Act 15 of 2007: Transforming Arkansas Trust Law – Key Changes & Impact

Table of Contents#

1. Overview of the Arkansas Trust Code
2. Key Provisions of the Trust Code
   • Modernizing the Rule Against Perpetuities (RAP)
   • Expanded Trustee Powers
   • Non-Judicial Settlement Agreements
   • Directed Trusts and Trust Protectors
   • Trust Modification and Termination
3. Impact on Trust Administration in Arkansas
4. Benefits for Settlors, Trustees, and Beneficiaries
5. Comparison with Pre-Trust Code Arkansas Trust Law
6. Practical Considerations for Estate Planning
7. Conclusion
8. References

Overview of the Arkansas Trust Code#

Enacted by the Arkansas General Assembly in 2005 through SB336 and codified in the Arkansas Code Annotated (Title 28, Chapter 73), the Arkansas Trust Code was designed to modernize the state's trust laws. Its primary goals were to:

• Make Arkansas a more attractive jurisdiction for trust formation and administration.
• Reduce unnecessary judicial involvement in trust matters.
• Provide greater flexibility for settlors (those creating trusts) to customize trusts to their needs.
• Align Arkansas law with the Uniform Trust Code (UTC), a model law adopted by most states to standardize and modernize trust rules.

Before the Trust Code, Arkansas trust law was criticized for strict limitations on trustee powers, rigid rules governing trust duration, and a lack of mechanisms for resolving disputes without court intervention. The Trust Code addressed these gaps, positioning Arkansas as a more competitive state for trust-based estate planning. Additional reforms in 2007, 2017, 2023, and 2025 have further strengthened the framework.

Key Provisions of the Trust Code#

Modernizing the Rule Against Perpetuities (RAP)#

The Rule Against Perpetuities (RAP) is a legal doctrine that limits how long a trust can exist, preventing property from being tied up indefinitely. Prior to reform, Arkansas followed the common-law RAP, which restricted trusts to a maximum duration of 21 years after the death of the last "measuring life" (e.g., a beneficiary alive when the trust was created). This made it impossible to create "dynasty trusts"—long-term trusts designed to preserve wealth for multiple generations.

Arkansas reformed RAP by:

• Adopting a "wait-and-see" approach: Instead of invalidating a trust upfront if it might violate RAP, courts now wait to see if the trust actually violates the rule over time.
• Extending the perpetuity period: For trusts created under current law, the maximum duration is 365 years (Arkansas Code § 18-3-101, as amended by HB1339 of 2023). This allows settlors to create dynasty trusts, ensuring wealth transfers across generations without fear of premature termination.

Expanded Trustee Powers#

Before the Trust Code, Arkansas law strictly limited trustee powers, requiring explicit authorization in the trust document for even routine actions (e.g., investing in stocks or real estate). This created inefficiencies and increased the risk of liability for trustees acting outside narrow boundaries.

The Trust Code broadened trustee powers by:

• Granting "default" powers: Trustees now have implied authority to engage in common financial transactions (e.g., investing, borrowing, selling assets, and entering contracts) unless the trust document explicitly restricts these actions (Arkansas Code § 28-73-816).
• Allowing digital asset management: Under the Revised Uniform Fiduciary Access to Digital Assets Act (Act 886 of 2017, codified in Chapter 75 of Title 28), trustees can manage digital assets (e.g., online accounts, cryptocurrencies) and access electronic records, reflecting modern technological realities.
• Clarifying fiduciary duties: The Trust Code defined trustees’ duties of care, loyalty, and impartiality, reducing ambiguity and liability risks.

Non-Judicial Settlement Agreements#

Prior to the Trust Code, resolving trust disputes or modifying trust terms often required costly and time-consuming court proceedings, even for minor issues.

The Trust Code introduced non-judicial settlement agreements (NJSAs), which allow trustees, settlors (if alive), and beneficiaries to resolve trust matters through a written agreement without court approval. NJSAs can address:

• Interpretation of trust terms.
• Trustee compensation or removal.
• Modification of administrative provisions (e.g., changing a trustee’s powers).
• Even minor changes to trust purposes, provided they align with the settlor’s original intent.

This provision reduced legal costs and delays, making trust administration more efficient.

