Uniform Trust Code effective in NJ
The
governor signed the NJSBA-drafted Uniform Trust Code into law. The law became effective on July 17.
This bill, as amended, titled the “Uniform Trust Code,” would supplement
and revise the State’s existing laws concerning trusts. The bill is largely
based upon model legislation prepared by the Uniform Law Commission (formerly
the National Conference of Commissioners on Uniform State Laws), with some
parts modified or altogether not included in order to better fit within New
Jersey’s existing scheme on trust law. Most significantly, the model code
contained two articles which have not been included in this bill: Article 2
concerning the jurisdiction of the court, as these matters are controlled by
court rule and not statutory law; and Article 9 concerning prudent investor
standards, as such standards are already part of the statutory law in this
State, known as the “Prudent Investor Act,” P.L.1997, c.26 (C.3B:20-11.1 et
seq.).
A-2915/S-2035 (Lagana, McKeon, Ciattarelli/Bateman, Barnes) - "Uniform
Trust Code"
ARTICLE 1 (3B:31-1 THROUGH 3B:31-12): This article
provides the definitions and general provisions to be used throughout the bill,
which would largely comprise a new chapter in Title 3B of the New Jersey
Statutes. Among the provisions of general applicability are those detailing
mandatory requirements for the creation and operation of trusts that cannot be
modified or eliminated by the agreed upon terms of a trust; these would include
the duty of a trustee to act in good faith, the rights of certain creditors and
assignees to reach a beneficiary’s trust interest, and the periods of
limitation for commencing judicial proceedings. The article also covers the
means for determining which jurisdiction’s law governs a trust, as well as
determining the location of a trust’s principal place of administration.
Additionally, the article would permit the nonjudicial settlement of a
trustee’s accounts and other matters related to trust administration, so long
as any such settlement does not produce a result contrary to what is allowed in
trust law, including, but not limited to, the modification or termination of a
trust in an impermissible manner.
ARTICLE 2 (3B:31-13 THROUGH 3B:31-17). Article 2
sets out guidelines with regard to the representation of a trust in a
transaction or proceeding. Representation may be provided by the holder
of general testamentary power of appointment, by a fiduciary or a parent,
or by virtual representation. Virtual representation allows a minor,
incapacitated person, unborn individual, or a person whose identity or location
is unknown to be represented by another having a substantially identical interest
concerning a particular question or dispute. If a court determines that an
interest is not represented or that available representation might not be
adequate, the court may appoint a guardian ad litem or other representative for
a minor, incapacitated person, unborn individual, or person whose identity or
location is unknown.
ARTICLE 3 (3B:31-18 THROUGH 3B:31-34). This article
details the methods and requirements for the creation, modification, and
termination of a trust.
The methods to create a trust would be: (1) the transfer of property to a
trustee under a written instrument during the life of a settlor (a person who
creates or contributes property to a trust), or by will or disposition upon the
settlor’s death; (2) a written declaration by the owner of property that the
owner holds identifiable property as trustee; or (3) a written power of
appointment in favor of a trustee. A trust would only be created if there is a
definite beneficiary for the trust, or the trust is a charitable trust, a trust
for the care of an animal, or a trust for a noncharitable purpose. The written
instrument creating a trust or transferring property to a trust would not be
invalid or ineffective because the transferee is identified as the trust rather
than the trustee thereof.
A trust may generally be enforced if its purposes are lawful, not contrary
to public policy, and possible to achieve. Any trust, to the extent its
creation was induced by fraud, duress, or undue influence, would be void to
such extent.
As to the modification and termination of a trust, the article sets forth
the means by which a trustee or beneficiary may commence proceedings to approve
or disapprove a proposed trust modification or termination. Additionally, a
trust is subject to termination to the extent it is revoked or expires pursuant
to its own terms, no purpose of the trust remains to be achieved, or the
purposes of the trust have become unlawful, contrary to public policy, or
impossible to achieve.
A trustee for a trust consisting of property valued at less than $100,000
may, after notice to qualified beneficiaries, terminate the trust if that
trustee concludes that the value of the trust property is insufficient to
justify the costs of administration.
