Chapter 403
2012 -- S 2497
Enacted 06/23/12
A N A C T
RELATING TO
FIDUCIARIES -- POWERS OF FIDUCIARIES
Introduced By: Senator Michael J. McCaffrey
Date Introduced: February 16, 2012
It is enacted by the
General Assembly as follows:
SECTION 1. Chapter 18-4 of the General Laws entitled
"Powers of Fiduciaries" is
hereby amended by adding thereto the following section:
18-4-31.
Power to invade principal in trust. – (a)(1) Unless the trust instrument
expressly provides otherwise or unless the trust is a “Special
Needs Trust” or “Supplemental
Needs Trust” created in accordance with 42
who has absolute power under the terms of a trust to
invade the principal of the trust, referred to
in this section as the “first trust,” to make
distributions to or for the benefit of one or more
persons, may instead exercise the power by appointing all or
part of the principal of the trust
subject to the power in favor of a trustee of another trust,
referred to in this section as the “second
trust,” for the current benefit of one or more of such
persons under the same trust instrument or
under a different trust instrument, provided:
(i)
The beneficiaries of the second trust may include only beneficiaries of the
first trust;
(ii) The second trust
may not reduce any fixed income, annuity or unitrust
interest in the
assets of the first trust; and
(iii) If any
contribution to the first trust qualified for a marital or charitable deduction
for
federal income, gift or estate tax purposes under the
Internal Revenue Code of 1986, as amended
26 U.S.C. section 1, et seq., the second trust shall
not contain any provisions which, if included in
the first trust, would have prevented the first trust
from qualifying for such a deduction or would
have reduced the amount of such deduction.
(2) For purposes of
this subsection, an absolute power to invade principal shall include a
power to invade principal that is not limited to specific
or ascertainable purpose, such as health,
education, maintenance, and support whether or not the term
“absolute” is used. A power to
invade principal for purposes such as best interests,
welfare, comfort, or happiness shall constitute
an absolute power not limited to specific or
ascertainable purposes.
(b) The exercise of a
power to invade principal under subsection (a)(1) or
(a)(2) shall be
by an instrument in writing, signed and acknowledged by
the trustee, and filed with the records of
the first trust.
(c) The exercise of a
power to invade principal under subsection (a)(1) or
(a)(2) shall be
considered the exercise of a power of appointment, other than a
power to appoint to the trustee,
the trustee’s creditors, the trustee’s estate, or the
creditors of the trustee’s estate.
(d) The trustee shall
notify all qualified beneficiaries (as hereinafter defined) of the first
trust, in writing, at least sixty (60) days prior to the
effective date of the trustee’s exercise of the
trustee’s power to invade principal pursuant to subsection
(a)(1) or (a)(2) of the manner in which
the trustee intends to exercise the power. A copy of the
proposed instrument exercising the
power shall satisfy the trustee’s notice obligation under
this subsection. If all qualified
beneficiaries waive the notice period by signed written instrument
delivered to the trustee, the
trustee’s power to invade principal shall be exercisable
immediately. The trustee’s notice under
this subsection shall not limit the right of any
beneficiary to object to the exercise of the trustee’s
power to invade principal except as provided in other
applicable provisions of this title.
(e) “Qualified
Beneficiary” means a living beneficiary who, on the date the beneficiary’s
qualifications is determined:
(1) Is a distributee or permissible distribute of trust income or
principal;
(2) Would be a
distribute or permissible distribute of trust income or principal if the
interests of the distributes described in subsection (a)
terminated on that date without causing the
trust to terminate; or
(3) Would be a distributee or permissible distribute of trust income or
principal if the
trust terminated in accordance with its terms on that date.
(f) The exercise of
the power to invade principal under subsection (a)(1)
or (a)(2) is not
prohibited by a spendthrift clause or by a provision in the
trust instrument that prohibits
amendment or revocation of the trust.
(g) Nothing in this
section is intended to create or imply a duty to exercise a power to
invade principal, and no inference of impropriety shall be
made as a result of a trustee not
exercising the power to invade principal conferred under subsection
(a)(1) or (a)(2).
(h) The provisions of
this section shall not be construed to abridge the right of any trustee
who has a power of invasion to appoint property in
further trust that arises under the terms of the
first trust or under any other section of this title or
under another provisions of law or under
common law.
SECTION 2. This act shall take effect upon passage.
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LC00985
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