Article Archives >> Lead Stories >> March 16-31, 2008

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Court Permits Deviation from Trust
Based on Unanticipated Circumstances
Uniform Trust Code authorizes sale of property
and use of proceeds for purposes of original gift

The Supreme Judicial Court of Maine has held that the Uniform Trust Code, adopted in the state in 2005, permits modification of the terms of a charitable trust because of circumstances not anticipated by the donor if such modification will further the purposes of the trust.  It has affirmed a trial court decision allowing the City of Augusta to sell land originally put in trust for a school in 1815, remove use restrictions for the purchaser, and use the proceeds to maintain the trust for a new school to replace the one sold. (City of Augusta v. Attorney General, No. Ken-07-246, 3/18/08.)

On Christmas day, 1815, Daniel Coney conveyed a parcel of land in Augusta to five named trustees in trust for a “female academy” on the site.  He added an additional parcel to the trust 10 years later.  The property was transferred to the City in trust in 1908 and it continued to operate a school on the site as the Coney Free High School until 2006.  Because one of the buildings was in poor condition and the City thought a new high school at a different location would be beneficial, it sought approval to sell part of the land and use the proceeds as a trust to support the new school.  The Court allowed a descendant of the original donor to intervene to oppose the request.

The descendant argued that even though the Legislature had passed the Uniform Trust Code the Court should apply the prior standards for modification.  She claimed that it should act only under circumstances of “emergency or exigency,” “extreme hardship,” “virtual necessity” “serious impairment of principal” or “impossibility to carry out the purpose of the trust.”  She argued that the Legislature was likely unaware of these requirements and probably thought that it was merely codifying the existing common law when it passed the UTC.

The Court responded, however, that the official Comment to the relevant section of the new UTC specifically referenced the prior law and indicated that the section was intended to expand the state law to permit modification of a trust, either its administrative terms or its purpose, without the requirement of an emergency. 

The new UTC permits modification of both administrative and dispositive terms or even termination “because of circumstances not anticipated by the settlor” if such modification will “further the purposes of the trust,” the Court said.  The statute requires only that modification be “in accordance with the settlor’s probable intention” “to the extent practicable.”

It held that the trial court did not err in finding that “drastic changes” in the City, which were not anticipated in 1815, justified the modification requested.

YOU NEED TO KNOW

The Uniform Trust Code may have a similar impact in other states where it has previously been quite difficult to obtain court approval to modify conditions of a trust.  It provides a lot of flexibility and authorizes changes to be made in accordance with the donor’s “probable intent.”

Article Archives >> Lead Stories >> March 16-31, 2008