2006 Winter, 6. THE UNIFORM TRUST CODE A New Resource for Old (and New!) Trust Law.

AuthorBar Journal Author - Michelle M. Arruda

New Hampshire Bar Journal


2006 Winter, 6.

THE UNIFORM TRUST CODE A New Resource for Old (and New!) Trust Law

New Hampshire Bar Journal Volume 46, No. 4, Pg. 6Winter 2006THE UNIFORM TRUST CODE A New Resource for Old (and New!) Trust LawBar Journal Author - Michelle M. ArrudaA part of New Hampshire law for just a little over a year, the Uniform Trust Code (the "NHUTC")(fn1)has become an important resource and tool for New Hampshire trustees and trust beneficiaries and for New Hampshire trusts and estate practitioners and their clients. After first providing some background about the NHUTC, including what the NHUTC does and does not cover, this article will review some of the NHUTC's more practical, innovative, and controversial provisions.

A. Background

The NHUTC originated with the National Conference of Commissioners on Uniform State Laws (NCCUSL). A body of practicing lawyers, judges, legislators and law professors appointed by states governments, NCCUSL drafts model acts concerning various areas of the law, with the goal of promoting uniformity among the states and bringing "clarity and stability to critical areas of state statutory law."(fn2) Each state, of course, is free to adopt the model act as is, adopt the model act with changes, or not adopt the model act at all.

NCCUSL first approved the Uniform Trust Code(fn3) in 2000, intending it to be a comprehensive codification of the law of trusts. The primary stimulus behind its adoption was the growing use of trusts, both in estate planning and in commercial transactions, coupled with only a fragmented and sparse body of trust law in many states. The purpose of the model act, therefore, was to "provide States with precise, comprehensive, and easily accessible guidance on trust law questions."(fn4) NCCUSL has amended the Uniform Trust Code since 2000 (partly in response to criticism of its more controversial provisions), most recently in 2005.

Many states already have adopted the Uniform Trust Code.(fn5) As with most model acts, states have not adopted it lock, stock and barrel, but rather have adopted it with modifications that address unique local issues, conform more closely to existing local law, or simply reflect local preferences.

New Hampshire adopted the NHUTC in 2004. Codified at RSA 564-B, the NHUTC became effective October 1, 2004. Like other states, New Hampshire adopted the model act with revisions, although the revisions were relatively few.(fn6) In 2005, New Hampshire amended the NHUTC,(fn7) mostly to make technical corrections, but also to respond to certain criticisms of the existing legislation, both within the New Hampshire estate planning community and nationally, and to enact other changes that NCCUSL made to the model act. The amendments became effective on September 20, 2005.(fn8)

B. Coverage and Application

1. NHUTC's Comprehensive Coverage

The NHUTC is very comprehensive. The statute's article headings reveal the wide range of issues it covers, including (1) the creation, validity, modification, and termination of trusts; (2) creditors' claims, including claims against spendthrift trusts and discretionary trusts; (3) special issues with respect to revocable trusts; (4) issues relating to the office of trustee, such as resignation, removal, and compensation; (5) duties and powers of trustees; (6) trust investments, including the application of the prudent investor rule; and (7) trustee liability and the rights of third persons dealing with the trustee.

2. Other Sources of Trust Law

Despite the comprehensive nature of the NHUTC, New Hampshire practitioners and trustees should be aware of other, additional sources of New Hampshire trust law. For example, while the NHUTC replaced much of what previously was known as the Uniform Trustees' Powers Act,(fn9) the following provisions of that act remain codified under RSA 564-A:(fn10)

* RSA 564-A:1, which provides the definitions of "trust" and "trustee" for purposes of the rest of RSA 564-A. More importantly, however, it is RSA 564-A:1's definition of "trust," and not the description of trusts covered by the NHUTC contained in section 102 of the NHUTC, that governs whether the probate court has exclusive jurisdiction with respect to a matter involving a trust, or concurrent jurisdiction with the superior court.(fn11)

* RSA 564-A:3, IV, concerning limitations on a trustee who also is a beneficiary of the trust.

* RSA 564-A:3-a, concerning trustee powers and liability with respect to environmental matters.

