Article VII
ARTICLE VII
TRUST ADMINISTRATION
PART 1
SITUS OF TRUSTS
COMMENT
Several considerations explain the presence in the Uniform Probate Code of procedures applicable to inter vivos and testamentary trusts. The most important is that the Court assumed by the Code is a full power court which appropriately may receive jurisdiction over trustees. Another is that personal representatives under Articles III and IV and conservators under Article V, have the status of trustees. It follows naturally that these fiduciaries and regular trustees should bear a similar relationship to the Court. Also, the general move of the Code away from the concept of supervisory jurisdiction over any fiduciary is compatible with the kinds of procedural provisions which are believed to be desirable for trustees.
The relevance of trust procedures to those relating to settlement of decedents’ estates is apparent in many situations. Many trusts are created by will. In a substantial number of states, statutes now extend probate court control over decedents’ estates to testamentary trustees, but the same procedures rarely apply to inter vivos trusts. For example, eleven states appear to require testamentary trustees to qualify and account in much the same manner as executors, though quite different requirements relate to trustees of inter vivos trusts in these same states. Twenty four states impose some form of mandatory court accountings on testamentary trustees, while only three seem to have comparable requirements for inter vivos trustees.
From an estate planning viewpoint, probate court supervision of testamentary trustees causes many problems. In some states, testamentary trusts cannot be released to be administered in another state. This requires complicated planning if inconvenience to interested persons is to be avoided when the beneficiaries move elsewhere. Also, some states preclude foreign trust companies from serving as trustees of local testamentary trusts without complying with onerous or prohibitive qualification requirements. Regular accountings in court have proved to be more expensive than useful in relation to the vast majority of trusts and sometimes have led to the ill advised use of legal life estates to avoid these burdens.
The various restrictions applicable to testamentary trusts have caused many planners to recommend use of revocable inter vivos trusts. The widely adopted Uniform Testamentary Addition to Trusts Act has accelerated this tendency by permitting testators to devise estates to trustees of previously established receptacle trusts which have and retain the characteristics of inter vivos trusts for purpose of procedural requirements.
The popularity of this legislation and the widespread use of pour over wills indicates rather vividly the obsolescence and irrelevance of statutes contemplating supervisory jurisdiction.
One of the problems with inter vivos and receptacle trusts at the present time, however, is that persons interested in these arrangements as trustees or beneficiaries frequently discover that there are no simple and efficient statutory or judicial remedies available to them to meet the special needs of the trust relationship. Proceedings in equity before courts of general jurisdiction are possible, of course, but the difficulties of obtaining jurisdiction over all interested persons on each occasion when a judicial order may be necessary or desirable are commonly formidable. A few states offer simplified procedures on a voluntary basis for inter vivos as well as testamentary trusts. In some of these, however, the legislation forces inter vivos trusts into unpopular patterns involving supervisory control. Nevertheless, it remains true of the legislation in most states that there is too little for inter vivos trusts and too much for trusts created by will.
Other developments suggest that enactment of useful, uniform legislation on trust procedures is a matter of considerable social importance. For one thing, accelerating mobility of persons and estates is steadily increasing the pressure on locally oriented property institutions. The drafting and technical problems created by lack of uniformity of trust procedures in the several states are quite serious. If people cannot obtain efficient trust service to preserve and direct wealth because of state property rules, they will turn in time to national arrangements that eliminate property law problems. A general shift away from local management of trusteed wealth and increased reliance on various contractual claims against national funds seems the most likely consequence if the local law of trusts remains nonuniform and provincial.
Modestly endowed persons who are turning to inter vivos trusts to avoid probate are of more immediate concern. Lawyers in all parts of the country are aware of the trend toward reliance on revocable trusts as total substitutes for wills which recent controversies about probate procedures have stimulated. There would be little need for concern about this development if it could be assumed also that the people involved are seeking and getting competent advice and fiduciary assistance. But there are indications that many people are neither seeking nor receiving adequate information about trusts they are using. Moreover, professional fiduciaries are often not available as trustees for small estates. Consequently, neither settlors nor trustees of “do it yourself” trusts have much idea of what they are getting into. As a result, there are corresponding dangers to beneficiaries who are frequently uninformed or baffled by formidable difficulties in obtaining relief or information.
Enactment of clear statutory procedures creating simple remedies for persons involved in trust problems will not prevent disappointment for many of these persons but should help minimize their losses.
Several objectives of the Code are suggested by the preceding discussion. They may be summarized as follows:
1. To eliminate procedural distinctions between testamentary and inter vivos trusts.
2. To strengthen the ability of owners to select trustees by eliminating formal qualification of trustees and restrictions on the place of administration.
