Vermont Bar Journal
Fall 2008 - #14.
The Uniform Trust Code Clarifying and Codifying Vermont Trust Law
The Vermont Bar Journal #175, Volume 34, No. 3 FALL 2008
The Uniform Trust Code Clarifying and Codifying Vermont Trust Lawby Catherine Richmond, Esq.What is the Uniform Trust Code (UTC)?(fn1) The UTC is a model code for states to use to create a uniform, comprehensive, easy-to-find body of trust law. With some exceptions, it is generally a default statute that applies only when a trust is silent on a particular issue or question. Why should Vermont consider adopting the UTC? The use of trusts has become more and more common. People use trusts for many reasons, including tax planning, probate avoidance, privacy and to provide for minor children, disabled family members, or generally to provide for a surviving spouse and the next generation and beyond. Currently little black-letter law exists in Vermont about the administration of trusts, except for trusts overseen by the probate court system (mostly testamentary trusts), investments (the Uniform Prudent Investor Act), and the allocation of income and principal of a trust (the Uniform Principal and Income Act). Attorneys, trustees, beneficiaries, and third parties dealing with trusts find only minimal statutory and case law to interpret trusts, to try to fill in blanks when trusts are silent, unclear on issues, or have contradictory provisions. In the absence of Vermont statutory and case law, attorneys and others dealing with trusts, trustees, and beneficiaries must rely on secondary sources such as the Restatement (Second and Third) on Trusts(fn2) andScott on Trusts(fn3) when Vermont law is silent. Attorneys and professionals working with trusts every day are familiar with case law and the secondary sources of law. Individual beneficiaries and trustees and third parties dealing with trusts, however, may not be familiar with those secondary sources and currently cannot easily determine what Vermont trust law would be for many situations. In addition, in our mobile society, having a body of trust law that is similar to the law in other states would help people who move to and from Vermont by reducing the need to revise trust documents and by minimizing the need to learn a new set of trust laws in another state. According to the National Conference of Commissioners of Uniform State Laws, as of August 28, 2008, the District of Columbia and nineteen states, including New Hampshire, Maine, and Florida, have adopted the UTC in some fashion. Four additional states, including Massachusetts, have introduced bills to adopt it.(fn4)
Proposed Vermont Uniform Trust Code
Since early 2007, a group of Vermont attorneys, trust officers, and bankers have met at least monthly, and most recently every second or third week, to analyze the model UTC. The first phase of the project involved understanding the UTC and comparing it to existing Vermont law. Individuals, and sometimes teams, studied and presented each article of the UTC to the full study committee.
The second phase, currently in progress, again has individual members and teams reviewing each article of the UTC with an eye toward drafting a proposed Vermont UTC (VTUTC). The review includes specific attention to how other states have revised each section of the UTC. The study committee has generally revised aspects of the UTC to codify or complement and expand current Vermont law, with some interesting exceptions that are intended to modernize Vermont's laws and integrate them within the structure of the UTC. At the time of the writing of this article, the group has finished the second phase through Article 7 and is working on Article 8. The goal is to have a proposed VTUTC ready to introduce to the legislature in the fall of 2008. The proposed VTUTC will provide a comprehensive and easy-to-find body of trust law, primarily a default statute, for individual trustees and beneficiaries, professional trustees, attorneys, and third parties dealing with trusts.(fn5)
Current Vermont Statutory Law on Trusts
The Vermont UTC study committee who reviewed the UTC and current Vermont law found limited Vermont trust law. The law that does exist, for the most part, is similar to the provisions of the model UTC. Therefore, very few provisions of the model UTC need to be changed to comply with current Vermont law. Current statutory trust law is found under Chapters 105 and 117 (the Uniform Principal and Income...