First Quarterly Issue Spring 2003 NEBRASKA, NEW MEXICO AND WYOMING ENACT UNIFORM TRUST CODE

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1 First Quarterly Issue Spring 2003 UTC NOTES NEBRASKA, NEW MEXICO AND WYOMING ENACT UNIFORM TRUST CODE Nebraska, New Mexico and Wyoming enacted the Uniform Trust Code this year, bringing the total number of UTC adoptions to four following Kansas last year. Additional enactments are expected in several other states this year, and UTC studies continue around the country. Numerous introductions are expected in The Nebraska bill (LB 130) passed its unicameral legislature and was signed by Governor Johanns on March 20th. The effective date is January 1, Few changes were made to the bill. The Nebraska UTC was enacted following a detailed study which is available at under State Reports. Many thanks to Senator David Landis, Bill Marienau, Uniform Law Commissioners Larry Ruth and Amy Longo and Professors John Gradwohl and Ronald Volkmer for their help. The New Mexico bill (HB 48), sponsored by Representative Alfred Parks, was signed by Governor Richardson on April 2nd and becomes effective on July 1, Thanks are extended to Fletcher Catron and Uniform Law Commissioners Jack Burton and Paula Tackett. The Wyoming bill (HB 77) was signed by Governor Fruedenthal and will also go into effect on July 1, Wyoming s bill was passed after a Joint Judiciary Interim Committee study. The Wyoming bill has number of changes from the text of the uniform act. Uniform Law Commissioners Harold Meier and Charles Kepler played a key role in the enactment. All three enactments will be analyzed in the next edition of UTC Notes. Copies of the bills can be found under State Legislatures - Internet Sites- at In This Issue... The Co ntroversy Over 105(b)(8)...2 Study Gro up Upd ate...6 Summaries of the Missouri Law Review UTC Symposium David E nglish...7 Eugene S coles...8 Ronald C hester and S arah Reid Ziomek...9 Karen Boxx...10 Paula Monopoli...11 Scot Boulton...12 UTC Notes is a quarterly newsletter p ublished by the National Conference of Comm issioners on Uniform State Laws under the direction of David M. English, Chair, UTC Advisory Committee. Michelle Clayton, Editor. Page 1 of 12

2 THE CONTROVERSY OVER UTC 105(b)(8) By David English Section 105(b)(8) of the Uniform Trust Code ( UTC ), which is part of the section containing the UTC s compilation of mandatory rules, is the most discussed provision in the UTC. It limits the settlor s authority to waive certain notice provisions listed in 813(b) in the terms of an irrevocable trust, except with respect to beneficiaries under the age of twenty-five. Many state study groups have grappled with this subsection and have modified it, in some cases making it easier for a settlor to waive otherwise required notices and in other cases making it more difficult. This article describes the operation of 105(b)(8) and shows how it corresponds with other sections in the UTC in light of its purposes. Most of American trust law, both statutory and case law, consists of rules subject to override by the terms of the trust. The UTC, likewise, is primarily default law. Before the UTC, however, neither the Restatement, nor treatise writers, nor state legislatures had attempted to specifically define principles of law that are not subject to settlor control. The UTC collects these mandatory rules in 105. These mandatory rules include such fundamentals as the requirements for creating a trust, the power of a court to modify or terminate a trust, a trustee s obligation to act in good faith, and the rights of third parties in their dealings with the trustee. Most of the mandatory rules, because they are self-evident, have received little discussion or even attention. Concerns remain, however, as to whether 105(b)(8) codifies the common law notice rights of beneficiaries too broadly and whether settlors should be able to bar beneficiaries from any knowledge of the trust who are under an age of discretion determined by the settlor or who are not yet receiving distributions. To understand 105(b)(8), it is important to read and recognize how it interrelates with 813, the trustee s duty to inform and report, and 103(12), the definition of qualified beneficiary. 105(b)(8) - Its Language 105(b)(8) has caused problems because it can be difficult to read and understand due to its wording. There were several versions of the subsection drafted and styled. The final approved draft of any uniform act always goes through the NCCUSL Style Committee whose task is to clarify the grammar and meaning of a uniform act, never to change the substance of a finalized act. However, some efforts to style are more successful than others. The final version of 105(b)(8) reads as follows: (b) The terms of a trust prevail over any provision of this [Code] except: (8) except for a qualified beneficiary who has not attained 25 years of age, the duty under Section 813 (b)(2) and (3) to notify qualified beneficiaries of an irrevocable trust of the existence of the trust, of the identity of the trustee, and of their right to request trustee s reports; Page 2 of 12