3. To locate nonmandatory judicial proceedings for trustees and beneficiaries in a convenient court fully competent to handle all problems that may arise.
4. To facilitate judicial proceedings concerning trusts by comprehensive provisions for obtaining jurisdiction over interested persons by notice.
5. To eliminate routinely required court accountings, substituting clear remedies and statutory duties to inform beneficiaries.
PART 1
SITUS OF TRUSTS
Section 7 101. [Principal Place of Administration.]
A trust shall be subject to the jurisdiction of the court of this commonwealth for the county in which is located its principal place of administration. The principal place of administration of a testamentary trust shall be deemed to be the location of the court of this commonwealth in which the will creating the trust was granted informal or formal probate. Unless otherwise designated in the trust instrument, the principal place of administration of an inter vivos trust is the trustee’s usual place of business where the records pertaining to the trust are kept, or at the trustee’s residence if the trustee has no such place of business. In the case of co trustees, the principal place of administration, if not otherwise designated in the trust instrument, is (1) the usual place of business of the corporate trustee if there is but one corporate co trustee, or (2) the usual place of business or residence of the individual trustee who is a professional fiduciary if there is but one such person and no corporate co trustee, and otherwise (3) the usual place of business or residence of any of the co trustees as agreed upon by them.
COMMENT
The scope of this section and of Article VII is tied to the definition of “trustee” in Section 1 201. It was suggested that the definition should be expanded to include “land trusts.” It was concluded, however that the inclusion of this term which has special meaning principally in Illinois, should be left for decision by enacting states. Under the definition of “trust” in this Code, custodial arrangements as contemplated by legislation dealing with gifts to minors, are excluded, as are “trust accounts” as defined in Article VI.
MASSACHUSETTS COMMENT
Under present law, inter vivos trusts, whether revocable or irrevocable, are not required to be registered and testamentary trusts are administered subject to the supervision of that Division of the Probate and Family Court Department of the Trial Court which allowed the will to probate. It is appropriate to confer central jurisdiction over trusts but unnecessary to require registration of trusts, absent litigation or other court proceeding.
It is believed that most Massachusetts settlors place great value on privacy. Since the trustee has a duty to keep the beneficiaries informed, there is no need to register a trust. Furthermore, creating a registry for trusts would place an undesirable administrative burden on the Registries of Probate.
Section 7-102. [Reserved.]
Section 7 103. [Effect of Trusteeship.]
(a) By accepting the trusteeship of a trust, the trustee submits personally to the jurisdiction of the court in any proceeding under section 7 201 of this code relating to the trust that may be initiated by any interested person. Notice of any proceeding shall be delivered to the trustee, or mailed to the trustee by ordinary first class mail at the trustee’s address as reported to the court and to the trustee’s address as then known to the petitioner.
(b) To the extent of their interests in the trust, all beneficiaries of a trust administered in this commonwealth are subject to the jurisdiction of the court of this commonwealth for the county in which is located the principal place of administration of the trust, for the purposes of proceedings under section 7 201, provided notice is given pursuant to section 1 401.
COMMENT
This section provides for jurisdiction over the parties. Subject matter jurisdiction for proceedings involving trusts is described in Sections 7 201 and 7 202. The basic jurisdictional concept in Section 7 103 is that reflected in widely adopted long arm statutes, that a state may properly entertain proceedings when it is a reasonable forum under all the circumstances, provided adequate notice is given. Clearly the trustee can be deemed to consent to jurisdiction by virtue of holding office. This basis for consent jurisdiction is in addition to and not in lieu of other bases of jurisdiction. It also seems reasonable to require beneficiaries of an inter vivos trust to go to the seat of the trust when litigation has been initiated there concerning a trust in which they claim beneficial interests, much as the rights of shareholders of a corporation can be determined at a corporate seat. The settlor has indicated a principal place of administration by his selection of a trustee or otherwise, and it is reasonable to subject rights under the trust to the jurisdiction of the Court where the trust is properly administered. Although most cases will fit within traditional concepts of jurisdiction, this section goes beyond established doctrines of in personam or quasi in rem jurisdiction as regards a nonresident beneficiary’s interests in foreign land or chattels, but the National Conference believes the section affords due process and represents a worthwhile step forward in trust proceedings.
MASSACHUSETTS COMMENT
This section has been changed to conform with the revision of 7-101.
Section 7-104. [Reserved.]
Section 7 105. [Qualification of Foreign Trustee.]
A foreign corporate trustee is required to qualify as a foreign corporation doing business in this commonwealth if it maintains the principal place of administration of any trust within the commonwealth. A foreign co trustee is not required to qualify in this commonwealth solely because its co trustee maintains the principal place of administration in this commonwealth. Unless otherwise doing business in this commonwealth, local qualification by a foreign trustee, corporate or individual, is not required in order for the trustee to receive distribution from a local estate, to hold, invest in, manage or acquire property located in this commonwealth, or to maintain litigation. Nothing in this section affects a determination of what other acts require qualification as doing business in this commonwealth.
