Also known as the principal place of administration, when does a trust’s situs move? What are the conditions that will trigger this move? Must a trustee be worried about their trust’s situs? In the years, or even decades after a trust are created and also well into its management by a trustee, these very important questions are often ignored.
Many reasons make a trust situs a very important issue. It can dictate tax from which state will apply, for example, whether California, New York or Wyoming. The trust situs often will define the state where a beneficiary or trustee will solicit judicial assistance. Therefore, it is of the utmost importance for a trustee to determine and potentially relocate the trust situs.
Most of the time, ‘principle place of administration’ instead of ‘situs’ is used by the Uniform Trust Code and the states that have adopted the Code. Under this protocol, where the trustee is located will be established as the default place of administration of the trust. Exceptional rules may apply in case there is more than one trustee.
Different states have different rules about co-trustee. For example, in Colorado, the laws state that the main place of administration in the case of co-trustees will be the location of the business of a corporate co-trustee or professional fiduciary. Alternatively, in case there is no corporate or professional co-trustee, the main location of administration will be the official place of residence of any one of the individual co-trustees, as decided by them.
Nonetheless, all these rules are null and void if the trustor has nominated the main place of administration while setting up the trust. The creator of the trust has the option to either enforce that the trust will be administered in a particular place or state or all or a portion of the administration of the trust will occur in that location. This rule may be interpreted differently in different states. For example, in Wyoming, the governing laws state that if the trustor was a resident of the state when he set up the trust, the designated main place of administration is also controlling.
With the general principles of where a trust’s main place of administration is situated, it can be noticed that situs is quite a fluid doctrine subject to the circumstance and facts that exist at any given moment. Trustees get replaced or move, often leading to unforeseen outcomes for those who are not cautious. As we have outlined above, the principal place where the trust is administered is very important in many key matters, and it includes court jurisdiction and state income tax.
How moving between states may affect the Trust Situs
Therefore, an individual trustee moving between states must be very cautious and be careful as doing so may also result in the relocation of the administration of the trust’s principal place. More significantly, a trustee must not forget that he or she is continuously under the duty to administer the trust in a location most appropriate to its purpose, its administration, and the best interests of the trust’s beneficiaries. Something the simple of moving from a low-income tax state to a high-income tax state could cause unforeseen and substantial issues for a trustee.
In any event, a trustee does generally have the option (subject to the continued duty indicated above) to relocate the principal place where the trust can be administered. In this case, the trustee should usually inform the qualified inheritors of the proposed transfer at least sixty days prior to transferring, giving them the possibility to object to the transfer.
If there are additional issues around the suggested transfer or any objections are raised, the trustee may need to seek for judicial approval. Nevertheless, assuming that no objections are raised, the trustee may relocate the trust without any court approval.
How Valsen Can Help
The experienced staff of Valsen Fiduciaries Group our global network allow us to provide high-quality services in several jurisdictions. We are at your disposal to help you further clarify, and understand the different codes related to trust situs. Please contact us through [email protected] or +248 2 525 217