3 The double excepts have caused much confusion and the question of whether there should be a not has also been debated. Some states have opted to use an earlier version of the language: (b) The terms of a trust prevail over any provision of this [Code] except: (8) with respect to qualified beneficiaries of an irrevocable trust who have attained twentyfive years of age, the duty under Section 813 to notify them of the existence of the trust, of the identity of the trustee, and of their right to request trustee reports; The Definition of Qualified Beneficiary (Section 103(12)) The definition of qualified beneficiary permeates the UTC. It is used as the default rule (which may be waived) in several sections including: 108, which requires 60 days notice before transferring a trust s principal place of administration; 417, which requires that notice be given prior to a trust being combined or divided; 705, which defines the class of beneficiaries to whom notice must be given of a trustee resignation; and 813, which sets forth the trustee s duty to inform the beneficiaries of the trust s administration. Section 103(12) defines qualified beneficiary as follows: Qualified beneficiary means a beneficiary who, on the date the beneficiary s qualification is determined: (A) is a distributee or permissible distributee of trust income or principal; (B) would be a distributee or permissible distributee of trust income or principal if the interests of the distributees described in subparagraph (A) terminated on that date; or (C) would be a distributee or permissible distributee of trust income or principal if the trust terminated on that date. A few states are considering altering the definition in a variety of ways, in some cases by eliminating subsections (B) and (C). Ironically, the purpose of this definition was to limit, rather than expand, the class of beneficiaries to whom certain notice and consent would apparently have to be given under general trust common law. The effect of the definition is to eliminate beneficiaries with remote interests. The qualified beneficiaries consist only of beneficiaries currently eligible to receive a distribution from the trust, together with those who might be termed first-line remaindermen. These are beneficiaries who would become eligible to receive distributions were the event triggering the termination of a beneficiary s interest or of the trust itself (typically the deaths of beneficiaries currently eligible to receive income) were to occur on the date in question. If the definition of qualified beneficiary is restricted in an effort to limit the mandatory notice provisions under 105(b)(8), other kinds of notice and consent designed to protect beneficiaries (which now may be waived) would no longer be default law. First-line remaindermen would lose many basic protections under the UTC, and there would be no practical means by which beneficiaries could protect the basic rights to loyalty, prudence, and impartiality. Page 3 of 12

4 Section Duty to Inform and Report Because of 105(b)(8), the following duties of a trustee may not be waived by the settlor with respect to beneficiaries 25 years of age or older. In order to protect a settlor s natural concern about making young beneficiaries aware of the trust while also assuring that beneficiaries are adequately able to protect their interests under the trust, the drafters of the UTC adopted age 25, an age commonly encountered in trust documents, as a compromise of the conflicting concerns. Section 813(b)(2) and (3) read as follows: (b) A trustee: (2) within 60 days after accepting a trusteeship, shall notify the qualified beneficiaries of the acceptance and of the trustee s name, address, and telephone number; (3) within 60 days after the date the trustee acquires knowledge of the creation of an irrevocable trust, or the date the trustee acquires knowledge that a formerly revocable trust has become irrevocable, whether by the death of the settlor or otherwise, shall notify the qualified beneficiaries of the trust s existence, of the identity of the settlor or settlors, of the right to request a copy of the trust instrument, and of the right to a trustee s report as provided in subsection (c); Section 813 codifies the common law duty of keeping beneficiaries reasonably informed of the administration of the trust - a fundamental duty of all trustees. Only by being informed can the beneficiaries know of and enforce their interests. Section 813, however, is designed to make the duty more precise by limiting its application to qualified beneficiaries. By focusing on disclosure to beneficiaries most likely to receive distribution, the UTC enhances trustee accountability, while at the same time relieving the trustee from the undue burden of having to identify and notify beneficiaries who hold truly remote interests. The Policy Arguments The UTC represents a compromise between opposing viewpoints. One view is that settlors should be able to waive all notice provisions because knowledge of trust benefits might result in a less productive life for some beneficiaries, as well as for simple privacy reasons. The opposing policy arguments, as expressed in UTC Notes (and reprinted in Probate & Property, March/April 2003, Vol. 17, No. 2) by UTC Drafting Committee