COMMENT
Section 7 105 deals with non resident trustees in a fashion which should correct a widespread deficiency in present regulation of trust activity. Provisions limiting business of foreign corporate trustees constitute an unnecessary limitation on the ability of a trustee to function away from its principal place of business. These restrictions properly relate more to continuous pursuit of general trust business by foreign corporations than to isolated instances of litigation and management of the assets of a particular trust. The ease of avoiding foreign corporation qualification statutes by the common use of local nominees or subtrustees, and the acceptance of these practices, are evidence of the futility and undesirability of more restrictive legislation of the sort commonly existing today. The position embodied in this section has been recommended by important segments of the banking and trust industry through a proposed model statute, and the failure to adopt this reform has been characterized as unfortunate by a leading trust authority. See 5 Scott on Trusts § 558 (3rd ed. 1967).
MASSACHUSETTS COMMENT
This changes present law. G.L. c. 203, §17A permits a foreign trustee to petition for a license to sell real estate in the commonwealth and to account to the appointing court for the proceeds. By contrast, G.L. c. 203, §10 requires a foreign trustee holding real estate in the commonwealth in trust for residents thereof to be appointed by its courts.
PART 2
JURISDICTION OF COURT CONCERNING TRUSTS
Section 7 201. [Court; Jurisdiction of Trusts.]
(a) The court has jurisdiction of proceedings initiated by interested parties concerning the internal affairs of testamentary and inter vivos trusts. Proceedings which may be maintained under this section are those concerning the administration and distribution of trusts, the declaration of rights and the determination of other matters involving trustees and beneficiaries of trusts. These include, but are not limited to, proceedings:
(1) to appoint or remove a trustee;
(2) to review trustees’ fees and to review and settle interim or final accounts; and
(3) to ascertain beneficiaries, to determine any question arising in the administration or distribution of any trust including questions of construction of trust instruments, to instruct trustees, to authorize the sale of real or personal property, to order the consolidation or the termination and distribution of uneconomic trusts, to authorize compromise of controversies affecting trusts under the procedure described in sections 3-1101 and 3-1102, and to determine the existence or nonexistence of any immunity, power, privilege, duty or right.
(b) Neither accepting trusteeship of a testamentary or inter vivos trust nor a proceeding under this section results in continuing supervisory proceedings. The management and distribution of a trust estate, submission of accounts and reports to beneficiaries, payment of trustee’s fees and other obligations of a trust, acceptance and change of trusteeship, and other aspects of the administration of a trust shall proceed expeditiously consistent with the terms of the trust, free of judicial intervention and without order, approval or other action of any court, subject to the jurisdiction of the court as invoked by interested parties or as otherwise exercised as provided by law.
COMMENT
Derived in small part from Florida Statutes, 1965, Chapters 737 and 87, and Title 20, Pa.Stat. §32080.101 et seq. (Purdon).
MASSACHUSETTS COMMENT
The Probate and Family Court Department of the Trial Court now has jurisdiction with the Superior Court and the single justice session of the Supreme Judicial Court over testamentary trusts. Litigation concerning inter vivos trusts may be commenced in the Probate and Family Court Department, in the Superior Court Department or in certain instances in the Supreme Judicial Court. Note that common trust funds are unaffected by this and the other sections of Article VII because they are excluded from the definition of trust in Section 1-201.
Section 7 202. [Trust Proceedings; Venue.]
Venue for proceedings under section 7 201 involving trusts in this commonwealth is in the principal place of administration of the trust, and otherwise by the rules of civil procedure.
Section 7 203. [Trust Proceedings; Dismissal of Matters Relating to Foreign Trusts.]
The court will not, over the objection of a party, entertain proceedings under Section 7 201 involving a trust registered or having its principal place of administration in another state, unless (1) when all appropriate parties could not be bound by litigation in the courts of the state where the trust is registered or has its principal place of administration or (2) when the interests of justice otherwise would seriously be impaired. The court may condition a stay or dismissal of a proceeding under this section on the consent of any party to jurisdiction of the state in which the trust is registered or has its principal place of business, or the court may grant a continuance or enter any other appropriate order.
COMMENT
While recognizing that trusts which are essentially foreign can be the subject of proceedings in this state, this section employs the concept of forum non conveniens to center litigation involving the trustee and beneficiaries at the principal place of administration of the trust but leaves open the possibility of suit elsewhere when necessary in the interests of justice. It is assumed that under this section a court would refuse to entertain litigation involving the foreign registered trust unless for jurisdictional or other reasons, such as the nature and location of the property or unusual interests of the parties, it is manifest that substantial injustice would result if the parties were referred to the court of registration. As regards litigation involving third parties, the trustee may sue and be sued as any owner and manager of property under the usually applicable rules of civil procedure and also as provided in Section 7 203.
