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Uniform Trust Act D R A F T FOR DISCUSSION ONLY UNIFORM TRUST ACT NATIONAL CONFERENCE OF COMMISSIONERS ON UNIFORM STATE LAWS OCTOBER 1999 DRAFT UNIFORM TRUST ACT WITH PREFATORY NOTE AND COMMENTS Copyright © 1999 By NATIONAL CONFERENCE OF COMMISSIONERS ON UNIFORM STATE LAWS The ideas and conclusions set forth in this draft, including the proposed statutory language and any comments or reporter’s notes, have not been passed upon by the National Conference of Commissioners on Uniform State Laws or the Drafting Committee. They do not necessarily reflect the views of the Conference and its Commissioners and the Drafting Committee and its Members and Reporters. Proposed statutory language may not be used to ascertain the intent or meaning of any promulgated final statutory proposal. DRAFTING COMMITTEE ON UNIFORM TRUST ACT MAURICE A. HARTNETT, III, Supreme Court, 57 The Green, Dover, DE 19901, Chair FRANK W. DAYKIN, 4745 Giles Way, Carson City, NV 89704 E. EDWIN ECK, II, University of Montana, School of Law, Missoula, MT 59812 WILLIAM L. EVANS, Ohio Northern University, Pettit College of Law, 525 S. Main Street, Ada, OH 45810 RUSSELL L. GEORGE, P.O. Box 907, 120 W. Third Street, Rifle, CO 81650 JOHN H. LANGBEIN, Yale Law School, P.O. Box 208215, New Haven, CT 06520 GLEE S. SMITH, P.O. Box 360, 111 E. 8th, Larned, KS 67550 NATHANIEL STERLING, Law Revision Commission, Suite D-1, 4000 Middlefield Road, Palo Alto, CA 94303 RICHARD V. WELLMAN, University of Georgia, School of Law, Athens, GA 30602 DAVID M. ENGLISH, University of Missouri-Columbia, School of Law, Missouri Avenue & Conley Avenue, Columbia, MO 65211, Reporter EX OFFICIO JOHN L. McCLAUGHERTY, P.O. Box 553, Charleston, WV 25322, President STANLEY M. FISHER, 1100 Huntington Building, 925 Euclid Avenue, Cleveland, OH 44115- 1475, Division Chair AMERICAN BAR ASSOCIATION ADVISORS JOSEPH KARTIGANER, 425 Lexington Avenue, New York, NY 10017, Advisor DAVID ALAN RICHARDS, 875 3rd Avenue, New York, NY 10022, Real Property, Probate & Trust Law Section Advisor RAYMOND H. YOUNG, 26th Floor, 150 Federal Street, Boston, MA 02110, Real Property, Probate & Trust Law Section Advisor EXECUTIVE DIRECTOR FRED H. MILLER, University of Oklahoma, College of Law, 300 Timberdell Road, Norman, OK 73019, Executive Director WILLIAM J. PIERCE, 1505 Roxbury Road, Ann Arbor, MI 48104, Executive Director Emeritus Copies of this Act may be obtained from: NATIONAL CONFERENCE OF COMMISSIONERS ON UNIFORM STATE LAWS 211 E. Ontario Street, Suite 1300 Chicago, Illinois 60611 312/915-0195 UNIFORM TRUST ACT TABLE OF CONTENTS ARTICLE 1. GENERAL PROVISIONS AND DEFINITIONS SECTION 101. SHORT TITLE .................................................................... 9 SECTION 102. DEFINITIONS ..................................................................... 9 SECTION 103. MANDATORY RULES ............................................................ 18 SECTION 104. NOTICE TO BENEFICIARIES ...................................................... 20 SECTION 105. COMMON LAW OF TRUSTS ....................................................... 21 SECTION 106. CHOICE OF LAW ................................................................. 21 SECTION 107. PRINCIPAL PLACE OF ADMINISTRATION .......................................... 23 SECTION 108. TRUST REGISTRATION .......................................................... 24 SECTION 109. NONJUDICIAL SETTLEMENTS .................................................... 25 SECTION 110. RULES OF CONSTRUCTION ...................................................... 27 ARTICLE 2. JUDICIAL PROCEEDINGS SECTION 201. ROLE OF COURT IN ADMINISTRATION OF TRUST .................................. 30 SECTION 202. JURISDICTION OVER TRUSTEE AND BENEFICIARY ................................ 32 SECTION 203. NOTICE OF JUDICIALLY APPROVED SETTLEMENT ................................ 33 [SECTION 204. SUBJECT-MATTER JURISDICTION] ............................................... 34 [SECTION 205. VENUE] ........................................................................ 35 ARTICLE 3. REPRESENTATION OF OTHERS SECTION 301. REPRESENTATION: BASIC PRINCIPLES ............................................ 39 SECTION 302. REPRESENTATION BY HOLDERS OF GENERAL TESTAMENTARY POWER OF APPOINTMENT ................................................................. 39 SECTION 303. REPRESENTATION BY FIDUCIARIES AND PARENTS ............................... 39 SECTION 304. REPRESENTATION BY PERSON HAVING SUBSTANTIALLY IDENTICAL INTEREST .... 40 SECTION 305. APPOINTMENT OF REPRESENTATIVE ............................................. 40 ARTICLE 4. CREATION, VALIDITY, MODIFICATION, AND TERMINATION OF TRUST SECTION 401. METHODS OF CREATING TRUST ................................................. 