The Vermont Statutes Online

Title 14A: Trusts

Chapter 001: General Provisions and Definitions

• § 101. Short title

  This title may be cited as the Vermont Trust Code. (Added 2009, No. 20, § 1.)

• § 102. Scope

  (a) This title applies to express trusts, charitable or noncharitable, and trusts created pursuant to a statute, judgment, or decree that requires the trust to be administered in the manner of an express trust. Except as provided in subsection (b) of this section, this title shall not apply to trusts described in the following provisions of Vermont Statutes Annotated: 3 V.S.A. chapter 16; 6 V.S.A. chapter 151; 8 V.S.A. chapters 103, 204, and 222; 10 V.S.A. chapters 11A, 12, and 59; 11A V.S.A. chapter 7; 15 V.S.A. chapter 11; 16 V.S.A. chapters 55, 90, and 131; 18 V.S.A. chapters 121, 177, and 225; 21 V.S.A. chapter 9; 24 V.S.A. chapters 65, 119, 125, and 133; 27 V.S.A. chapter 7; 28 V.S.A. chapter 11; 29 V.S.A. chapter 16; and 30 V.S.A. chapters 84 and 91; but section 1013 of this title (certification of trust) shall apply to all such trusts.

  (b) Section 1013 of this title (certification of trust) shall apply to all trusts described in subsection (a) of this section. (Added 2009, No. 20, § 1; amended 2009, No. 92 (Adj. Sess.), § 4; 2009, No. 132 (Adj. Sess.), § 11, eff. May 29, 2010.)

• § 103. Definitions

  In this title:

  (1) “Action,” with respect to an act of a trustee, includes a failure to act.

  (2) “Ascertainable standard” means a standard relating to an individual’s health, education, support, or maintenance within the meaning of Section 2041(b)(1)(A) or 2514(c)(1) of the Internal Revenue Code of 1986, as in effect on the effective date of this title.

  (3) “Beneficiary” means a person that:

  (A) has a present or future beneficial interest in a trust, vested or contingent; or

  (B) in a capacity other than that of trustee, holds a power of appointment over trust property.

  (4) “Charitable trust” means a trust, or portion of a trust, created for a charitable purpose described in subsection 405(a) of this title.

  (5) “Conservator” shall have the same meaning as “Guardian of the property” under subdivision 7(A)(ii) of this section.

  (6) “Environmental law” means a federal, state, or local law, rule, regulation, or ordinance relating to protection of the environment.

  (7)(A) “Guardian.”

  (i) “Guardian of the person” means a person appointed by the Probate Division of the Superior Court to make decisions regarding the support, care, education, health, and welfare of a minor or adult individual.

  (ii) “Guardian of the property” means a person appointed by the Probate Division of the Superior Court to administer the estate of a minor or adult individual.

  (B) Neither term includes a guardian ad litem.

  (8) “Interests of the beneficiaries” means the beneficial interests provided in the terms of the trust.

  (9) “Jurisdiction,” with respect to a geographic area, includes a state or country.

  (10) “Person” means an individual, corporation, business trust, estate, trust, partnership, limited liability company, association, joint venture, or government; governmental subdivision, agency, or instrumentality; public corporation, or any other legal or commercial entity.

  (11) “Power of withdrawal” means a presently exercisable general power of appointment other than a power:

  (A) exercisable by a trustee and limited by an ascertainable standard; or

  (B) exercisable by another person only upon consent of the trustee or a person holding an adverse interest.

  (12) “Property” means anything that may be the subject of ownership, whether real or personal, legal or equitable, or any interest therein.

  (13)(A) “Qualified beneficiary” means a beneficiary who, on the date the beneficiary’s qualification is determined, is:

  (i) a “first tier” beneficiary as a distributee or permissible distributee of trust income or principal;

  (ii) a “second tier” beneficiary who would be a first tier beneficiary of trust income or principal if the interests of the distributees described in subdivision (A)(i) of this subdivision (13) terminated on that date without causing the trust to terminate; or

  (iii) a “final beneficiary” who would be a distributee or permissible distributee of trust income or principal if the trust terminated on that date.

  (B) Notwithstanding subdivisions (A)(ii) and (iii) of this subdivision (13), a second tier beneficiary or a final beneficiary shall not be a “qualified beneficiary” if the beneficiary’s interest in the trust:

  (i) is created by the exercise of a power of appointment and the exercise of the power of appointment is not irrevocable; or

  (ii) may be eliminated by an amendment to the trust.

  (14) “Revocable,” as applied to a trust, means revocable by the settlor without the consent of the trustee or a person holding an adverse interest.

  (15) “Settlor” means a person, including a testator, who creates, or contributes property to, a trust. If more than one person creates or contributes property to a trust, each person is a settlor of the portion of the trust property attributable to that person’s contribution except to the extent another person has the power to revoke or withdraw that portion.

  (16) “Spendthrift provision” means a term of a trust which restrains both voluntary and involuntary transfer of a beneficiary’s interest.

