New Jersey’s recently enacted Uniform Trust Code (the “UTC”) contains many provisions that will streamline the administration of trusts under New Jersey law, but it also imposes some controversial new obligations on trustees to make certain disclosures to trust beneficiaries. Under the UTC, trustees will be required to keep certain trust beneficiaries “reasonably informed about the administration of the trust and of the material facts necessary for them to protect their interests.” Many individuals who have created trusts may find these new requirements onerous, as they may prefer that their beneficiaries not know about the existence of trusts for their benefit for a variety of reasons, or until a later time.
There is some good news, however. The law provides that the terms of a trust may override the duty to make disclosures to trust beneficiaries, with certain limits. If the trust terms so provide, the trustee does not have to make affirmative disclosures regarding the existence of the trust or its administration. However, notwithstanding any provision in the trust to the contrary, the trustee must respond to a request made by a “qualified” beneficiary (essentially, a current beneficiary or the person(s) next in line to benefit from the trust after the current beneficiaries) of the trust who is at least 35 years old for a copy of the trust instrument or other information reasonably related to the administration of the trust. The duty to respond to a beneficiary’s request for information regarding a trust’s administration does little to change the obligations of trustees under current law, because beneficiaries are already entitled to demand that a trustee account for his or her acts and proceedings as trustee.
The UTC takes effect July 17 but applies to all New Jersey trusts, including those created prior to the law’s enactment. Because any trust created prior to the enactment of the UTC obviously would not contain language overriding the disclosure requirements of the UTC, clients with existing trusts who do not want the disclosure requirements to apply to those trusts will need to take action in order to opt out of the requirements, if possible. Depending on a particular trust’s terms, it may be possible to transfer property from the trust into a newly created trust containing provisions overriding the disclosure rules. Such transfers would need to be completed before July 17 to avoid being subject to these disclosure rules.
If you have one or more existing trusts and would like to discuss how the new disclosure requirements will affect you or your options for potentially avoiding them, please contact your attorney as soon as possible.