Uniform Trust Code

Article 4. Creation, Validity,
Modification, and Termination of Trust

General Comment

Sections 401 through 409, which specify the requirements for the creation of a trust, largely codify traditional doctrine. Section 401 specifies the methods by which trusts are created, that is, by transfer of property, self-declaration, or exercise of a power of appointment. Whatever method may have been employed, other requirements, including intention, capacity and, for certain types of trusts, an ascertainable beneficiary, also must be satisfied before a trust is created. These requirements are listed in Section 402. Section 403 addresses the validity in the enacting jurisdiction of trusts created in other jurisdictions. A trust not created by will is validly created if its creation complied with the law of specified jurisdictions in which the settlor or trustee had a significant contact. Section 404 forbids trusts for illegal or impossible purposes, and requires that a trust and its terms must be for the benefit of its beneficiaries. Section 405 recites the permitted purposes of a charitable trust. Section 406 lists some of the grounds for contesting a trust. Section 407 validates oral trusts. The remaining sections address what are often referred to as “honorary” trusts, although such trusts are valid and enforceable under this Code. Section 408 covers a trust for the care of an animal; Section 409 allows creation of a trust for another noncharitable purpose such as maintenance of a cemetery lot.

Sections 410 through 417 provide a series of interrelated rules on when a trust may be terminated or modified other than by its express terms. The overall objective of these sections is to enhance flexibility consistent with the principle that preserving the settlor’s intent is paramount. Termination or modification may be allowed upon beneficiary consent if the court concludes that the trust or a particular provision no longer achieves a material purpose or if the settlor concurs (Section 411), by the court in response to unanticipated circumstances or due to ineffective administrative terms (Section 412), or by the court or trustee if continued administration under the trust’s existing terms would be uneconomical (Section 414). A trust may be reformed to correct a mistake of law or fact (Section 415), or modified to achieve the settlor’s tax objectives (Section 416). Trusts may be combined or divided (Section 417). A trustee or beneficiary has standing to petition the court with respect to a proposed termination or modification (Section 410).

Section 413 codifies and at the same time modifies the doctrine of cy pres, at least as applied in most States. The Uniform Trust Code authorizes the court to apply cy pres not only if the original means becomes impossible or unlawful but also if the means become impracticable or wasteful. Section 413 also creates a presumption of general charitable intent. Upon failure of the settlor’s original plan, the court cannot divert the trust property to a noncharity unless the terms of the trust expressly so provide. Furthermore, absent a contrary provision in the terms of the trust, limits are placed on when a gift over to a noncharity can take effect upon failure or impracticality of the original charitable purpose. The gift over is effective only if, when the provision takes effect, the trust property is to revert to the settlor and the settlor is still living, or fewer than 21 years have elapsed since the date of the trust’s creation.

The requirements for a trust’s creation, such as the necessary level of capacity and the requirement that a trust have a legal purpose, are controlled by statute and common law, not by the settlor. See Section 105(b)(1). Nor may the settlor negate the court’s ability to modify or terminate a trust as provided in Sections 410 through 416. See Section 105(b)(4). However, a settlor is free to restrict or modify the trustee’s power to terminate an uneconomic trust as provided in Sections 414, and the trustee’s power to combine and divide trusts as provided in Section 417.

Section 401. Methods of Creating Trust

Section 402. Requirements For Creation

Section 403. Trusts Created in Other Jurisdictions

Section 404. Trust Purposes

Section 405. Charitable Purposes; Enforcement

Section 406. Creation of Trust induced by Fraud,
Duress, or Undue influence

Section 407. Evidence of oral Trust

Section 408. Trust For Care of Animal

Section 409. Noncharitable Trust Without Beneficiary

Section 410. Modification or Termination of Trust;
Proceedings For Approval or Disapproval

Section 411. Modification or Termination
of Noncharitable Irrevocable Trust by Consent

Section 412. Modification or Termination Because of Unanticipated Circumstances or inability to Administer Trust Effectively

Section 413. Cy Pres

Section 414. Modification or Termination of Uneconomic Trust

Section 415. Reformation to Correct Mistakes

Section 416. Modification to Achieve Settlor's Tax Objectives

Section 417. Combination and Division of Trusts