Does the Uniform Trust Code Apply to me?Tax Professionals' Resource
January 7, 2013 — 1,255 views
The Uniform Trust Code (UTC) is a law which is used by 22 states in the US. This is the first attempt made by the regulatory bodies to create a model for codifying the law of trusts. Generally, the UTC is a default statute, but it can also be used to revise or supplement the already existing laws of the state, regarding trusts.
The UTC was drafted in the year 2000 by the Uniform Law Commissioners. The drafting of the law was done over a period of 6 years. Trusts are considered as the best devices for planning one’s personal estate. Hence, it is necessary for estate planners to get a clear idea about UTC and its operating procedures.
The Need for UTC
In the recent years, there has been a great use of the trust, both in commercial transactions and family estate planning, not only in the US, but also on an international level. Also, the existing trust laws of the states fail to provide sufficient guidance and also do not address many practical issues. These factors were the main stimuli for the drafting of the UTC, which is a comprehensive law regarding trusts. The trust agreements in the UTC will allow the states to specify their trust laws with precision.
UTC and Express Trusts
Express trusts are the ones which are created by settlers who can either transfer their property to a trustee or else can declare themselves as the owner of the property. The UTC describes the laws which pertain to the functioning of these trusts. Following the creation of the trust, the trustee will hold the concerned properties, on behalf of the beneficiaries.
UTC and Commercial Trusts
Aside from estate planning, trusts are now being used in the event of many commercial transactions like repayment of debts in the corporate sector and in mutual funds for the purpose of pooling investment assets. Even if the commercial trusts are governed by some other body of law, the courts can use UTC as guidance while interpreting the other law.
UTC and Estate Tax Concerns
An estate planner should be familiar with UTC because it includes laws which can affect the estate taxes. This law codifies the common rule that the settler and beneficiary may jointly terminate an irrevocable trust. This modification of the original law raised serious estate tax concerns and issues regarding court approval. The law was later amended in such a way so as to give an enacting jurisdiction to add the requirement of a court approval. The court can also choose to make this provision an alternative.
Settlement of Trusts
The UTC has provisions which favor the settlement of issues regarding the trusts outside the court. According to the trust agreements, if there is a conflict of interests in issues concerning the estate, a conservator can be appointed to manage the property. If a conservator is not appointed, then a guardian can be appointed to make decisions with regard to personal care. The Uniform Trust Code also has provisions to eliminate the administrative inefficiency in estates.