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The Vermont Statutes Online

 

Title 14A: Trusts

Chapter 004: CREATION, VALIDITY, MODIFICATION, AND TERMINATION OF TRUST

  • § 401. Methods of creating trust

    A trust may be created:

    (1) by transfer of property to another person as trustee or to the trust in the trust's name during the settlor's lifetime or by will or other disposition taking effect upon the settlor's death;

    (2) by declaration by the owner of property that the owner holds identifiable property as trustee;

    (3) by exercise of a power of appointment in favor of a trustee;

    (4) pursuant to a statute or judgment or decree that requires property to be administered in the manner of an express trust;

    (5)(A) by an agent or attorney-in-fact under a power of attorney that expressly grants authority to create the trust; or

    (B) by an agent or attorney-in-fact under a power of attorney that grants the agent or attorney-in-fact the authority to act in the management and disposition of the principal's property that is as broad or comprehensive as the principal could exercise for himself or herself and that does not expressly exclude the authority to create a trust, provided that any trust so created does not include any authority or powers that are otherwise prohibited by 14 V.S.A. § 3504. An agent or attorney-in-fact may petition the Probate Division of the Superior Court to determine whether a power of attorney described in this subdivision grants the agent or attorney-in-fact authority that is as broad or comprehensive as that which the principal could exercise for himself or herself. (Added 2009, No. 20, § 1; amended 2009, No. 154 (Adj. Sess.), § 236, eff. Feb. 1, 2011.)

  • § 402. Requirements for creation

    (a) A trust is created only if:

    (1) the settlor has capacity to create a trust;

    (2) the settlor indicates an intention to create the trust;

    (3) the trust has a definite beneficiary or is:

    (A) a charitable trust;

    (B) a trust for the care of an animal, as provided in section 408 of this title; or

    (C) a trust for a noncharitable purpose, as provided in section 409 of this title;

    (4) the trustee has duties to perform; and

    (5) the same person is not the sole trustee and sole beneficiary of all beneficial interests.

    (b) A settlor is deemed to have the capacity to create a trust if:

    (1) the trust is created by an agent of the settlor under a power of attorney as described in subdivision 401(5) of this title; and

    (2) the settlor had capacity to create a trust at the time the power of attorney was executed.

    (c) A beneficiary is definite if the beneficiary can be ascertained now or in the future, subject to any applicable rule against perpetuities.

    (d) A power in a trustee to select a beneficiary from an indefinite class is valid. If the power is not exercised within a reasonable time, the power fails and the property subject to the power passes to the persons who would have taken the property had the power not been conferred. (Added 2009, No. 20, § 1; amended 2009, No. 92 (Adj. Sess.), § 6.)

  • § 403. Trusts created in other jurisdictions

    A trust not created by will is validly created if its creation complies with the law of the jurisdiction in which the trust instrument was executed, or the law of the jurisdiction in which, at the time of creation:

    (1) the settlor was domiciled, had a place of abode, or was a citizen;

    (2) a trustee was domiciled or had a place of business; or

    (3) any trust property was located. (Added 2009, No. 20, § 1.)

  • § 404. Trust purposes

    A trust may be created only to the extent its purposes are lawful, not contrary to public policy, and possible to achieve. A trust and its terms must be for the benefit of its beneficiaries. (Added 2009, No. 20, § 1.)

  • § 405. Charitable purposes; enforcement

    (a) A charitable trust may be created for the relief of poverty; the advancement of education or religion; the promotion of health, scientific, literary, benevolent, governmental, or municipal purposes; or other purposes the achievement of which is beneficial to the community.

    (b) If the terms of a charitable trust do not indicate a particular charitable purpose or beneficiary or if the designated charitable purpose cannot be completed or no longer exists, the trustee, if authorized by the terms of the trust, or if not, the Probate Division of the Superior Court may select one or more charitable purposes or beneficiaries. The selection must be consistent with the settlor's intention to the extent it can be ascertained.

    (c) The settlor of a charitable trust, the Attorney General, a cotrustee, or a person with a special interest in the charitable trust may maintain a proceeding to enforce the trust. (Added 2009, No. 20, § 1; amended 2009, No. 154 (Adj. Sess.), § 236, eff. Feb. 1, 2011.)

  • § 406. Creation of trust induced by fraud, duress, or undue influence

    A trust is void to the extent its creation was induced by fraud, duress, or undue influence. (Added 2009, No. 20, § 1.)

  • § 407. Evidence of oral trust

    Except as required by a statute other than this title, a trust need not be evidenced by a trust instrument, but the creation of an oral trust and its terms may be established only by clear and convincing evidence. (Added 2009, No. 20, § 1.)

  • § 408. Trust for care of animal

    (a) A trust may be created to provide for the care of an animal alive during the settlor's lifetime. The trust terminates upon the death of the animal or, if the trust was created to provide for the care of more than one animal alive during the settlor's lifetime, upon the death of the last surviving animal.

    (b) A trust authorized by this section may be enforced by a person appointed in the terms of the trust or, if no person is so appointed, by a person appointed by the Probate Division of the Superior Court. A person having an interest in the welfare of the animal may request the Probate Division of the Superior Court to appoint a person to enforce the trust or to remove a person appointed.