advisers Joseph Kartiganer and Raymond Young, are: that the essence of the trust relationship is accounting to the beneficiaries; that it is wise administration to account and inform beneficiaries, to avoid the greater danger of the beneficiary learning of a breach or possible breach long after the event; and that there are practical difficulties with secrecy (for example, the Trustee must tell a child that he or she is not eligible for financial aid at college because the trust will pay, and must determine whether to accumulate income at high income tax rates or pay it out for inclusion in the beneficiary s own return.). Kartiganer and Young also stress the practical advantage of a one year statute of limitations where the beneficiary is informed of the trust transactions and advised of the bar if no claim is made within one year. In the absence of notice, the trustee is exposed to liability for the term of the trust plus five years. Even at common law, the doctrine of laches would not begin to run on a matter until a beneficiary learns of it. Page 4 of 12

5 Enforcement of the duty of impartiality is also an important consideration when states decide which beneficiaries should receive notice. In an article for UTC Notes, Professor Edward C. Halbach, Jr. stated, A trustee s duty to provide information to beneficiaries on a reasonable basis has long been recognized as fundamental to the trust relationship and as essential to carrying out the duty to impartiality. Furthermore, Halbach states that the duty to provide information to beneficiaries also offers trustees vital protection from belated claims by beneficiaries whose challenges, by proper disclosure practice, might have been barred by doctrines of laches or estoppel or by applicable statute of limitations. Halbach noted the unfortunate although diminishing earlier reluctance of some practitioners concerning the applicability and performance of this traditional general duty. State Responses In my article on significant policy issues with respect to the UTC, which is summarized in this issue of UTC Notes, I note that the waiver issue with respect to 813 was the most discussed issue during the drafting of the UTC and now in state bar committees. While most specific notice requirements in the UTC may be waived, there are two that may not: as noted above, 105(b)(8) dealing with the trustee s obligation to notify qualified beneficiaries age 25 or older of the existence of an irrevocable trust and of the right to request trustee reports; and 105(b)(9), the obligations of a trustee to respond to any beneficiary s request for a trustee s report and other information reasonably related to the trust s administration (even if the trustee was not obligated to inform the beneficiary about the trust in the first instance). States have responded differently on the waiver and notice provisions. One response has been to allow a settlor to waive notice to any and all beneficiaries regardless of age by striking 105(b)(8) completely. Another response has been to alter the definition of qualified beneficiary to include only those currently receiving distribution or those with vested remainders. Altering the definition of qualified beneficiary is the most harmful response because the definition interrelates with many important sections of the UTC that may be waived but, as default law, are designed to provide minimal protections for beneficiaries. Other responses include modifying 105(b)(8) in order to allow a settlor to waive notice to all remainder beneficiaries or to adjust the age limit either higher or lower. The extent to which a settlor may waive notices and other information requirements is not a new issue. Limitations on the ability to waive duties have long been recognized in case law and in Restatements of Trust Law. Considering the issue in the form of a statute brings it into much sharper focus, however. Codifying the law highlights the conflict between the goal of carrying out a settlor s specific intent against the goal of making certain the beneficiaries have sufficient information to enforce their interests. The UTC approach is a compromise about which some on both sides of the issue will not be satisfied. State bar associations and legislatures will have the final say. I hope that most will choose the balanced approach in the Uniform Trust Code. The fundamental character and integrity of the trust device is at stake. Page 5 of 12