* RSA 564-A:3-c, concerning the conversion of a trust into a "unitrust."

* 564-A:5, I, concerning the power of the probate court to relieve a trustee from any restriction imposed by the trust or by chapter 564-A.

* RSA 564-A:7, II through V, concerning the protection of third parties who rely on a certification concerning the trustee's power to convey real estate and personal property.

* RSA 564-A:8, 9, and 11, concerning the applicability of chapter 564-A, the uniformity of its interpretation, and the severability of its provisions.

When dealing with a trust under a will, or a so-called testamentary trust, the provisions of RSA 564 may apply in addition to, or instead of, the NHUTC. Section 710 of the NHUTC provides that the NHUTC is not intended to modify or limit the provisions of RSA 564 as they relate to testamentary trusts, and that if, with respect to a testamentary trust, there is a conflict between the NHUTC and RSA 564, RSA 564 controls.

Also, RSA 292-B, concerning the management of institutional funds, applies to charitable trusts.

Finally, the NHUTC provides that "the common law of trusts and principles of equity supplement [the NHUTC], except to the extent modified by [the NHUTC] or another statute of this state."(fn12)

3. NHUTC's Application

Not only is the NHUTC comprehensive, but it also has wide application, as underscored by two of its provisions. The more salient provision is section 102, concerning the statute's scope. It states that "[t]his chapter applies to express trusts, charitable or noncharitable, and trusts created pursuant to a statute, judgment, or decree that requires the trust to be administered in the manner of an express trust." Quite plainly, the rules of the NHUTC apply to all "express trusts," regardless of how, why, by whom, and for whom created, including charitable trusts, business trusts, and oral trusts. The only trusts not within the statute's purview are "resulting trusts" and "constructive trusts." In reality, these "trusts" are not trusts at all, but are equitable remedies imposed by courts to adjust property interests and ownership. In sum, then, the rules of the NHUTC apply to all trusts other than resulting and constructive trusts.

In addition to the wide range of trusts to which the NHUTC applies, the NHUTC also generally applies to trusts that existed before its October 1, 2004 effective date. Specifically, section 1104 provides that, with certain exceptions discussed below, the NHUTC applies to trusts that were created before October 1, 2004 and to judicial proceedings concerning trusts that began before October 1, 2004. The exceptions to the statute's retroactive application are:

* Section 602(a) provides that, unless the terms of the trust expressly provide that the trust is irrevocable, a trust may be amended or revoked by the settlor. Since this is a change in New Hampshire law - which previously had followed the majority approach prevalent in other states and presumed a trust to be irrevocable absent evidence to the contrary - section 602(a), by its own terms, does not apply to a trust created under an instrument executed prior to October 1, 2004.(fn13)

In other words, if a trust instrument executed before October 1, 2004 is silent concerning whether it is revocable, it will be presumed to be irrevocable, absent evidence to the contrary. The same trust instrument executed on or after October 1, 2004, will be amendable and revocable by the settlor under the NHUTC's rule of construction contained in section 602(a).

* The trustee's duties under sections 813(b),(c), and (d) to provide certain trust beneficiaries and other persons with information concerning the trust, do not apply to irrevocable trusts created before October 1, 2004, including revocable trusts that became irrevocable before October 1, 2004.

* Under section 1104,

o Any particular provision of the NHUTC will not apply to a judicial proceeding commenced prior to October 1, 2004, if the court finds that its application "would substantially interfere with the effective conduct of the judicial proceedings or prejudice the rights of the parties."

o A rule of construction or a presumption under the NHUTC will not apply to a trust instrument executed prior to October 1, 2004, if "there is a clear indication of a contrary intent in the terms of the trust."

o An act done before October 1, 2004, is not affected by the NHUTC.

o A "right acquired, extinguished, or barred upon the expiration of a prescribed period that has commenced to run under any other statute" before October 1, 2004 is not affected, and the other statute will continue to apply.

4. NHUTC as Set of Default Rules

Perhaps the most important thing to note about the NHUTC is that the majority of its provisions are "default" rules that apply only if the terms of the trust do not provide otherwise or do not sufficiently address a particular issue.(fn14) In other words, the person who creates the trust, alternatively known as the...

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