The limited shelf lives of such trust-law partial codifications as the uniform principal and income acts

Charles E. Rounds, Jr. - Suffolk University Law School

Guido Calabresi in A Common Law for the Age of Statutes (1982) asserts that the “slow, unsystematic and organic quality of common law change made it clearly unsuitable to many legal demands of the welfare state. At the same time, the speed which perceived economic crises have followed upon economic crises has brought forth legislative responses even in areas where the common law might have been capable of making the necessary adjustments.” The unintended consequence of this “orgy of statute making” is “legal obsolescence,” the result of a statute being “hard to revise once it is passed.” Thus, “laws are governing that would not and could not be enacted today, and that some of these laws not only could not be reenacted but also do not fit, are in some sense inconsistent with, our whole legal landscape.” Calabresi recommends treating “statutes as if they were no more and no less than the common law.” Courts should be empowered to either tweak a statute as appropriate in light of changed circumstances or force legislatures to step up and rescue obsolete statutes from being judicially euthanized. So much for the legislative process being nimble. The common law as enhanced by equity to the rescue. In Calabresi’s book, however, there is nothing about the law of trusts. One can see why.

In the case of an ostensibly obsolete statute regulating some aspect of the trust relationship, legislative promiscuity, not legislative reticence, is what is complicating and muddling the jurisprudence. Recall that the trust relationship is a principles-based invention of equity, not statute. Take the critical duty of a trustee to properly allocate/apportion receipts between income and principal, and the related duty to properly allocate/apportion the burden of the trust estate’s financial obligations. Before the “age of statutes,” principals-based custom and practice, as clarified or supplemented by the occasional judicial decision, generally sufficed. See, e.g., Minot v. Paine, 99 Mass. 101 (1868). But now, almost every state (U.S.) has enacted its version of one of the Uniform Law Commission’s (ULC’s) four model principal and income statutes. So much for jurisprudential uniformity and simplification. First, there was the Uniform Principal and Income Act (1931). Then the Revised Uniform Principal and Income Act (1962). Then, the Uniform Principal and Income Act (1997). The 1997 Act purported to break new ground. It allowed trustees authorized and inclined to pursue total return investment strategies to make appropriate reallocations or adjustments between the income and principal accounts in furtherance of these strategies, provided three conditions were met: “(1) The trustee in carrying out the duty to invest is regulated by the prudent investor rule; (2) the terms of the trust call for mandatory payments of net trust accounting income, and (3) the trustee is unable to comply with the duty to administer the trust impartially without making adjustments between the income and principal accounts.” Now comes the Uniform Fiduciary Income and Principal Act (2018). It would authorize the trustee to adjust if the trustee determines that doing so will assist the fiduciary in administering the trust impartially. This “standard of assistance” is intended as a “relaxation” of the “standard of impossibility” that had been imposed by the 1997 Act.

It remains to be seen what the shelf life will be of a principal and income statute tailored to facilitate implementation by trustees of a particular investment strategy, one that happened to be in vogue when the statute was on the drawing board. In any case, that the 3rd trust restatement and ULC’s 4th principal and income act are not always in accord suggests that the orgy of statute-making in the trust space has by no means run its course. See §6.2.4 of Loring and Rounds: A Trustee’s Handbook (2024). The relevant portion of the section is reproduced in the appendix below.

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