6 UTC STUDY GROUP UPDATE Several groups recently began studying the Uniform Trust Code for potential enactment in their states. After a bill was introduced in Maine, a joint committee of the Maine State Bar Association and the Maine Bankers Association was formed to conduct an interim study. It will examine changes that might be required in Maine s version of the Uniform Probate Code and help the Legislature draft an appropriate bill. In New Hampshire, a UTC Committee has formed to study, draft and facilitate legislation. The New Hampshire Uniform Trust Code Project will work in phases with subcommittees doing work on different articles and then the full committee examining initial drafts. The committee s membership includes probate judges, experienced trust and estate lawyers and members of the banking community. In Vermont, a group of probate judges is beginning to study the Uniform Trust Code and hopes to expand interest to the bar association and banking community. A regional seminar is planned for New England in the Fall to help assist the study groups with questions on the Code. The State of New York EPTL-SCPA Legislative Advisory Committee is beginning its review of the Uniform Trust Code and plans to meet in June for a seminar. Meanwhile, ongoing studies of the UTC continue in states such as: Alabama, Idaho, Florida, Maryland, Michigan, Missouri, Montana, North Carolina, Oregon, Ohio, Pennsylvania, Tennessee, Texas, Utah and Virginia. Late last year, the National Conference of Commissioners on Uniform State Laws (NCCUSL) launched a website for the UTC Project in an effort to provide helpful information and a meeting place for those studying the Uniform Trust Code around the country. While some favorable comments have been received, there has been very little participation on the message board. It may be that people are fearful of being added to a big listserve. Posting messages on will not put anyone on a listserve for unwanted . Another issue may be that posting does require a passcode - obtainable by contacting Michelle Clayton at mclayton@nccusl.org. Entering your address and the passcode is all that is needed to post a message or reply. Please feel free to get a password and start posting your questions, concerns or thoughts about the Uniform Trust Code. Page 6 of 12

7 MISSOURI LAW REVIEW UNIFORM TRUST CODE SYMPOSIUM HIGHLIGHTS [The Spring 2002 Missouri Law Review contained six articles about the Uniform Trust Code. Below are brief descriptions of the articles. Full copies of the articles may be obtained by contacting the Missouri Law Review office at or through Lexis or Westlaw.] The Uniform Trust Code (2000): Significant Provisions and Policy Issues David M. English In his article, Professor English provides an overview of the Uniform Trust Code as well as a discussion of the fourteen topics receiving the most discussion in states as they consider enactment of the UTC. Professor English first discusses related uniform acts, some of which are incorporated into the UTC, such as the Uniform Prudent Investor Act, and some of which are to be repealed with enactment of the UTC, such as Article VII of the Uniform Probate Code and the Uniform Trustee s Powers Act. Other related uniform acts stand alone and are not superceded by the UTC, such as the Uniform Common Trust Fund Act and the Uniform Principal and Income Act, among others. Professor English also states that the UTC was drafted in close coordination with the revision of the Restatement of Trusts, and that the UTC is also supplemented by the common law of trusts. In his overview of the UTC, Professor English first mentions that the UTC states the law relating to express trusts, with the breadth of the UTC indicated by its organization into eleven articles. These articles of the UTC address topics including: judicial proceedings, representation, modification and termination, spendthrift provisions and rights of creditors, revocable trusts, the office of the trustee, duties and powers of the trustee, liability of trustees, and the application of the UTC to existing trusts. Professor English next sets out particular issues for states to consider in their study process of the UTC, including, but not limited to, deciding on the drafting model and what to do about optional provisions, deciding on other key local law issues, and identifying other policy and political issues. Then, he goes on to discuss some of the main policy issues that are currently being discussed by states. These issues cover the following topics: Default Rules (section 105); Principal Place of Administration (section 108); Representation and Settlements (section 111 and Article 3); Rules of Construction (section 112); Creation of Trusts (sections 401 to 409); Trust Modification and Termination (sections 410 to 417); Charitable Trusts (section 405, 413); Spendthrift Provisions and Rights of Beneficiary s Creditors (Article 5); Revocable Trusts (Article 6); Cotrustees (section 703); Trustee Removal (section 706); Duty to Keep Beneficiaries Informed (section 813); Remedies for Breach of Trust (sections ); and Trustee Dealings with Third Persons (section ). Professor English concludes that the UTC has been drafted to create a comprehensive code of trust but does not and could not codify all trust law topics. However, the UTC is ultimately a model for state trust statutes. Cite - 67 MO. L. REV. 143 (2002) Page 7 of 12