A court may modify the administrative or dispositive terms of a trust or
terminate the trust if, because of circumstances not anticipated by the
settlor, modification or termination would further the purposes of the trust.
To the extent practicable, any such modification should be made in accordance with
the settlor’s probable intent. The court may also reform a trust, even if
unambiguous, to conform the terms to the settlor’s probable intent if it is
proved by clear and convincing
evidence that there was a mistake of fact or law, whether in expression or
inducement.
Provisions in the article further provide that the court may modify the
terms of a trust to achieve a settlor’s tax objectives, so long as done in a
manner that is not contrary to the settlor’s probable intent.
ARTICLE 4 (3B:31-35 THROUGH 3B:31-41). This article
establishes guidelines concerning creditor’s claims, and spendthrift and
discretionary trusts.
A spendthrift provision restricts a beneficiary’s creditor from attaching
the beneficiary’s interest in the trust until there is a distribution to the
beneficiary. A spendthrift provision is created by a reference to a
“spendthrift trust,” or words of similar import, in the trust instrument, that
would restrain both voluntary and involuntary transfer of the beneficiary’s
trust interest.
If there is no spendthrift provision in a trust, a creditor may reach a
beneficiary’s interest by attachment of future or present distributions before
the trust is distributed, subject to New Jersey law concerning wage executions
(N.J.S.2A:17-50 through N.J.S.2A:17-56, and sections 3 and 4 of P.L.1981, c.
203 (C.2A:17-56.1a and C.2A:17- 56.6)).
The article also addresses a type of trust for the young, the elderly, or
the disabled, known as a “special needs trust,” or “OBRA ’93” trust. Such a
trust would limit distributions during the term of the trust to benefit one or
more “protected persons,” such as a person who is aged, blind, disabled,
developmentally disabled, or a person under the age of 18, or over the age of
18 and a full-time student, with a serious disability that may prevent
self-sufficiency.
A creditor could not reach or attach an interest in a special needs trust,
nor require the trustee to distribute to satisfy a creditor’s claim. A special
needs trust would not be required to repay government aid provided to the
protected person unless the aid was provided on the basis that the trust would
repay the aid when the person dies, the trust is terminated, and the special
needs trust instrument expressly calls for such repayment. This provision would
not apply to first-party, self- settled OBRA’93 trusts.
Also, a creditor may not compel a trustee to make a distribution to a
beneficiary that is discretionary.
Regardless of any spendthrift provision in a trust, the property of a
revocable trust is subject to claims by a settlor’s creditor during the
settlor’s lifetime. With respect to an irrevocable trust, a creditor (or
assignee of the settlor) may obtain the maximum amount available that can be
distributed to or for the settlor’s benefit. After the settlor’s death, and
subject to the settlor’s right to direct the source from which liabilities are
paid, the property of a trust revocable at the settlor’s death is subject to
creditor claims, cost of administration of the settlor’s estate, the expenses
of the settlor’s funeral and disposal of remains, and to a surviving spouse or
civil union partner and children to the extent the settlor’s probate estate is inadequate to satisfy those
claims, costs, and expenses.
ARTICLE 5 (3B:31-42 THROUGH 31-45). This article
addresses the use of revocable trusts as alternatives to wills and seeks to
clarify certain issues in connection with the use of revocable trusts. A
revocable trust is one in which the settlor retains the power to control,
amend, revoke, or add property to the trust similar to a will. The article sets
forth the circumstances in which a settlor, a settlor’s attorney in fact, or
guardian may revoke or amend a revocable trust. A trust is revocable unless the
terms of a trust expressly provide that it is irrevocable, or unless there is
clear and convincing evidence that it is irrevocable. The trustee of a
revocable trust is responsible only to the settlor of the trust. The article
establishes time limits on contesting the validity of a revocable trust after
the death of the settlor, which generally conform to the time limits for
contesting the probate of a will. The bill also protects a trustee who makes
distributions from the trust after the settlor’s death, unless the trustee
knows of a pending or possible contest concerning the validity of the trust.
