Overview of the North Carolina Uniform Trust Code. By: J. Stanley - PDF document

Overview of the North Carolina Uniform Trust Code. By: J. Stanley Atwell Introduction North Carolina’s law governing trusts has been changed significantly by reason of the adoption of the Uniform Trust Code (UTC) in this state (also referred to simply as "the Code"), with what many would describe as only modest modifications to the version of the UTC as proposed by the Uniform Commissioners on Uniform State Laws. This review of the UTC will focus on changes made in the North Carolina law and upon the deviations from what the Uniform Commissioners propose, with particular focus on the how the law of trusts and Trust Code itself continue to evolve as a result of the explosive use of trusts in estate planning, especially as tools for probate avoidance and tax planning. This overview will include particular focus on matters of jurisdiction over trust proceedings that are to be heard before the Clerks of Court versus the Superior Courts of the State, and what difference it makes. Also, concepts of virtual representation of trust beneficiaries, beneficiaries’ rights to disclosure of trust activities, and modifications of trusts will be reviewed in detail. The text of the entirety of North Carolina's Uniform Trust Code is provided, although only a few of the Sections will be able to be covered thoroughly in the time permitted. Even so, many questions can be answered by a quick reference to the Code itself and so Trustees shouldn't need a lawyer to consider everyday questions that will arise in the administration of a trust, especially compared to the state of the law prior to the Code, where so much of the law of trusts had to be ascertained from case law, much of which was not settled. In addition, as with the Uniform Commercial Code (UCC), where the law is consistent between jurisdictions, the case law that develops under the UTC from other jurisdictions will become very useful in deciding new case that may arise here in North Carolina. In considering how the UTC works, it should be remembered that the Code works primarily as default statute, whose provisions can be overridden by the terms of a trust instrument that provides contrary to the provisions of the Code. Of course there are a number of provisions of the UTC that cannot be overridden, and so a good starting point for a review of significant provisions of the Code will be to consider such provisions in the Code that cannot be overridden, contained in Section 1-105 of the Code, where we begin. NC General Statutes - Chapter 36C 1

North Carolina UTC -- Table of Sections Article 1 - General Provisions and Definitions. G.S. 36C-1-101 § 36C-1-101. Short title. G.S. 36C-1-102 § 36C-1-102. Scope. G.S. 36C-1-103 § 36C-1-103. Definitions. G.S. 36C-1-104 § 36C-1-104. Knowledge. G.S. 36C-1-105 § 36C-1-105. Default and mandatory rules. G.S. 36C-1-106 § 36C-1-106. Common law of trusts; principles of equity. G.S. 36C-1-107 § 36C-1-107. Governing law. G.S. 36C-1-108 § 36C-1-108. Principal place of administration. G.S. 36C-1-109 § 36C-1-109. Methods and waiver of notice. G.S. 36C-1-110 § 36C-1-110. Others treated as qualified beneficiaries. G.S. 36C-1-111 § 36C-1-111. Nonjudicial settlement agreements. G.S. 36C-1-112 § 36C-1-112. Rules of construction. G.S. 36C-1-113 § 36C-1-113. Construction of certain formula clauses applicable to estates of decedents dying in calendar year 2010. G.S. 36C-1-114 § 36C-1-114. Insurable interest of trustee. Art icle 2 - Judicial Proceedings. G.S. 36C-2-201 § 36C-2-201. Role of court in administration of trust. G.S. 36C-2-202 § 36C-2-202. Jurisdiction over trustee and beneficiary. G.S. 36C-2-203 § 36C-2-203. Subject matter jurisdiction. G.S. 36C-2-204 § 36C-2-204. Venue. G.S. 36C-2-205 § 36C-2-205. Commencement of proceedings, pleadings, consolidation, and joinder. G.S. 36C-2-206 § 36C-2-206. Representation of parties. G.S. 36C-2-207 § 36C-2-207. Waiver of notice. G.S. 36C-2-208 § 36C-2-208. Accounting to clerk. G.S. 36C-2-209 § 36C-2-209. Qualification and accounting of trustee of a testamentary trust. Article 3 - Representation. G.S. 36C-3-301 § 36C-3-301. Representation: basic effect. G.S. 36C-3-302 § 36C-3-302. Representation by holder of power of revocation or general power of appointment. G.S. 36C-3-303 § 36C-3-303. Representation by fiduciaries, parents, and other persons. G.S. 36C-3-304 § 36C-3-304. Representation by person having substantially identical interest. G.S. 36C-3-305 § 36C-3-305. Appointment of representative; scope of representation. Article 4 - Creation, Validity, Modification, and Termination of Trust. G.S. 36C-4-401 § 36C-4-401. Methods of creating trust. G.S. 36C-4-401.1 § 36C-4-401.1. Interest of trustee as beneficiary of life insurance or other death benefit sufficient to support inter vivos or testamentary trust. NC General Statutes - Chapter 36C 2