8 Choice of Law in Trusts: Uniform Trust Code, Sections 107 and 403 Eugene F. Scoles Professor Scoles discusses the UTC provisions (sections 107 and 403) on determining the law governing trust creation and interpretation. He states that these provisions do not create much new ground in the area of choice of law, but do give guidance to lawyers and their clients, and to judges when litig- ation occurs. Professor Scoles emphasizes that the dominant policy shared by all states is to give effect to the settlor s intent. Both section 107 and section 403 of the UTC reflect this policy. These sections also accommodate the necessary consideration of the reasonable expectations of the parties, as well as the interests and policies of the states involved. Professor Scoles then points out that there are numerous complexities involved in the administration of a trust, so it is necessary to consider the particular choice of law issue in question in light of the circumstances related to the trust regarding that particular issue. Resolving a choice of law issue requires consideration of how the settlor s intention and the relevant law and policy relate to the issue. Therefore, it is important to isolate and identify the particular narrow issue to be resolved. In the process of identifying and resolving the particular matter in dispute, Professor Scoles stresses that matters relating to validity must be distinguished from matters of construction. Furthermore, with respect to matters of validity, the formalities necessary to transfer particular assets must be distinguished from substantive limitations based on other policies of law. With respect to matters of construction, a distinction must be made between matters concerning the substantive dispositions to beneficiaries and matters concerning the administration of the trust. Professor Scoles states that whatever the issue, the courts will generally try to give effect to the settlor s dispositive scheme as far as possible. With regard to validity issues, this frequently means sustaining the validity by any reasonably related law as provided under UTC section 403. In matters of construction, the settlor s expressed or implied intent controls against the background of the law of the state having the most significant relationship to the matter at issue, as is provided in UTC section 107. Professor Scoles then goes on to discuss some of the common concerns under the UTC relating to matters of validity (formalities and matters of substance) and of construction (dispositive provisions and administrative provisions). He concludes that the variety of matters that may call for a determination of choice of law requires an accommodating statute that does not preclude reasonable approaches in resolving new and unforeseen issues generated by changing circumstances. The UTC does this, particularly through sections 107 and 403. Cite - 67 MO. L. REV. 213 (2002) Page 8 of 12

9 Removal of Corporate Trustees Under the Uniform Trust Code and Other Current Law: Does a Contractual Lense Help Clarify the Rights of Beneficiaries? Ronald Chester Sarah Reid Ziomek Absent a breach of trust or express language in the trust, beneficiaries have often been unable to remove corporate trustees. Recent reforms in American trust law appear to be responding to this limitation. Since the modern trust essentially involves a contract about how property is to be managed and distributed, Professor Chester and Ms. Ziomek consider the issue of trustee removal from a contractual perspective. They note the significant ways the trust resembles a third party beneficiary contract. It is the trust deal itself that determines the rights of beneficiaries. The authors state that viewing this trust deal as a contract may help clarify the trust removal problem. In considering reforms in this area, the authors first discuss the Claflin doctrine, which states that even if all beneficiaries consent to termination of a trust, they may not compel the termination if doing so would be inconsistent with a material purpose of the trust. Therefore, the general rule has been that the court will not remove a trustee only because the beneficiaries desire this removal. However, both section 706 of the Uniform Trust Code and Section 65 of the Restatement (Third) of Trusts now seem to give beneficiaries easier means of removal. Some recent case law has also indicated that the Claflin doctrine is not necessarily a bar to trustee removal. In the Matter of May C. Hogan Trust, the court found that the provisions of a trust represent a contract between the settlor and trustee. That court held that the particular corporate trustee involved was not necessary to carry out the material purposes of the trust. Thus, the material purposes test was used affirmatively to allow replacement of a trustee rather than negatively to bar it. The article expands on the contractual analysis of the trustee removal problem by noting that civil law systems often treat trust-like situations as, in effect, third-party beneficiary contracts. Trustees in civil law systems do not hold a continuing office in the same sense as do trustees in the Anglo-American trust system. In many European countries, a replacement trustee is the trustee of a new contract rather than a successor to continuing office of trustee as in England and the United States. In Anglo-American trusts, those powers not explicitly provided for in the trust deal are otherwise implied from the default rules of trust law. Under Hogan, it appears that one such implied term is that a change of trustee is possible if, in a given case, it is not in violation of a material purpose of the settlor. Professor Chester and Ms. Ziomek would extend this analysis to all cases where the beneficiaries seek to replace one institutional trustee with another. In this and other ways, American law is beginning to give beneficiaries more say in removal of trustees. A contractual way to look at this is that the typical settlor intends the trust to survive the individual trustee and thus contemplates possible trustee replacement. Professor Chester and Ms. Ziomek ultimately argue that some balance needs to be struck between the desire of the beneficiaries for easier trustee removal and the interests of the settlor and the trustee in establishing the trust deal. Recent law, including UTC Section 706 and Restatement (Third) of Trusts Section 65, takes significant steps toward achieving this goal. Cite - 67 MO. L. REV. 241 (2002) Page 9 of 12

