narayan
The session “It’s 10 PM, Do You Know Where Your Trust Is Sited?” at the 2026 Heckerling Institute on Estate Planning detailed some new initiatives for solving conflicts of law issues regarding trusts. Robert H. Sitkoff introduced the topic and was joined by a panel that included Jane G. Ditelberg, Michaelle D. Rafferty and Ronald J. Scalise Jr.
The Evolving Landscape of Trust Situs
Trust law has undergone rapid evolution in recent decades. The Second Restatement of Trusts (Second Restatement) provides a reliable framework anchored by physical locations, such as the location of land, the probate court or the situs of tangible assets. Today’s trust environment is unmoored from these historic anchors. It’s now common for a settlor in New York to establish a trust in Alaska for a beneficiary residing in Texas. Current trust practices have rendered traditional locational rules increasingly obsolete. Estate planners must now grapple with a landscape where the old rules no longer suffice, and conflict-of-law questions demand new approaches.
The Demise of Locational Anchors
Historically, the situs of land or the jurisdiction of the probate court provided clarity in determining which state’s law governed a trust. Today, these anchors are rarely relevant. Land is typically held in entities, and most wealth is stored in liquid assets that are intangible and can be moved across jurisdictions with ease. Formal judicial accountings are rare, and trusts are encouraged to stay out of court absent controversy, so that it’s less likely that there’s a probate court to which regular accountings are being submitted. The result is a legal environment where the comments and guidance of the Second Restatement are increasingly problematic for resolving conflicts of trust law. Planners must recognize that the world is too complex to rely solely on traditional locational anchors; new frameworks are therefore necessary.
Differentiating Trust Types and Issues
Under current guidance, the complexity is compounded by the existence of different rules for trusts holding land versus movable property, as well as for testamentary versus inter vivos trusts, among others. Also, the nature of the issue involved (for example, validity, administration and powers of appointment) can trigger nuanced and divergent rules. Estate planners must be attuned to these distinctions and understand that the category of issue and the nature of the conflict among states are critical in determining which law applies. A new paradigm is needed to deal with the modern trust environment.
New Uniform Act and Third Restatement
Recognizing the inadequacy of existing frameworks, the legal community is in the process of modernizing these concepts through two new initiatives: the Third Restatement of the Law of Conflict of Laws (Third Restatement) and the Uniform Conflict of Laws in Trusts and Estates Act (Uniform Law). These initiatives aim to simplify decision-making, reduce the number of categories required to analyze a decision and clarify the distinction between validity and administration. The new approach treats real and personal property similarly and generally aligns the treatment of inter vivos and testamentary trusts, with logical distinctions made where necessary. For example, the validity of a testamentary trust is determined by the settlor’s domicile at the time of death, while for an inter vivos trust, it’s where the settlor lived during their lifetime. This is a logical timing difference that is simple to apply.
Construction and Interpretation: A Unified Approach
Traditionally, interpretation involved discerning the settlor’s actual intent, often through extrinsic evidence, while construction filled gaps where the settlor was silent, such as applying anti-lapse rules. The new frameworks combine construction and interpretation into a single category, recognizing that the settlor could have addressed each point in the trust instrument if they wished to. Rules of evidence are left to the forum, while matters of administration are similarly forum-based. Estate planners can proactively address these issues by drafting trust documents that clearly specify the applicable law for each category of assets.
Validity: Formalities, Capacity and Substantive Rules
Validity is a cornerstone of trust law, and the Third Restatement recognizes three types: formalities of execution, capacity and consent and substantive validity. The two new initiatives provide that a trust is valid if it would be valid in any jurisdiction with which it has a substantial connection. That connection can be based on property location, fiduciary residence or settlor domicile. For capacity and consent, the settlor’s domicile is paramount, reflecting the importance of local standards for undue influence and mental capacity questions. Substantive validity, such as duration of a trust, asset protection, and restraints on alienation, is governed by the settlor’s choice of law, provided there’s a substantial relationship of that selected jurisdiction to the trust and no firm contrary public policy in another state.
Planning for Situs and Choice of Law
Estate planners can mitigate conflict-of-law risks by explicitly stating the governing law for validity, construction, interpretation and administration in the trust instrument. The new initiatives provide a list of factors to determine which state has the most connection to a trust, and practitioners should leverage these in drafting. The situs of administration is particularly important for issues such as investment policy statements and trustee powers. The principal place of administration is often determinative, but identifying which state is “principal” can be challenging in complex trusts with multiple fiduciaries, protectors and institutional trustees.
Administration: Powers, Duties and Change of Situs
Administration governs the powers and duties of trustees, and the default rule is that the settlor’s stated choice in the trust controls. However, the law governing administration can change if the principal place of administration changes, unless the settlor specifies otherwise. If the trust is silent, planners must look to the place of administration, a determination complicated in many modern trusts by the involvement of multiple fiduciaries in different states. The new initiatives introduce a three-step process: following the settlor’s direction, allowing trustees to announce the principal place of administration in writing and defaulting to the “most active” trustee if neither of the other mechanisms exists.
Resolving Conflicts and Governing Law Clauses
Conflicts arise when trusts touch multiple states, and trustees may face conflicting orders from different courts. The Uniform Act allows a court in a non-administration state to defer to the courts of the principal place of administration, provided that place can be clearly identified. Governing law clauses in trust instruments are often ambiguous, using non-technical terms like “subject to” or referencing administration without specifying validity or construction. The Uniform Act interprets such clauses as intending to apply to all categories unless the principal place of administration changes. Practitioners should review and clarify governing law language in their forms to ensure it reflects the intended scope.
State Nuances and Administrative Acts
State law nuances abound, regarding, for example, the allocation of income, expenses and carrying costs. Administrative acts, such as the allocation of CPA and attorney fees, pet trust legislation and fiduciary actions like trustee removal, modification, termination, virtual representation and decanting, vary considerably by state. The Uniform Act allows choice of law for administration, but requires a substantial connection to the chosen state. Unless the settlor specifies otherwise, administration is ambulatory, and appointing a successor trustee can change the applicable law.
Unitrust conversion is governed by the law of the state of administration, and state laws differ significantly. Allocation of trustee fees to principal or income can range from 50/50 splits to 90/10 or other ratios, depending on the jurisdiction. Decanting and amendment rules are similarly diverse, with practitioners needing to consider the laws of both the originating and destination states. For example, decanting a New York trust into a Nevada trust may require compliance with both states’ laws. While some may assume that complying with the new state’s laws suffices, challenges may arise if the transaction wasn’t handled correctly in the original New York state law. Merely naming a new trustee may not be sufficient to change situs or governing law. Careful planning and compliance with statutory requirements are essential.
Proactive Planning in a Complex Environment
The complexity of modern trust situs and conflict of law issues demands proactive and careful planning. Estate planners must move beyond relying on historic locational anchors and embrace the new frameworks provided by these initiatives. By clearly specifying governing law for each category of trust issues, understanding state nuances and anticipating conflict-of-law challenges, practitioners can support the settlor’s interests and ensure the effective administration of trusts in an increasingly mobile and interconnected world.
admin
