Jurisdiction over Administration

Terms:

Trust:
A trust is a fiduciary relationship with respect to specific property, to which the trustee holds the legal title for the benefit of one or more persons, who hold equitable title as beneficiaries. Thus, two forms of ownership interests—legal and equitable—exist in the same property at the same time.

Settlor (aka trustor, donor, transferor, grantor, testator):
The settlor is the person who creates the trust, either by inter vivos transfer or by will.

Testamentary trust:
Trust that takes effect at the death of the settlor or testator.

Inter vivos trust:
Trust created during lifetime of settlor and to become effective in his lifetime.

Chattel:
An article of personal property, as distinguished from real property. A chattel is personal and movable. It may refer to animate as well as inanimate property.

Domicile:
A person’s usual and permanent dwelling place; where the person intends to return after temporary absences.

Uniform Probate Code (“UPC”):
A body of law, substantive and procedural, which sought to clarify and modernize the rules in the wills area and bring greater uniformity among the states. The original UPC was promulgated in 1969; the revised UPC was promulgated in 1990 and amended in 1993.

As with administering a will, most states have specialized courts, such as the probate court, that have jurisdiction over administering trusts. Other states use their courts of general jurisdiction to oversee trusts.

Also as with wills, the law of the place where the land is located determines the validity and effect of a trust concerning land. For personal property (or chattel), the settlor’s domicile is the key determining factor in jurisdiction selection for a testamentary trust involving chattel. Yet, if the laws of the testator’s domicile would defeat the intent of the testator, the law of the place where the property is located would govern instead.

Example: Jack has lived for most of his life in Arizona. Although he recently moved to California, he still has personal property (or chattel) in Arizona. While in California, Jack dies. His will disposes of his chattels in Arizona to his nephew, Alec, in trust; the trust is to be administered under Arizona law. When the trust is evaluated under California’s trust law (where Jack was domiciled when he died) it was found to be invalid under the California Rule Against Perpetuities. However, the trust was valid under Arizona law. Jack's heirs sued in Arizona to invalidate the trust. Generally, the law where the settlor/testator was domiciled would determine the validity of the trust involving chattel. In this case, however, the court held that the trust was valid (using Arizona law) because application of that general rule (meaning that the law would follow the settlor’s domicile) would result in the trust being invalid, which would be contrary to the settlor’s intention. See, e.g., Matter of Chappell, 213 P. 684 (Wash. 1923).

For an inter vivos trust involving chattel, the law of the place where the chattel is located at the time of the creation of the trust governs.

Example: Hugh, a resident of Alabama, takes securities and cash worth $250,000 to the state of New York and delivers them to Blair to hold in trust. In Alabama, the trust would be invalid; however, in New York the trust would be valid and enforceable. The court held that New York law governs the trust, thereby making it valid. See Hutchison v. Ross, 187 N.E. 65 (N.Y. 1933).

Once the validity of the trust is determined, jurisdiction for administering the trust must be established. Generally, the administration of a trust of chattel is governed by the law of the place designated by the settlor.

The Uniform Probate Code (“UPC”) first eliminates the distinction between testamentary and inter vivos trusts. Next, it calls for the registering of both testamentary and inter vivos trusts in the probate court for ease of administration. Registration submits the trustee to that court’s jurisdiction. As such, the place where the trust was created loses its significance.

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