May 3, 2012

The Impact of the Massachusetts Uniform Probate Code on Trust Administration

The Massachusetts Uniform Probate Code (the “MUPC”) became fully effective on March 31, 2012.  Article VII of the MUPC governs certain aspects of trust administration.  A bill to enact the Massachusetts Uniform Trust Code (the “MUTC”), which will repeal Article VII of the MUPC, is pending before the legislature.  The MUTC contains provisions that give trustees more flexibility in administering trusts, reduce the necessity for court intervention and clarify the rights of the trust beneficiaries.  Until it is enacted, however, Article VII of the MUPC is in effect.  While some of provisions of the MUPC will only apply to trusts that become irrevocable after March 31, 2012, certain administrative provisions likely also apply to trusts irrevocable prior to that date.  

Below are some highlights of the MUPC and issues to consider: 

A Trustee’s Duty to Provide Information to the Beneficiaries

  • A trustee is required to notify the beneficiaries within 30 days when a trust becomes irrevocable or a trustee is appointed thereafter.
  • A trustee is required to provide information about the trust at the request of the beneficiaries.
  • Upon request, a beneficiary is entitled to receive annual accounts and a final account of the administration of the trust.

Principal Place of Administration of the Trust

  • A trustee is under a continuing duty to administer a trust in a place appropriate to the trust’s purposes and its efficient management.
  • The provisions of a trust relating to the place of administration control unless compliance is contrary to the purposes and efficient management of the trust.
  • If a principal place of administration becomes inappropriate, a court can remove a trustee and appoint a trustee in another state or country.
  • The views of adult beneficiaries are to be taken into account in determining the suitability of a trust’s place of administration.

Court Removal of a Trustee

  • The trust beneficiaries may petition a court to remove a trustee; unlike prior law, MUPC provisions do not require that the beneficiaries show cause for removal.
  • A trustee may also petition a court to remove a co-trustee.
  • The MUPC provides that the court will grant such a petition if it determines that removal is in the best interests of the beneficiaries.

Compromise Agreements

  • A trustee and beneficiaries may enter into compromise agreements resolving questions regarding the construction or interpretation of a trust instrument, disputes between beneficiaries and/or a trustee, the powers and authority of a trustee, the approval of a trustee’s accounts and other issues.
  • The court will approve an agreement if it finds that the controversy is in good faith and the effect of the agreement on persons represented by others, such as a parent or guardian, is just and reasonable. 

Virtual Representation 

  • Absent a conflict of interest:

    • In some matters personal representatives and trustees can represent persons interested in an estate or trust.
    • Conservators and guardians can represent a ward/protected person.
    • Parents can represent their minor and unborn children, but not grandchildren and their issue.
    • A beneficiary with a substantially identical interest in the trust can represent unborn and unascertained beneficiaries.
  • There are some open questions as to how these provisions will be applied.  Personal representatives and trustees will need to identify conflicts of interest and situations in which virtual representation is not appropriate. 

Time Limits on Commencing Legal Proceedings Against a Trustee

  • Actions against a trustee in connection with a final account must be commenced within the first to occur of the following:

    • Six months after a beneficiary’s actual receipt of a final account that fully discloses material matters.
    • Three years after a beneficiary actually received a final account and was informed of the location of the trust records for review, even if the account does not fully disclose a material matter. 
  • This provision only applies to a final account.

We are available to answer your questions about the MUPC and to review trust instruments to determine how individual trusts are impacted by the statute.

If you would like additional information about the issues addressed in this Client Alert, please contact:

Mary-Kathleen O'Connell

Susan L. Abbott

Eric P. Hayes

Jennifer Locke