Section 603 of the Uniform Trust Code provides that while a trust is revocable and the settlor has capacity to revoke the trust, rights of the beneficiaries, such as the equitable remaindermen, are subject to the control of, and the duties of the trustee are owed exclusively to, the settlor. Nothing new here: This is merely a codification of traditional trust doctrine. Section 813(c) of the UTC partially codifies the common law/equitable duty of a trustee to account to the remaindermen. What about the trustee’s duty to account to the remainderman for his actions during the period when the now-deceased settlor had capacity? Could it be that there is no longer such a duty in some of the states that have enacted the UTC? If that is the case, presumably a trustee could with impunity secretly self-deal in breach of trust during the settlor’s lifetime, as the remaindermen would be deprived down the road of the critical information pertaining to the self-dealing that they would need to effectively protect their equitable property interests. In other words, their right of action against the trustee would be illusory.
The Supreme Court of Iowa was asked to “interpret” the “interplay” of the two comparable sections of the Iowa Trust Code, which, though it has a UTC flavor to it, was developed “from scratch.” On January 25, 2013, the Court handed down its decision in In the Matter of Trust # T-1 of Mary Faye Trimble, 826 N.W.2d 474 (2013): “We hold the accounting issue is governed by section 633A.3103 [Iowa], under which the settlor alone is entitled to an accounting for the period the trust is revocable, even if the beneficiary’s request for the accounting is made after the trust becomes irrevocable.” This holding is a radical departure from traditional trust law doctrine. Just as the trustee who is to receive a pour-over from a probate estate traditionally has been entitled to a full accounting from the executor, so also have the remaindermen of a terminated revocable trust been entitled to a full accounting from the trustee upon the death of its settlor. How could this have happened? It happened, I suggest, because the Court was not looking in the right places for guidance. Instead of turning to general principles of equity, it turned to the law: “Because there are two reasonable ways to read the operative statutory language, we turn to the canons of statutory construction.” The problem is that a trust code on this side of the Atlantic, unlike a civil law code, is not self-contained. It is essentially just a grab bag of assorted tweaks to the vast edifice that Prof. Maitland referred to as Equity, with a capital “E.”
Finally, so much for the proposition that codification of aspects of the law of trusts would foster uniformity and clarity across the jurisdictions: Apparently, Florida and California would afford the remaindermen a right to such an accounting; Missouri and Louisiana, on the other hand, apparently would not.
The duties of the trustee of a revocable inter vivos trust are covered generally in §8.11 of Loring and Rounds: A Trustee’s Handbook (2014), which is reproduced in its entirety below.