New Jersey has adopted a new Uniform Trust Code which you’ll find at N.J.S.A. 3B:31-1 et seq. (Public law 2015, chapter 276). It was signed into law on January 19, 2016 and will take effect on July 17, 2016. The law has wide-reaching implications. It applies to existing trusts as well as trusts that come into existence after the effective date. If you are the trustee of a trust, or a beneficiary of a trust, or are in the process of creating a trust, it’s a good idea to review the trust with an attorney to see what may be affected by the new law.
Here are a few features of the new Code.
The law establishes time limits in which a beneficiary can contest the way the trust is administered. See N.J.S.A. 3B:31-74. Some trustees send out an annual report or accounting to the beneficiaries, and others do not. Some trusts require this, others do not. A beneficiary is generally entitled to demand a view of the records of the trust to see if his/her interests are being protected: The new statute mandates that a trustee “keep the qualified beneficiaries of the trust reasonably informed about the administration of the trust and of the material facts necessary for them to protect their interests.” See N.J.S.A. 3B:31-67.a. These are the current permissible or mandatory distributees, successor permissible distributees, or presumptive remainder beneficiaries.
It is still up to the Trustee whether and when to send out an accounting of the trusts’s activity. However, the benefit to the trustee of sending out a report or accounting is that under the new law, once the trustee sends out a report that (a) adequately discloses the existence of a claim for breach of trust and (b) informs the beneficiary of the time allowed for commencing a legal proceeding, the beneficiary has just six (6) months in which to file suit. If the trustee sends no report, the beneficiary has up to five (5) years to sue after the earlier of (a) removal, resignation or death of the trustee, (b) termination of the beneficiary’s interest, or (c) termination of the trust. If the beneficiary is a minor, this time limit starts to run upon reaching the age of majority. See N.J.S.A. 3B:31-74.
The law allows one co-trustee to delegate powers to a co-trustee even if the trust language didn’t expressly allow it, provided that it doesn’t appear that the settlor reasonably expected the trustees to act jointly on all functions. This could provide for greater flexibility in the trust administration, particularly in case of an emergency. See N.J.S.A. 3B:31-60.
One other area that could be of great use is that a trust can be amended by the trustee with the consent of all interested persons, without the need to go to court to get judicial approval. See N.J.S.A. 3B:31-27. Even an irrevocable trust could be amended. The modifications must be consistent with the material purpose of the trust. This may mean that if you are dealing with an old trust such as a First Party Special Needs Trust that doesn’t meet all the current regulatory requirements, the trustee and beneficiary could agree to the modification without judicial intervention. If the beneficiary receives benefits from Medicaid, the State’s consent may be required as well … but that’s a discussion for another day.
Call us to review and discuss trusts, estate planning and special needs … 732-382-6070