    (c) Property of a trust authorized by this section may be applied only to its intended use, except to the extent the Probate Division of the Superior Court determines that the value of the trust property exceeds the amount required for the intended use. Except as otherwise provided in the terms of the trust, property not required for the intended use must be distributed to the settlor, if then living, otherwise to the settlor's successors in interest. (Added 2009, No. 20, § 1; amended 2009, No. 154 (Adj. Sess.), § 236, eff. February 1, 2011.)

  • § 409. Noncharitable trust without ascertainable beneficiary

    Except as otherwise provided in section 408 of this title or by another statute, the following rules apply:

    (1) A trust may be created for a noncharitable purpose without a definite or definitely ascertainable beneficiary or for a noncharitable but otherwise valid purpose to be selected by the trustee. The trust may not be enforced for more than 21 years.

    (2) A trust authorized by this section may be enforced by a person appointed in the terms of the trust or, if no person is so appointed, by a person appointed by the Probate Division of the Superior Court.

    (3) Property of a trust authorized by this section may be applied only to its intended use, except to the extent the Probate Division of the Superior Court determines that the value of the trust property exceeds the amount required for the intended use. Except as otherwise provided in the terms of the trust, property not required for the intended use must be distributed to the settlor, if then living, otherwise to the settlor's successors in interest. (Added 2009, No. 20, § 1; amended 2009, No. 154 (Adj. Sess.), § 236, eff. Feb. 1, 2011.)

  • § 410. Modification or termination of trust; proceedings for approval or disapproval

    (a) In addition to the methods of termination prescribed by sections 411 through 414 of this title, a trust terminates to the extent the trust is revoked or expires pursuant to its terms, no purpose of the trust remains to be achieved, or the purposes of the trust have become unlawful, contrary to public policy, or impossible to achieve.

    (b) A proceeding to approve or disapprove a proposed modification or termination under sections 411 through 416 of this title, or trust combination or division under section 417 of this title, may be commenced by a trustee or beneficiary, and a proceeding to approve or disapprove a proposed modification or termination under section 411 of this title may be commenced by the settlor. The settlor of a charitable trust may maintain a proceeding to modify the trust under section 413 of this title. (Added 2009, No. 20, § 1.)

  • § 411. Modification or termination of noncharitable irrevocable trust by consent

    (a) A noncharitable irrevocable trust may be modified or terminated upon consent of the settlor and all beneficiaries, even if the modification or termination is inconsistent with a material purpose of the trust. If, upon petition, the Probate Division of the Superior Court finds that the settlor and all beneficiaries consent to the modification or termination of a noncharitable irrevocable trust, the Probate Division of the Superior Court shall approve the modification or termination even if the modification or termination is inconsistent with a material purpose of the trust. A settlor's power to consent to a trust's modification or termination may be exercised by an agent under a power of attorney only to the extent expressly authorized by the power of attorney or the terms of the trust; by the settlor's guardian of the property with the approval of the Probate Division of the Superior Court supervising the guardianship if an agent is not so authorized; or by the settlor's guardian of the person with the approval of the Probate Division of the Superior Court supervising the guardianship if an agent is not so authorized and a guardian of the property has not been appointed.

    (b) A noncharitable irrevocable trust may be terminated upon consent of all of the beneficiaries if the Probate Division of the Superior Court concludes that continuance of the trust is not necessary to achieve any material purpose of the trust. A noncharitable irrevocable trust may be modified upon consent of all of the beneficiaries if the Probate Division of the Superior Court concludes that modification is not inconsistent with a material purpose of the trust.

    (c) A spendthrift provision in the terms of the trust is not presumed to constitute a material purpose of the trust.

    (d) Upon termination of a trust under subsection (a) or (b) of this section, the trustee shall distribute the trust property as agreed by the beneficiaries.

    (e) If not all of the beneficiaries consent to a proposed modification or termination of the trust under subsection (a) or (b) of this section, the modification or termination may be approved by the Probate Division of the Superior Court if the Probate Division of the Superior Court is satisfied that:

    (1) if all of the beneficiaries had consented, the trust could have been modified or terminated under this section; and

    (2) the interests of a beneficiary who does not consent will be adequately protected. (Added 2009, No. 20, § 1; amended 2009, No. 154 (Adj. Sess.), § 236, eff. Feb. 1, 2011.)

  • § 412. Modification or termination because of unanticipated circumstances or inability to administer trust effectively

    (a) The Probate Division of the Superior Court may modify the administrative or dispositive terms of a trust or terminate the trust if, because of circumstances not anticipated by the settlor, modification or termination will further the purposes of the trust. To the extent practicable, the modification must be made in accordance with the settlor's probable intention.

    (b) The Probate Division of the Superior Court may modify the administrative terms of a trust if continuation of the trust on its existing terms would be impracticable or wasteful or impair the trust's administration.

    (c) Upon termination of a trust under this section, the trustee shall distribute the trust property as directed by the Probate Division of the Superior Court or otherwise in a manner consistent with the purposes of the trust. (Added 2009, No. 20, § 1; amended 2009, No. 154 (Adj. Sess.), § 236, eff. Feb. 1, 2011.)

