Alert July 10, 2012

Massachusetts Uniform Trust Code Enacted

The Massachusetts Uniform Trust Code (the “MUTC”) was signed into law on July 8, 2012 and became effective immediately.  It repeals Article VII of the Massachusetts Uniform Probate Code which governed certain aspects of trust administration.  The MUTC contains provisions that give trustees flexibility in administering trusts, reduce the necessity for court intervention and clarify the rights of the trust beneficiaries.  It applies to all trusts in existence before, on and after its effective date, with a few limited exceptions that are prospective only.  Many, but not all, of the provisions of the MUTC can be overridden by the terms of the trust instrument.

Here are some highlights of the MUTC: 

A Trustee’s Duty to Provide Information to the Beneficiaries 

  • A trustee is required to notify the “qualified beneficiaries” of the trust within 30 days of a trust becoming irrevocable or a trustee is appointed thereafter.
  • A trustee is required to provide information about the trust at the request of the beneficiaries.
  • Absent a contrary provision in the trust, a trustee must send annual and final accounts to a distributee or permissible distributee of trust income or principal and to other qualified beneficiaries upon request.
  • A qualified beneficiary is defined as:
    • a distributee or permissible distributee of trust income or principal; and
    • a distributee of trust income or principal if the trust terminated at the time a notice is required or an account is requested.
    • A beneficiary who has sent a trustee a request for notice shall be treated as a qualified beneficiary for notice purposes.
  • The requirements to provide notice and accounts, absent overriding provisions in the trust, are new statutory requirements. 

Provisions Regarding Revocable Trusts

  • Unless the terms of a trust expressly provide that the trust is irrevocable, a trust is revocable. 
  • This is a change from prior law and is prospective only.
  • A person may commence a judicial proceeding to contest the validity of a trust that was revocable on the settlor’s death within the earlier of:
    • one year after the settlor’s death; or
    • 60 days after the trustee sent the person a copy of the trust and informed the person of the trustee’s name and address and that the person has 60 days to commence a proceeding.

Actions by Trustees

  • Absent a contrary provision in the trust, trustees may act by majority decision.
  • This is a change from prior law which required trustees to act unanimously unless the terms of the trust provided otherwise, and is prospective only. 

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.
  • Virtual representation is not limited to court proceedings.
  • This is a change to prior law and allows persons who lack legal capacity to be bound by representatives.
  • In court proceedings, the need for a guardian ad litem to represent minor and unborn issue may be eliminated.
  • Trustees will need to identify conflicts of interest and situations in which virtual representation is not appropriate.

Non-Judicial Settlement Agreements 

  • Trustees and beneficiaries may enter into a non-judicial settlement agreement to resolve questions regarding the construction or interpretation of a trust instrument; the powers, authority and/or liability of a trustee; the approval of accounts; the resignation or appointment of a trustee; and other issues.
  • The agreement will be valid if it does not violate a material purpose of the trust and includes terms and conditions that could properly be approved by a court.
  • Since these agreements do not require court approval (although a trustee or interested person may request court approval), this provision provides for the expeditious and economical resolution of conflicts, clarification of terms, trustee powers and the like.

Modification and Termination of a Trust 

  • If the settlor and beneficiaries consent, a court may approve the modification or termination of a non-charitable trust even if it is inconsistent with a material purpose of the trust.
  • The court may terminate or modify a non-charitable irrevocable trust with the consent of all the beneficiaries if the court concludes that modification or termination is not inconsistent with a material purpose of the trust.

Court Removal of a Trustee 

  • All of the qualified beneficiaries may petition a court to remove a trustee without cause.
  • The court will grant such a petition if it determines that removal serves the interests of all beneficiaries and is not inconsistent with a material purpose of the trust.
  • Under prior law, a trustee could only be removed for cause.

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.
    • A beneficiary may not commence a proceeding against a trustee for breach of trust more than three years after the date the beneficiary or his/her representative knew or reasonably should have known of the existence of a potential claim for breach of trust. 

Miscellaneous

  • Trustees are granted a broad set of statutory powers unless the terms of the trust provide otherwise, which must be reviewed in conjunction with the powers granted in the trust document.
  • An exculpatory provision drafted or caused to be drafted by a trustee may be invalid unless the trustee proves that its existence and contents were adequately communicated to the settlor.
  • The settlor of a charitable trust may sue to enforce the trust. 

We are available to answer your questions about the MUTC 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 Hayes

Jennifer Locke