Kentucky adopts Uniform Trust Code

Kentucky has adopted the Uniform Trust Code as part of its statutory law.  This body of law becomes effective July 15, 2014.

As its name implies, this law governs trusts.  Kentucky had statutes concerning trusts, but those statutes were outdated and not very comprehensive.  The Uniform Trust Code is designed to be an updated and much more comprehensive set of laws for how trusts are governed.

It is a uniform code in that it is based on a set of statutes recommended by lawyers who serve on a committee that writes suggested laws for the states to adopt.  The idea is for states to be able to adopt the uniform law so people can have consistent laws regardless of their state of residence.  Unfortunately, each state tends to adopt uniform laws with some variances, so the laws can still be different from state to state.  However, there is a trend toward more states adopting the Uniform Trust Code, so there is much more consistency among the states on this topic than in the past.

The Kentucky Uniform Trust Code is a substantial change in the law of trusts in Kentucky.  The code is about 100 pages long, so there are too many changes to cover in a brief writing.  However, the following are a few changes that may be of interest.

1.  Trusts do not have to be registered with a court, even if the trust is created under a Will.  KRS 386B.2-050(1).  In the past, all trusts created by a Will had to be registered with the court.  This was an additional expense for the trust, and it also opened the courthouse door to any beneficiary that wanted to file a motion or complaint against the trustee.  Under the Uniform Trust Code, no trust has to be registered with the court unless the Trustmaker requires registration.

2.  A parent is now allowed to sign papers to bind his or her minor child concerning trust matters.  KRS 386B.3-030(6).  This is important because in the past, if a trust had minor beneficiaries and the trustee needed approval from the beneficiaries for some action, the trustee was forced to go to court, register the trust, and have an attorney (called a guardian ad litem) appointed to represent the minor child.  The court would require the guardian ad litem to file a report stating the child’s position on the matter, and then the court would make a decision.  Obviously this is a lot of red tape—resulting in a lot of expense for the trust—for what could be easily decided by the child’s parent.

This new statute does have some restrictions on it.  First, the parent cannot have a conflict of interest with the interests of his or her child.  In other words, if the parent could benefit by signing the paper to the detriment of his or her child, then the parent’s signature is not valid on behalf of the child.  Second, if the child already has a court appointed guardian, then the parent can’t sign for the child.  Rather, the guardian must sign on behalf of the child, and typically the guardian will want or need to get court approval to sign on behalf of the child.

This new statute also allows a parent to sign on behalf of his or her unborn children.  This can be important because trusts frequently have remainder beneficiaries who are not yet born.  For example, the trust may last for the lifetime of a person and upon his death, the remaining assets pass to his or her children.  At the time a decision needs to be made, the current beneficiary may still have additional children.  Normally, those unborn children have to be represented by a guardian ad litem just like minor children.  The new statute can help eliminate this additional red tape.

These are just two of the changes that the Uniform Trust Code has made to the law of trusts in Kentucky.  I will continue to study this new law and share my insights on this new law.