St. Mary's Journal on Legal Malpractice & Ethics

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St. Mary's University School of Law


Charles Ipock

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In the year 2000, the Uniform Law Commissioners approved the Uniform Trust Code (UTC). This was the first effort to provide states with an all-inclusive model for codifying their trust laws. Since then, at least twenty-three states adopted some, or most of the UTC. But this enactment did not come without controversy. Most of the controversies stem from provisions regarding asset-protection trusts. The net result of asset-protection trusts within the UTC essentially disposes of discretionary trusts by requiring them to contain spendthrift language. The undesirable effect of these provisions is that without a spendthrift clause any creditor can attach a beneficiary’s interest and—standing in that beneficiary’s shoes—demand payment of any distribution directly to that creditor instead of to the beneficiary. It is not desirable to incorporate a spendthrift clause, because it is common to have broad-ranging exception creditors for spendthrift trusts in UTC states. In re Estate of Stidham raised an underlying inquiry regarding whether a lawyer in a Uniform Trust Code (UTC) jurisdiction committed malpractice for failing to research thoroughly and establish an asset-protection trust in a jurisdiction most beneficial to the client. The case’s latent importance lies in the questions it raises if the estate planning was performed in a different manner. These questions should inform all attorneys, especially those in UTC jurisdictions with clients that intend to protect their assets, to thoroughly research establishing an asset-protection trust in a jurisdiction most beneficial to the client. The client and attorney should consider factors such as: the inconvenience of having the trust established outside of the client’s jurisdiction, any extra costs that may be involved, and most importantly, if the decision is made to establish the trust in a UTC jurisdiction, and the long-arm of exception creditors.