ARTICLE 6 (3B:31-46 THROUGH 3B:31-53). This article
provides a series of default rules concerning the office of trustee, many of
which are already established in chapters 11, 14 and 18 of Title 3B of the New
Jersey Statutes, New Jersey Rules of Court, and New Jersey case law. Except for
the court’s authority to issue letters of testamentary trusteeship and to order
bond, all of the provisions of Article 6 are subject to modification by the
express terms of the governing trust instrument.
The article addresses the process of qualifying a trustee, including
procedures for accepting or declining the office of trustee and bonding the
trustee. It also establishes the duties and responsibilities between or among
co-trustees, and provides standards for addressing various issues that may
arise with co-trustees. For example, provisions would permit co-trustees to act
by majority action and specify how and what happens when one of several
trustees dissents from a course of action, as well as the extent to which the
others must act when one is unable or has properly delegated performance of a
function.
The article addresses changes in the office of trustee including: when and
how a vacancy is filled, the procedure for resignation, grounds for removal,
and the duties and obligations of a resigning or removed trustee. The settlor,
a co-trustee, a beneficiary or the court on its own initiative may request that
a trustee be removed on grounds as set forth in N.J.S.3B:14-21 (such as failing
to file an inventory, render an account, refusal to abide by a court order,
embezzlement, or neglect, refusal, or inability to perform trustee duties).
The article also prescribes standards for reimbursement for expenses
advanced by the trustee. Since the matter of trustee compensation is addressed
comprehensively in chapter 18 of Title 3B
of the New Jersey Statutes, the provision in the Uniform Trust Code
concerning trustee compensation has not been included in the bill.
ARTICLE 7 (3B:31-54 THROUGH 3B:31-70). This article
sets forth the basic duties and powers of trustees. The basic duty is the duty
of loyalty which requires a trustee to manage the trust solely in the best
interests of the beneficiaries and to avoid conflicts of interest between the
interests of a trustee and that of a beneficiary. The other duties include the
duty of impartiality, the obligation of prudent administration, the obligation
to incur only reasonable costs, and the obligation to apply the trustee’s
special skills when there is reliance on those skills in the naming of the
trustee. A trustee may delegate certain duties and powers, but is held to a
prudent standard of appointment in so doing. The agent of any such delegation
is held to the fiduciary standard of the trustee in the exercise of the
trustee’s delegated duties and powers.
With regard to the trustee’s duty to disclose and make reports, provisions
require the trustee to keep qualified beneficiaries reasonably informed about
the administration of the trust and of the material facts necessary for them to
protect their interests.
The article also includes a section, not included in the model legislation,
concerning the powers of fiduciaries to direct investment decisions for a
trust. When a governing instrument gives authority to one or more persons to
direct, consent to, or disapprove a fiduciary's actual or proposed investment
decisions, such persons would be considered to be investment advisers and
fiduciaries when exercising such authority unless the governing instrument
otherwise provides.
The section provides that if a governing instrument states that the
fiduciary is to follow the direction of an investment adviser, and the fiduciary acts in accordance with such a
direction, then except in cases of willful misconduct or gross negligence, the
fiduciary would not be liable for any loss resulting directly or indirectly
from any such act. Except to the extent that the governing instrument provides
otherwise, the fiduciary, acting under the instrument to follow the investment
adviser’s direction, would have no duty to: (1) monitor the conduct of the
investment adviser; (2) provide advice to the investment adviser or consult
with the investment adviser; or (3) communicate with or warn or apprise any
beneficiary or third party concerning instances in which the fiduciary would or
might have exercised the fiduciary's own discretion in a manner different from
the manner directed by the investment adviser.
If the governing instrument provides that a fiduciary is to make decisions with the consent of an investment adviser, then except in cases of willful misconduct or gross
negligence on the part of the fiduciary, the fiduciary would not be liable for
any loss resulting directly or indirectly from any act taken or omitted as a
result of such investment adviser's failure to provide such consent after
having been requested to do so by the fiduciary.
