debts or liabilities of the grantor; and

(d) The claim is made against the assets of the trust after the death of the grantor.

(3) Sections 1 to 15 of this 2001 Act apply to all claims against a nontestamentary trust described in subsection (2) of this section, without regard to whether the claims are contingent, unliquidated or not yet due.

SECTION 1a. Commencement of proceeding. (1) At any time after the death of a grantor of a nontestamentary trust described in section 1 (2) of this 2001 Act, a trustee of the trust may petition the probate court to determine the claims of creditors of the trust grantor. A petition under this section must include all of the following information to the extent known by the trustee:

(a) The grantor’s name, date of birth, date and place of death and Social Security number.

(b) The name of the trustee.

(c) The address at which claims must be presented.

(d) The name of the trust, if any, and the date of the trust, including the dates of any amendments.

(e) The facts establishing venue in the county where the petition is being filed.

(2) The clerk of the court shall charge and collect in advance from the trustee the filing fee required from a plaintiff under ORS 21.110 (1).

(3) A proceeding under this section may be brought only:

(a) In the county where the grantor had domicile or a place of abode at the time of death;

(b) In any county where assets of the trust were located at the time of death or are located at the time the proceeding is commenced; or

(c) In the county where the grantor died.

(4) The court has personal jurisdiction over a trustee that files a petition under this section, whether the trustee is a resident or nonresident of this state, for the purposes of any proceeding relating to the trust that may be instituted by an interested person.

SECTION 2. Limitation on presentation of claims when notice to claimants given. Not later than four months after a petition under section 1a of this 2001 Act is entered in the register of the court, the trustee of the trust shall give notice to persons with claims against the trust estate in the manner provided by sections 3 and 4 of this 2001 Act. All claims against the trust estate are barred unless those claims are submitted before the later of:

(1) Four months after the date of first publication of notice to claimants in the manner provided by section 3 of this 2001 Act; or

(2) If the trustee delivers or mails a notice to a claimant under section 4 of this 2001 Act, 30 days after a notice meeting the requirements of section 4 of this 2001 Act is delivered or mailed to the last-known address of the person having or asserting the claim.

SECTION 3. Publication of notice. After filing a petition under section 1a of this 2001 Act, a trustee must cause a notice to claimants to be published once in each of three consecutive weeks in a newspaper of general circulation published in the county in which the petition is filed. The notice must include:

(1) The name of the grantor;

(2) The name of the trustee and the address at which claims must be presented;

(3) The date of the first publication of the notice; and

(4) A statement that claims against the trust estate may be barred unless presented to the trustee at the address specified in the notice within four months after the date of the first publication of the notice.

SECTION 4. Notice to individual claimants. (1) Within three months after a petition is entered in the register of the court under section 1a of this 2001 Act, or within such longer time as the court allows, a trustee must make reasonably diligent efforts to investigate the financial records and affairs of the grantor and to take such further actions as are reasonably necessary to ascertain the identity and address of each person who has or asserts a claim against the trust estate. The court shall allow the trustee as much time as requested by the trustee for the purpose of determining the claims against the trust estate. The trustee must thereafter cause to be delivered or mailed a notice containing the information required in subsection (2) of this section to each person known by the trustee to have or to assert a claim against the trust estate and to the Estate Administration Unit of the Senior and Disabled Services Division of the Department of Human Services. Notice under this section is not required for any claim that has already been presented, accepted or paid in full or on account of a claim that is merely conjectural.

(2) The notice required by this section must include:

(a) The name and Social Security number of the grantor;

(b) The name of the trustee and the address at which claims must be presented;

(c) A statement that claims against the trust estate that are not presented to the trustee within 30 days after the date of the notice may be barred;

(d) The date of the notice, which shall be the date on which the notice is delivered or mailed; and

(e) A copy of the grantor’s death certificate.

SECTION 5. Form of claim; evidence in support. (1) A claim presented under sections 1 to 15 of this 2001 Act must:

(a) Be in writing.

(b) Describe the nature and the amount of the claim, if ascertainable.

(c) State the name and address of the claimant and any attorney for the claimant.

(2) A defect of form of a claim timely presented may be waived by the trustee or by the court.

(3) Upon demand of a trustee, a claimant must produce any written evidence supporting a claim made under sections 1 to 15 of this 2001 Act and account for any written evidence supporting a claim that is not produced.

