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THE NEW LAW OF LIVING
TRUSTS
By David G. Hoffman
It is often said that the
diversity of America’s people is the source of her strength.
However, in law, diversity bestows no such benefit. Until
recently, which law governed your living trust depended on
which region of the country you called home. Easterners had
English Common Law, citizens of Louisiana looked to
Napoleonic Law and people in the central and western states
long ago settled on their own law – except for California,
of course, where any question of law is always preceded by
the question, “what day is this?” The law needed to be the
same for everyone. That need has finally been addressed by
the Uniform Trust Code (the UTC).
Last summer, the Virginia
legislature enacted the UTC and the law went into effect
July 1 of this year. Also this year, four more states
adopted it, thus bringing the number of participating states
to 19. When all of the states and the District of Columbia
have enacted the UTC, America will have one – and only one –
law of trusts.
This new law applies to
everyone who has a trust. It does not matter if you have a
living trust or a testamentary trust (i.e. a trust inside a
will). Nor does it matter whether you have bags of money or
a just a pocketful of change. The UTC is not a tax law. It
is a law that sets down the rights and responsibilities of
the people establishing the trusts (i.e. settlors), the
people running the trust (i.e. trustees) and the people
getting the trust money (i.e. beneficiaries). Thus, how the
law affects you depends entirely on which hat you wear.
If you are a trustee, there is
good news and bad news. The good news is that the law grants
you the power to terminate small unproductive trusts,
broadens your power to manage trust assets, shelters you
from creditors and malcontents and even allows you to limit
the time squabbling beneficiaries can hold up the final
distribution of the trust. The bad new is that you are
supposed to keep all beneficiaries and potential
beneficiaries informed and up to date with regular notices
and financial statements – even before anyone has died.
For beneficiaries, the law is
almost all good news. You now have the power to modify the
trust and change the trustee. You just have to get all of
your fellow beneficiaries to agree. And, as I have said, you
also have the right to know all about the trust, the trust
assets and even the trustees themselves.
For you, the settlor of the trust,
you have the right to reject any one of these rules provided
you do so in writing. So, if you do not want your trustee
sending out annual financial statements to your greedy
relatives, you can eliminate that requirement. If you do not
want your kids to be able to fire the trustee and appoint
themselves as trustees instead, you can fix that too. In
fact, with very few exceptions, you can reject 95 percent of
the new law and write your trust any old way you please.
Finally, if you are so inclined,
the new law allows you to do something that you could never
have done before. You can now set up a trust for your pet.
Yes, your pet can have his or her own caregiver and all the
pampering you can afford. All that is required is that an
individual, corporation or charity gets whatever is left
once your Pookums has gone to that big litter box in the
sky.
So, you see, if have a trust and
you live in Virginia or any of the other 18 states that have
embraced the UTC, this would be a good time to call the
lawyer who drafted it and see what needs fixing. If you do
not have a trust but you would like to, this is a good time
to make one because model statutes such as this one rarely
change and you can rest assured that your trust will stand
the test of time. And, of course, if you are somebody’s pet,
this is the day you have been waiting for.
David Hoffman is a Virginia attorney
who limits his practice to wills, trusts, probate and estate
taxation. His offices are located in the northern Virginia
suburb of Fairfax City. 703-267-6100
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