VA Trusts

Question 1

Virginia trustees of testamentary trusts must:

Answer 1

i) “Qualify” before the clerk or court;
ii) Furnish bond with surety unless surety is waived; and
iii) File annual accountings with the local Commissioner of Accounts unless such requirement is waived by the instrument.

Va. Code. Ann. §§ 64.2-1307, -1401, -1403(a).

Question 2

Qualified Self-Settled Spendthrift Trusts (QSSST)

These are irrevocable trusts for the settlor’s own benefit

Settlors may enjoy spendthrift protection for self-settled trusts that meet the following requirements. (can be a beneficiary)

Answer 2

i) The trust is irrevocable;
ii) The trust incorporates Virginia law;
iii) contains an otherwise valid spendthrift provision;
iv) A Virginia trustee who is independent from the settlor possesses sole discretion as to whether to distribute income, principal, or both to the settlor; and
v) At least one other beneficiary is entitled to receive income or principal distributions throughout the settlor’s lifetime.

Va. Code Ann. § 64.2-745.1.

Question 3

What are the ways to create a trust?

Answer 3

i) Transfer of property to another person as trustee during the settlor’s lifetime;
ii) Declaration by the owner of property that the owner holds identifiable property as trustee;
iii) Transfer by will or other disposition taking effect upon the settlor’s death;
iv) Exercise of a power of appointment in favor of a trustee;
v) Petition to the circuit court by an interested party.

Va. Code. Ann. § 64.2-719.

Question 4

A trustee may transfer the principal place of trust administration to another state or country by

Answer 4

notifying the qualified beneficiaries at least 60 days before initiating the transfer.

Transfer is effective without court order if no qualified beneficiary objects by the given date.

As to testamentary trusts, however, a court order is necessary to transfer the principal place of administration.

Question 5

The trustee may terminate a trust without court approval if

Answer 5

(i) the trustee determines that the value of the trust does not justify the cost of administration
(ii) the total value of the trust does not exceed 100k
(iii) the trustee gives notice to qualified beneficiaries

Upon termination, the trustee is to distribute trust property “in a manner consistent with the purposes of the trust.”

Question 6

What are the common law grounds for trustee removal? Statutory grounds?

Answer 6

The Virginia UTC recognizes the common law principles under which a court may remove a trustee for

i) Breach of trust;
ii) Inability to cooperate with co-trustees;
iii) Lack of fitness; or
iv) Persistent failure to administer effectively.

Va. Code. Ann. § 64.2-759(B).

The Virginia UTC also permits removal when the court finds that:

i) There has been a substantial change in circumstances, or removal is requested by all of the qualified beneficiaries;
ii) Removal best serves the interests of all of the beneficiaries;
iii) Removal is not inconsistent with a material purpose of the trust; and
iv) A suitable co-trustee or successor trustee is available.