This column isn't for everyone. But if you are a spouse or former spouse receiving or paying maintenance or child support, this information may be vital to your future.
A bill will be introduced early in the 2004 legislative session, one part of which deals with ways to put money into spendthrift trusts, money that can't be reached to pay maintenance and child support, and done in a way that avoids present protections from such machinations. The bill is called the Uniform Trust Code (UTC) and it is being promoted by the Colorado Bar Association.
I'll avoid many legal terms. Who executes a Will? A testator (man) or testatrix (woman). For simplicity we'll use "testator". Who handles distributions? An "executor". Who executes a Trust? A "settlor". A "trustee" handles trust distributions. Someone receiving funds from a trust is a "beneficiary". A settlor can also be a beneficiary.
Spendthrift trusts were originally designed to keep "wastrels" from
wasting trust money. The administrator decided how much to give the beneficiary and when. Today, spendthrift trusts are used to protect trust money from creditors, which in some states, such as Kansas, include ex-spouses and children.
Testators and settlors in Colorado are allowed to pick any one of the 50 states' laws they want to govern the trust or will. It doesn't have to be Colorado law, even when the testator or settlor is a Colorado resident.
The Uniform Probate Law governs that "choice of law" both for wills and trusts. It is CRS 15-11-703. You can choose any state law, South Dakota, Virginia, or wherever. BUT if there is a conflict between that law and Colorado's public policy, then Colorado law is applied. And Colorado law enumerates maintenance and child support as being public policy governed by Colorado law no matter what the law of another state provides. CRS 15-11-703 is easy to read, complete, and brilliant.
The UTC was introduced near the end of the 2003 session. In Senate Judiciary Committee, while I testified on the maintenance and child support issue, the bill's sponsor asked the measure no longer be heard because the Judicial Administrator's Office claimed the 78 page bill had a fiscal impact of $1 million.
The proposed UTC section 15-5-107 lets the settlor choose what state law will govern, just as does 15-11-703. From there on, things differ. To overcome the choice of another state's law the UTC requires "strong public policy". You can't find that term in the Colorado statutes although there may be a dozen state Supreme Court cases that use those words. In addition the UTC requires the "strong public policy of the jurisdiction having the most significant relationship to the matter at issue". So it may not be Colorado.
"Significant relationship" is not defined in the bill. There are footnotes called Official Comments, which offer some choices of what to use. But they are NOT part of the bill and not voted on by the legislature. So let's play "trial".
Trustee: "Kansas law forbids entering a spendthrift trust for child support, and under the UTC, it has to be "strong" public policy of Colorado, and then only if Colorado has the most significant relationship to the issue."
Some years down the road, the Colorado Supreme Court will decide who wins, but that doesn't put food in the mouths of children or ex-spouses or lessen the need for additional research on many similar issues.
UTC supporters claim that both 15-5-107 and 15-11-703 apply. Duh? They are irreconcilable. Colorado law, 2-4-206 provides "if statutes ... are irreconcilable, the statute prevails which is latest in its effective date...". And that would be the UTC.
There are a number of other sections with similar problems that also need to be amended before Colorado considers passing the UTC.
(Jerry Kopel served 22 years in the Colorado legislature.)
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