USA – MASSACHUSETTS Law and Practice Contributed by: Patricia Annino, Rimon, P.C.
3.4 Exercising Control Over Irrevocable Planning Vehicles Massachusetts case law recognises decanting (see 3.1 Types of Trusts, Foundations or Similar Entities ). Under the Massachusetts Uniform Trust Code, the settlor and all the beneficiaries of a non-charitable irrevocable trust may petition the court for approval to modify or terminate the trust. The court may approve this even if it would be inconsistent with the material purpose of the trust. A non-charitable irrevocable trust may be terminated or modified by consent of all the beneficiaries if the court determines that continuance of the trust without modification is not necessary to achieve a material purpose of the trust. If not all the beneficiaries consent to the proposed modification or termination, the court may still approve it if the court is satisfied that if all the beneficiaries consented, the trust would have been modified or terminated, and the interests of the non-consenting beneficiaries would be adequately protected. A settlor may object to the modification or termination. Under the Massachusetts Uniform Trust Code, the court also has the power to modify the administra - tive or dispositive terms of a trust or to terminate it if, because of circumstances not contemplated by the settlor, modification or termination would further the trust’s purposes. The court may also reform the terms of a trust, even if those terms are unambiguous, in order to conform the trust to the settlor’s intention, if it is proved by clear and convincing evidence that the settlor’s intent or the terms of the trust were affected by a mistake of fact or law, whether in expression or inducement. Under the Massachusetts Uniform Trust Code, inter - ested persons may also enter into a binding non-judi - cial settlement agreement with respect to any matter involving a trust to the extent that it does not violate a material purpose of the trust and includes terms and conditions that could be properly approved by the court, such as interpreting the terms of a trust, direct - ing a trustee to refrain from a particular act, granting a trustee the authority to take action, or transferring a trust’s place of principal administration.
The “Nominee Trust” Massachusetts has a unique trust, known as a “nomi - nee trust”, which frequently holds title to real estate. It is not a true trust. It is a principal/agent relation - ship. The beneficial owners are listed on a separate schedule of beneficiaries (which is not recorded in the Registry of Deeds). The trustee cannot act without the beneficiary’s authority. The listed owner on the schedule may be an individual or individuals, a trust or an entity. Donor Advised Funds (DAFs) In addition to trusts, many clients utilise donor advised funds (DAFs) as part of their overall estate planning strategy. 3.2 Recognition of Trusts Massachusetts recognises trusts. Case law has respected and supported trusts for centuries. The Massachusetts Uniform Trust Code (MGL c 203E), effective since 8 July 2012, governs the administra - tion of trusts. 3.3 Tax Considerations: Fiduciary or Beneficiary Designation Serving as a trustee for a foreign trust in Massachu - setts can have income tax implications for both the trustee and the beneficiary. Massachusetts generally taxes income derived from sources within Massachu - setts. Even if a trust is administered by a non-Massa - chusetts trustee, if the trust generates income from sources within Massachusetts (such as rental from real estate located in Massachusetts), that income can be subject to Massachusetts income taxes. If the foreign trust has Massachusetts-resident benefi - ciaries, income allocated or distributed to those ben - eficiaries can be subject to Massachusetts income tax, even if the trustee is no longer in Massachusetts. If a non-resident estate or trust accumulates Massa - chusetts-source income, that income is taxable to the estate or trust regardless of whether the beneficiaries are Massachusetts residents or not.
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