30 | May | 2023 | Simply Church

Click here to go to the following webpage for Table of Contents with links to all chapters of: Simply Church: The Holy Union of Christ and His Local Church

Jerald Finney
Copyright May 30, 2023

See Endnote for links to state adaptations of the Uniform Trust Code

General Considerations

The concept of the trust fiduciary relationship with property (both material and spiritual) was originated by God. See, The Bible Trust Relationship with Property Is Not Something New: It was God’s Plan Starting with Adam and Eve. Common law and statutory law, whichever is in effect in a given jurisdiction, recognize the relationship. Courts, under the common law, before government legislated rules for deciding trust issues, decided matters regarding abuse of the trust relationship when petitioned by an interested party or parties, using prior case law, and/or Bible or religious principles, and/or principles of ethics. Under statutory law, courts look at the statutory rules, and/or common law rules, and/or principles of ethics in deciding issues.

Under both the common law and statutory law the trust relationship is private and requires no filing, contract, or registration with or regulation by the state. Thus, the trust relationship with property is dramatically distinct from trusts which are a product of man’s law and creatures of the state—charitable trusts, business trusts, etc.

Both the common law and the codified adaptations of the common law of trusts define trust in the same way. The statutory rules, many of which are adopted directly from the common law, standardize some of the rules for deciding issues, but defer also to the common law if need be. Both the common law and code or statutory law require that a trust be declared and practiced (whether orally or in writing) for a legal purpose. As long as a trust is declared solely as a means of holding and managing property outside the realm of tax laws, inheritance laws, and other laws the courts will apply the applicable statutory or common law rules. Under both common law and statutory law, a court will not intervene in the administration of a trust unless its jurisdiction is invoked by an interested party. If contested, jurisdiction must be established by the petitioning party.

The Bible trust relationship with property declared and/or practiced by churches as a means of holding and managing God’s property invoke no tax consequences. The First Amendment is a statement of the Bible principle of separation of church and state. See for explanation, God Betrayed/Separation of Church and State: The Biblical Principles and the American Application; or Separation of Church and State/God’s Churches: Spiritual or Legal Entities. Thus, a church who remains totally separate from civil government is non-taxable whereas a church who has established a legal connection with civil government is tax exempt. To understand the difference see the essay Church Internal Revenue Code 508(c)(1)(A) Tax Exempt Status and the essays linked to in that article. The property held in a church Bible trust involve no tax matters. The trust is a private fiduciary relationship with property, and assuming that the trust is properly declared and managed, the only reason any party could have for petitioning the court regarding a trust matter would have to involve a violation by the trustee of his fiduciary duties in holding and administering the trust estate. This is true under both common law and statutory law, whichever is applicable.

Trusts are commonly used as part of an individual’s estate plan, to avoid probate and/or to obtain favorable tax consequences. Churches who love the Lord and wish to please their espoused, the Lord Jesus Christ, use God’s trust plan; they declare the trust relationship with material and spiritual properties. Some churches orally apply the concept, others execute trust documents declaring the trust relationship with property given to the Lord Jesus Christ, to God. Generally, the preferred method is for the church to execute written trust documents.

Specific Considerations

Under the common law of trusts, there were no statutes to guide the courts, only prior court decisions and principles of equity. Statutory trust law gives rules to guide courts in the event trust matters are brought to the court for resolution.

Most or all states in America now have codified rules for courts to follow in cases where an interested party has petitioned the court to take jurisdiction over a matter involving a trust relationship with property. The prior law governing the trust relationship is fundamentally American common law. Now, statutes in most states provide rules for courts to look at in deciding issues involving the trust relationship.

Thirty-six states have adopted, usually with some modifications, the Uniform Trust Code (UTC). The UTC is a model law in the United States created by the Uniform Law Commission, which although not binding, is influential in the states, and used by many as a model law. As of May 19, 2021, 34 states had adopted, usually with modifications, the UTC (See, EN [i] for listing of those states; see also, States that Have Adopted the Uniform Trust Code. Hawaii and the District of Columbia enacted the UTC as of January 1, 2022.

In 2000 the National Conference of Commissioners on Uniform State Laws (NCCUSL) adopted the first national codification of the law of trusts with the Uniform Trust Code (UTC). According to the NCCUSL, the purpose of the Uniform Trust Code is to provide a comprehensive model for codifying the law on trusts. The UTC has its basis in common law sources. The objective of the UTC is a codification of existing law, but with elements of law reform. According to NCCUSL, the reforms are intended to conform trust law to modern needs. The UTC provides fundamental rules that apply to all voluntary trusts. According to NCCUSL, the UTC “does not try to incorporate detailed rules for every conceivable kind of trust, nor does it incorporate all of the kinds of trusts there are.”

The UTC is intended to enable states that enact it to specify their rules on trusts with precision and to provide individuals with a readily available source for determining their state’s law on trusts.

Trust statutes direct courts to the common law when necessary. Section 106 of the UTC states: “The common law of trusts and principles of equity supplement this [Code], except to the extent modified by this [Code] or another statute of this State.” This is also true of trust statutes of states who have not adopted the UTC. For example, The California Probate Code, Division 9, Trust Law, Part 1, Section 15002 states: “Except to the extent that the common law rules governing trusts are modified by statute, the common law as to trusts is the law of this state.” Subtitle B – Texas Trust Code, Chapter 111 Section 111.005 – Reenactment of Common Law states, “If the law codified in this subtitle repealed a statute that abrogated or restated a common law rule, that common law rule is reestablished, except as the contents of the rule are changed by this subtitle.”