The concepts of res judicata and full faith and credit applicable to any managing owner of property have generally been applicable to trustees. Consequently, litigation by trustees has not involved the artificial problems historically found when personal representatives maintain litigation away from the state of their appointment, and a prior adjudication for or against a trustee rendered in a foreign court having jurisdiction is viewed as conclusive and entitled to full faith and credit. Because of this, provisions changing the law, analogous to those relating to personal representatives in Section 4 401 do not appear necessary. See also Section 3 408. In light of the foregoing, the issue is essentially only one of forum non conveniens in having litigation proceed in the most appropriate forum. This is the function of this section.
Section 7 204. [Reserved]
MASSACHUSETTS COMMENT
The uniform act section which would expand the Court’s jurisdiction to include any litigation involving trusts, is not adopted.
Section 7 205. [Proceedings for Review of Employment of Agents and Review of Compensation of Trustee and Employees of Trust.]
On petition of an interested person, after notice to all interested persons, the court may review the propriety of employment of any person by a trustee including any attorney, auditor, investment advisor or other specialized agent or assistant, and the reasonableness of the compensation of any person so employed, and the reasonableness of the compensation determined by the trustee for the trustee’s own services. Any person who has received excessive compensation from a trust may be ordered to make appropriate refunds.
COMMENT
In view of the broad jurisdiction conferred on the probate court, description of the special proceeding authorized by this section might be unnecessary. But the Code’s theory that trustees may fix their own fees and those of their attorneys marks an important departure from much existing practice under which fees are determined by the Court in the first instance. Hence, it seems wise to emphasize that any interested person can get judicial review of fees if he desires it. Also, if excessive fees have been paid, this section provides a quick and efficient remedy. This review would meet in part the criticism of the broad powers given in the Uniform Trustees’ Powers Act.
MASSACHUSETTS COMMENT
Massachusetts has never had statutory fees and proceedings to establish fees have been rare. Thus the reasonableness of fees and expenses is usually raised only by a proceeding for allowance of accounts. It may be appropriate to bring these issues before the Court on a more timely basis, as provided here.
Section 7 206. [Trust Proceedings; Initiation by Notice; Necessary Parties.]
Proceedings under section 7 201 are initiated by filing a petition in the court and giving notice pursuant to section 1 401 to interested parties. The court may order notification of additional persons. A decree is valid as to all who are given notice of the proceeding though fewer than all interested parties are notified.
PART 3
DUTIES AND LIABILITIES OF TRUSTEES
Section 7 301. [General Duties Not Limited.]
Except as specifically provided, the general duty of the trustee to administer a trust expeditiously for the benefit of the beneficiaries is not altered by this code.
Section 7 302. [Reserved.]
COMMENT
The UPC general provision was designed to make clear the standard of skill expected from trustees, both individual and corporate, nonprofessional and professional. It read as follows:
Except as otherwise provided by the terms of the trust, the trustee shall observe the standards in dealing with the trust assets that would be observed by a prudent person dealing with the property of another, and if the trustee has special skills or is named trustee on the basis of representations of special skills or expertise, the trustee is under a duty to use those skills.
It differs somewhat from the standard stated in § 174 of the Restatement of Trusts, Second, which is as follows:
The trustee is under a duty to the beneficiary in administering the trust to exercise such care and skill as a man of ordinary prudence would exercise in dealing with his own property; and if the trustee has or procures his appointment as trustee by representing that he has greater skill than that of a reasonable man of ordinary prudence, he is under a duty to exercise such skill.
By making the basic standard align to that observed by a prudent man in dealing with the property of another, the section accepts a standard as it has been articulated in some decisions regarding the duty of a trustee concerning investments. See Estate of Cook, (Del.Chanc.1934) 20 Del. Ch. 123, 171 A. 730. Also, the duty as described by the above section more clearly conveys the idea that a trustee must comply with an external, rather than with a personal, standard of care.
MASSACHUSETTS COMMENT
The Prudent Man Rule setting forth trustee’s standards of care and performance has been extensively updated as the Prudent Investor Act and has been adopted in Massachusetts in 1998 as G.L. c. 203C.
Section 7 303. [Duty to Inform and Account to Beneficiaries.]
