Utah Law Developments, 1219 UTBJ, Vol. 32, No. 6. 28

Author:By Langdon T. Owen, Jr.
Position:Vol. 32 6 Pg. 28
 
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Utah Law Developments

Vol. 32 No. 6 Pg. 28

Utah Bar Journal

December, 2019

November, 2019

The New Utah Uniform Directed Trust Act

By Langdon T. Owen, Jr.

The Uniform Directed Trust Act (the Act) is now in effect in Utah, having been adopted in 2019. Utah Code Ann. §§ 75-12-101 to -18. Many practitioners have been using trust protectors for some time. A trust protector is one type of “trust director” under this Act, which also covers “trust advisors” and the holders of certain powers of direction however labelled. The Act provides useful and needed guidance as to these positions, while allowing for these positions to be important tools for providing flexibility for trusts. Trust directors, including trust protectors, can often provide quicker and more economical ways to adjust trust terms and solve administrative issues or disputes, particularly in very long-term trusts that can run for several lifetimes or generations, than the traditional methods of providing flexibility.

The traditional methods start with robust trustee discretion, which may include establishing new trusts with other terms where the trustee has strong discretion over when and how to distribute principal, a process known as trust decanting. For common law decanting, see Phipps v. Palm Beach Trust Co., 196 S. 299 (Fla. 1949); In re Estate of Spencer, 232 N.W.2d 491 (Iowa 1975); Wiedenmayer v. Johnson, 254 A.2d 534 (N.J. Super. Ct. App. Div. 1969); Morse v. Kraft, 992 N.E.2d 1021 (Mass. 2013); restatement (second) of ProPerty: donative transfers §§ 11.1, 19.4 (1988); restatement (third) of ProPerty: Wills and other donative transfers § 17.1 (2011). Trustee oversight and removal provisions are useful traditional methods. Trust modification under the trust code, Utah Code Sections 75-7-410 through 417, may be effective but such modification requires an agreement or court order. Actions on certain matters by beneficiaries may be allowed under an instrument. Powers of appointment can be a particularly powerful tool where they apply but can come with tax consequences that may not be acceptable and may not be able to deal with administrative issues. Utah Code Ann. §§ 75-10-101 to -18.

Each of those traditional methods has its place and value, but many practitioners have desired more, and have thus crafted trust protector provisions relying on general authorizations such as Utah Code Section 75-7-105 or common law principles (the grantor can condition the gift as desired) including Restatement (Third) of Trusts section 64 (2002), or, in some states, on section 808 “Powers to Direct” of the Uniform Trust Code (a provision not adopted in Utah). The nature and extent of the powers and authority of trust protectors, and the uncertain liability that might be incurred by a trust protector or other sort of trust director, see, e.g., Robert T. McLean Irrevocable Trust v. Patrick Davis, P.C., 283 S.W.3d 786 (Mo. Ct. App. 2009), led to the development of broader statutes that authorize and define trust protectors and more generally trust directors, in order to provide clarity. Special state legislation has been adopted in a few states, and recently the Uniform Directed Trust Act was promulgated in 2017 by the Commissioners for Uniform State Laws. The Uniform Act has, as of this writing, been adopted in ten states, including Utah.

What a Power of Direction is Not

The first thing to note about a power of direction granted to a trust director under the terms of a trust is what the power is not, because the Act does not apply to such matters. See Utah Code Ann. § 75-12-105(2). It is not a power of appointment (which is a non-fiduciary power) to designate a recipient of, or another power of appointment over, trust property, see also id. § 75-12-105(3); it is not a power to remove a fiduciary (trustee or trust director); it is not a settlor’s power of revocation; it is not the power of a beneficiary to affect the beneficiary’s interest or the interests of other beneficiaries where the beneficiary virtually represents the other beneficiaries, see id. § 75-7-301; and it is not a power required by the U.S. tax code to be a non-fiduciary power.

Application

The Act applies to any trust whenever created with its principal place of administration in Utah, but for trusts existing before May 14, 2019, it only applies to actions after that date. Also, if administration is changed to Utah after that date, it applies only to actions and decisions...

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