The Massachusetts Uniform Trust Code (the “MUTC”), codified at Mass. Gen. Laws c. 203E, became effective as of July 8, 2012. The enacting legislation provides that, except as otherwise provided, the MUTC applies to all trusts created before, on, or after the July 8, 2012 effective date.
The before and after effect of Massachusetts’ adoption of its version of the Uniform Trust Code as drafted by the National Conference of Commissioners on Uniform State Laws (“NCCUSL”) is the stuff of many other legal blogs. For the purpose of this blog entry, we want to focus on one small part: the requirements for creating a valid trust under MUTC where a general durable power of attorney is in play.
Consider the following fact pattern:
Jeeves is an older gentleman who has considerable assets that he wishes to leave in trust for the benefit of his children. His existing estate plan documents were executed some years ago – before Jeeves made his millions – and his estate plan documents are comprised of a Will, general durable power of attorney (which expressly authorize the creation and amendment of revocable trusts of which Jeeves is the settlor), a health care proxy, and a living will.
Jeeves visits his attorney a number of times over a two-month period to consider alternatives and to craft an inter-vivos revocable trust that he intends to execute and fund.
Alas, as warned on a worse-case scenario basis time and again throughout this nation’s Estates and Trusts Law Departments, while on the way to his attorney’s office to sign the trust, Jeeves indeed does get hit by a bus and suffers a serious brain injury. He no longer has capacity to create a trust.
- §402(a) (1) of the MUTC requires that the settlor must have “capacity to create a trust”; and
- §402(a) (2) requires that the settlor must “indicate an intention to create the trust”.
Jeeves is without capacity to create a trust and presumably, without capacity, cannot indicate his intent to create the trust at the signing. §402 is silent with regard to whether an agent acting under a POA may create a trust on behalf of its principal. In light of the requirements of creation laid out in subparagraphs (a) (l) and (a) (2) above, a plain reading of the statute would not validate a trust created by an agent under a POA.
Not yet convinced? Consider that other provisions of MUTC specifically call out the powers of an agent with respect to revocation, amendment or distribution of trust property under §602(e), entitled “Revocation or Amendment of Revocable Trust”:
A settlor’s powers with respect to revocation, amendment or distribution of trust property may be exercised by an agent under a power of attorney only to the extent expressly authorized by the terms of the trust and the power.
In other words, if the Legislature intended to grant an agent the power to create a trust on behalf of a settlor under a power of attorney, it could have specifically done so in §402 just as it did with the powers included in §602(e). As a generally accepted rule of statutory construction, where the Legislature “includes particular language in one section of a statute but omits it in another section of the same Act, it is generally presumed that [the Legislature] acts intentionally and purposely in the disparate inclusion or exclusion.” Rodriguez v. United States, 480 U.S. 522, 525 (1987).
Indeed, our neighbor to the north has enacted statutory language in this regard that expressly authorizes such action by an agent. Vermont statute 14 V.S.A. §401(5) (A) specifically permits creation of a trust “by an agent or attorney-in-fact under a power of attorney that expressly grants authority to create the trust.” As the argument goes, if Vermont made the conscious choice to add such language to their equivalent of MUTC, then so too could the Massachusetts Legislature; that is, if it in fact intended to authorize an agent to create a trust on behalf of a principal like Jeeves, it would have done so.
The “that’s a lot of power!” argument? Pure opinion here. To authorize an agent to amend an existing revocable trust is to grant substantial power to that person. The Legislature has put some level of safeguard in place by requiring express authority in both the POA and the trust document. And one would surmise that the amendment power might not be unfettered, but would be for such purposes as to account for unforeseen events, to amend for tax-law changes, or to correct errors (and perhaps the required POA language should be that specific). In this situation, however, a Court-ordered estate plan is likely the better option, as it tends to avoid these uncertainties.
In Jeeves’ situation there seems to be pretty good evidence of his intended trust terms, and the inability of the agent to quickly carry out his apparent intention would be unfortunate. But to allow the creation of a new trust by the agent is, it seems to us, a higher level of control over the principal’s assets that the Massachusetts Legislature has declined to embrace.
Ultimately, in the face of a dearth of case law interpreting MUTC in this respect (and, for that matter, of a dearth of pre-MUTC case law on the subject), the answer remains uncertain. From our perspective, a colorable argument can be made that while MUTC permits an agent to revoke or amend an existing trust validly executed and created by the principal, MUTC does not permit an agent to create a new trust on the principal’s behalf.