The trustee shall keep the donor of a revocable trust and the beneficiaries of an irrevocable trust reasonably informed of the trust and its administration. In addition, unless the trust is revocable:
(a) Within 30 days after his acceptance of the trust or the trust becomes irrevocable, whichever is later, the trustee shall inform in writing the current beneficiaries and if possible, one or more persons who under section 1 403 may represent beneficiaries with future interests, of the court having jurisdiction over the trust and of the trustee’s name and address. The information shall be delivered or sent by ordinary first class mail.
(b) Upon reasonable request, the trustee shall provide the beneficiary with a copy of the trust and with relevant information about the assets of the trust and the particulars relating to its administration.
(c) Upon reasonable request, a beneficiary is entitled to a statement of the accounts of the trust annually and on termination of the trust or change of the trustee.
COMMENT
Analogous provisions are found in Section 3 705.
This provision does not require regular accounting to the Court nor are copies of statements furnished beneficiaries required to be filed with the Court. The parties are expected to assume the usual ownership responsibility for their interests including their own record keeping. Under Section 1 108, the holder of a general power of appointment or of revocation can negate the trustee’s duties to any other person.
This section requires that a reasonable selection of beneficiaries is entitled to information so that the interests of the future beneficiaries may adequately be protected. After mandatory notification by the trustee to the beneficiaries, further information may be obtained by the beneficiary upon request. This is to avoid extensive mandatory formal accounts and yet provide the beneficiary with adequate protection and sources of information. In most instances, the trustee will provide beneficiaries with copies of annual tax returns or tax statements that must be filed. Usually this will be accompanied by a narrative explanation by the trustee. In the case of the charitable trust, notice need be given only to the attorney general or other state officer supervising charitable trusts and in the event that the charitable trust has, as its primary beneficiary, a charitable corporation or institution, notice should be given to that charitable corporation or institution. It is not contemplated that all of the individuals who may receive some benefit as a result of a charitable trust be informed.
MASSACHUSETTS COMMENT
Under present law a Massachusetts testamentary trustee is required to account to the Court periodically but not directly to the beneficiaries. Massachusetts has not adopted the Uniform Principles and Model Account Formats.
Section 7 304. [Duty to Provide Bond.]
In the case of a testamentary trust, a trustee shall furnish a bond for the performance of the trustee’s fiduciary duties and a surety shall be required unless waived by the terms of the trust, or found by the court not to be necessary to protect the interests of the beneficiaries. On petition of the trustee or other interested person the court may excuse a requirement of bond, reduce the amount of the bond, release the surety, or permit the substitution of another bond with the same or different sureties. When the instrument creating the trust exempts the trustee from furnishing a bond or limits the amount thereof, or the court determines that the bond is insufficient, the court may if it concludes that a bond be necessary or that a bond of a larger amount is necessary, require the furnishing of such bond.
COMMENT
See Sections 3 603 and 3 604; 60 Okla.Stats.1961, § 175.24 [60 Okl.St.Ann. § 175.24]; Pa.Fid. Act, 1949, § 390.911(b) [20 Pa.Stat. § 390.911(b) (Purdon)]; cf. Tenn.Code Ann. § 35 113.
Section 7 305. [Trustee's Duties; Appropriate Place of Administration; Deviation.]
A trustee is under a continuing duty to administer the trust at a place appropriate to the purposes of the trust and to its sound, efficient management. If the principal place of administration becomes inappropriate for any reason, the court may enter any order furthering efficient administration and the interests of beneficiaries, including, if appropriate, removal of the trustee and appointment of a trustee in another state or country. Trust provisions relating to the place of administration and to changes in the place of administration or of trustee control unless compliance would be contrary to efficient administration or the purposes of the trust. Views of adult beneficiaries shall be given weight in determining the suitability of the trustee and the place of administration.
COMMENT
The primary thrust of Article VII is to relate trust administration to the jurisdiction of courts, rather than to deal with substantive matters of trust law. An aspect of deviation, however, is touched here.
Section 7 306. [Personal Liability of Trustee to Third Parties.]
(a) Unless otherwise provided in the contract, a trustee is not personally liable on contracts properly entered into in the trustee’s fiduciary capacity in the course of administration of the trust estate unless the trustee fails to reveal his representative capacity and identify the trust estate in the contract.
(b) A trustee is not personally liable unless the trustee is personally at fault for either (i) obligations arising from ownership or control of property of the trust estate, or (ii) torts committed in the course of administration of the trust estate.
(c) Claims based on contracts entered into by a trustee in the trustee’s fiduciary capacity, on obligations arising from ownership or control of the trust estate, or on torts committed in the course of trust administration may be asserted against the trust estate by proceeding against the trustee in a fiduciary capacity, whether or not the trustee is personally liable therefor.
(d) The question of liability as between the trust estate and the trustee individually may be determined in a proceeding for accounting, surcharge or indemnification or other appropriate proceeding.
