The Uniform Trust Code Turns 25

“The Uniform Trust Code Turns 25,” that’s the subject of today’s ACTEC Trust and Estate Talk.
Transcript/Show Notes
This is ACTEC Fellow Connie Eyster of Boulder, Colorado.
The Uniform Trust Code, known as the UTC, was drafted in 2000 by the National Conference of Commissioners on Uniform State Laws. It was drafted to collect, unify, and codify trust law. The UTC has been exceptionally influential on trust law throughout the United States. As of 2022, 36 states and jurisdictions have adopted some version of the UTC.
ACTEC Fellow Professor David English of Columbia, Missouri, joins us today to take a look back at the UTC and discuss what might lie ahead. Welcome, David, and thanks for joining us today.
The Beginning of the Uniform Law Commission in 2000
Professor David English: Thank you, Connie. Instead of a very, very long name, I’m going to call the Commission just the Uniform Law Commission, or in fact, just the Commission. And when you draft these laws, one person is designated as the reporter. And so I was the reporter for the UTC back in 2000. But I had lots and lots of help, including by many ACTEC Fellows.
So what I’m going to talk a little bit about today are some of the successes the UTC has had, particularly the more successful provisions, but also some of the more challenging provisions. And we need to keep in mind that 2000 to 2025 is 25 years, of course. And a lot can happen this period. And so I’m going to talk a little bit about changes in trust practice in general since 2000, and a few related uniform acts, just brief mentions, that have come along since the UTC.
Objective of the UTC
I think the main point I want to emphasize about the Uniform Trust Code is it is not a totally new code. The major objective of the UTC was to codify the common law. Because in many states, including states like Missouri, even though there are many, many trust cases that have been decided over the decades, there are many issues that have never been addressed. And so what the purpose of the UTC was, was to codify the common law, give all the states a base code- a base statute- from which to work, and to make the law much more accessible than it was formerly.
Successes of the UTC
Representation
What are some of the more successful provisions of the UTC? Well, at the top of my list would be the provisions on what’s called representation and nonjudicial settlements. So what does representation involve if you have a minor beneficiary or a beneficiary lacks mental capacity? And of course, oftentimes the beneficiaries, we don’t know who they are yet. They might not yet even be born. And so what Article 3 does is it creates a set of rules securing that beneficiary’s consent, allowing somebody else to act on their behalf.
Nonjudicial Settlements
Related to representation is nonjudicial settlements. And so prior to the Uniform Trust Code, there were a handful of states that allowed the use of representation in connection with nonjudicial settlements. But there obviously are much, much more now with the approval the UTC.
Trust Creation
Other successes, the rules on trust creation, we hardly talk about them, which in some ways is good. They’ve been very, very successful, and have been enacted largely without change.
Modification or Termination Provisions of a Trust
The rules on modification or termination of a trust, the UTC gave a liberalizing nudge to this area of the law. Obviously, things like trust decanting and so on have moved the conversation much farther. Then another success are the rules on revocable trusts. So we know that a revocable trust is a trust, and so it should be governed by trust law. But in large part, it’s used as an alternative to a will. So what Article VI does is tries to focus on selected issues, such as what’s the capacity standard to create a revocable trust. How do you revoke a revocable trust? Is a beneficiary entitled to information, like the remainder, while the settler is living? And so we have all these special just sort of selected provisions on rev trusts.
Trustee Duties and Powers
The UTC codified the list of trustee duties and powers. That’s been enacted largely without change. And then another one that’s important but you hardly notice, when a trustee signs contracts, you know, with to sell assets, to contract to have work done on real estate, what’s the liability when you’re dealing with what’s called a third party? That is somebody other than the beneficiary or trustee. Those provisions have been successful as well.
Challenges to the UTC
But there also have been some challenges. I think this is true of any, it’s true of almost every uniform law. The term “uniform” was invented in the 1890s. I think the original founders expected states to just enact these laws without change. That’s not the case. And so certain provisions have been altered quite a bit.
Revoking an Irrevocable Trust
And so, can a settlor and beneficiaries get together and revoke an irrevocable trust? The answer is yes, but how that provision has come out in the UTC will vary state by state.
Creditor Rights and Spendthrift Trusts
A topic where we knew there would not be uniformity is the whole issue of creditor rights and spendthrift trusts that many states had legislated in this area even before the UTC. And so we expected that states would use the UTC as a framework, but probably put in their own particular rules. And that’s happened.
Removal of a Trustee
A third controversial area is the ability of the court to remove the trustee. The UTC expanded the grounds a bit, with success in some states and less success in other states. But the real controversial item was to what extent a settlor can limit disclosure to the beneficiaries? And so the UTC tried to come up with a rule that really hasn’t satisfied anyone. And so states great variation on the extent to which the settlor, the creator of the trust, can keep the trust secret in a particular state.
Trends in Trust Law Since 2000
So the UTC was drafted in light of the law in practice in 2000. What are some of the trends that we’ve been seeing the last 24, 25 years? Trusts are lasting a lot longer than they formerly did. And of course, when trusts last longer, there may be a greater desire or need to modify and change the trust terms. So that’s one trend.
There’s a much greater desire for protection against creditors, particularly creditors of the settlor, than there was in 2000. So we’ve seen a number of states enacting asset protection statutes. We’re seeing much more complicated trust structures, almost like corporations in their organization where you’ve got protectors and advisory committees. And the UTC permitted and actually recognized directed trusts, but it didn’t really, wasn’t really set up for these complicated structures that we are seeing today.
And then there is a greater desire today than 20-some years ago keep disputes out of court. And so we’re seeing more arbitration type provisions in trust documents formally. My sense is we’re seeing more contest provisions- no contest clauses- then they were formerly. And then finally, trust law is becoming more multi-jurisdictional. That is, more states or you have any particular trust may have contact more states than was formally case.
So how has the Uniform Law Commission responded to the changes in practice? Well, it hasn’t amended the UTC so much as supplemented the UTC with other laws. And so we have the Uniform Trust Decanting Act, which was approved in 2015 and that’s been enacted now in 17 states. We have the Uniform Directed Trust Act, that was 2017 approved in 18 states. And these acts supplement the UTC; in a way are integrated with the UTC because they fit closely together.
Future of the UTC
The Commission has also appointed a drafting committee, which I’m a member, to draft a uniform conflicts of law in trust and estate act, which is a huge project for which I’m very glad I’m not the reporter. We have someone far better qualified than me.
Then, one of the items on my wish list for amending the UTC eventually would be to enact a statute that would recognize arbitration provisions in trusts. So, we’ve got about 10 states now, with Florida taking the lead, that have amended their version of the UTC to clarify that a mandatory arbitration provision in a trust document is enforceable.
Those are some of the key changes. There are a lot of significant provisions in the UTC that I could talk about in a 3-hour or so presentation, but I think those are really the highlights and I hope when you listen you find this helpful. Thank you.
Connie Eyster: Thank you, Professor English, for your extensive work on the UTC and for speaking with us today. It’s been so wonderful to hear your reflections on the successes of the UTC and where we may see some growth in the future.
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