The Uniform Trust Code Arrives in New Jersey

Eimi Figlio

Eimi specializes in the area of Estate Planning and Estate Administration. Eimi’s estate planning practice includes planning for both simple and complex estates. Her services include drafting basic and tax planning Wills, Durable Powers of Attorney and Advance Medical Directives, as well as preparing trust documents necessary to preserve family wealth and minimize tax consequences. Eimi also assists clients with gifting and transfers of family assets and closely-held businesses. Eimi’s estate administration practice includes all aspects of probate matters. including intestacy proceedings, probate of Wills, marshaling estate assets and providing an inventory, preparation and filing of Federal and New Jersey and New York estate tax returns, preparation of formal and informal estate accountings, and the final distribution of estate assets to the beneficiaries and heirs of the estate. Eimi also assists clients with post mortem estate planning opportunities. Eimi also represents clients in matters regarding Trust administration and Trust termination by way of informal agreement or formal court applications, including filing of accountings, as well as modification and revocation of Trusts by way of information agreement or by court application.

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05.16.2016

Posted in Hot Trends: Developing Case Law | By Estate & Trust Group

The Uniform Trust Code Arrives in New Jersey — Finally!

On January 19, 2016, New Jersey enacted the Uniform Trust Code (“UTC”), to take effect on July 17, 2016. The new statute is in Chapter 31 of Title 3B of the New Jersey statutes.

This is the first part of a bi-weekly series in which we will discuss New Jersey law generally, and the UTC as enacted in New Jersey (at times referred to as “NJ UTC”). In addition, at times our blog entries will compare other national standards, including the model UTC and the Restatement of Trusts.

In particular, this survey considers the following topics (with references below to the articles of the NJ UTC as applicable):

General effect – and what is not changed by the NJ UTC;
The general provisions and definitions of the NJ UTC (Article 1), including the provisions on representation (Article 2) and miscellaneous provisions (Article 9);
The creation of trusts, including whether a valid trust exists (Article 3);
Reformation, modification, interpretation, revocation and termination of trusts (Article 3);
Probable intent as to trusts;
Creditor’s claims and spendthrift and discretionary trusts (Article 4);
Revocable trusts (Article 5);
The office of the trustee, and the duties and powers of the trustee (Articles 6 and 7);
Liability of trustees and the rights of persons dealing with trustees (Article 8);
Directed trusts (Article 7);
Special needs trusts;
Secret trusts;
Jurisdiction and venue (Article 1).

Part ONE: GENERAL EFFECT – AND WHAT IS NOT CHANGED BY THE NJ UTC

Although the NJ UTC takes effect on July 17, 2016, it applies to trusts created before, on, or after its effective date. N.J.S.A. § 3B:31-84(a)(1).

The NJ UTC applies to express trusts, charitable or noncharitable trusts, and trusts created pursuant to a statute, judgment, or decree that requires the trust to be administered in the manner of an express trust. See N.J.S.A. § 3B:31-2.

Under N.J.S.A. § 3B:31-6, “The common law of trusts and principles of equity supplement this act, except to the extent modified by this act or another statute of this State.”

The statute also applies to all judicial proceedings commenced on or after the effective date. N.J.S.A. § 3B:31-84 (a)(2). It applies to judicial proceedings commenced before its effective date unless the court finds that applying a particular provision substantially interferes with the proceedings or prejudice the parties. N.J.S.A. § 3B:31-84 (a)(3). But see In the Matter of the Estate of Violet Nelson, No. BER-P-001-15, 2016 N.J. Super. Unpub. LEXIS 180 (N.J. Super. Ct. Ch. Div., Jan. 27, 2016), rehearing at, 2016 N.J. Super. Unpub. LEXIS 403 (N.J. Super. Ct. Ch. Div. Feb. 22, 2016). Initially the court concluded that, absent ambiguity in the language of a trust, the court cannot resort to extraneous circumstances to explain away what is plainly set forth in the trust. Plaintiffs then moved for reconsideration, arguing that the NJ UTC, under N.J.S.A. §§ 3B:31-31 and 32, allows a court to reform the terms of a trust, even if unambiguous, to conform the terms to the settlor’s probable intent. See In re Nelson, 2016 N.J. Super. Unpub. LEXIS 403 (Ch. Div. Feb. 22, 2016). Upon reconsideration, however, the trial court found that: the new law expressly provides that it shall take effect on July 17, 2016 – a date yet to occur; the NJ UTC “is not and will not be applicable to judicial proceedings commenced and concluded prior to its effective date”; and instead the court “is compelled to apply the law as it exists in deciding disputes presented to it.” 2016 N.J. Super. Unpub. LEXIS 403 at *5. Thus, the motion for reconsideration was denied.

Significantly, in various instances the terms of the trust can override the act. N.J.S.A. § 3B:31-5 (a)-(b). The exceptions are enumerated in subsection (b) of that statutory provision and surveyed in more detail below.

Moreover, the NJ UTC does not change four key statutes dealing with trusts:

Prudent Investor Act (N.J.S.A. § 3B:20-11.1 et seq.)
Principal and Income Act (N.J.S.A. § 3B:19B-1 et seq.)
Compensation of Fiduciaries (N.J.S.A. § 3B:18-1 et seq.)
Fiduciary Powers (N.J.S.A. § 3B:14-23)

Finally, pursuant to N.J.S.A. § 3B:31-84(b), statute of limitations that have commenced to run before the effective date of the NJ UTC, continue to apply even if that statute has been repealed or superseded by the NJ UTC.