July 15, 2014
Authored by: Luke Lantta
Even if a state has ‘adopted’ the Uniform Trust Code, you still need to compare the actual UTC language against the language in that state’s ‘uniform’ trust code – including definitions. The United States Tenth Circuit Court of Appeals’ decision in Kastner v. Intrust Bank draws our attention to how Kansas – a UTC state – has departed from the UTC’s definition of “qualified beneficiary,” which had major consequences for a beneficiary of a trust.
Jessie I. Brooks executed a revocable trust that provided distributions would be made to Ms. Brooks during her lifetime and, upon her death, continued for the benefit of her daughter, Nola Mae Wills. The trust also provided that the remainder of the trust’s assets, if any, would be distributed to Ms. Brooks’ grandson, Kristofer Thomas Kastner, upon the death of his mother, Ms. Wills. Although Ms. Brooks died, Ms. Wills was still living and receiving income distributions from the trust.
Under the Uniform Trust Code, the Court found that this would make Mr. Kastner a qualified beneficiary because on the date that his qualification was determined he is an individual who would be eligible to receive a distribution if the current distributee’s interests terminated without terminating the trust (i.e., he would be a distributee if Ms. Wills’ interest terminated and the trust continued). See UTC § 103(13)(B). Not so under the Kansas Uniform Trust Code. Here, the Kansas Uniform Trust Code departs from the UTC. Under the KUTC, a qualified beneficiary is a beneficiary who, as of the date in question, is either eligible to receive mandatory or discretionary distributions of trust income or principal, or would be so eligible if the trust terminated on that date. K.S.A. 58a-103(12)(A). Thus, the Kansas Uniform Trust Code does not include within its definition of “qualified beneficiary” an individual who would be eligible to receive a distribution if the current distributee’s interests terminated without terminating the trust. This is a critical distinction because, while Mr. Kastner would be a qualified beneficiary under the UTC, he was not under the Kansas Uniform Trust Code. Thus, Mr. Kastner could not maintain claims for reformation of the trust or removal of the trustee as those can only be brought by qualified beneficiaries of a trust.