10 Of Punctilios and Paybacks: The Duty of Loyalty under the Uniform Trust Code Karen E. Boxx Professor Boxx considers the trustee s duty of loyalty. The duty of loyalty is seen as the essence of the fiduciary duty. In particular, a trustee holds the highest level of control over another s property, and the duty of loyalty consequently holds a trustee to the highest standards. Professor Boxx first looks at the common law origins of the duty of loyalty. The duty of loyalty requires the trustee to administer the trust solely in the interests of the beneficiaries. This duty is joined by the duty of prudent administration to form the law of fiduciary duty. This law of fiduciary duty is a relatively modern development in the history of the trust, for a trustee s role was originally one of a passive titleholder rather than an active asset manager. However, in the nineteenth century, the purpose of trusts began to shift from a way to hold and convey real property to management of financial assets, and it was therefore, necessary to give trustees broad discretion. Due to this broad discretion, the duty of loyalty is necessary to deter wrongdoing. However, there is difficulty in defining the boundaries of the duty of loyalty. In particular, it can be difficult to determine exactly if a breach of the duty has occurred. Under the common law, whether a particular transaction is prohibited must be determined on a case-by-case basis depending on the degree and significance of the personal benefit to the trustee. Professor Boxx states that this ambiguity is necessary to ensure that the trustee be conservative in order to avoid liability and not reach too far beyond his powers. However, it may also restrict trustees whose conflicts were created by the trust settlor. Professor Boxx then notes some past attempts to codify the duty of loyalty. She mentions statutes in Indiana, Michigan, California, and North Dakota as states that offer at least broad statements of the common law of fiduciary duty. Also mentioned are the Uniform Trusts Act, the Uniform Trustees Powers Act, and the Uniform Probate Code, which contain provisions that implicate the duty of loyalty. However, these uniform acts do not discuss the duty as fully as the UTC does. Professor Boxx goes on to analyze the UTC s formulation of the duty and considers how it provides guidance to the acting trustee and the court in determining if a breach of duty has occurred. Under the common law, a trustee is presumed to be disloyal in transactions between the trust and trustee, which is also true under the UTC. However, when conflicts are not direct, the UTC does not focus so much on whether the transaction was fair, as is the case in common law, but rather on whether the trustee s judgment was affected. This places a higher burden on the trustee. However, even if the transaction is more direct and the trustee s interest more significant, the trustee still has the opportunity under the UTC to rebut a presumption of disloyalty, which is not available under common law. Beneficiaries also fare better under the UTC since they can void a transaction that may be fair, which is only one factor considered, if it can be shown that the trustee s personal interests affected his or her actions as a trustee. Cite - 67 MO. L. REV. 279 (2002) Page 10 of 12

11 Fiduciary Duty: A New Ethical Paradigm for Lawyer/Fiduciaries Paula A. Monopoli Professor Monopoli discusses the ethical issues arising when lawyers are designated as fiduciaries, a topic not specifically addressed in the UTC, but still an important consideration in modern trust administration. The article reviews the current ethical model that allows a lawyer to draft an instrument in which he or she is also named as a fiduciary, despite the potential conflicts of interest. Several models have been offered in the past that would alter the status quo, an absolute prohibition model, an increased judicial inquiry model prior to fiduciary appointment; and an increased judicial inquiry model with teeth. Professor Monopoli suggests a new ethical paradigm that combines elements of the second and third models with further disclosure. This proposed model would increase judicial inquiry and scrutiny and impose a duty on the lawyer/fiduciary to prove full disclosure and informed consent by the client in the appointment of the lawyer as fiduciary. Professor Monopoli then discusses reformation of the ABA Model Rules of Professional Conduct. The proposal by the Ethics 2000 Commission for