VERMONT WILLS AND TRUSTS REQUIREMENTS
Statutory Authority.
Wills: Vt. Stat., Tit. 14, Chap. 1: Wills (14 Vt. Stat. ยงยง1, et. seq.).
Trusts: Vermont Trust Code, Vt. Stat., Tit. 14A (14A Vt. Stat. ยงยง101, et. seq.).
Vermont Will Requirements.
To execute a valid will in Vermont, a testator must be at least 18 years of age (or an emancipated minor) and of sound mind.ย A Vermont will must be in writing and signed by the testator (or on the testatorโs behalf by another person in the testatorโs presence at the testatorโs direction). The testator must sign in the presence of at least two credible witnessesโwho must themselves subscribe the will in the presence of the testator and each other.ย
Though it is generally preferable for a willโs witnesses to have no interest in the testatorโs estate, an interested witness (i.e., a witness who has an interest in the estate) does not render a Vermont will invalid.ย However, a provision in favor of a witness (or a witnessโs spouse) is voidable unless the will has at least two other disinterested witnesses. An instruction to pay an existing debt from the testatorโs estate is valid even if the creditor being paid is one of the willโs witnesses.
Vermont law does not require a will to be notarized, though a Vermont will can be made โself-provedโ through execution of a notarized affidavit by the testator and the willโs witnesses.ย Self-proved wills can be admitted to probate based upon the affidavit and without the need for witness testimony.ย
The Vermont General Assembly enumerates the requirements for self-proved affidavits within 14 Vt. Stat. ยง108. The testator states in the affidavit that he or she voluntarily signed the will while in the witnessesโ presence with the intent to create a will. Witnesses attest that they each signed the will at the testatorโs request while in the presence of the testator and the other witness. Witnesses further state that, when signing, the testator had legal capacity to create a will and was under no constraint or undue influence.ย
To the extent a will does not fully dispose of a decedentโs entire estate, Vermont law recognizes a testatorโs right to restrict a potential heirโs right to inherit estate property through intestate succession. A Vermont will may not, however, disinherit a surviving spouse by restricting the spouseโs right to an elective share in the testatorโs estate.
Vermontโs probate laws do not authorize wills to incorporate other documents by referenceโas is permitted in the majority of other states. An estateโs executor mayโas a moral obligationโhonor a testatorโs distribution instructions for tangible personal property set forth in a personal property memorandum. However, a tangible personal property list is not legally binding on an executor or other interest parties under Vermont law unless the list complies with all formalities required for creation of a will or codicil.
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Amendment, Revision, and Revocation of Vermont Wills.
A Vermont will can be revoked in whole or in part by a โrevocatory actโ performed with the intent to revoke the will.ย Revocatory acts include destruction of some or all of the document by burning, tearing, canceling, or obliterating. A revocatory act may be performed by the testator or by someone else acting at the testatorโs direction while in the testatorโs conscious presence.ย ย
A testator may also revoke a Vermont will by executing a subsequent will that either expressly declares that the prior will is revoked or includes provisions inconsistent with the prior will. Vermont law presumes that a later will with inconsistent provisions completely revokes the prior will if the later will disposes of the testatorโs entire estate. If the later will does not completely dispose of the testatorโs estate, the later will is presumed to have been intended as a supplementโin which case both wills are operative and revocation only extends to provisions of the earlier will that are inconsistent with the later will.
If a testator divorces after executing a Vermont will, any provisions of the will in favor of a former spouse married to the testator when the will was executed are nullified. Provisions in favor of a former spouse are not nullified by divorce if the will specifically states that it is not affected by a subsequent divorce.
If a child of a Vermont testator is born after the testator executes a will, the after-born childโif omitted from the willโis entitled to an interest in the estate as if the testator had died without a will. An after-born childโs share is inapplicable if it is apparent from the will that the testator intended not to provide for an after-born child. If a child already born when the will was executed is omitted from the will, the omitted child is entitled to an intestate share in the estate if it can be shown that the omission resulted from a mistake or accident.
Holographic and Oral Wills.
Vermont law does not recognize handwritten (or โholographicโ) wills. A will signed and written in the testatorโs handwriting may be valid if it is signed by two witnesses and otherwise satisfies all requirements for Vermont wills.ย
Vermont no longer recognizes oral (or โnuncupativeโ) willsโwhich were previously valid to pass up to $200.00 in personal property. Vermont does, though, expressly recognize the validity of military wills created by servicemembers under federal law. A military will that meets the standards prescribed by federal law is valid in Vermont, even if the will does not observe all of Vermontโs formalities.
Vermont Trust Requirements.