SECTION 6. Claim based on debt due or judgment. (1) If a claim on a debt due is presented and allowed, allowance shall be in the amount of the debt remaining unpaid on the date of allowance.

(2) If a judgment was entered on a claim prior to the death of the grantor, the claim shall be presented under sections 1 to 15 of this 2001 Act in the same manner as if no judgment had been entered, and a copy of the judgment shall be attached to the claim. The claim may be disallowed only if the judgment was void or voidable, or if the judgment could have been set aside on the date of the grantor’s death, or if the claim is not presented within the time required by section 1 of this 2001 Act. If the judgment was a lien against the property of the trust estate on the date of the grantor’s death, the judgment shall be treated as a claim on a debt due for which the creditor holds security. In all other respects, a claim that has been reduced to judgment shall have the same priority under section 10 of this 2001 Act as a claim that has not been reduced to judgment.

SECTION 7. Claim on debts not yet due. A claim on a debt not due, whether or not the creditor holds security for the claim, may be presented under sections 1 to 15 of this 2001 Act as a claim on a debt due. If the claim is allowed, allowance shall be in an amount equal to the value of the debt on the date of allowance. The creditor, after allowance of the claim, may withdraw the claim without prejudice to other remedies. Payment on the basis of the amount allowed discharges the debt and the security, if any, held by the creditor for the claim.

SECTION 7a. Claim on secured debt that is due. (1) A claim on a debt due for which the creditor holds security may be presented under sections 1 to 15 of this 2001 Act as a claim on an unsecured debt due, or the creditor may elect to rely entirely on the security without presentation of the claim.

(2) If the claim is presented under this section, the claim shall describe the security. If the security is an encumbrance that is recorded, the encumbrance may be described by reference to the book, page, date and place of recording.

(3) If a claim is presented and allowed under this section, payment shall be on the basis of the amount of the debt remaining unpaid on the date that the claim is allowed.

(4) If the creditor surrenders the security for a claim presented and allowed under this section, payment shall be on the basis of the amount allowed.

(5)(a) If the creditor does not surrender the security for a claim presented and allowed under this section, and the creditor exhausts the security before receiving payment on the claim, payment shall be on the basis of the amount allowed less the amount realized on exhausting the security unless otherwise provided by law.

(b) If the creditor does not surrender the security for a claim presented and allowed under this section, and the creditor does not exhaust the security before receiving payment or does not have the right to exhaust the security, payment shall be on the basis of the amount allowed less the value of the security determined by agreement or as the court may order.

(6) The trustee may convey the secured property to the creditor in consideration of the satisfaction or partial satisfaction of the claim.

SECTION 8. Claim on contingent or unliquidated debt. (1) A claim on a contingent or unliquidated debt shall be presented under sections 1 to 15 of this 2001 Act in the same manner as other claims. If the debt becomes absolute or liquidated before distribution of the trust estate, the claim shall be paid in the same manner as a claim on an absolute or liquidated debt.

(2) If a contingent or unliquidated debt does not become absolute or liquidated before distribution of the trust estate, the trustee may provide for payment of the claim by any of the following methods:

(a) The creditor and trustee may determine, by agreement, arbitration or compromise, the value of the debt and the claim may be allowed and paid in the same manner as a claim on an absolute or liquidated debt.

(b) The trustee may distribute the trust estate, but retain sufficient funds to pay the claim if and when the debt becomes absolute or liquidated. Distribution of trust assets may not be delayed under this paragraph for more than two years after distribution would otherwise be required by the terms of the trust. If the debt does not become absolute or liquidated within that time, the funds retained, after payment therefrom of any expenses accruing during that time, shall be distributed to the beneficiaries.

(3) A court may order the trustee to make distribution of the trust estate as though the claim did not exist.

(4) If after distribution under subsection (2)(b) or (3) of this section the debt becomes absolute or liquidated, the beneficiaries are liable to the creditor to the extent of the trust estate received by them. Payment of the debt may be arranged by creating a trust, giving a mortgage, securing a bond from a distributee or by other method.

SECTION 9. Allowance and disallowance of claims. (1) The trustee may compromise a claim against the trust estate.