Absent clear and convincing evidence to the contrary, the actions of the
fiduciary pertaining to matters within the scope of the investment adviser's
authority, such as confirming that the investment adviser's directions have
been carried out and recording and reporting actions taken at the investment
adviser's direction, would be presumed to be administrative actions taken by
the fiduciary solely to allow the fiduciary to perform those duties assigned to
the fiduciary under the governing instrument. Such administrative actions would
not be deemed to constitute an undertaking by the fiduciary to monitor the
investment adviser or otherwise participate in actions within the scope of the
investment adviser's authority.
ARTICLE 8 (3B:31-71 THROUGH 3B:31-81). This article
addresses the liability of a trustee and the rights of persons dealing with the
trustee. It provides for remedies when there is a breach of an obligation by
the trustee and specifies how money damages are to be determined. It also
specifies certain trustee defenses, including the addition of a statute of
limitations for claims alleging breach of trust. Generally, a beneficiary could
not commence a proceeding for breach of trust against a trustee more than six
months after the date the beneficiary (or beneficiary’s representative)
received a report disclosing the existence of a potential claim. If such a
report was not applicable to a potential claim, the claim would have to be
filed within five years of the following first-occurring event: (1) the
removal, resignation, or death of the trustee; (2) the termination of the
beneficiary’s interest in the trust; or (3) the termination of the trust.
However, the foregoing would not bar any proceeding by a beneficiary until five
years after such beneficiary has attained majority, has knowledge of the
existence of the trust and has knowledge that such beneficiary is or was a
beneficiary of the trust, if these factors were applicable to the beneficiary’s
situation.
ARTICLE 9 (3B:31-82 THROUGH 3B:31-84). Miscellaneous
administrative provisions are addressed in this final article, such as
clarifying the status of the proposed code’s provisions under the federal
statutory law regarding electronic records and signatures. The article also
provides a severability clause so that if any provision of the code is held
invalid, the invalidity does not affect other provisions of the code.
The provisions of the code, as stated in this article, would apply to
trusts created before, on, or after the effective date of the bill.
ADDITIONAL SECTIONS
In addition to the new supplemental chapter, described above, the bill
amends existing law, at N.J.S.3B:14-37, clarifying that a person, other than a
beneficiary, who in good faith assists a fiduciary or deals with the fiduciary
for value is protected as if the fiduciary properly exercised his power. A
similar provision would be added to the section concerning a person who in good
faith assists a former trustee,
without knowledge that the trusteeship was terminated, to protect that
person from liability as if the former trustee were still a trustee.
Lastly, the bill repeals four sections of existing law that are unnecessary
or are inconsistent with the bill’s provisions: N.J.S.3B:11- 5 (trustee’s death
or failure to act; appointment of new trustee by court; powers); N.J.S.3B:11-6
(vacancy in trusteeship upon discharge or removal); N.J.S.3B:11-7 (power of
new, substituted or additional trustees); and section 1 of P.L.2001, c.144
(C.3B:11-38) (trust funds for pets).
The bill, as amended and reported by the committee, is identical to
Assembly Bill No. 2915 (1R), also amended and reported today by the committee.
