Consider the following situation. Settlor owns a thousand acres of land in a domestic-asset- protection haven (DAPT state). While he is alive, he transfers in trust the land to a corporate trustee that does business exclusively in a non-DAPT state. Trust is fully discretionary. There is no express reserved right to revoke, and no express designation of which state’s law shall govern the construction and enforceability of its dispositive provisions. Settlor is the initial beneficiary. There is a spendthrift clause that is intended to be enforced ab initio. Is the spendthrift clause enforceable against the settlor’s future creditors? Borrowing the analogies of one commentator, one could say that the Uniform Trust Code (UTC)’s conflict-of-laws rules are clear as “mud” in such situations; the Restatement (Second) of Conflict of Laws (hereinafter “Restatement (Second)”), specifically its Chapter 10 (Trusts), on the other hand, have rules that, for good or for ill, are “crystal” clear in such situations, at least by comparison to the UTC. See Thomas P. Gallanis, Trusts and the Choice of Law: What Role for the Settlor’s Choice and the Place of Administration?, 97 Tul. L. Rev. 805, 816 (2023). For a DAPT primer, see my May 7, 2024 JDSUPRA posting: https://www.jdsupra.com/legalnews/uniform-trust-code-utc-and-uniform-9217529/. Recall that rules of construction relate to the disposition of the trust property, not to the trust’s fiduciary administration. Interpretation and construction are not synonymous. Interpretation ascertains the settlor’s intentions; rules of construction kick in when there is no satisfactory evidence of the meaning words were intended to bear. What follows are some specifics as to why the Restatement (Second) is more user friendly than the UTC when it comes to scoping out what rules of construction are likely applicable if a particular trust has multijurisdictional contacts.
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