the revision of the ABA Model Rules embraces the duty of disclosure but also states that the Model Rules do not prohibit a lawyer from seeking to have him or her named as a fiduciary, which Professor Monopoli sees as a step backward. She then discusses changes in this proposal that should be made, including mandating that the lawyer must advise the client if the lawyer is also the draftsperson and incorporating the disclosure model. The article then goes on to discuss alternative procedural changes for attorney/fiduciaries, which would be the mechanism for enforcing the new ethical paradigm. These would include changes to the Uniform Probate Code and the new Uniform Trust Code that would allow a court to unilaterally inquire about whether a lawyer was also the drafting attorney and would require proof of disclosure. The changes to the Uniform Probate Code would provide for the court to order supervised probate, while the changes to the Uniform Trust Code would require the court to remove a drafting attorney who is the sole trustee of a trust and who cannot prove disclosure and informed consent by the client. She also proposes mandatory bond and accountings for drafting attorney/fiduciaries under certain circumstances. Professor Monopoli also sets out additional systemic reforms, including changes in statutes which allow double compensation of lawyers who act both as the fiduciary and the attorney for the estate. She includes proposals for random audits, fiduciary liability insurance and improved client compensation funds. These are all aimed at increasing deterrence, detection and compensation of clients who suffer as a result of a breach of fiduciary duty. The final set of reforms discussed by Professor Monopoli concern better training of lawyers and judges and increasing resources available to probate courts. Cite - 67 MO. L. REV. 309 (2002) Page 11 of 12

12 How Uniform Will the Uniform Trust Code Be: Vagaries of Missouri Trust Law Versus Desires for Conformity Scot Boulton In this article, Mr. Boulton discusses some of the unique provisions and aspects of Missouri trust law and how they may be incorporated and addressed in the enactment of the Uniform Trust Code in Missouri. Missouri s limited statutes on trusts are codified in Chapter 456 of the Missouri Revised Statutes. The UTC will fill some important gaps in Missouri law and solve the issues left open by the current statutory provisions. However, there are rules unique to Missouri law, some of which express policy decisions different from those expressed in the UTC. One such area is judicial termination and modification of trusts. Under the UTC, modification or termination upon consent of all beneficiaries is allowed if not inconsistent with a material purpose of the trust. Under Missouri law, section , the beneficiaries may petition the court to terminate a trust early without regard to material purpose. Mr. Boulton suggests that if this existing Missouri provision is incorporated into Missouri s enactment of the UTC, serious consideration needs to be made to increasing the protection accorded the interests of the minor, unborn, and ascertained beneficiaries. In addition, the impact of this incorporation on other provisions of the UTC must also be considered. Also, Missouri s current law on rights of settlor s creditors to reach trust assets differs from the UTC s provisions. Missouri law allows a valid spendthrift provision to restrain either voluntary or involuntary transfer of a beneficiary s interest. The UTC, in section 502, provides that a spendthrift provision is valid only if it restrains both voluntary and involuntary transfer. Also, under the UTC, all assets of revocable trusts are subject to claims of the settlor, and creditors of the settlor of an irrevocable trust can reach the maximum amount that can be distributed to or for the settlor s benefit. Missouri allows a settlor to retain a discretionary interest as one of a class of beneficiaries, in order to allow that interest to be excluded from the settlor s gross estate for federal estate tax purposes. Furthermore, in UTC section 505, the assets of a trust revocable immediately prior to the settlor s death are subject to the claims of the settlor s creditors, but only to the extent the settlor s probate estate is inadequate to satisfy those claims. However, Mr. Boulton points out that this section leaves a number of questions unanswered, such as what happens if the trust is not revocable, who has the right to recover trust assets the creditor or the personal representative of the deceased settlor, and is there a time limit on such recovery? Missouri existing statutes answer these questions, and Mr. Boulton suggests that a reference to them be inserted in the UTC if enacted in Missouri. These and other issues of difference between current Missouri law and the UTC must be considered if enactment of the UTC is to occur. The UTC will provide much guidance to Missouri in a number of areas, but Missouri trust law does contain a number of well-developed and unique provisions. Mr. Boulton believes that a judicious blending of both will provide a sound body of trust statutes for Missouri. Cite - 67 MO. L. REV. 361 (2002) Page 12 of 12