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![handle is hein.nccusl/nccpub01055 and id is 1 raw text is: MEMORANDUM
To: Members of the Insurable Interest Drafting Committee
From Roger Henderson, Chair, and Robert Jerry, Reporter, Insurable Interest Drafting
Committee
Re: Commentary on Proposed 8129108 Amendment to Uniform Trust Code
Date: September 1, 2008
Attached is a document titled [Amendment to Uniform Trust Code] and
identified as 8/29/2008 draft (hereafter referred to as the 8/29 draft). This draft is
formatted as it would appear if inserted as the last section of Article 1 of the Uniform
Trust Code (hereinafter referred to as the UTC). 1 Because the UTC uses the term
settlor, that term, instead of the term grantor (which appears in a number of statutes
enacted to date), is used in the 8/29 draft. The purpose of this memorandum is to explain
the considerations involved in the preparation of this draft.
Nine states2 have statutes that address, either directly or indirectly, the Chawla
problem (see spreadsheet and comparison documents). The statutes vary in a number of
ways, but the underlying purpose of each is to enable a trust or trustee to purchase and
own insurance on the lives of certain categories of individuals without being vulnerable
to a claim that the insurance policy is void on account of the trust's or trustee's lack of an
insurable interest in the life on which the insurance is purchased. Given that our effort to
amend the UTC has as its purpose creating a safe harbor for the trustee (and, more
specifically, the trust planner), the scope of the safe harbor should be sufficiently broad to
protect all commonly used estate planning arrangements where life insurance is used to
fund some portion or all of the trust.
SECTION [J. INSURABLE INTEREST; APPLICABILITY.
Subsection (a), line 5: In addition to any insurable interest otherwise
recognized under the law of this state
The 8/29 draft has an explicit provision that both limits the reach of the
amendment to the UTC while at the same time making it clear that it supplements
existing law in the state dealing with insurable interests for the purpose of life insurance.
Thus, the proposed language is intended to resolve the Chawla problem within the
confines of the UTC without having, as its purpose or effect, collateral impact on the law
of insurable interest. If the state already has a provision in its insurance code that deals
I If inserted as the last section of Article I of the UTC, Alternative A for subsection (b) would be the
preferred choice, not Alternative B. Alternative B, however, may be used if the amendment were made a
part of the insurable interest statutes of the adopting jurisdiction or otherwise adopted independent of the
UTC.
2Delaware; Florida; Georgia; Maine; Maryland; South Dakota; Utah; Virginia; Washington.
1](ViewImageLocal?handle=hein.nccusl/nccpub01055&div=1&collection=&method=preview&ext=.png&size=3)