(2) A claim presented to a trustee under sections 1 to 15 of this 2001 Act shall be considered allowed as presented unless within 60 days after the date of presentment of the claim the trustee mails or delivers a notice of disallowance of the claim in whole or in part to the claimant and to the attorney of the claimant if the claimant has an attorney.

(3) A notice of disallowance of a claim shall inform the claimant that the claim has been disallowed in whole or in part and, to the extent disallowed, will be barred unless the claimant requests a summary determination or brings an action in the manner provided by subsection (4) of this section.

(4) If a trustee disallows a claim submitted under sections 1 to 15 of this 2001 Act in whole or in part, the claimant, within 30 days after the date of mailing or delivery of the notice of disallowance, may:

(a) File a request for summary determination of the claim in the probate court, with proof of service of a copy of the request upon the trustee or the attorney of the trustee; or

(b) Commence a separate action against the trustee on the claim in the circuit court.

(5) If the claimant fails either to request a summary determination or commence a separate action as provided in subsection (4) of this section, the claim is barred to the extent the claim has been disallowed by the trustee.

(6) If a claimant prevails in a proceeding or action under subsection (4) of this section, the claim shall be allowed or judgment entered in the full amount determined to be due to the claimant. The claim or judgment shall be paid from the assets of the trust estate only to the extent that funds are available after payment of other claims with higher priority under section 10 of this 2001 Act.

(7) If the claimant files a request for summary determination of a claim under subsection (4) of this section, the trustee may notify the claimant in writing that the claimant must commence a separate action against the trustee on the claim within 60 days after the claimant receives the notice. Notice under this subsection must be given by the trustee within 30 days after the request for summary determination is served on the trustee or the attorney of the trustee. If the claimant fails to commence a separate action within the time allowed, the claim is barred to the extent the claim has been disallowed by the trustee.

(8) In a proceeding for summary determination under this section:

(a) The trustee shall make response to the claim as though the claim were a complaint filed in an action.

(b) The court shall hear the matter without a jury, after notice to the claimant and trustee. The court shall determine the claim in a summary manner, and shall make an order allowing or disallowing the claim in whole or in part.

(c) No appeal may be taken from the order of the court made in a proceeding for summary determination under this section.

(9) If a civil action is commenced under subsection (4) of this section, a trustee, or beneficiary as defined by ORS 128.135, may petition the court to approve a proposed disposition of claims or to provide instructions on the treatment of claims.

(10) A claimant filing a request for summary determination of a claim under subsection (4) of this section must pay the filing fee required of a defendant or respondent under ORS 21.110 (1) and other fees applicable to civil actions in circuit court.

SECTION 9a. Creditor may obtain order for payment. A creditor whose claim has been allowed or established by summary determination or separate action, and who has not received payment within six months after the date of the first publication of notice to interested persons, may apply to the court for an order directing the trustee to pay the claim. The trustee may recover amounts owing under the claim from any beneficiary who received a distribution from the trust estate. The right of recovery is limited to the extent the beneficiary’s distribution would have been reduced by timely payment of all allowed or established claims.

SECTION 9b. Evidence required to allow court approval of claim disallowed by trustee. A claim that has been disallowed by a trustee under sections 1 to 15 of this 2001 Act may not be allowed by any court except upon some competent, satisfactory evidence other than the testimony of the claimant.

SECTION 9c. Waiver of statute of limitations. A claim subject to sections 1 to 15 of this 2001 Act that is barred by a statute of limitations may not be allowed by the trustee or by any court except upon the written direction or consent of those interested persons who would be adversely affected by allowance of the claim.

SECTION 9d. Tolling of statute of limitations on claim. If a claim is not barred by the statute of limitations on the date of death of the grantor, the claim is not barred by any statute of limitations until at least one year after the date of death.

SECTION 10. Priority of claims. (1) Claims allowed against the trust estate under sections 1 to 15 of this 2001 Act must be paid by the trustee in the following order of priority:

(a) Expenses of administering the trust estate.

(b) Expenses of a plain and decent funeral and disposition of the remains of the grantor.

(c) Debts and taxes with preference under federal law.

(d) Reasonable and necessary medical and hospital expenses of the last illness of the grantor, including compensation of persons attending the grantor.

(e) Taxes with preference under the laws of this state that are due and payable while possession of the trust estate of the grantor is retained by the trustee.

(f) Debts owed employees of the grantor for labor performed within 90 days immediately preceding the date of death of the grantor.

