UTC Is No Threat to SNTs

This letter is in reaction to the article “A Threat to All SNTs“ by Mark Merrick and Douglas W. Stein, which appeared in Trusts & Estates' November 2004 issue. The thrust of their article is that the passage of the Uniform Trust Code will cripple special needs trusts (SNTs) in states that adopt it. That is wrong.

Among the incorrect charges leveled against the UTC is the assertion that “the elimination of the discretionary-support distinction“ leaves all discretionary trusts vulnerable to government claims, thereby allowing federal and state governments to attach beneficial interests in SNTs as well as reach underlying trust assets. This assertion is false for two reasons. First, UTC Section 504 follows the modern view and eliminates the artificial distinction between discretionary trusts and support trusts for “creditor rights purposes only.” Common law principles regarding discretionary trusts will continue to apply in determining trustee duties and the rights of beneficiaries. Nothing in the UTC enhances the ability of a beneficiary of a discretionary trust to compel a distribution.

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