The committee amendments to the bill:
- add a definition for “beneficiary,” to specify that the term
includes persons: who have any
present or future trust interest, vested or contingent; who, in a capacity
other than that of a trustee, hold appointment power over trust property; who
are owners in a trust interest by assignment or other transfer; or who, relating
to a charitable trust only, are entitled to enforce the trust;
- expand the definition of “trustee” set forth in existing law to
include a corporate entity in its capacity as a trustee or co- trustee where
two or more are appointed;
- provide that a nonjudicial settlement of a trust matter cannot be
used to produce results contrary to the statutory trust law, including, but not
limited to, attempts to terminate or modify a trust in an impermissible manner;
- indicate that a settlor may not represent and bind a beneficiary
with respect to the termination or modification of a noncharitable irrevocable
trust;
- clarify that a trustee’s power to select a beneficiary from an
indefinite class is not void pursuant to section 14 of P.L.1999, c.159
(C.46:2F-10), which repealed the Uniform Statutory Rule Against Perpetuities, or any other applicable
rule against perpetuities or restraint on alienation;
- eliminate a provision which would have allowed a settlor general
authority to bring a proceeding to approve or disapprove a proposed
modification or termination of a trust; instead, a settlor may only act to
modify a charitable trust;
- provide that a noncharitable irrevocable trust may be modified or
terminated upon consent of the trustee, not the settlor as originally provided
in the underlying bill;
- add, regarding a trust spendthrift provision, that such a provision
does not prevent the appointment of interests through the exercise of a power
of appointment;
- grant, to a trustee of a special needs trust, broad discretion to
make trust distributions, and require that such a trust have at least one
protected person as a beneficiary;
- remove language concerning creditor claims on an irrevocable trust,
so that assets of such a trust may still be subject to a creditor’s claim even
when a trustee’s authority to pay taxing authorities directly, or reimburse the
settlor for trust income tax payable by the settlor, is solely discretionary;
- add a new section, to be allocated within the proposed new chapter
on trusts in Title 3B, concerning the investment functions of fiduciaries, as
described in the statement above;
- require that a trustee keep qualified beneficiaries reasonably
informed about the administration of a trust and of the material facts
necessary for them to protect their interests;
- provide that the provisions establishing a general five-year
statute of limitations on actions against a trustee would not bar a proceeding
by a beneficiary until five years after such beneficiary has attained majority,
has knowledge of the existence of the trust and has knowledge that such
beneficiary is or was a beneficiary of the trust, if these factors were
applicable to the beneficiary’s situation;
- include references throughout the bill to “partner in a civil
union” whenever only the term “spouse” appears, to reflect the equal status
between marriages and civil unions per the provisions of P.L.2006, c.103
(C.37:1-28 et al.), which established civil unions in this State; and
- correct references to the term “co-trustee,” as well as correct and
update internal cross-references and external references to existing trust law
and other relevant applicable law.
The Bill sponsors wrote:
This bill would supplement and revise the State’s existing laws concerning trusts. In 2000, the National Conference of Commissioners on Uniform State Laws (now known as the Uniform Law Commission) promulgated the first national codification of the law of trusts: the Uniform Trust Code. The purpose of the code is to provide states with a model uniform trust act that would allow for precise, comprehensive, and easily accessible guidance on trust law questions. Most of the provisions of the model act, which has been revised by the commission several times, are default rules that apply only if the terms of the trust instrument fail to address or insufficiently cover a particular issue. The model act also includes several innovative provisions, which have been incorporated into this bill, including: specification of the rules of trust that are not subject to override in the trust’s terms, comprehensive rules on representation of beneficiaries, rules on trust modification and termination that will enhance flexibility, and the inclusion of an article collecting the special rules pertaining to revocable trusts. While this bill is modeled on the commission’s Uniform Trust Code, it has been changed and adapted to fit within New Jersey’s existing trust law.
Article 1 of the bill contains definitions and general provisions. The provisions of this article include: section 3B:31-3, which defines certain terms used in the bill; section 3B:31-5, which enumerates certain rules that cannot be waived in the terms of the trust; section 3B:31-7, which establishes rules regarding the governing law of a trust; section 3B:31-8, which sets forth a procedure for changing the situs (principal place of administration) of a trust; and section 3B:31-11, which provides statutory authority for the nonjudicial settlement of a trustee’s accounts and other matters related to trust administration.
Article 2 of the bill concerns representation of beneficiaries, including what is known as virtual representation. Section 3B:31-13 is the introductory section, laying out the scope of the article. Sections 3B:31-14 through 3B:31-17 cover the different types of representation. 3B:31-14 deals with representation by the holder of a general testamentary power of appointment. Section 3B:31-15 deals with representation by a fiduciary, whether of an estate, trust, conservatorship, or guardianship. The section also allows a parent without a conflict of interest to represent and bind a minor or unborn child. Section 3B:31-16 is the virtual representation provision, providing for representation of and the giving of a binding consent by another person having a substantially identical interest with respect to the particular issue. Section 3B:31-17 authorizes the court to appoint a representative to represent the interests of unrepresented persons for whom the court concludes the other available representation might be inadequate.
