Nonjudicial agreements between and among trust beneficiaries: The UTC/UPC overlap

Charles E. Rounds, Jr.
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Taken together, the Uniform Trust Code (UTC) and the Uniform Probate Code (UPC) have inflicted on equity a hodgepodge of poorly coordinated, sometimes overlapping, provisions that would regulate the validity and enforceability of nonjudicial agreements entered into by trust beneficiaries:

• UTC §111 [nonjudicial settlement agreements generally]

• UTC §411 [modification/ termination of non-charitable irrevocable trust by consent]

• UPC §3-1101 [effect of agreements involving trusts generally]

• UPC §3-1102 [procedure for securing court approval of compromise].

In a controversy involving whether a “settlor” had had the requisite capacity to create a trust in the first place, which statute would govern any attendant settlement agreement, UTC §111 (which is deferential to a trust’s material purpose), or UPC § 3-1102 (which is not)? One court has ruled the latter. See In the Matter of Bradley L. Brakke Trust, 890 N.W.2d 549 (N.D. Feb. 23, 2017) ("The Uniform Trust Code does not explicitly address settlement agreements in judicial proceedings raising claims about a settlor's capacity to create a trust.").

The material purpose doctrine is taken up generally in §8.15.7 of Loring and Rounds: A Trustee’s Handbook [pages 1160-1165 of the 2018 Edition], which section is annexed hereto. See below.

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DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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