Colorado § 15-1.2-804 - Severability.

§ 15-1.2-804. Severability.

If any provision of this article 1.2 or its application to any person or circumstance is held invalid, the invalidity does not affect other provisions or applications of this article 1.2 which can be given effect without the invalid provision or application, and to this end the provisions of this article 1.2 are severable.

Source: L. 2021: Entire article added, (SB 21-171), ch. 143, p. 841, § 1, effective January 1, 2022.

15-1.5 ARTICLE 1.5

Colorado Uniform Custodial Trust Act

15-1.5-101. Definitions.

15-1.5-102. Custodial trust - general.

15-1.5-103. Custodial trustee for future payment or transfer.

15-1.5-104. Form and effect of receipt and acceptance by custodial trustee - jurisdiction.

15-1.5-105. Transfer to custodial trustee by fiduciary or obligor - facility of payment.

15-1.5-106. Multiple beneficiaries - separate custodial trusts - survivorship.

15-1.5-107. General duties of custodial trustee.

15-1.5-108. General powers of custodial trustee.

15-1.5-109. Use of custodial trust property.

15-1.5-110. Determination of incapacity - effect.

15-1.5-111. Exemption of third persons from liability.

15-1.5-112. Liability to third persons.

15-1.5-113. Declination, resignation, incapacity, death, or removal of custodial trustee - designation of successor custodial trustee.

15-1.5-114. Expenses, compensation, and bond of custodial trustee.

15-1.5-115. Reporting and accounting by custodial trustee - determination of liability of custodial trustee.

15-1.5-116. Limitations of action against custodial trustee.

15-1.5-117. Distribution on termination.

15-1.5-118. Methods and forms for creating custodial trusts.

15-1.5-119. Applicable law.

15-1.5-120. Uniformity of application and construction.

15-1.5-121. Short title.

15-1.5-122. Severability.

PREFATORY NOTE

This Uniform Act provides for the creation of a statutory custodial trust for adults to be governed by the provisions of the Act whenever property is delivered to another "as custodial trustee under the (Enacting state) Uniform Custodial Trust Act." The provisions of this Act are based on trust analogies to concepts developed and used in establishing custodianships for minors under the Uniform Transfers to Minors Act (UTMA). The Custodial Trust Act is designed to provide a statutory standby inter vivos trust for individuals who typically are not very affluent or sophisticated, and possibly represented by attorneys engaged in general rather than specialized estate practice. The most frequent use of this trust would be in response to the commonly occurring need of elderly individuals to provide for the future management of assets in the event of incapacity. The statute will also be available for accomplishing distribution of funds by judgment debtors and others to incapacitated persons for whom a conservator has not been appointed. Since this Act allows any person, competent to transfer property, to create custodial trusts for the benefit of themselves or others, with the beneficial interest in custodial trust property in the beneficiary and not in the custodial trustee, its potential for use is extensive. Although the most frequent use probably will be by elderly persons, it is also available for a parent to establish a custodial trust for an adult child who may be incapacitated; for adult persons in the military, or those leaving the country temporarily, to place their property with another for management without relinquishing beneficial ownership of their property; or for young people who have received property under the Uniform Transfers to Minors Act to continue a custodial trust as adults in order to obtain the benefit and convenience of management services performed by the custodial trustee.

This Act follows the approach taken by the Uniform Transfers to Minors Act and allows any kind of property, real or personal, tangible or intangible, to be made the subject of a transfer to a custodial trustee for the benefit of a beneficiary. However, the most typical transaction envisioned would involve a person who would transfer intangible property, such as securities or bank accounts, to a custodial trustee but with retention by the transferor of direction over the property. Later, this direction could be relinquished, or it could be lost upon incapacity. The objective of the statute is to provide a simple trust that is uncomplicated in its creation, administration, and termination. The potential for tax problems is minimized by permitting the beneficiary in most instances to retain control while the beneficiary has capacity to manage the assets effectively. The statute contains an asset specific transfer provision that it is believed will be simple to use and will gain the acceptance of the securities and financial industry. A simple transfer document, examples of which are set forth in the Act, and a receipt from the custodian, also in the Act, would provide for identification of beneficiaries or distributees upon death of the beneficiary. Protection is extended to third parties dealing with the custodian. Although the Act is patterned on the Uniform Transfers to Minors Act and meshes into the Uniform Probate Code, it is appropriate for enactment as well in states which have not adopted either UTMA or the UPC.

An adult beneficiary, who is not incapacitated, may: (1) terminate the custodial trust on demand (section 15-1.5-102 (5)); (2) receive so much of the income or custodial property as he or she may request from time to time (section 15-1.5-109 (1)); and (3) give the custodial trustee binding instructions for investment or management (section 15-1.5-107 (2)). In the absence of direction by the beneficiary, who is not incapacitated, the custodial trustee manages the property subject to the standard of care that would be observed by a prudent person dealing with the property of another and is not limited by other statutory restrictions on investments by fiduciaries. (section 15-1.5-107).

A principal feature of the Custodial Trust under this Act is designed to protect the beneficiary and his or her dependents against the perils of the beneficiary's possible future incapacity without the necessity of a conservatorship. Under section 15-1.5-110, the incapacity of the beneficiary does not terminate (1) the custodial trust, (2) the designation of a successor custodial trustee, (3) any power or authority of the custodial trustee, or (4) the immunities of third persons relying on actions of the custodial trustee. The custodial trustee continues to manage the property as a discretionary trust under the prudent person standard for the benefit of the incapacitated beneficiary.

Means of monitoring and enforcing the custodial trust include provisions requiring the custodial trustee to keep the beneficiary informed, requiring accounting by the custodial trustee (section 15-1.5-115), providing for removal of the custodial trustee (section 15-1.5- 113), and the distribution of the assets on termination of the custodial trust (section 15-1.5- 117). The custodial trustee is protected in section 15-1.5-116 by the statutes of limitation on proceedings against the custodial trustee.

Transactions with the custodial trustee should be executed readily and quickly by third parties because their rights and protections are determined by the Act and a third party acting in good faith has no need to determine the custodial trustee's authority to bind the beneficiary with respect to property and investment matters. (section 15-1.5-111). The Act generally limits the claims of third parties to recourse against the custodial property, with the beneficiary insulated against personal liability unless he or she is personally at fault and the custodial trustee is similarly insulated unless the custodial trustee is personally at fault or failed to disclose the custodial capacity when entering into a contract (section 15-1.5-112).

As a consequence of the mobility of our population, particularly the mature persons who are most likely to utilize this Act, uniformity of the laws governing custodial trusts is highly desirable, and the Act is designed to avoid conflict of laws problems. A custodial trust created under this Act remains subject to this Act despite a subsequent change in the residence of the transferor, the beneficiary, or the custodial trustee or the removal of the custodial trust property from the state of original location. (section 15-1.5-119).