COMMENT
The purpose of this section is to make the liability of the trust and trustee the same as that of the decedent’s estate and personal representative.
Ultimate liability as between the estate and the fiduciary need not necessarily be determined whenever there is doubt about this question. It should be permissible, and often it will be preferable, for judgment to be entered, for example, against the trustee individually for purposes of determining the claimant’s rights without the trustee placing that matter into controversy. The question of his right of reimbursement may be settled informally with beneficiaries or in a separate proceeding in the probate court involving reimbursement. The section does not preclude the possibility, however, that beneficiaries might be permitted to intervene in litigation between the trustee and a claimant and that all questions might be resolved in that action.
MASSACHUSETTS COMMENT
This does not change present law. However, paragraph (b) has been modified to negate the unfortunate statutory construction contained in footnote 3 to Apahouser Lock & Security Corp. v. Carvelli, 26 Mass. App. Ct. 385 (1988).
Section 7 307. [Limitations on Proceedings Against Trustees After Final Account.]
Unless previously barred by adjudication, consent or limitation, any claim against a trustee for breach of trust is barred as to any beneficiary who has received a final account or other statement fully disclosing the matter and showing termination of the trust relationship between the trustee and the beneficiary unless a proceeding to assert the claim is commenced within 6 months after receipt of the final account or statement. In any event and notwithstanding lack of full disclosure a trustee who has issued a final account or statement received by the beneficiary and has informed the beneficiary of the location and availability of records for examination by the beneficiary is protected after 3 years. A beneficiary is deemed to have received a final account or statement if, being an adult, it is received by the beneficiary personally or if, being a minor or disabled person, it is received by the beneficiary’s representative as described in section 1 403(1) and (2).
COMMENT
Final accounts terminating the trustee’s obligations to the trust beneficiaries may be formal or informal. Formal judicial accountings may be initiated by the petition of any trustee or beneficiary. Informal accounts may be conclusive by consent or by limitation. This section provides a special limitation supporting informal accounts. With regard to facilitating distribution see Section 5 103.
Section 1 108 makes approval of an informal account or settlement with a trustee by the holder of a presently exercisable general power of appointment binding on all beneficiaries. In addition, the equitable principles of estoppel and laches, as well as general statutes of limitation, will apply in many cases to terminate trust liabilities.
MASSACHUSETTS COMMENT
Under present law only a court proceeding can discharge the trustee of a testamentary trust. Inter vivos trusts often contain provisions for non-judicial accountings, but in the absence of a proceeding their finality may be questioned. The Code permits informal accounting but an interim account would not bar further claims, except as to any trustee for whom it is the final account.
For limitations on claims against trustees by creditors of a deceased person see Section 3-803(b) which preserves G.L. c. 197, § 9(c).
Section 7-308. [Resignation or Removal of Trustee; Appointment to Fill Vacancy.]
(a) A trustee may resign the office or be removed as provided by the terms of the will or other instrument creating the trust. Any vacancy caused by such resignation, removal or otherwise may be filled as so provided.
(b) A trustee may resign the office by filing a written statement of resignation with a petition for permission to resign with the court having jurisdiction of the trust.
(c) A trustee or any person interested in a trust may at any time petition for removal of a trustee on the ground that removal would be in the best interest of the beneficiaries of the trust or for cause. Cause for removal exists if it is shown that the trustee has disregarded an order of the court, has become incapacitated or otherwise incapable of discharging the duties of the office, or has mismanaged the property or failed to perform any duty pertaining to the office.
(d) A trustee or any person interested in a trust may at any time petition for the appointment of a trustee to fill a vacancy which is not filled as provided by the terms of the will or other instrument creating the trust.
(e) Upon filing of the petition, the court shall fix a time and place for hearing. Notice shall be given by the petitioner to the trustees, the beneficiaries and to other persons as the court may order. After notice and hearing, the court may terminate the appointment of a trustee by ordering removal or by accepting the resignation and, if the petition contains a prayer therefor, may appoint a successor trustee to fill the vacancy caused by such resignation, removal or otherwise.
MASSACHUSETTS COMMENT
This section is based upon Section 3-610 and G.L. c. 203, §12.
Section 7-309. [Petition for Transfer of Trust Property Whose Disposition Depends Upon the Death of an Absentee.]
(a) If a trustee holds trust property the disposition of which depends upon the death of an absentee whose death has not been determined under paragraph (1), (2) or (3) of section 1-107, on or after the day five years after the date of the absentee’s disappearance the trustee, or any person who would be interested in the trust property were the absentee dead, may petition the court having jurisdiction of the trust for an order that the trust property be disposed of to the persons to whom and in the shares or proportions in which it would be distributed under the provisions of the trust if the absentee had died on that day.
