The National Conference of Commissioners on Uniform State Laws (“NCCUSL”) discusses, debates and drafts model laws for subject areas which may benefit from uniformity across the states. Because the body of trust law is small, NCCUSL drafted a Uniform Trust Code (“UTC”), which Colorado adapted and enacted effective January 1, 2019. Trust administrations are largely private, however, the new Colorado Uniform Trust Code, C.R.S. 15-5-101, et seq. (“CUTC”) gives settlors and trustees new guidance and tools. What does it mean for clients?
CUTC Makes Colorado Trust Law Similar to Most Other States.
33 states have adopted some version of the UTC, which means that Colorado trust administration has become similar to most other states.
CUTC Applies to Old and New Trusts.
When a new law is enacted, the legislature often determines that it will only apply going forward. That is not the case with the CUTC. The CUTC applies “to [all] express trusts, charitable or noncharitable, and trusts created pursuant to a statute, judgment, or decree that requires the trust to be administered in the manner of an express trust. This code does not apply to a business trust, a security arrangement, a trust created by a deposit arrangement in a financial institution, or any arrangement under which a person is a nominee or escrowee for another.”
Notice, Disclosure and Consent are Limited.
In contrast to probate, which is a public record, trusts are private. However, Colorado trust law previously required notice, disclosure and consent to a broader group than clients often contemplated. “Interested persons” under the CUTC are “qualified beneficiaries and other persons having a priority right in or claim against a trust estate which may reasonably and materially be affected by a judicial proceeding under [CUTC].” A “qualified beneficiary” is one who is “a distributee or permissible distributee of trust income or principal.” C.R.S. 15-5-103(16). This definition limits interested persons to those with a material interest in the current issue (e.g., children) and eliminates those with only a remote interest (e.g., grandchildren and contingent charitable beneficiaries). Qualified beneficiaries under age 25 who are not eligible for current distributions, e.g., are not entitled to mandatory notifications.
Trusts May be Amended by Agreement.
Colorado law provides that beneficiaries of a will may amend the testator’s plan by private agreement, however, there was no analogous mechanism for amending trusts by private agreement. CUTC now provides that trusts may also be amended by agreement. Private agreements will not be enforceable if they violate a material purpose of the trust, for example, disinheriting a child.
Settlors May Limit or Eliminate Ability to Modify Trusts.
However, clients usually feel strongly about their wishes being carried out, and not modified. CUTC permits a settlor to opt out of its mechanisms for allowing interested parties to modify a trust. An experienced estate attorney can draft such restriction into a client’s trust.
CUTC Provides a Timeline for Distribution on Termination, Which May Be Modified.
C.R.S. 15-5-817(1) provides that trustee may send beneficiaries a distribution proposal, and beneficiaries shall have 30 days to object, so long as trustee informs beneficiaries of this timeline. Clients may modify this default timeline in their documents.
Please contact our Denver estate planning attorneys if you would like to review or discuss your trust in light of the new CUTC, or if you need guidance regarding the administration of a loved one’s trust.