As we have just passed the one-year anniversary of the CUTC being signed into law, now seems like an appropriate time to go over a few reminders with regards to its mandatory provisions – in particular the Notice provisions.
The CUTC is generally considered to be a default statute – that is, a statute that can be overridden by the settlor’s intent as reflected in deliberate drafting of the trust instrument. However, there are thirteen (13) mandatory provisions in the CUTC that cannot be drafted around, regardless of the settlor’s intent. Section 15-5-105 lists the thirteen (13) mandatory provisions under the CUTC. Amongst these thirteen provisions are two “notice” requirements that must be satisfied.
The first mandatory notice requirement is listed in §15-5-105(h). This section makes the duty to provide notice under §15-5-813 (2)(b) and (2)(c) mandatory, stating: “The duty pursuant to section 15-5-813(2)(b) and (2)(c) to provide notice of the existence of an irrevocable trust, of the identity of the trustee, and of the right to request trustee’s reports to current distributees or permissible distributees of such trust at any age, or to other qualified beneficiaries of such trust who have attained twenty-five years of age[.]” §15-5-105(h). The effect of this requirement is that a settlor cannot prevent beneficiaries from having knowledge of a trust’s existence or its contents. The only potential beneficiaries that can be excluded from such notice regarding the trust’s existence or its contents are young beneficiaries (under the age of 25) who are not eligible for current distributions from the trust and therefor do not have a present interest.
The second mandatory notice requirement under the CUTC is in §15-5-105(i) and requires “the duty pursuant to section 15-5-813(1) to respond to the request of a qualified beneficiary of an irrevocable trust for trustee’s reports and other information reasonably related to the administration of a trust[.]” This mandatory requirement is particularly interesting in light of the narrow exception to the above requirement in §15-5-105(h) (beneficiaries under the age of 25 without a present interest in the trust) because section (i) has no age limit. Under this section, even if you have a beneficiary who is under the age of 25, who is not currently eligible to distributions, if that beneficiary somehow discovers the existence of the trust and their interest therein and, as a result, requests information reasonably related to the administration of the trust from the Trustee, then the trustee must oblige. The trust agreement cannot be drafted in such a way that would waive the trustee’s obligations in this regard, and the trustee would be required to provide such information to the beneficiary.
In summary, a good rule of thumb would be to earmark the mandatory provisions under the CUTC in §15-15-105, and be particularly wary of the interplay between the notice requirements articulated in sections (h) and (i) of the statute. These rules are the guardrails that must be respected when it comes to trust law in Colorado and no amount of creative drafting will be able to alter their requirements.