(b) The court may direct the petitioner to report the results of, or make and report back concerning, a reasonably diligent search for the absentee in any manner that may seem advisable, including any or all of the following methods:
(1) by inserting in one or more suitable periodicals a notice requesting information from any person having knowledge of the whereabouts of the absentee;
(2) by notifying law enforceable officials, public welfare agencies and registers of deaths in appropriate locations of the disappearance of the absentee;
(3) by engaging the services of an investigator.
The costs of any search so directed shall be paid from the trust property.
(c) After any such report directed by the court under paragraph (b) above has been completed to the satisfaction of the court, notice of the hearing on the petition shall be given as provided in section 1-401.
(d) If after the hearing the court finds that the facts warrant a presumption of death under paragraph (4) of section 1-107, it shall enter an appropriate order of disposition of the trust property and any undistributed net income.
MASSACHUSETTS COMMENT
This section is added as a replacement for G.L. c. 203, §§ 26 through 39. See also Section 3-914 for similar language applying to estates.
Section 7-310. [Receipts of Trustees.]
The receipt of a trustee, or of any one or more of several trustees, for any money, securities or other personal property or effects payable, transferable or deliverable to him or them under any trust or power shall be a sufficient discharge therefor to the person paying, transferring or delivering it, and no such person shall be bound to see to the application thereof.
MASSACHUSETTS COMMENT
This section adopts G.L. c. 203, § 20.
Section 7-311. [Duties of Purchasers.]
A company or corporation, public or private, or quasi corporation, or unincorporated association, or the managers of any trust, or any transfer agent, registrar or other agent of such company, corporation, quasi corporation, unincorporated association or managers, shall not be bound to see to the execution of any trust, express, implied or constructive, to which any of its shares, bonds or securities are subject, or to ascertain or inquire whether the trust authorizes a transfer thereof by the holder, but this section shall not be a protection against liability for participating with actual knowledge in a breach of trust, and the fact that the trust is of record shall not constitute such actual knowledge.
MASSACHUSETTS COMMENT
This section adopts G.L. c. 203, § 21.
PART 4
POWERS OF FIDUCIARY
Section 7-401. [Powers of Fiduciary.]
Except as restricted or otherwise provided by the will, deed or other instrument creating a trust or by an order in a formal proceeding, a trustee acting reasonably for the benefit of the interested persons may, without court authorization or confirmation, properly:
(1) hold and retain property of the trust including land in another state, until judging that disposition of the property should be made, and the property may be retained even though it includes property in which the trustee is personally interested;
(2) receive additions to the trust from fiduciaries or other sources;
(3) continue or participate in the operation of any business or other enterprise;
(4) acquire an undivided interest in property in which the trustee, in any fiduciary capacity, holds an undivided interest;
(5) invest and reinvest principal and income in any property the trustee determines, and without limiting the generality of the foregoing, invest in (i) shares of an investment company or in shares or undivided portions of any common trust fund established by the trustee and (ii) policies of life or endowment insurance or annuity contracts on the life of any beneficiary of the trust or of any person in whose life such beneficiary has an insurable interest;
(6) deposit trust funds in a state or federally insured financial institution, including one operated by the trustee;
(7) acquire or dispose of property, including land in another state, for cash or on credit, at public or private sale, and manage, develop, improve, exchange, partition, change the character of, abandon or demolish property;
(8) make ordinary or extraordinary repairs or alterations in buildings or other structures; demolish any improvements; and raze existing or erect new party walls or buildings;
(9) subdivide, develop, or dedicate land to public use; adjust boundaries; adjust differences in valuation on exchange or partition by giving or receiving considerations; and dedicate easements to public use without consideration;
(10) enter for any purpose into a lease as lessor or lessee, with or without option to purchase or renew, for a term within or extending beyond the term of the trust;
(11) enter into a lease or arrangement for exploration and removal of minerals or other natural resources or enter into a pooling or unitization agreement;
(12) grant an option involving disposition of an estate asset and take an option for the acquisition of any asset;
(13) vote a security, in person or by general or limited proxy;
(14) pay calls, assessments, and any other sums chargeable or accruing against or on account of securities;
(15) sell or exercise stock subscription or conversion rights;
(16) consent, directly or through a committee or other agent, to the reorganization, consolidation, merger, dissolution, or liquidation of a corporation or other business enterprise;
(17) hold uncertificated securities as more fully provided in section 14B of chapter two hundred and three;
(18) insure the property of the trust against damage or loss and the trustee against liability with respect to third persons;
(19) borrow money with or without security to be repaid from the trust property or otherwise and in connection therewith mortgage or otherwise encumber any property on any conditions the trustee determines even if the term of the loan may extend beyond the term of the trust;
