by Carol Warnick
The Uniform Trust Code (“UTC”) has now been adopted in 31 states. It is now the law in significantly more states than the Uniform Probate Code. The UTC is a uniform law drafted by the Uniform Law Commissioners, over a seven-year period. It is the first comprehensive uniform act dealing with trusts, although several states, notably California, Georgia, Indiana and Texas, all had comprehensive trust statutes at the time. These statutes, as well as any existing trust statutes in other states, were reviewed by the committee drafting the UTC. The stated goal of the National Conference of Commissioners on Uniform State Laws (“NCCUSL”) when drafting the model act was to “provide States with precise, comprehensive, and easily accessible guidance on trust law questions.” The impetus behind the model trust act was the growing use of trusts throughout the country, which coupled with the sparse body of trust law in many states, created significant issues for lawyers and courts trying to deal with trust disputes.
I practice trust and estate law in three states, Colorado, Utah and Wyoming. Both Utah and Wyoming have adopted the UTC. I find that it is so much easier to deal with and solve trust disputes in both Utah and Wyoming because of the provisions of the UTC. One reason is that the law is set forth much more clearly and gives judges ready authority to back their decisions. In my experience, bringing a statute to the attention of the court carries more weight than finding a case that is close to “on-point” in the dispute, if finding such a case is even possible. Because the law is set forth more clearly, everyone going into a dispute knows what the law is. There is not a significant body of trust common law in any of the states I practice in, therefore the UTC brings significantly more uniformity to the decisions of the variety of judges who have to rule on trust issues.
In addition, there are innovative portions of the UTC that provide more options to trust beneficiaries and potential litigants when issues arise with respect to a given trust. One example of such innovation are non-judicial settlement agreements. The UTC specifically provides that parties may enter into binding non-judicial settlement agreements to resolve issues concerning trusts as long as the agreement doesn’t violate a material purpose of the trust and includes terms and conditions that could be properly approved by a court under the UTC or other applicable law. Examples of matters that can be approved by a non-judicial settlement agreement would be the interpretation or construction of terms of the trust, approval of a trustee’s report or accounting, direction to the trustee to refrain from performing a particular act or to grant the trustee a necessary or desirable power, resignation and appointment of a trustee and determination of trustee compensation, transferring the trust’s principal place of administration, and the liability of a trustee for an action relating to the trust. Any interested person can also seek court approval of the agreement, but in my experience working with non-judicial settlement agreements in Utah and Wyoming, no one has felt the need to obtain court approval after the negotiation of such an agreement. Such flexibility allows the interested persons with regard to a trust (defined as those whose consent would be required to achieve a binding settlement if it were to be approved by the court) to collaborate and work out a variety of issues that would otherwise require the additional time and expense of obtaining court approval for such actions. I have found this option to be invaluable in working out trust issues for clients, especially when the size of the trust does not justify significant court involvement, and often brings about settlement more readily.
Much to the chagrin of many estate planners, the UTC was defeated in Colorado over a decade ago but is again being studied by a committee at the Colorado Bar Association. Each state legislature has the ability to adjust the model act and modify it as seems appropriate to reflect local preferences, so there is hope that the model act can be adjusted in such a way that it can be passed next year. I want to lend my voice of support to the adoption of the UTC in Colorado as an act that would greatly facilitate the ability to solve trust disputes early, more readily, and with less expense.