Trusts are powerful tools for protecting and transferring wealth. The Pennsylvania Uniform Trust Act serves as the foundation of trust law in the Commonwealth. It establishes the rules for creating and administering trusts, describes the rights of beneficiaries, and explains the responsibilities of trustees. This guide explains the key aspects of the law that trustees and beneficiaries frequently inquire about. It also covers the 2024 Uniform Directed Trust Act update and the shift in state tax treatment for grantor trusts.
What the Pennsylvania Uniform Trust Act Covers
The Act is codified in Title 20 of the Pennsylvania Consolidated Statutes, Chapter 77. It organizes trust law into clear subchapters that address general provisions, court proceedings, creation and modification of trusts, duties and powers of trustees, and trustee liability. Subchapter H addresses the responsibilities and powers of trustees. Subchapter I covers remedies and time limits for claims. Pennsylvania also added a new Subchapter H.1 for directed trusts in 2024.
The Duty to Inform and Report
Transparency is a core theme. Section 7780.3 requires a trustee to respond to reasonable requests from the settlor of a trust and from beneficiaries of an irrevocable trust. When certain life events occur, the trustee must send specific notice within 30 days. Examples include when a settlor of a revocable trust is adjudicated incapacitated and when a settlor dies. The notice must identify the trust, the settlor, and the trustee. It must also explain the right to receive a copy of the trust instrument and to receive periodic written financial reports upon request.
The 2024 amendments expanded the content of the notice that must be included. A trustee’s notice must now list each trust director’s name, address, and telephone number if the trust uses one. This change took effect in October 2024.
When a Beneficiary Can Challenge a Trustee’s Action
Pennsylvania pairs transparency with firm timelines. Section 7780.3 gives beneficiaries the right to information and periodic financial reports, and section 7785 sets limits on how long a beneficiary has to raise objections.
There are two key clocks to know.
First, there is a 30-month clock that begins when a trustee sends a report adequately disclosing a transaction and including a conspicuous statement explaining the time bar. If the beneficiary does not provide written notice disputing the transaction within the 30-month period, the claim is barred.
Second, there is a five-year absolute bar that applies after major milestones. It runs from the first of the following events: the trustee’s removal, resignation, or death after the required notice of the change. Termination of the beneficiary’s interest; termination of the trust. Even a beneficiary who preserves a claim with timely written notice must sue within five years of the date the report is disclosed.
Trustees can also utilize a nonjudicial account settlement process under Section 7785.1 to conclude administration at specific points in time. If the statutory notice and consent requirements are met, this tool can provide finality without a formal court audit.
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The 2024 Uniform Directed Trust Act Update
Pennsylvania adopted the Uniform Directed Trust Act, which became effective in mid-October 2024. The new subchapter allows a trust to appoint a trust director with the authority to direct specific areas, such as investments. The goal is to separate specialized functions from general administration and to assign fiduciary responsibility to the party that actually makes the decision.
What changed in practice?
- Trust directors and powers. A trust director can receive a power of direction that extends to one or more of the trustee’s powers. Trust directors who share powers act by majority unless the trust says otherwise. A trust may also appoint a trust director specifically for investments with a default list of powers directing or vetoing investment decisions, voting proxies, hiring managers, and setting valuation methods.
- Directed trustee standard. A directed trustee must take reasonable action to comply with a trust director’s instruction and is not liable unless compliance would be willful misconduct. This is a high threshold and excludes negligence and even gross negligence. A directed trustee with a reasonable doubt may seek a declaratory judgment from the court.
- No duty to monitor. Unless the trust states otherwise, a directed trustee is not obligated to monitor the trust director or warn beneficiaries or others about the trust director’s actions. Likewise, a trust director does not have a duty to monitor a trustee or a different trust director over whom they have no authority.
- Information sharing and reliance. Directed trustees and trust directors must share information reasonably related to their respective powers. Each can rely on information from the other, which reduces liability when acting in reliance within the scope of authority.
The 2024 legislation also touched on related provisions. It tied the statute of limitations for actions against a trust director to the same limits that apply to actions against trustees. It also updated the duty to inform notices to include the trust director’s contact information, as noted above.
Delegation by Trustees
Even without a trust director, Pennsylvania permits trustees to delegate duties that a prudent trustee might delegate. The trustee must use reasonable care to select the agent, define the scope and terms, and monitor performance. A trustee who meets these standards is not liable for the agent’s actions. The statute also permits one trustee to delegate to another trustee who has greater skills, with similar protections in place.
Grantor Trust Rules Now Align With Federal Law
Pennsylvania historically taxed many irrevocable grantor trusts at the trust level. That created a mismatch with federal income tax treatment. The Commonwealth has now aligned its rules with federal grantor trust rules.
For tax years beginning in 2025, personal income received by a resident or nonresident grantor trust is taxable to the grantor or other person treated as the owner under the Internal Revenue Code, whether or not the income is distributed. This change shifts the filing and payment obligation to the grantor, simplifying coordination with federal returns. The Pennsylvania Department of Revenue has issued guidance, and leading tax advisers have published practical summaries.
Practical Takeaways
- Trustees should set a calendar for required notices and reporting, and include the necessary conspicuous statement if they wish the 30-month bar to apply. They should also retain proof of mailing for each report.
- If a trust uses a trust director, the trustee’s notices must include the director’s contact information. Internal procedures should capture that detail.
- Directed trustees should document compliance with directions and confirm that an instruction does not require willful misconduct. Trust directors should maintain files documenting the reasoning behind their decisions, as they hold fiduciary duties for their respective domains.
- Grantors and trustees should review their estimated Pennsylvania tax payments for 2025 and subsequent years if a grantor trust now reports at the owner level for state purposes.
Talk With a Team That Focuses on Pennsylvania Trusts
The Pennsylvania Uniform Trust Act affects daily administration, beneficiary rights, and tax reporting. Directed trust provisions add flexibility and new roles requiring careful drafting and coordination. If you want experienced counsel on the Act, the 2024 directed trust update, or the grantor trust rules, May Herr & Grosh can help you apply these rules to your specific trust and goals. Contact our team for tailored advice and a clear plan forward.