Statutory trust law gives uniformity of rules when a court accepts a petition involving a matter involving tax implications. This can be readily seen by a reading of the Code. The common law was perfectly adequate for dealing with any church Bible trust issue; with a caveat for the church and believer: see I Corinthians 5 and 6, King James Bible. Under statutory law, if a matter involving a church Bible trust is ever presented to a court, and the court accepts jurisdiction, the court will likely have to refer to the common law and principles of equity. The reason for this is that the trust codes are usually necessary to deal with matters involving matters involving various types of taxes, and the church Bible trust fiduciary relationship with property does not implicate any such concern.

There can be no tax consequences for the Settlor, the Trustee, the Trust Estate, the Beneficiary or anyone else regarding a church Bible trust relationship with property as when a trust is used in estate planning, to avoid probate or to obtain favorable tax consequences. Why? Because:

The church Bible trust is not an organization. It is a fiduciary relationship with property. It has no income, no employees, pays no salaries, etc. What is given to God is held in trust to be used according to the will of the Lord Jesus Christ as given in his word, the holy King James Bible. There is no profit to the Settlor, the Trust, Trustee, or anyone else. The matter of use of the trust related to any taxation is not a factor which man’s law must address.

Uniform Trust Code with Comments

Uniform Trust Code – Background Memorandum Prepared by the North Dakota Legislatve Council staff for the Judiciary Committee, September 2005

UNIFORM TRUST CODE (Last Revised or Amended in 2010) Drafted by the NATIONAL CONFERENCE OF COMMISSIONERS ON UNIFORM STATE LAWS and by it APPROVED AND RECOMMENDED FOR ENACTMENT IN ALL THE STATES (General Comment. The Uniform Trust Code is primarily a default statute. Most of the Code’s provisions can be overridden in the terms of the trust.): https://dta0yqvfnusiq.cloudfront.net/fifel38841394/2018/12/Uniform-Trust-Code-5c12a36374cd4.pdf

Massachusetts UTC with Comments: https://www.fieldsdennis.com/uniform-trust-code-report-with-commentary

I would be glad to discuss these matters with you in more detail. You can call me (Jerald Finney) at 512-785-8445.

Endnote

EN[i] Alabama (Ala. Code §§ 19-3B-101, et seq.). Creditor’s Claims Against Settlor.

Arizona (Ariz. Rev. Stat. §§ 14-10101, et seq.). Creditor’s Claims Against Settlor.

Arkansas (Ark. Code Ann. §§ 28-73-101, et seq.). Creditor’s Claim Against Settlor.

Colorado (CO Rev Stat 15-5-101, et seq). Creditor’s Claim Against Settlor (Introduced to be Section 15-5-505).

Connecticut (Connecticut General Statutes 45a-499a)

District of Columbia (D.C. Code §§ 19-1301.01, et seq.). Creditor’s Claim Against Settlor.

Florida (Fla. Stat. §§ 736.0101, et seq.). Creditor’s Claim Against Settlor.

Illinois (760 Illinois Compiled Statutes 3). Creditor’s Claim Against Settlor – 760 ILCS 3/505.

Kansas (Kan. Stat. Ann. §§ 58a-101, et seq.). Creditor’s Claim Against Settlor.

Kentucky (Ken. Rev. Stat. §§ 386B.1-010, et seq.). Creditor’s Claim Against Settlor.

Maine (Me. Rev. Stat. Ann. Tit. 18-B, §§ 101–1104, et seq.). Creditor’s Claim Against Settlor.

Maryland (MD Est & Trusts Code §§ 14.5-101, et seq.). Creditor’s Claim Against Settlor.

Massachusetts (Mass. Gen. Law Chapter 203E). Creditor’s Claim Against Settlor.

Michigan (Mich. Compiled Laws §§ 700.7101, et seq.). Creditor’s Claim Against Settlor.

Minnesota (Minnesota Statutes §§ 501C.0101, et seq. Creditor’s Claim Against Settlor. Until July 2021, Minnesota had a trust-buster statute that effectively nullified Medicaid Asset Protection Trusts. However, this statute was recently struck down (with some help from Evan Farr) by Minnesota’s Court of Appeals.

Mississippi (MS Code §§ 91-8-101, et seq.). Creditor’s Claim Against Settlor not yet enacted.

Missouri (Mo. Rev. Stat. §§ 456.1-101, et seq.). Creditor’s Claim Against Settlor.

Montana (Mont. Code. Ann. §§ 72-38-101, et seq.). Creditor’s Claim Against Settlor.

Nebraska (Neb. Rev. Stat. §§ 30-3801, et seq.). Creditor’s Claim Against Settlor.

New Hampshire (N.H. Rev. Stat. Ann. §§ 564-B-101, et seq.). Creditor’s Claim Against Settlor.

New Jersey (N.J.S. 3B:31-1, et seq.). Creditor’s Claim Against Settlor.

New Mexico (N.M. Stat. Ann. §§ 46A-1-101, et seq.). Creditor’s Claim Against Settlor.

North Carolina (N.C. Gen. Stat. §§ 36C-1-101, et seq.). Creditor’s Claim Against Settlor.

North Dakota (N.D. Cent. Code §§ 59-09-01, et seq.). Creditor’s Claim Against Settlor.

Ohio (Ohio Rev. Code Ann. §§ 5801.01, et seq.). Creditor’s Claim Against Settlor.

Oregon (Or. Rev. Stat. §§ 130.001, et seq.). Creditor’s Claim Against Settlor.

Pennsylvania (20 Pa. Cons. Stat §§ 7701, et seq.). Creditor’s Claim Against Settlor.