(g) Child support arrearages.

(h) A claim of the Adult and Family Services Division for the net amount of public assistance, as defined in ORS 411.010, paid to or for the grantor, and the claim of the Mental Health and Developmental Disability Services Division for care and maintenance of any grantor who was at a state institution to the extent provided in ORS 179.610 to 179.770.

(i) All other claims against the trust estate.

(2) If the assets of the trust estate are insufficient to pay in full all expenses or claims of any one class specified in subsection (1) of this section, each expense or claim of that class shall be paid only in proportion to the amount thereof.

SECTION 11. Applicability of time limitations to public bodies. Notwithstanding ORS 12.250, all statutes of limitations and other time limitations imposed under sections 1 to 15 of this 2001 Act apply to actions brought in the name of the state, or brought in the name of any county or public corporation, and to actions brought for the benefit of the state or for the benefit of any county or public corporation.

SECTION 12. Applicability of time limitations to certain claims based on liens against property and liability of grantor or trustee. The statutes of limitations and time limitations provided by sections 1 to 15 of this 2001 Act do not affect:

(1) Any proceeding to enforce a mortgage, pledge or other lien upon property of the trust estate;

(2) Any proceeding to quiet title or reform any instrument with respect to title to property; or

(3) To the limits of the insurance protection only, any proceeding to establish liability of the grantor or the trustee for which the grantor or trustee is protected by liability insurance at the time the proceeding is commenced.

SECTION 13. Petition to close case. (1) Not earlier than four months after the publication of notice to claimants, or the date on which all claims against the trust estate have been resolved, whichever is later, a trustee that has filed a petition under section 1a of this 2001 Act must file a petition to close the case with a statement that all claims received by the trustee have been paid in full or otherwise resolved in the manner required by sections 1 to 15 of this 2001 Act. The trustee must attach to the petition an affidavit attesting to compliance with sections 3 and 4 of this 2001 Act. The trustee must attach to the affidavit a copy of the notice published under section 3 of this 2001 Act and a copy of any notice delivered or mailed under section 4 of this 2001 Act. The affidavit must attest to the date on which each notice was delivered or mailed, and the name and address of the person to whom each notice was delivered or mailed.

(2) Upon the filing of the petition to close the case in compliance with the provisions of this section, the court shall enter an order closing the case.

SECTION 14. Dismissal for want of prosecution. (1) If the trustee does not file a petition to close the case under section 13 of this 2001 Act within one year after filing a petition under section 1a of this 2001 Act, the court clerk shall mail a notice to the trustee, or the attorney for the trustee if the trustee is represented by counsel, informing the trustee that a judgment of dismissal will be entered in the case for want of prosecution unless an application for a continuance is made to the court and good cause is shown within 60 days after the date of the notice. Good cause for a continuance includes the pendency of a separate action under section 9 (4) of this 2001 Act.

(2) If an application for a continuance is not made under this section, or the court fails to find good cause for a continuance, the court shall enter a judgment of dismissal of the proceeding without prejudice. The dismissal does not bar a claimant’s right to pursue claims against a trustee, and a claimant shall have the same rights as if the trustee filed no proceeding.

SECTION 15. Consolidation of proceedings. If the proceeding to determine claims against a deceased grantor is pending under sections 1 to 15 of this 2001 Act at the same time as probate proceedings under ORS chapter 115, upon motion of any party or upon the court’s own motion, any of the courts conducting proceedings may:

(1) Order a joint hearing or trial on the common claims;

(2) Order that the proceedings be consolidated; or

(3) Make orders concerning the proceedings to avoid unnecessary costs for delays.

SECTION 16. Section 17 of this 2001 Act is added to and made a part of ORS chapter 115.

SECTION 17. The provisions of this chapter do not apply to claims against nontestamentary trusts that are subject to the provisions of sections 1 to 15 of this 2001 Act.

SECTION 18. Sections 1 and 17 of this 2001 Act apply only to claims against trust estates that arise on or after the effective date of this 2001 Act.

SECTION 19. The section captions used in this 2001 Act are provided only for the convenience of the reader and do not become part of the statutory law of this state or express any legislative intent in the enactment of this 2001 Act.

Approved by the Governor June 25, 2001

Filed in the office of Secretary of State June 25, 2001

Effective date January 1, 2002

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