Effective October 1

New Hampshire is among the first 10 states in the nation to adopt the Uniform Trust Code (UTC), which takes effect here on October 1, 2004, as RSA 564-B. The state's version of the UTC closely parallels the model law, but whether its cutting edge position is a matter of comfort or concern to settlors is still a matter of debate.

Chief among the benefits of the new law is the measure of clarity provided with respect to creation, modification, and termination of all sorts of trusts, as well as general trust administration, and remedies for breach thereof. The new law also reverses the presumption that a trust is irrevocable unless otherwise noted (a trust created under the UTC is presumed revocable).

The model law was drafted over a seven-year period by the National Conference of Commissioners on Uniform State Laws (NCCUSL), the same entity that brought us the Uniform Commercial Code, and a host of other uni form laws. Steadily increasing use of the trust, both for family estate planning and in commercial transactions, led the NCCUSL to tackle the project.

-Robert Wells, NH UTC Committee member

Kansas was the first state to enact the UTC, in 2003, followed by New Mexico, Wyoming, and Arizona. This year, the UTC takes effect in New Hampshire, the District of Columbia, Utah, and Tennessee. Next year, Maine and Missouri come on board. UTC bills are currently pending in a dozen other states.

Despite the recent adoptions, the UTC is not without controversy. Arizona repealed its enactment within a year. The Colorado legislature has refused to enact the code, and a group of Colorado attorneys scorn the new law as "fundamentally flawed," "regressive," and to be avoided by moving trusts out of UTC states.

The chief complaints about the model UTC center on the provisions granting beneficiaries greater notice rights and creditors greater access to spendthrift trusts. Also, critics charge, some of the model trust modification provisions may result in unintended tax consequences for settlors.

In response to these criticisms, the NCCUSL has issued a statement supporting the UTC, stressing the long drafting process, which involved hundreds of estate experts, and urging that the UTC, while not perfect, is a "significant improvement" to the current patchwork of trust laws across the country.

Here in New Hampshire, in the winter of 2003, Probate Judge John Maher rallied a group of trusts and estates lawyers to travel to a Connecticut conference to hear UTC Reporter David English.

The NH UTC Committee, chaired by Mary Susan Leahy, was formed soon after, and began drafting the New Hampshire legislation. "Wherever we could, we defaulted to the uniform act," Leahy said. "We all had some desire to tweak the language, but we were very much aware that trust lawyers had already spent seven years thinking this thing through."

Early on, the committee decided to push for enactment of the code in 2004, and to come back with amendments as necessary, Leahy said.

The New Hampshire enactment "is basically a codification of the common law, and will be extremely helpful to practitioners and to the Probate Court," said Robert Wells, who also served on the Committee. "But, it does require that we [trusts and estates lawyers] revise all of our documents."

Several sections of the model UTC did receive special treatment in the New Hampshire enactment.

"There were parts of existing New Hampshire law that we didn't want to lose, " Leahy said. "New Hampshire had already done a bit of work on the removal of trustees, so we included that in our UTC."

"Also, we had previously enacted the Uniform Trustees Powers Act, and we were very careful in repealing that Act to lift its language into the UTC," Leahy said.

Substantively, Leahy sees nothing drastic in the New Hampshire enactment of the UTC, though the mandatory disclosure provisions, vigorously debated, will not find favor everyone.

Under the NH UTC, when a trust becomes irrevocable, trustees give notice of the trust to qualified beneficiaries, and provide detailed reports describing the trust assets, at the request of the beneficiary.

"This provision was extensively debated," Leahy said. "It is a new requirement for New Hampshire, but in some ways it is simply making black and white something that was murky before. There are New Hampshire attorneys who have long maintained that a trust is not a trust until you have a beneficiary who knows about it and can enforce his rights to it."

Possible tax consequences in the model UTC were spotted by the New Hampshire drafters, and the NH UTC was revised accordingly, Leahy said.

The spendthrift trust issue was the single most-debated point at the NCCUSL level; the model UTC provides that spendthrift trust assets may be reached for both child support and alimony. In New Hampshire, the alimony provision was refined to allow a court to consider an ex-spouse's limited claims for basic shelter, food, and medical care.

New Hampshire departed from the language of the model code in the area of charitable trusts, in order to retain existing New Hampshire law, but the result remains consistent with the spirit of the model act, Leahy said.

Michael S. DeLucia, N.H. Director of Charitable Trusts, agrees that the new statute "pretty much preserves the language of the prior New Hampshire statutes that deal with charitable trusts."

NH Representative John B. Hunt, chair of the House Commerce Committee, sponsored the NH UTC partly to clarify existing New Hampshire trust law, and partly as a matter of economic development.

"We needed to modernize out trust statutes," Hunt said. "We have a lot of people in this state who also own homes in other states, and we want them to choose our law when it comes time to set up trusts."

Enacting a comprehensive, uniform law gives settlors a higher level of predictability, said Hunt, who introduced the title of the UTC bill in May 2003; the NH UTC Committee provided the text of the bill in September 2003.

Hampton attorney Gary Holmes, who has followed the national debate on the UTC, is concerned that the new disclosure requirements, which are applicable to some existing trusts, will be off-putting to settlors, and burdensome to trust administrators. "One of the values of common law trusts was that they were basically confidential," Holmes said.

"Also of concern are the enlargement of creditors' rights, and the opening of the door to the court system," Holmes said. "This legislation gives beneficiaries the opportunity to be more litigious."

For more information on an NHBA CLE program on the Uniform Trust Code, see page 17.

Home | About the Bar | For Members | For the Public | Legal Links | Publications | Online Store
Lawyer Referral Service | Law-Related Education | NHBA•CLE | NHBA Insurance Agency | NHMCLE
Search | Calendar

New Hampshire Bar Association
2 Pillsbury Street, Suite 300, Concord NH 03301
phone: (603) 224-6942 fax: (603) 224-2910
email: NHBAinfo@nhbar.org
© NH Bar Association Disclaimer