G.S. 36C-4-401.2 § 36C-4-401.2. Creation of trust by a court. § 36C-4-402. Requirements for creation. G.S. 36C-4-402 G.S. 36C-4-403 § 36C-4-403. Trusts created in other jurisdictions. G.S. 36C-4-404 § 36C-4-404. Trust purposes. G.S. 36C-4-405 § 36C-4-405. Charitable purposes. § 36C-4-405.1. Enforcement of charitable gift or trust. G.S. 36C-4-405.1 G.S. 36C-4-405.2 § 36C-4-405.2. Spending rules applicable to charitable trusts. G.S. 36C-4-406 § 36C-4-406. Creation of trust induced by fraud, duress, or undue influence. G.S. 36C-4-407 § 36C-4-407. Evidence of oral trust. § 36C-4-408. Trust for care of animal. G.S. 36C-4-408 G.S. 36C-4-409 § 36C-4-409. Noncharitable trust without ascertainable beneficiary. G.S. 36C-4-410 § 36C-4-410. Modification or termination of trust; proceedings for approval or disapproval. G.S. 36C-4-411 § 36C-4-411. Modification or termination of noncharitable irrevocable trust by consent. § 36C-4-412. Modification or termination because of unanticipated circumstances or G.S. 36C-4-412 inability to administer trust effectively. G.S. 36C-4-413 § 36C-4-413. Cy pres. § 36C-4-414. Modification or termination of uneconomic trust. G.S. 36C-4-414 G.S. 36C-4-415 § 36C-4-415. Reformation to correct mistakes. G.S. 36C-4-416 § 36C-4-416. Modification to achieve settlor's tax objectives. G.S. 36C-4-417 § 36C-4-417. Combination and division of trusts. § 36C-4-418. Distribution upon termination of trust. G.S. 36C-4-418 G.S. 36C-4-419 § 36C-4-419. Effect of inalienable interest on modification or termination. Article 4A - Tax Status of Charitable Trusts. G.S. 36C-4A-1 § 36C-4A-1. Prohibited transactions. G.S. 36C-4A-2 § 36C-4A-2. Reformation of charitable remainder trust. Article 4B - Charitable Remainder Trust Administration Act. G.S. 36C-4B-1 § 36C-4B-1. Short title. G.S. 36C-4B-2 § 36C-4B-2. General rule. G.S. 36C-4B-3 § 36C-4B-3. Definitions. G.S. 36C-4B-4 § 36C-4B-4. Administrative provisions applicable to both charitable remainder annuity trusts and charitable remainder unitrusts. G.S. 36C-4B-5 § 36C-4B-5. Administrative provisions applicable to charitable remainder trusts only. G.S. 36C-4B-6 § 36C-4B-6. Administrative provisions applicable to charitable remainder unitrusts only. § 36C-4B-7. Interpretation. G.S. 36C-4B-7 Article 5 - Creditors' Claims; Spendthrift and Discretionary Trusts. G.S. 36C-5-501 § 36C-5-501. Rights of beneficiary's creditor or assignee. § 36C-5-502. Spendthrift provision. G.S. 36C-5-502 G.S. 36C-5-503 § 36C-5-503. Exceptions to spendthrift provision. G.S. 36C-5-504 § 36C-5-504. Discretionary trusts; effect of standard. NC General Statutes - Chapter 36C 3