Pennsylvania Amendments to Uniform Trust Act
New PA Directed Trust Act
The Directed Trust Act (“DTA”), which goes into effect on October 13, 2024, is found in the new Subchapter H.1 of the PA Uniform Trust Act. See, 20 Pa.C.S.A. §§ 7780.11-7780.27. Directed trusts are defined, for purposes of the DTA, as “trust[s] for which the terms of the trust grant a power of direction.” The DTA includes illustrative powers which may be given to a trust protector and contains “short cut” statutory language for the appointment of a “trust director for investments” – simply citing to § 7780.16 grants to a trust director for investments named in the trust instrument all of the powers enumerated in that section. Under § 7780.20, directed trustees are required to “take reasonable action to comply with a trust director’s exercise or nonexercise of a power of direction, and [are not] liable for that action” unless by doing so the directed trustee engages in “willful misconduct.” For purposes of the DTA, “willful misconduct” is defined as “[i]ntentional conduct that is malicious, designed to defraud or unconscionable.” 20 Pa.C.S.A. § 7780.12. “Mere negligence, gross negligence and recklessness do not constitute ‘willful misconduct.’” Ibid. Trust directors are held to the same “willful misconduct” standard. 20 Pa.C.S.A. § 7780.21.
New Nonjudicial Method to Settle Trusts in Pennsylvania
Recent amendments to the PA Uniform Trust Act provide trustees with an election to obtain nonjudicial account settlement with the same preclusive effect of a final, unappealable court order approving a final or interim account. See, 20 Pa.C.S.A. § 7785.1. Trustees who elect to proceed under Section 7785.1 may obtain a nonjudicial settlement of their account “when (1) the trust terminates in whole or in part; (2) the trustee ceases or intends to cease to serve for any reason; or (3) the trustee seeks discharge for an interim accounting period when the trust is continuing.” 20 Pa.C.S.A. § 7785.1(a). In order to settle their account in this manner, trustees must give notice to all qualified beneficiaries, other beneficiaries who have requested notice regarding the trust account, others with notification rights of beneficiaries, co-trustees, successor trustees, trust directors and other fiduciaries. The contents of the notice are set forth in § 7785.1(e) and require 30 months of trust account statements to be included. 20 Pa.C.S.A. § 7785.1(e). Written objections to proceeding with the nonjudicial settlement of an account must be sent to the trustee within 60 days after the notice was sent. 20 Pa.C.S.A. § 7785.1(g). The trustee and objector may then proceed either by starting a court proceeding to resolve the objection or by entering into a nonjudicial settlement agreement under 20 Pa.C.S.A. § 7710.1. Ibid. The amendment to the UTA providing for nonjudicial account settlement becomes effective on October 13, 2024.