  (17) “State” means a state of the United States, the District of Columbia, Puerto Rico, the U.S. Virgin Islands, or any territory or insular possession subject to the jurisdiction of the United States. The term includes a Native American tribe or band recognized by federal law or formally acknowledged by a state.

  (18) “Terms of a trust” means the manifestation of the settlor’s intent regarding a trust’s provisions as expressed in the trust instrument or as may be established by other evidence that would be admissible in a judicial proceeding.

  (19) “Trust instrument” means an instrument executed by the settlor that contains terms of the trust, including any amendments to the instrument.

  (20) “Trustee” includes an original, additional, and successor trustee, and a cotrustee. (Added 2009, No. 20, § 1; amended 2009, No. 92 (Adj. Sess.), § 5; 2009, No. 154 (Adj. Sess.), § 236, eff. Feb. 1, 2011.)

• § 104. Knowledge

  (a) Subject to subsection (b) of this section, a person has knowledge of a fact if the person:

  (1) has actual knowledge of it;

  (2) has received a notice or notification of it; or

  (3) from all the facts and circumstances known to the person at the time in question, has reason to know it.

  (b) An organization that conducts activities through employees has notice or knowledge of a fact involving a trust only from the time the information was received by an employee having responsibility to act for the trust, or would have been brought to the employee’s attention if the organization had exercised reasonable diligence. An organization exercises reasonable diligence if it maintains reasonable routines for communicating significant information to the employee having responsibility to act for the trust and there is reasonable compliance with the routines. Reasonable diligence does not require an employee of the organization to communicate information unless the communication is part of the individual’s regular duties or the individual knows a matter involving the trust would be materially affected by the information. (Added 2009, No. 20, § 1.)

• § 105. Default and mandatory rules

  (a) Except as otherwise provided in the terms of the trust, this title governs the duties and powers of a trustee, relations among trustees, and the rights and interests of a beneficiary.

  (b) The terms of a trust prevail over any provision of this title except:

  (1) the requirements for creating a trust;

  (2) the duty of a trustee to act in good faith and in accordance with the terms and purposes of the trust and the interests of the beneficiaries;

  (3) the requirement that a trust and its terms be for the benefit of its beneficiaries, and that the trust have a purpose that is lawful, not contrary to public policy, and possible to achieve;

  (4) the power of the Probate Division of the Superior Court to modify or terminate a trust under sections 410 through 416 of this title;

  (5) the effect of a spendthrift provision and the rights of certain creditors and assignees to reach a trust as provided in chapter 5 of this title;

  (6) the power of the Probate Division of the Superior Court under section 702 of this title to require, dispense with, or modify or terminate a bond;

  (7) the power of the Probate Division of the Superior Court under subsection 708(b) of this title to adjust a trustee’s compensation specified in the terms of the trust which is unreasonably low or high;

  (8) the effect of an exculpatory term under section 1008 of this title;

  (9) the rights under sections 1010 through 1013 of this title of a person other than a trustee or beneficiary;

  (10) periods of limitation for commencing a judicial proceeding;

  (11) the power of the Probate Division of the Superior Court to take such action and exercise such jurisdiction as may be necessary in the interests of justice; and

  (12) the subject matter jurisdiction of the Probate Division of the Superior Court and venue for commencing a proceeding as provided in sections 203 and 204 of this title. (Added 2009, No. 20, § 1; amended 2009, No. 154 (Adj. Sess.), § 236, eff. Feb. 1, 2011.)

• § 106. Common law of trusts; principles of equity

  The common law of trusts and principles of equity supplement this title, except to the extent modified by this title or another statute of this state. (Added 2009, No. 20, § 1.)

• § 107. Governing law

  The meaning and effect of the terms of a trust are determined by:

  (1) the law of the jurisdiction designated in the terms unless the designation of that jurisdiction’s law is contrary to a strong public policy of the jurisdiction having the most significant relationship to the matter at issue; or

  (2) in the absence of a controlling designation in the terms of the trust, the law of the jurisdiction having the most significant relationship to the matter at issue. (Added 2009, No. 20, § 1.)

• § 108. Principal place of administration

  (a) Without precluding other means for establishing a sufficient connection with the designated jurisdiction, terms of a trust designating the principal place of administration are valid and controlling if:

  (1) a trustee’s principal place of business is located in or a trustee is a resident of the designated jurisdiction; or

  (2) all or part of the administration occurs in the designated jurisdiction.

  (b) A trustee is under a continuing duty to administer the trust at a place appropriate to its purposes, its administration, and the interests of the beneficiaries.

  (c) Without precluding the right of the Probate Division of the Superior Court to order, approve, or disapprove a transfer, the trustee, in furtherance of the duty prescribed by subsection (b) of this section, may transfer the trust’s principal place of administration to another state or to a jurisdiction outside the United States.

