Governing Law in Trust Interpretations/Contests

Trust law can be quite complex. Among the several reasons for this is the fact that there are instances in which a trust instrument in one State may be interpreted in accordance with a completely different State’s laws.
In Missouri, the “governing law” provision of the Trust Code is guided by (1) the law of the jurisdiction designated in the terms of the trust, or, in the absence of such a designation, (2) the law of the jurisdiction having the most significant relationship to the matter at issue. Section 456.1-107, RSMo.
With respect to the “terms of the trust,” Missouri law generally defines that as the manifestation of the settlor’s/trust-maker’s intent regarding a trust’s provision as expressed in the trust instrument or through other admissible evidence. As such, the statutory phrase “terms of the trust” is quite misleading in that it is not limited to the words used in the trust and also may include oral statements, the situation of the beneficiaries, the purposes of the trust, circumstances of administration and other judicial rules of construction. See comment to Section 103 of the Uniform Trust Code.
Regarding the “most significant relationship” approach, this, for trust purposes, is usually tantamount to the trust’s principal place of administration. A trust’s principal place of administration, in turn, is usually the place where the trustee is located; other facts such as where the records are kept and where the trust assets are held may also inform the analysis.
Determining the governing law in a trust dispute — e.g., breach of trust, trustee removal, trust interpretation, trust modification — is paramount because the laws can vary State to State. And because of those differences, a Court’s order/judgment can be different.
Note that determining the “governing law question” is not always easy. It is becoming increasingly popular to include provisions in trusts which authorize a trustee, trust-protector or settlor to change the governing law via written amendment or otherwise. This can add another layer of complexity when there are multiple elections as to governing law.
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