We have this report from the frontlines in Washington, D.C., by Donald D. Kozusko, a partner with Kozusko Lahey Harris LLP:
The Uniform Trust Code may be coming soon to a location near you, so look closely at what it offers and what it takes away. The UTC has been enacted in five states since it was first proposed three years ago. At press time, it was on track to become law in the District of Columbia, after a unanimous vote by the D.C. City Council on Dec. 2. Pennsylvania and Maryland are in the early stages of considering the code, as are several other states around the country (see www.nccusl.org).
Of course, “uniform” means the code is recommended by the National Conference of Commissioners on Uniform State Laws (NCCUSL). It does not mean this “uniform” trust law is being enacted uniformly. Kansas and Wyoming have substantially altered its provisions. States with fully developed trust laws are even more likely to make major changes — if they enact it at all.
The code is important, nonetheless, because it maps out new rules for vast stretches of trust law, including: reporting to beneficiaries, trust modification and early termination, delegation and division of fiduciary duties, settlement of disputes and protection against fiduciary liability, differences between revocable and irrevocable trusts and wills, and whether spendthrift clauses, oral trusts, purpose trusts and trusts for animals are effective. (See www.nccusl.org for a copy of the 2001 version and 2003 amendments.) Even if the code is not adopted in a particular jurisdiction, mere consideration of the proposal may provide an impetus to review and reconsider existing local trust law across this landscape of issues.
In the District of Columbia, the legislative process took three calendar years; the review, analysis, amendments and debate consumed countless hours of work by the local trust bar, which includes many nationally known lawyers. In the end, the most controversial provisions of the UTC were reworked. A novel D.C. amendment allows a settlor to keep a trust almost entirely confidential from a beneficiary if someone else is named to review trust operations in good faith on behalf of the beneficiary. Changes also were made to other provisions concerning reporting to beneficiaries, and the UTC rules for enforcing alimony and child support awards against a beneficiary of spendthrift and discretionary trusts were deleted entirely, with a view to revisiting those issues at a later time and preserving existing law in the interim. More technical provisions such as the rules on virtual representation and cy pres also were revised after serious debate.
In ways both large and small, certain policy decisions reflected in the UTC appear to be too radical for some lawyers and trust officers, yet too traditional for others, thinning the ranks of those in the middle who might recommend that a legislature adopt it without substantial amendment.