CHICAGO – Credit unions in 10 states are in the midst of anewly-enacted code that updates trust laws and adds sometimescontroversial disclosures, but the model still has the flexibilityto be tweaked. The Uniform Trust Code (UTC) was drafted and adoptedby the National Conference of Commissioners on Uniform State Laws(NCCUSL). It is a default statute, containing a set of basic ruleson the creation of trusts, representation, day-to-dayadministration and their modification and termination. Since 2000,the year UTC was adopted, 10 states have enacted the Code – Kansas,Wyoming, Nebraska, New Mexico, District of Columbia, Utah, Maine,Tennessee, New Hampshire and Missouri. Another 30 are expected tointroduce UTC legislation next year, said Michelle Clayton, NCCUSLgeneral counsel. Formed in 1892, NCCUSL comprises more than 300lawyers, judges, and law professors, appointed by the states aswell as the District of Columbia, Puerto Rico, and the U.S. VirginIslands to draft proposals for uniform and model laws and worktoward their enactment in their legislatures. For credit unions andCUSOs that offer trust services to their members, the UTC can meanmore leeway for the person who creates the trust. “With onlylimited exceptions, anyone who creates a trust may spell out in thetrust's terms how the trust is to be administered and distributed,”Clayton said. “The exceptions include the requirements for creatinga trust, the duty of a trustee to act in good faith, and therequirement that a trust and its terms be for the benefit of itsbeneficiaries.” Maine recently updated its UTC and for members thathave trust accounts, education is paramount, said Dan Duff,certified financial planner and a branch manager of the RaymondJames & Associates office in Millinocket, Maine. “With theimplementation of UTC, we educate those members that havesignificant assets who may be considering a trust to not forget tofund it,” Duff said. “Many times, someone will go to an attorney,have it drawn up but not fund it. That's just like having a safetydeposit box with no contents.” Indeed, according to some industryexperts, up to 75% of living trusts are put together incorrectly.Generally, an estate's assets must fund the trust, so everythingmust be re-titled to the plan's name. Any assets not titled to aliving trust are vulnerable to a cumbersome probate process.Unfortunately, some attorneys don't communicate this vital step andleave it up to their clients to follow through with neglectfulresults. Duff said over the past year, members have expressedinterest in trust accounts and the UTC will go a long way in how arevocable or living trust will work for them. “We just received anupdate from our attorney,” Duff said. “We're working hard topublicize it, educate clients and members.” Many individuals todayuse the revocable trust as their primary estate-planning documentto avoid the procedural formalities and court supervision involvedin probate, Clayton said, adding it is one of the main thrusts ofUTC. Still, keeping in mind that the UTC is a model law and thatstates still have the leeway to make modification, is not going tomake the due diligence job of knowing each state's respective trustlaws any easier, said Neil Archibald, corporate counsel and chiefcompliance officer for MEMBERS Trust Co., the credit unionindustry's first nationally-chartered trust company. “The word`uniform' is a misnomer. There will be some provisions that areuniform across the board, but there will still be nuances,”Archibald said. “This is not a federal issue but it is anexperiment in state democracy. State legislatures will have a sayin what will be struck out or added.” Archibald also said “thedisclosures under UTC may enable more people to know what's goingon with the trust – which can lead to family squabbles.” NCUA hasissued a number of opinion letters on revocable or “living” trustsas of late. As recent as June, GFA Federal Credit Union in Gardner,Mass. wrote to NCUA seeking clarification on the extent of NCUAshare insurance coverage for funds held in two accounts establishedby a member in connection with a living trust in which the accountowner's son and daughter were the beneficiaries. NCUA wrote backthat the interests of the son and the daughter are each insured upto $100,000, separate from any individual accounts of the member orthe beneficiaries, for a total of up to $200,000. Last December,Deer Valley Credit Union in Phoenix also sought clarification onthe amount of coverage involving a living trust. Ironically,Arizona Gov. Janet Napolitano signed UTC into law in May 2003 butafter a “huge outcry” from the estate planning community, it wasrepealed in the last legislation session, said Paul Cruikshank,general counsel for the Arizona Credit Union System. “There were anumber of issues of concern (from the estate planning community)involving disclosures and responsibilities,” Cruikshank said. “UTCwas quite frankly knocked out this year.” Archibald said whenthere's a repeal of a law as was the case in Arizona, “rest assuredit's a hot-button issue.” Meanwhile, Clayton said the use oftrusts, both in family estate planning and commercial transactions,has increased dramatically in recent years and the UTC, in whateverform states adopt it, can be beneficial in the long run. “There hasbeen a rise in the number of day-to-day questions involving trustsand the recognition that trust law in many states is quite thin,”she said. [email protected]

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