Aug 10 NJ Legislation Impacts Trustees, Trusts and Beneficiaries

Recent legislation enacted by New Jersey lawmakers has a significant impact on trustees, trusts and their beneficiaries. The Uniform Trust Code (“Code”) became effective in New Jersey on July 17, 2016 but applies to all trusts in existence, regardless of execution date.

Some of the Code’s provisions are mandatory because they speak to the essence of what a trust is. Other provisions can be overridden by language in the trust instrument. However, the court still retains the ultimate power to modify or terminate a trust, and that power cannot be eliminated by language in the trust.

One of the mandatory and more controversial mandates in the Code is the trustee’s duty to respond to beneficiaries of irrevocable trusts when they request copies of the trust instruments or other information related to administration of the trusts, given that the beneficiary is over age 35. This essentially bans silent trusts in New Jersey once the beneficiary is over the age of 35.

Another significant provision of the new code involves the modification or termination of a trust. Consent of the grantor is no longer required, and a trust can be modified or terminated with either the consent of the trustee and all beneficiaries or the consent of all beneficiaries. However, this provision can be overridden by language in the trust itself.

Other provisions are default rules that can also be overridden by language in the trust document. These include:

• A trustee can terminate small inefficient trusts.
• A trustee must act impartially in distributing trust property to beneficiaries.
• A trustee must keep beneficiaries under age 35 informed of trust administration.

Another mandatory provision in the Code shortens the statute of limitations for commencing a legal action against a trustee for breach of trust from 5 years to 6 months after the date a beneficiary receives a report that adequately discloses a potential claim and notifies the beneficiary of the 6-month period. The report should include a listing of assets, liabilities, receipts and disbursements.

These are just a few of the mandatory and suggested provisions of the Uniform Trust Code in New Jersey. For more information on how this new legislation affects the fiduciary responsibilities of trustees and the rights of beneficiaries, please contact Steven Kaplan at [email protected] or (973) 472-6250.

BIO:

Steven P. Kaplan, CPA, JD, LLM
Senior Tax Advisor

Steve Kaplan has led the estate and trust practice at Sax for 35 years. Specializing in sophisticated estate and income tax planning techniques, Steve handles corporate, individual, fiduciary, and estate tax matters of varying complexities.

Steve holds a BS degree in Accounting from Brooklyn College, a Juris Doctor degree from Brooklyn Law School, and a Masters of Law degree in Taxation (LLM) from New York University.