Vermont trusts are primarily governed by the Vermont Trust Code, enacted by the General Assembly as Title 14A of the Vermont Statutes (14 Vt. Stat ยง101, et. seq.).ย A Vermont trust may be created to serve any purpose that is lawful, possible to achieve, and not contrary to Vermontโs public policy. A Vermont trust and its terms must be for its beneficiariesโ benefit.
To create a valid trust under Vermont law, a settlor must express an intent to create the trust and have adequate capacity. Capacity is measured under the same standard applying to wills, and a settlor is deemed to have capacity if an agent of the settlor creates a trust under a power-of-attorney created when the settlor had capacity. A Vermont trust is void to the extent its creation was induced through fraud, duress, or undue influence.
Though most trusts are evidenced by a written instrument setting forth the trustโs terms, the Vermont Trust Code permits oral trusts. However, the creation and terms of an oral trust must be established by clear and convincing evidence, and other statutes require certain types of trusts to be evidenced by a written trust instrument. A trust relating to real estate, for instance, must be evidenced by a trust instrument signed by the settlor.
Vermont trusts must have a definite beneficiary or a beneficiary ascertainable now or in the futureโsubject to exceptions such as for charitable trusts, trusts for the care of animals, and certain noncharitable trusts. A Vermont trust must also have a trustee with actual duties to perform. Though Vermont law generally allows for overlap among a trustโs three principal parties, the sole trustee of a Vermont trust cannot also be the sole beneficiary of all beneficial interests in the trust.ย ย
A trustee of a Vermont trust must act in good faithโadministering the trust in accordance with its terms and purpose and the beneficiariesโ interests. A trustee is a fiduciary and must act prudently and avoid self-dealing. Vermont trustees who invest and manage trust assets are governed by the โprudent investor rule,โ under which a trustee must manage assets prudently in consideration of the purposes, terms, distribution requirements, and other circumstances of the trust. A trust instrument may expand, restrict, eliminate, or otherwise modify application of the prudent investor rule.ย
The Vermont Trust Code authorizesโbut does not requireโappointment of a โtrust protectorโ or โtrust advisor.โ A trust protector or trust advisor is a person granted specific powers in relation to a trust. Such powers could includeโfor exampleโthe power to appoint or remove a trustee, modify the trust for tax advantages or in response to changes in law, adjust or consent to distributions, or advise the trustee relating to beneficiaries or investment of trust assets.
Vermont trusts may be formed by a settlorโs transfer of property (either during life or through a will or other testamentary provision) to a trustee or to a trust in the trustโs name; by a property ownerโs declaration that the owner holds the property as trustee; through the exercise of a power of appointment in favor of a trustee; pursuant to a statute or a courtโs judgment or decree; or by an agent acting under a power-of-attorney authorizing creation of trusts.ย
Vermont law assumes that trusts are revocable unless the trust is expressly made irrevocable. The settlor of a revocable trust retains the right to revoke, amend, or add property to the trust as long as the settlor has adequate capacityโjudged under the standard required to create a will. A settlor revokes or amends a revocable trust using the method specified in the trust instrument. Or, if the trust instrument does not specify a method, the settlor can revoke or amend the trust through a later will or codicil or another method providing clear and convincing evidence of the intent to revoke or amend the trust.
Vermont trusts terminate upon expiration or revocation under the trustโs own terms or when no purpose of the trust remains to be achieved. A trust also terminates to the extent its purpose has become unlawful, contrary to public policy, or impossible to achieve.ย Under appropriate circumstances, a court may modify or terminate a Vermont irrevocable trust upon the petition of the settlor, trustee and/or beneficiaries. A probate court may modify an irrevocable trust to conform to the settlorโs intentions or to achieve the settlorโs tax objectives.
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Estate Taxes: Vermont does not assess an inheritance tax but is among the relatively small minority of states that charge estate taxes on wealthy estates. Vermontโs estate tax applies to estates of decedent Vermont residents and assets owned in Vermont by non-residents.ย
Vermontโs estate-tax exemption amount (the minimum value before an estate qualifies for the tax) is $5.0 million for 2021โless than half the federal exemption of $11.7 million. Thus, Vermont estates that do not qualify for federal estate tax may still owe estate tax to Vermont. Vermont assesses its estate tax at a flat rate of 16% on asset value in excess of the exemption. Unlike the federal counterpart, Vermontโs estate tax does not allow for portability of estate-tax exemptions between spouses.
Simplified Probate:ย Vermont law authorizes a simplified small-estate administration process that streamlines probate for qualifying estates. To qualify for small-estates probate, an estate must include no real property, and the value of personal property must not exceed $45,000.