Article 3 of the bill deals with how a trust is validly created, modified and terminated. Sections 3B:31-18 through 3B:31-25 deal with the creation of a trust and the purposes for a trust. Sections 3B:31-18 and 3B:31-19 state the method and requirements for creation of a trust, including the requirement that the same person not be the sole trustee and the sole beneficiary. Section 3B:31-20 recognizes the validity of trusts created in other jurisdictions provided certain requirements are met, including the requirement that the trust be in writing. The requirement that the trust be in writing is a deviation from the Uniform Trust Code, which allows for trusts to be created orally. Section 3B:31-21 concerns the purposes of a trust and states that a trust generally may be enforced if its purposes are lawful, not contrary to public policy, and possible to achieve. Under section 3B:31-23, a trust induced by fraud or duress is not valid. Section 3B:31-24 adopts a broader provision concerning trusts for the care of animals and section 3B:31-25 addresses situations where non-charitable trusts without ascertainable beneficiaries are valid.
Sections 3B:31-26 through 3B:31-33 deal with the modification and termination of a trust. These provisions deal with the purposes and procedures for modification and termination. The general provision is contained in section 3B:31-26, which summarizes the grounds on which a trust may be terminated and specifies which persons may bring an action to terminate a trust. Section 3B:31-27 describes the circumstances when a non-charitable trust may be compelled by the beneficiaries, with or without the consent of the settlor. Under section 3B:31-28, a court may modify the administrative or dispositive terms of a trust if doing so will further the purposes of the trust. Section 3B:31-29 addresses modification or termination of a charitable trust and section 3B:31-30 addresses modification or termination of an uneconomical trust. Section 3B:31-31 provides for the reformation of a trust to conform to a settlor’s probable intent and is designed to be consistent with New Jersey’s probable intent doctrine as it applies to trusts under subsection b. of section 28 of P.L.2004, c.132 (C.3B:3-33.1). Section 3B:31-33 permits modification to achieve a settlor’s tax objectives, consistent with existing New Jersey law. Section 3B:31-34 provides for the combination of two or more trusts into a single trust and the division of a single trust into two or more trusts, provided the requirements of the section are met. This provision is similar to existing New Jersey law under subsection r. of N.J.S.3B:14-23.
Article 4 deals with spendthrift provisions in trusts. This article was heavily edited by the ad hoc committee of New Jersey lawyers to preserve certain aspects of current New Jersey law. For example, the phrase “except as otherwise provided by law” was added to section 3B:31-35 to clarify that the changes are not intended to effect other existing provisions of statutory law including: R.S.25:2-1 et seq. (protection from attachment in the case of a self-settled trust that is a qualified retirement account); N.J.S.17B:24-6 (the inability of a creditor to attach proceeds of life insurance policies); N.J.S.17B:24-7 (the inability of creditors to attach annuity proceeds); N.J.S.17B:24-8 (the inability of creditors to attach health and disability insurance benefits); and, N.J.S.17B:24-9 (the inability of creditors to attach proceeds of group insurance policies).
Section 3B:31-37, concerning exceptions to spendthrift provisions, was revised and is not similar to the comparable provision of the Uniform Trust Code. The Uniform Trust Code provides that there are certain creditors, known as “exception creditors,” that can attach a trust with a spendthrift provision. Other “exception creditors” in the Uniform Trust Code would be (i) child support; (ii) a spouse; (iii) a former spouse who has a judgment for support or maintenance; (iv) a judgment creditor who has provided services for the protection of a beneficiary’s interest; and (v) governmental claims. In New Jersey there are certain recognized creditors that are “excepted” from the application of the spendthrift clause, thus additional provisions are unnecessary. Adding additional classes of exception creditors, as the Uniform Trust Code proposes, has drawn national criticism. The committee of ad hoc lawyers who developed this bill elected not to include this provision. Instead, section 3B:31-37 creates a type of trust for the young or disabled, known as a “special needs trust,” which would have certain special protections from creditors.
Sections 3B:31-39 through -41 codify certain rules already in place for trusts and make certain changes necessary to implement the provisions of section 3B:31-37 concerning special needs trusts.
