US trusts law
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United States trust law is the body of law regulating the legal instrument for holding wealth known as a trust.
Most law regulating the creation and administration of trusts in the United States is now statutory at the state level. In August 2004, the National Conference of Commissioners on Uniform State Laws created the first attempt to codify generally accepted common law principles in Anglo-American law regarding trusts into a uniform statutory code for the fifty states, called the Uniform Trust Code (UTC). As of July 2012, 25 states have adopted some substantive form of the UTC with three others having introduced it into the legislature for adoption.
The goal of the uniform law is to standardize the law of trusts to a greater extent, given their increased use as a substitute for the "last will and testament" as the primary estate planning mechanism for the affluent. Despite the uniform law, however, differences remain, as states still harbor rich differences in fiduciary law. Each state adopting the UTC has incorporated changes to their version of the Code, reflecting certain peculiar or long-standing exceptions in their own state's law that legislators intend to preserve.
Trusts are essentially creatures of contract. Virtually all trusts are made in written form, either through an inter vivos or "living trust" instrument (created while the settlor is living) or in a will (which creates a testamentary trust). Therefore, in understanding certain terms in a trust, general rules of construction regarding interpretation of wills or other testamentary documents will apply. Subject to certain fundamental requirements of trusts, the UTC generally states that the terms of a trust instrument, as written by the settlor, will control over the "default rules" of the UTC. Where a document does not contain a provision that is otherwise covered by the UTC's default rules, the UTC will control.
Where a document contains obnoxious, unworkable, impractical, or outdated language, the beneficiaries and trustees have recourse to local courts having general jurisdiction in equity – most commonly for a declaratory judgment, judicial construction or reformation of the trust to bring it into compliance with the original intent of the settlor. Also, the court may be called upon to deal with circumstances not imaginable by the settlor at the time the trust was created to make the trust cy pres or as close as possible to the original intent.
Trusts are a special breed of contract in that they often govern the disposition of property in the same way a "last will and testament" does via a probate proceeding. Many states differ as to their procedures concerning the interpretation and administration of trusts created during life (i.e., the inter vivos trust) versus those created in a will which are typically subject to jurisdiction in probate proceedings (the testamentary trust). The UTC attempts to standardize the general composition of both trust forms and their requirements, but does not generally attempt to address the procedural questions as to overall subject-matter jurisdiction and other aspects of proceedings involving trusts. Instead, the vagarities of various state and local procedural rules will generally apply.
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