October 29th, 2013
They became known simply as the Peierls cases – the three opinions in which the Delaware Court of Chancery refused to accept jurisdiction over, and then “reform,” thirteen trusts created during the period 1953 through 2005. None of the trusts was created or settled under Delaware law, and none was ever administered in Delaware. Understandably, the Court of Chancery’s opinions caused much hand-wringing among Delaware trustees because there seemed to be an almost insurmountable hurdle to moving foreign trusts to Delaware. At a minimum, they threw a well-established practice for Delaware trustees and practitioners into disarray. In a series of three opinions addressing the Peierls inter vivos trusts, charitable lead unitrust, and testamentary trusts, the Delaware Supreme Court – while mostly affirming the Court of Chancery’s opinions – gave us a road map for how to bring an out-of-state trust under Delaware law and into Delaware administration.
The bottom line is when a settlor does not intend his choice of governing law to be permanent and the trust instrument includes a power to appoint a successor trustee without geographic limitation, the law governing the administration of the trust may be changed. A settlor’s mere designation of an initial choice of law is not evidence that the choice is absolute and unchangeable – something more is needed to reach that conclusion. (more…)