19 May Is a trust valid in all states?

Q. Is a trust is valid in all states? For example, if I make a trust in California and someday I moved to Florida, does my daughter will have to travel to California to deal with that trust?
— Mom

A. We’re glad to hear you’re planning ahead.

The short answer is that Trusts are “good” in all 50 states — in the sense that the beneficiaries can be in any state or move to any state, as can the trustee, said Nancy Heslin Reading, an estate planning attorney with Reading Law Firm in Newton.

Reading said should any dispute arise that triggers litigation, the litigation would be in the state identified in the trust with language like, “Governing law: This agreement and the trusts established hereunder shall be governed by the laws of the State of New Jersey.”

That also means the trust will be taxed under the laws of the governing state, she said.

“Since most trusts never end up in litigation, trustees rarely have to appear in court in the home state,” she said. “Some exceptions though would be if a trustee dies, resigns or for any reason ceases to act and no successor trustee is named in the trust agreement, then a legal action needs to be commenced in the home state for the appointment of a successor trustee.”

Likewise, she said, if for any reason it is desirable to amend the terms of the trust agreement, that proceeding would have to be brought in the state whose law governs the trust agreement.

“I usually add language to my trust agreement that the trustee has the power to apply to transfer the trust to another estate if the trustee relocates, if in his or her opinion, the laws of the new state are more favorable to the purposes of the trust,” Reading said.

If you’d like to get into the weeds, for New Jersey, the following statutory language is relevant:

“3B:31-8. Principal Place of Administration

“a. Without precluding other means for establishing a sufficient connection with the designated jurisdiction, terms of a trust designating the principal place of administration are valid and controlling if: a trustee maintains a place of business located in or a trustee is a resident of the designated jurisdiction; or (2) all or part of the administration occurs in the designated jurisdiction. In the absence of terms of a trust designating the principal place of administration, the initial principal place of administration of a nontestamentary trust shall be this State if the trust is governed by the law of this State, and the principal place of administration of a testamentary trust shall be the jurisdiction in which the decedent was domiciled at the time of death.

“b. A trustee is under a continuing duty to administer the trust at a place appropriate to its purposes, its administration, and the interests of the beneficiaries.

“c. The trustee, in furtherance of the duty prescribed by subsection b. of this section, may
transfer the trust’s principal place of administration to another State or to a jurisdiction outside of the United States.”

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This story was first published in May 2017.