Directed Trusts and Trust Protectors#

The Trust Code recognized two innovative trust structures to enhance flexibility:

• Directed trusts: Settlors can appoint "directors" (e.g., investment advisors, family members) to manage specific aspects of the trust (e.g., investments, distributions), while the trustee handles administrative duties (e.g., record-keeping, tax filings). This separates decision-making authority, allowing settlors to leverage expertise (e.g., a financial advisor for investments) without burdening the trustee.

• Trust protectors: Settlors can appoint a "trust protector"—an independent third party—with the power to modify trust terms, remove/replace trustees, or resolve disputes. This adds a layer of oversight, ensuring the trust adapts to changing circumstances (e.g., new tax laws, family dynamics).

Trust Modification and Termination#

Before the Trust Code, modifying or terminating a trust was difficult unless the trust document explicitly allowed it. Courts could only intervene in extreme cases (e.g., if the trust's purpose became impossible to fulfill).

The Trust Code relaxed these rules by:

• Allowing trust modification if unforeseen circumstances make the original terms impractical, provided the modification aligns with the settlor’s intent.
• Permitting early termination if all beneficiaries consent and the settlor’s intent is not frustrated.
• Allowing "decanting" (transferring assets from an old trust to a new one with updated terms): Act 293 of 2023 added decanting authority to the Trust Code (Arkansas Code § 28-73-818), and the Uniform Trust Decanting Act was adopted in 2025 (Act 680), providing a comprehensive framework for trustees to update trust terms without court approval.

Impact on Trust Administration in Arkansas#

The Trust Code transformed trust administration by:

• Reducing judicial involvement: NJSAs and expanded trustee powers mean fewer court filings, saving time and legal fees.
• Enhancing flexibility: Trustees and settlors now have tools to adapt trusts to changing laws, family needs, or market conditions.
• Attracting out-of-state trusts: Arkansas’ 365-year perpetuity period and modern trust rules have made it a destination for individuals seeking to create dynasty trusts or protect assets, boosting the state’s reputation in estate planning.

Benefits for Settlors, Trustees, and Beneficiaries#

Settlors#

• Greater control: Settlors can customize trusts with directed trustees, trust protectors, and long durations (dynasty trusts).
• Adaptability: Trusts can be modified or decanted to address unforeseen changes (e.g., tax law updates, family emergencies).

Trustees#

• Clearer authority: Expanded default powers reduce the risk of liability for routine actions.
• Efficiency: NJSAs allow trustees to resolve disputes without court, streamlining administration.

Beneficiaries#

• Faster access to assets: Reduced court involvement means quicker resolution of distribution or modification requests.
• Protected interests: Trust protectors and NJSAs ensure beneficiaries’ needs are considered in trust changes.

Comparison with Pre-Trust Code Arkansas Trust Law#

Practical Considerations for Estate Planning#

• Drafting new trusts: When creating a trust today, leverage the Trust Code's provisions (e.g., 365-year perpetuity, directed trustees, trust protectors) to maximize flexibility.
• Existing trusts: If you have a pre-2005 trust, consider decanting it into a new trust to access modern Trust Code benefits (e.g., longer duration, expanded trustee powers).
• Consult an expert: Work with an Arkansas estate planning attorney to ensure your trust aligns with current law and your goals (e.g., dynasty planning, asset protection).

Conclusion#

Arkansas's modernized trust law has been a game-changer for the state, modernizing outdated rules and making Arkansas a competitive destination for trust-based estate planning. By expanding trustee powers, allowing non-judicial settlements, extending trust durations to 365 years, and providing for directed trusts and decanting, the Arkansas Trust Code provides settlors, trustees, and beneficiaries with greater flexibility, efficiency, and control. Whether you're creating a new trust or updating an existing one, understanding the Trust Code is key to maximizing the benefits of trust planning in Arkansas.

References#

• Arkansas General Assembly. (2005). Arkansas Trust Code (codified in Arkansas Code Annotated Title 28, Chapter 73). Arkansas Trust Code
• Arkansas General Assembly. (2023). HB1339 – Amendment to the Statutory Rule Against Perpetuities (codified in Arkansas Code Annotated § 18-3-101). HB1339
• Arkansas General Assembly. (2023). Act 293 – Trust Decanting (codified in Arkansas Code Annotated § 28-73-818). Act 293
• Arkansas General Assembly. (2017). Act 886 – Revised Uniform Fiduciary Access to Digital Assets Act (codified in Arkansas Code Annotated Title 28, Chapter 75).
• Uniform Law Commission. (2000). Uniform Trust Code. UTC Overview