  (d) The trustee shall notify the qualified beneficiaries of a proposed transfer of a trust’s principal place of administration not less than 60 days before initiating the transfer. The notice of proposed transfer must include:

  (1) the name of the jurisdiction to which the principal place of administration is to be transferred;

  (2) the address and telephone number at the new location at which the trustee can be contacted;

  (3) an explanation of the reasons for the proposed transfer;

  (4) the date on which the proposed transfer is anticipated to occur; and

  (5) the date, not less than 60 days after the giving of the notice, by which the qualified beneficiary must notify the trustee of an objection to the proposed transfer.

  (e) The authority of a trustee under this section to transfer a trust’s principal place of administration terminates if a qualified beneficiary notifies the trustee of an objection to the proposed transfer on or before the date specified in the notice.

  (f) In connection with a transfer of the trust’s principal place of administration, the trustee may transfer some or all of the trust property to a successor trustee designated in the terms of the trust or appointed pursuant to section 704 of this title. (Added 2009, No. 20, § 1; amended 2009, No. 154 (Adj. Sess.), § 236, eff. Feb. 1, 2011.)

• § 109. Methods and waiver of notice

  (a) Notice to a person under this title or the sending of a document to a person under this title must be accomplished in a manner reasonably suitable under the circumstances and likely to result in receipt of the notice or document. Permissible methods of notice or for sending a document include first-class mail, commercial delivery service, personal delivery, delivery to the person’s last known place of residence or place of business, or a properly directed electronic message.

  (b) Notice otherwise required under this title or a document otherwise required to be sent under this title need not be provided to a person whose identity or location is unknown to and not reasonably ascertainable by the trustee.

  (c) Notice under this title or the sending of a document under this title may be waived by the person to be notified or sent the document.

  (d) Notice of a judicial proceeding must be given as provided in the applicable rules of court procedure. (Added 2009, No. 20, § 1.)

• § 110. Others treated as qualified beneficiaries

  (a) Whenever notice to qualified beneficiaries of a trust is required under this title, the trustee shall also give notice to any other beneficiary who has sent the trustee a request for notice.

  (b)(1) A charitable organization expressly designated to receive distributions under the terms of a charitable trust has the rights of a qualified beneficiary under this title if the charitable organization, on the date the charitable organization’s qualification is being determined, is:

  (A) a “first tier” beneficiary as a distributee or permissible distributee of trust income or principal;

  (B) a “second tier” beneficiary who would be a first tier beneficiary of trust income or principal if the interests of the distributees described in subdivision (1)(A) of this subsection (b) terminated on that date without causing the trust to terminate; or

  (C) a “final beneficiary” who would be a distributee or permissible distributee of trust income or principal if the trust terminated on that date.

  (2) Notwithstanding subdivision (1) of this subsection (b), a second tier beneficiary or a final beneficiary whose interest in the trust is created by the exercise of a power of appointment, and the exercise of the power of appointment is not irrevocable, shall not have the rights of a “qualified beneficiary.”

  (c) A person appointed to enforce a trust created for the care of an animal or another noncharitable purpose as provided in section 408 or 409 of this title has the rights of a qualified beneficiary under this title.

  (d) The Attorney General of this State has the rights of a qualified beneficiary with respect to a charitable trust having its principal place of administration in this State. (Added 2009, No. 20, § 1.)

• § 111. Nonjudicial settlement agreements

  (a) For purposes of this section, “interested persons” means persons whose consent would be required in order to achieve a binding settlement were the settlement to be approved by the Probate Division of the Superior Court.

  (b) Except as otherwise provided in subsection (c) of this section, interested persons may enter into a binding nonjudicial settlement agreement with respect to any matter involving a trust.

  (c) A nonjudicial settlement agreement is valid only to the extent it does not violate a material purpose of the trust and includes terms and conditions that could be properly approved by the Probate Division of the Superior Court under this title or other applicable law.

  (d) Matters that may be resolved by a nonjudicial settlement agreement include:

  (1) the interpretation or construction of the terms of the trust;

  (2) the approval of a trustee’s report or accounting;

  (3) direction to a trustee to perform or to refrain from performing a particular act or the grant to a trustee of any necessary or desirable power;

  (4) the resignation or appointment of a trustee and the determination of a trustee’s compensation;

  (5) transfer of a trust’s principal place of administration; and

  (6) liability of a trustee for an action relating to the trust.

  (e) Any interested person may request the Probate Division of the Superior Court to approve a nonjudicial settlement agreement to determine whether the representation as provided in chapter 3 of this title was adequate, and to determine whether the agreement contains terms and conditions the Probate Division of the Superior Court could have properly approved. (Added 2009, No. 20, § 1; amended 2009, No. 92 (Adj. Sess.), § 5; 2009, No. 154 (Adj. Sess.), § 236, eff. Feb. 1, 2011.)

• § 112. Rules of construction

  The rules of construction that apply in this State to the interpretation of and disposition of property by will also apply as appropriate to the interpretation of the terms of a trust and the disposition of the trust property. (Added 2009, No. 20, § 1.)