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On April 26, 2018 Colorado became the 33rd state to enact the Uniform Trust Code. The law will become effective on January 1, 2019. Previously, the law governing the administration of trusts in Colorado was contained within the probate code. Through the enactment of a majority of the Uniform Trust Code, Colorado will create a comprehensive code for the administration of trusts, separate from the Colorado Probate Code.
An important aspect of the Uniform Trust Code is that it will increase uniformity across jurisdictions. For example, Colorado previously did not have any choice of law provision for handling trusts. This is important when a trust is enacted, and no choice of law provision is provided for in the trust. If differing states have varying views as what law will control in the absence of a provision in the trust, this can result in excess litigation across state lines. By enacting the Uniform Trust Code choice of law provisions, this allows for clearer guidelines in determining what state law to apply in the absence of a choice of law provision in the trust.
The Uniform Trust Code also sets forth new grounds for modifying irrevocable trusts; that are codified for the first time in Colorado law. Modifications or terminations of a trust based on the consent of the beneficiaries will now require court approval. In addition, Courts may now modify trusts even if all the beneficiaries are not in agreement with the proposed modifications as long as the interests of the objecting beneficiary is adequately protected, and the terms of the trust and the law do not prohibit the modification.
The Uniform Trust Code will also allow for nonjudicial settlement agreements to address issues including the interpretation of the trust, approval of a trustee’s accounting, the resignation of a trustee, transfer of the trusts place of administration, and others. These agreements do not have to be supported by consideration, provided the agreement does not defeat the material purpose of the trust or violate any other laws, and includes all parties whose interest will be affected by the agreement. This will allow for greater flexibility in the administration of trusts.
This article discusses just a few of the numerous provisions that will be enacted through the new Uniform Trust Code. Some mirror the provisions already codified in the Colorado Probate Code, which will be repealed and replaced with the new trust code. However, some provisions are completely new to Colorado statutes, and have previously been used by attorneys only through case law.
It is important to understand the new provisions to ensure your trust is in compliance with the new Uniform Trust Code and to protect it adequately from future changes if that is the intent of the settlor. Contact us today for assistance with modifying your trust or drafting a new trust in compliance with Colorado’s Uniform Trust Code.