Many individuals serve as a co-trustee of a trust, such as a family trust holding real estate or a trust of a parent or close friend after their death. Individuals who serve as a co-trustee or, more importantly, are contemplating serving as a co-trustee or successor trustee should be aware of a significant change since the enactment of the Massachusetts Uniform Trust Code (“MUTC”) on July 8, 2012, specifically a change concerning the number of trustees that must agree to act when performing their fiduciary duties.
Prior to the MUTC, the common law rule required that co-trustees act unanimously, unless the terms of the trust instructed otherwise.
The MUTC, however, changed this law. Section 703(a) of the MUTC states: “Co-trustees who are unable to reach a unanimous decision may act by majority decision.” Importantly, Section 65 of the MUTC limits the new law’s application to only those trusts executed after the effective date of the MUTC, July 8, 2012: “[S]ubsection (a) of section 703 of chapter 203E of the General Laws shall not apply to trust instruments executed before the effective date of this act.” Thus, for all trusts executed after July 8, 2012, co-trustees can act by majority decision; for all trusts executed before July 8, 2012, co-trustees must continue to act by unanimous decision (unless the terms of the trust direct otherwise).
From a practical standpoint, this change allows for co-trustees to act quicker with less deadlock and perhaps with less court intervention needed, as co-trustees do not need to obtain unanimous approval after conferring with all of the co-trustees. The Comment contained in the Report of the Ad Hoc Massachusetts Uniform Trust Code Committee provides that this rule “impl[ies] that the trustees must confer and attempt to reach a conclusion, and that two trustees cannot simply act alone without the third trustee.” On the other hand, this change could divide co-trustees and provide a way for the majority of co-trustees to take significant actions, such as making discretionary distributions of trust assets, selling stock, or seeking to remove an uncooperative co-trustee.
Along with knowing the powers contained in the trust instrument and understanding the fiduciary duties associated with serving as a trustee, it is important that individuals realize that, under the MUTC, co-trustees of trusts enacted post-July 8, 2012 may act by majority decision.