Article 5 addresses the use of revocable trusts as alternatives to wills and seeks to clarify certain issues in connection with the use of revocable trusts. Section 3B:31-42 provides that the capacity required to create, amend or revoke a trust is the same as that required to execute a will. Section 3B:31-43 provides that a trust is revocable unless the terms of a trust expressly provide that it is irrevocable, or unless there is clear and convincing evidence that it is irrevocable and sets forth the circumstances in which a settlor, a settlor’s attorney in fact, or guardian may revoke or amend a revocable trust. Section 3B:31-44 provides that the trustee of a revocable trust is responsible only to the settlor of the trust. Section 3B:31-45 establishes time limits on contesting the validity of a revocable trust after the death of the settlor, which generally conform to the time limits for contesting the probate of a will. Section 3B:31-45 also protects a trustee who makes distributions from the trust after the settlor’s death unless the trustee knows of a pending or possible contest.
Article 6 of the bill contains a series of default rules dealing with the office of trustee, many of which are already dealt with and firmly established in chapters 11, 14 and 18 of Title 3B of the New Jersey Statutes, New Jersey Rules of Court, and New Jersey case law. Except for the court’s authority to issue letters of testamentary trusteeship and to order bond, all of the provisions of Article 6 are subject to modification by the express terms of the governing trust instrument.
Sections 3B:31-46 and 3B:31-47 address the process of qualifying a trustee, including procedures for accepting or declining the office of trustee and bonding the trustee. Section 3B:31-48 addresses the duties and responsibilities of and other issues that may arise between or among co-trustees. For example, this section permits co-trustees to act by majority action and specifies how and what happens when one of several trustees dissents from a course of action and the extent to which the others shall act when one is unable or has properly delegated performance of a function.
3B:31-49 through 3B:31-52 address changes in the office of trustee including: when and how a vacancy is filled, the procedure for resignation, grounds for removal and the duties and obligations of a resigning or removed trustee. Certain provisions of the comparable article of the Uniform Trust Code were deemed redundant and thus not included in this bill.
Section 3B:31-53 prescribes standards for reimbursement for expenses advanced by the trustee. Since the matter of trustee compensation is addressed comprehensively in chapter 18 of Title 3B of the New Jersey Statutes, the provision in the Uniform Trust Code concerning trustee compensation has not been included in the bill.
Article 7 sets forth the basic duties and powers of trustees. This article embraces and expands on the authorization in the “Prudent Investor Act,” P.L.1997, c.26 (C.3B:20-11.1 et seq.), to delegate managerial functions. All of the provisions in this article may be modified or overridden by the express terms of the governing instrument, except for the fundamental obligations to act in good faith for the benefit of the beneficiaries and in accordance with the terms of the governing instrument creating the trust.
Article 8 addresses liability of trustees and trustee dealings with persons other than beneficiaries. With respect to the rights of beneficiaries: 3B:31-70 lists the remedies for breach of trust; 3B:31-71 specifies how money damages are to be determined; and 3B:31-73 and 3B:31-76 specify certain trustee defenses, including the addition of a statute of limitations for claims alleging breach of trust (3B:31-73) and a provision on enforcing exculpatory clauses (3B:31-76). The provision in the Uniform Trust Code concerning attorney’s fees in suits against trustees is not included in the bill.
Article 9 of the bill contains miscellaneous administrative provisions. Section 3B:31-81 clarifies the status of the bill’s provisions under the federal statutory law regarding electronic records and signatures. Section 3B:31-82 is a severability clause. Section 3B:31-83 states that the provisions of the trust code generally apply to trusts created before, on or after the effective date.
The bill repeals three sections of existing law that are unnecessary or are inconsistent with its provisions: N.J.S.3B:11-5, N.J.S.3B:11-6, N.J.S.3B:11-7, and section 1 of P.L.2001, c.144 (C.3B:11-38).
The Uniform Trust Code contained two additional articles which have not been included in this bill. Article 2 of the Uniform Trust Code concerned the jurisdiction of the court. In New Jersey, these matters are controlled by court rule. Article 9 of the Uniform Trust Code is the “Prudent Investor Act,” which has already been enacted in this State by P.L.1997, c.26 (C.3B:20-11.1 et seq.). source
ftp://www.njleg.state.nj.us/20162017/S0500/174_I1.HTM
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