43 SECTION 402. REQUIREMENTS FOR CREATION ................................................. 45 SECTION 403. TRUST PURPOSES ............................................................... 47 ARTICLE 404. TRUST CREATED BY UNDUE INFLUENCE, DURESS, OR FRAUD ..................... 48 SECTION 405. EVIDENCE OF ORAL TRUST ...................................................... 49 SECTION 406. TRUST FOR CARE OF ANIMAL. ................................................... 49 SECTION 407. TRUST FOR NONCHARITABLE PURPOSE .......................................... 51 SECTION 408. CHARITABLE TRUSTS ........................................................... 52 SECTION 409. TERMINATION OF TRUST; PETITIONS FOR APPROVAL OR DISAPPROVAL ........... 56 SECTION 410. MODIFICATION OR TERMINATION OF IRREVOCABLE TRUST BY CONSENT .................................................................. 57 SECTION 411. MODIFICATION OR TERMINATION BECAUSE OF UNANTICIPATED CIRCUMSTANCES OR INABILITY TO ADMINISTER TRUST EFFECTIVELY ............................ 60 SECTION 412. TERMINATION OF UNECONOMIC NONCHARITABLE TRUST ........................ 62 SECTION 413. REFORMATION TO CORRECT MISTAKES .......................................... 63 SECTION 414. MODIFICATION TO ACHIEVE SETTLOR’S TAX OBJECTIVES ........................ 64 SECTION 415. COMBINATION AND DIVISION OF TRUSTS ........................................ 65 ARTICLE 5. CREDITOR’S CLAIMS; SPENDTHRIFT PROVISIONS; DISCRETIONARY TRUSTS SECTION 501. RIGHTS OF BENEFICIARY’S CREDITOR OR ASSIGNEE: GENERAL ................... 68 SECTION 502. SPENDTHRIFT PROVISION: GENERAL ............................................. 69 SECTION 503. EXCEPTIONS TO SPENDTHRIFT PROVISION ....................................... 70 SECTION 504. DISCRETIONARY TRUSTS AND TRUSTS SUBJECT TO STANDARD .................. 72 SECTION 505. CREDITOR’S CLAIM AGAINST SETTLOR .......................................... 74 SECTION 506. OVERDUE DISTRIBUTION ........................................................ 77 SECTION 507. PERSONAL CREDITORS OF TRUSTEE ............................................. 77 ARTICLE 6. REVOCABLE TRUSTS SECTION 601. CAPACITY OF SETTLOR OF REVOCABLE TRUST ................................... 79 SECTION 602. REVOCATION OR AMENDMENT OF REVOCABLE TRUST ........................... 80 SECTION 603. DIRECTION OF SETTLOR ......................................................... 84 SECTION 604. SETTLOR’S EXERCISE OF RIGHTS OF BENEFICIARIES; PRESENTLY EXERCISABLE POWERS OF WITHDRAWAL ..................................................... 84 SECTION 605. LIMITATION ON ACTION CONTESTING VALIDITY OF REVOCABLE TRUST .......... 86 ARTICLE 7. OFFICE OF TRUSTEE SECTION 701. ACCEPTANCE OR DECLINATION OF TRUSTEESHIP ................................ 89 SECTION 702. TRUSTEE’S BOND ............................................................... 91 SECTION 703. COTRUSTEES ................................................................... 92 SECTION 704. VACANCY IN TRUSTEESHIP; APPOINTMENT BY BENEFICIARIES OR COURT ........ 94 SECTION 705. RESIGNATION OF TRUSTEE ...................................................... 96 SECTION 706. REMOVAL OF TRUSTEE .......................................................... 97 SECTION 707. DELIVERY OF PROPERTY BY FORMER TRUSTEE .................................. 99 SECTION 708. COMPENSATION OF TRUSTEE ................................................... 100 SECTION 709. REPAYMENT OF EXPENDITURES ................................................ 102 ARTICLE 8. FIDUCIARY ADMINISTRATION SECTION 801 DUTY TO ADMINISTER TRUST .................................................. 104 SECTION 802. DUTY OF LOYALTY ............................................................ 105 SECTION 803. IMPARTIALITY ................................................................. 109 SECTION 804. PRUDENT ADMINISTRATION .................................................... 110 SECTION 805. COSTS OF ADMINISTRATION .................................................... 110 SECTION 806. TRUSTEE’S SKILLS ............................................................. 111 SECTION 807. DELEGATION BY TRUSTEE ..................................................... 111 SECTION 808. POWERS TO DIRECT ............................................................ 113 SECTION 809. CONTROL AND PROTECTION OF TRUST PROPERTY .............................. 114 SECTION 810. SEPARATION AND IDENTIFICATION OF TRUST PROPERTY ........................ 114 SECTION 811. ENFORCEMENT AND DEFENSE OF CLAIMS ....................................... 115 SECTION 812. FORMER FIDUCIARIES .......................................................... 116 SECTION 813. DUTY TO INFORM AND REPORT ................................................. 116 SECTION 814. DUTY WITH REGARD TO DISCRETIONARY POWER ..............................
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