An interested person requests small-estate probate by filing with the probate court a petition with the necessary information and attachments.ย If approved, the estateโs representative can resolve creditor claims, distribute assets, and close the estate with substantially less formality than the full probate process.
Non-Probate Transfers:ย Along with living trusts, Vermont law offers multiple other options for transfer of assets outside of probate.ย POD (payable-on-death) and TOD (transfer-on-death) designationsโwhich provide for automatic transfer of an asset to a beneficiary upon an ownerโs deathโcan be used in Vermont for a variety of assets.ย For instance, POD designations can be added to financial accounts and CDs, and TOD designations can be used with assets like registered securities and brokerage accounts.ย ย
Similarly, some assetsโlike retirement accounts and life insuranceโallow owners to name a beneficiary who automatically takes ownership of the asset upon the original ownerโs death.
Assets co-owned as joint tenants with a right of survivorship automatically transfer to a surviving owner upon the other ownerโs death, with no need for probate.ย Joint tenancy with right of survivorship can be used for co-ownership of real estate and personal property in Vermont. Vermont also recognizes tenancy by the entiretiesโa joint ownership form with a right of survivorship that can only be used for co-ownership by spouses.ย ย
Transfer-on-Death (TOD) Deeds and Vehicle Titles:ย Vermont is not among the states that authorize TOD designations on real estate deeds.ย However, Vermont is one of the handful of states that recognize โenhanced life estate deedsโ (also called โLadybird deedsโ)โwhich serve a purpose similar to TOD deeds. A property owner who executes a Ladybird deed reserves a life estate interest in the property and grants a contingent remainder interest transferring the property to another person when the current owner dies. Unlike with traditional life estates, the holder of the contingent remainder interest acquires no vested rights in the property during the grantorโs lifetime. An owner who reserves an enhanced life estate retains the right to sell, transfer, or mortgage the property during life or to revoke the Ladybird deed.
Vermont law authorizes TOD designations on titles to Vermont-registered vehicles.ย When a TOD designation is added to a vehicle title, ownership of the vehicle automatically transfers to the named beneficiary upon the ownerโs deathโallowing the vehicle to bypass probate.ย The beneficiary does not acquire any present rights in the vehicle until the ownerโs death actually occurs.ย
Spousal Shares: To protect against spousal disinheritance, Vermont provides surviving spouses the right to an elective share in a deceased spouseโs estate.ย The elective share amount is one-half of the probate estate after deducting allowances, estate claims, and administrative expenses. A surviving spouse can waive the right to an elective share through a valid pre- or post-nuptial agreement.ย
If a deceased Vermonter leaves no will, a surviving spouseโs share depends on the deceased spouseโs surviving descendantsโthat is, surviving children and grandchildren. If the deceased spouse leaves no surviving descendants, the surviving spouseโs intestate share is the entire net estate (after deducting costs of administration, allowances, estate debts, and funeral expenses). A surviving spouse also receives the entire net estate if all surviving descendants of the deceased spouse are also descendants of the surviving spouse (i.e., the deceased spouse does not have a child who is not also the surviving spouseโs child). If the deceased spouse has surviving descendants who are not the surviving spouseโs descendants, the surviving spouseโs share is one-half of the net estate.
A property transfer designed to avoid a surviving spouseโs elective or intestate share is void under Vermont law if the transfer was not effective until the deceased spouseโs death and was not supported by adequate consideration.
Vermont Spendthrift Trusts:ย Although the general rule is that creditors of a trustโs beneficiaries may attach a beneficiaryโs interest in a trust with court approval, Vermont law recognizes โspendthrift trusts.โ Assets held in a spendthrift trust cannot be reached by most creditors of beneficiaries until actually distributed to the beneficiary. Vermont spendthrift trusts do not protect against attachment to satisfy child support obligations, governmental claims, or claims arising from services provided to protect the beneficiaryโs interest in the trust.ย
Creditors of a revocable trustโs settlor can attach trust assets as long as the settlor remains living (or, upon death, through estate claims). If a Vermont trust is irrevocable, the settlorโs creditors can attach the amount of trust assets that could be distributed for the settlorโs benefitโexcept that wealth in an irrevocable special needs trust is protected from attachment.ย
Creating a will or trust does not have to be difficult or intimidating.ย However, certain circumstancesโlike second marriages, stepchildren, aging parents, special needs beneficiaries, guardianships, and business interests (to name a few)โcan add a layer of complexity and result in unforeseen long-term consequences.ย Whenever any out-of-the-ordinary issues are present, itโs a good idea to consult with an experienced attorney familiar with and licensed under the laws of the relevant jurisdiction.
