Recent Developments in Trust Law: New Jersey Enacts the Uniform Trust Code
This January the New Legislature passed, and Governor Christie signed into law, the New Jersey Uniform Trust Code (“NJ UTC”) after nearly eight years of deliberations. The law, which is effective as of July 17, 2016, provides a comprehensive set of guidelines as to trusts.
Some part of the model Uniform Trust Code has been adopted in at least 32 states, including Pennsylvania, and works to standardize the practice of trust law throughout the nation. This standardization of trust law benefits trustees, beneficiaries, and attorneys as it creates consistency and a level of predictability in trust administration and litigation.
New Jersey adopted nine of the eleven Articles of the model Uniform Trust Code. The NJ UTC covers a multitude of areas including representation; modification and termination of trusts; creditor’s claims; and duties, powers, and liabilities of trustees. There are many significant aspects of the NJ UTC, but some noteworthy highlights include:
Modification/Termination of Trusts: The power of modification enables the court, a settlor, trustee, or beneficiary to change an intended trust term or provision to better effectuate the purpose of the trust. An example of a permissible type of modification under the NJ UTC is found in N.J.S.A. § 3B:31-27, which provides that a non-charitable irrevocable trust may be modified or terminated upon consent of the settlor and all beneficiaries, even if the modification or termination is inconsistent with a material purpose of the trust.
Nonjudicial Settlement Agreements: While prior to the enactment of the NJ UTC, many trust disputes were settled informally through a nonjudicial settlement agreement, now parties are expressly authorized to use this settlement method. See N.J.S.A. § 3B:31-11. Eliminating the cost and delay of court approval, the NJ UTC authorizes the use of nonjudicial settlement agreements in the following scenarios: (1) interpreting the terms of a trust; (2) approving a trustee’s account; (3) approving or restraining a trustee’s actions; (4) approving the resignation or appointment of a trustee; (5) transferring a trust’s principal place of administration; and (6) establishing a trustee’s liability for an action related to a trust.
Representation: Virtual representation of future interests in New Jersey was fixed by court rule prior to the adoption of the NJ UTC. The NJ UTC provisions regarding virtual representation are similar to the court rule, but are more specific and expansive. The essence of virtual representation remains the same (N.J.S.A. § 3B:31-13(a) provides that notice to one who may represent and bind another person has the same effect as if notice were given directly to the other person).
Jurisdiction: Under the NJ UTC, a trustee can potentially change the principal place of administration of a testamentary trust. A trustee would not need judicial approval so long as the qualified beneficiaries, a distributee or permissible distributee, do not object. Further, a trustee would likely be able to change the principal place of administration of an inter vivos trust. The process would be the same as it is for testamentary trusts. N.J.S.A. § 3B:31-8(d).
To learn more about the NJ UTC, please join us at Archer & Greiner’s complimentary Estate Litigation Seminar on April 21, 2016 from 8am-1pm at Tavistock Country Club in Haddonfield, New Jersey. For more information or to register, visit http://www.archerlaw.com/seminars/1306/ or contact Archer & Greiner P.C. at firstname.lastname@example.org.
DISCLAIMER: This client advisory is for general information purposes only. It does not constitute legal or tax advice, and may not be used and relied upon as a substitute for legal or tax advice regarding a specific issue or problem. Advice should be obtained from a qualified attorney or tax practitioner licensed to practice in the jurisdiction where that advice is sought.
This article was originally published by the Chamber of Commerce of Southern New Jersey. To view the original article, copy and paste the link below into a new internet browser.