(20) pay or contest any claim; settle a claim by or against the trust or its property by compromise, arbitration, or otherwise; and release, in whole or in part, any claim belonging to the trust to the extent the claim is uncollectible;
(21) pay taxes, assessments, compensation of the trustee, and other expenses incurred in the collection, care, administration, and protection of the estate;
(22) allocate items of income or expense to either income or principal, as permitted or provided by law, including creation of reserves out of income for depreciation, obsolescence, or amortization, or for depletion in mineral or timber properties;
(23) allot in or towards satisfaction of any payment, distribution, or division, in any manner the trustee determines, any property at its then current fair market value;
(24) hold trusts and shares undivided or at any time hold them or any of them set apart one from another;
(25) pay any sum distributable to a beneficiary by paying the sum to the beneficiary or by paying the sum for the use of the beneficiary to the guardian, conservator or custodian of the beneficiary or, if none, to a relative or other person having custody of the beneficiary;
(26) employ persons, including attorneys, auditors, investment advisors, or agents, even though they are associated with the trustee, to advise or assist in the performance of administrative duties; act upon their recommendation without independent investigation, and instead of acting personally, employ agents to perform any act of administration, whether or not discretionary;
(27) prosecute or defend actions, claims, or proceedings in any jurisdiction for the protection of trust property and of the trustee in the performance of fiduciary duties; and
(28) execute and deliver all instruments that will accomplish or facilitate the exercise of the powers vested in the trustee.
MASSACHUSETTS COMMENT
The bulk of this section was drafted by editing Section 5-423 [Powers of Conservator in Administration]. The powers provision of the Uniform Statutory Will Act, G.L. c. 191B, §13, is the source of paragraphs (19), (23) and (24) and the provisions of paragraph (26) allowing the delegation of discretionary powers by the trustee. Each of these sources appears to have been based upon the Uniform Trustee Powers Act. G.L. c. 203, §25A is the source of clause (ii) of paragraph (5).
PART 5
STATUTORY CUSTODIANSHIP TRUSTS
MASSACHUSETTS COMMENT
This part preserves, with minor conforming changes, the provisions of G.L. c. 201C. It is not part of the Uniform Probate Code.
Section 7-501. [Transfer of Property; Statutory Custodianship Trustee; Revocability.]
An adult person may, during his or her lifetime, transfer any property owned by him or her, in any manner otherwise consistent with law, to one or more named persons designated, in substance, as a “statutory custodianship trustee”. Such transfer shall be sufficient to create a trust upon the terms set forth in this part 5 as it is in effect at the date of the transfer without any further trust instrument or designation of terms and without appointment or qualification by any court, and shall be complete upon acceptance of the trust by the trustee or trustees manifested in any form. The trustee or trustees shall serve without giving bond or surety unless the transferor by written instrument, or the court upon the application of any person interested in the estate of the transferor and upon good cause shown, shall provide for a bond. All transfers in trust under this part 5 shall be revocable by the transferor at any time the transferor has legal capacity by a writing signed by the transferor and delivered to the person, or if more than one to any person serving as trustee.
Section 7-502. [Application of Income and Principal; Accounting by Trustee.]
During the life of the transferor the trustee or trustees shall apply the income and principal, by payment to the transferor or by direct expenditure, as may be necessary for the comfortable and suitable maintenance and support of the transferor and the transferor’s family in accordance with the principles applicable to a conservator. Upon the death of the transferor the remaining property shall be delivered and paid over to the estate of the transferor. With respect to the property in the trust, except as modified in the instrument of transfer, the trustee or trustees shall have the fiduciary powers provided in section 7-401, and such additional rights and powers as the transferor may provide by written instrument. The trustee or trustees shall account at least annually to the transferor or to the transferor’s guardian or conservator, if any, and after the death of the transferor to the transferor’s personal representative. In the event of the incompetency of the transferor the trustee or trustees may apply to the court in the same manner as a guardian or conservator for authority to deal with property held in trust in any manner in which the court might authorize a guardian or conservator to deal with property of the transferor.
Section 7-503. [Resignation or Removal of Trustee; Appointment to Fill Vacancy]
A trustee may resign by an instrument in writing delivered to the transferor or to the transferor’s guardian or conservator, if any. A trustee may be removed by the transferor by an instrument in writing delivered to such trustee. If there is more one person serving as trustee, a vacancy need not be filled, and until a successor is appointed the remaining trustee or trustees may act alone. In the event of a vacancy a successor may be appointed by the transferor, if legally competent, or as the transferor shall have provided by a written instrument, and otherwise by the transferor’s guardian or conservator, if any, and if none, by the transferor’s heirs presumptive, and such appointment shall become effective upon acceptance.
12/2008