  • § 413. Cy pres

    (a) Except as otherwise provided in subsection (b) of this section, if a particular charitable purpose becomes unlawful, impracticable, impossible to achieve, or wasteful:

    (1) the trust does not fail, in whole or in part;

    (2) the trust property does not revert to the settlor or the settlor's successors in interest; and

    (3) the Probate Division of the Superior Court, on motion of any trustee, or any interested person, or the Attorney General, may apply cy pres to modify or terminate the trust by directing that the trust property be applied or distributed, in whole or in part, in a manner consistent with the settlor's charitable purposes.

    (b) A provision in the terms of a charitable trust that would result in distribution of the trust property to a noncharitable beneficiary prevails over the power of the Probate Division of the Superior Court under subsection (a) of this section to apply cy pres to modify or terminate the trust only if, when the provision takes effect:

    (1) the trust property is to revert to the settlor and the settlor is still living; or

    (2) fewer than 21 years have elapsed since the date of the trust's creation. (Added 2009, No. 20, § 1; amended 2009, No. 154 (Adj. Sess.), § 236, eff. February 1, 2011.)

  • § 414. Modification or termination of uneconomic trust

    (a) After notice to the qualified beneficiaries, the trustee of a trust consisting of trust property having a total value less than $100,000.00 may terminate the trust if the trustee concludes that the value of the trust property is insufficient to justify the cost of administration.

    (b) The Probate Division of the Superior Court may modify or terminate a trust or remove the trustee and appoint a different trustee if it determines that the value of the trust property is insufficient to justify the cost of administration.

    (c) Upon termination of a trust under this section, the trustee shall distribute the trust property as directed by the Probate Division of the Superior Court or otherwise in a manner consistent with the purposes of the trust.

    (d) This section does not apply to an easement for conservation or preservation. (Added 2009, No. 20, § 1; amended 2009, No. 154 (Adj. Sess.), § 236, eff. February 1, 2011.)

  • § 415. Reformation to correct mistakes

    The Probate Division of the Superior Court may reform the terms of a trust, even if unambiguous, to conform the terms to the settlor's intention if it is proved by clear and convincing evidence that both the settlor's intent and the terms of the trust were affected by a mistake of fact or law, whether in expression or inducement. (Added 2009, No. 20, § 1; amended 2009, No. 154 (Adj. Sess.), § 236, eff. February 1, 2011.)

  • § 416. Modification to achieve settlor's tax objectives

    The Probate Division of the Superior Court may modify the terms of a trust to achieve the settlor's tax objectives if the modification is not contrary to the settlor's probable intention. The Probate Division of the Superior Court may provide that the modification has retroactive effect. (Added 2009, No. 20, § 1; amended 2009, No. 154 (Adj. Sess.), § 236, eff. Feb. 1, 2011.)

  • § 417. Combination and division of trusts

    After notice to the qualified beneficiaries, a trustee may combine two or more trusts into a single trust or divide a trust into two or more separate trusts if the result does not impair rights of any beneficiary or adversely affect achievement of the purposes of the trust. (Added 2009, No. 20, § 1.)

  • § 418. Intentional and unlawful killing; termination of interest in trust

    (a) A person who commits an intentional and unlawful killing shall forfeit an interest in a trust:

    (1) to the extent the trust was funded by the victim of the intentional and unlawful killing or would be funded by the victim's estate;

    (2) to the extent the person's interest in the trust is augmented or advanced by the termination of the victim's interest in the trust as the result of the person's intentional and unlawful killing of the victim, and the interest is attributable to funding by someone other than the person or the victim of the intentional and unlawful killing;

    (3) if the interest was created as the result of an exercise of a power of appointment held by the victim.

    (b) An interest in a trust that is forfeited under subsection (a) of this section shall be administered and distributed in accordance with the terms of the trust as if the person whose interest is forfeited died on the date of the intentional and unlawful killing.

    (c) A person who commits an intentional and unlawful killing shall be removed as trustee of a trust:

    (1) that was funded by the victim of the intentional and unlawful killing or would be funded by the victim's estate;

    (2) in which the person's interest in the trust is augmented or advanced by the termination of the victim's interest in the trust as the result of the person's intentional and unlawful killing of the victim, and the interest is attributable to funding by someone other than the person or the victim of the intentional and unlawful killing.

    (d) For purposes of this section, the record of a conviction of a person for an intentional and unlawful killing of another shall be conclusive evidence that the person committed an intentional and unlawful killing of the other person.

    (e) In the absence of a final judgment of conviction, a beneficiary or trustee of a trust may petition the Probate Division of the Superior Court for a determination, or the court may on its own initiative determine, that the interest of a person who commits an intentional and unlawful killing has been forfeited under subsection (a) of this section, or that a person should be removed as trustee under subsection (c) of this section.

    (f) This section shall apply to any interest in a trust that is or will be distributed on or after January 1, 2009. (Added 2009, No. 55, § 9; amended 2009, No. 154 (Adj. Sess.), § 236, eff. February 1, 2011.)