Introduced By: Senator Roney
Date Introduced : March 19, 1999
It is enacted by the General Assembly as follows:
SECTION 1. Title 18 of the General Laws entitled "Fiduciaries" is hereby amended by adding thereto the following chapter:
{ADD 18-9.2-1. Short title. -- ADD} {ADD This chapter shall be known and may be cited as the "Qualified Dispositions in Trust Act". ADD}
{ADD 18-9.2-2. Definitions. -- ADD} {ADD As used in this chapter: ADD}
{ADD (1) "Claim" means a right to payment, whether or not the right is reduced to judgment, liquidated, unliquidated, fixed, contingent, matured, unmatured, disputed, undisputed, legal equitable, secured or unsecured. ADD}
{ADD (2) "Creditor" means with respect to a transferor, a person who has claim. ADD}
{ADD (3) "Debt" means liability on a claim. ADD}
{ADD (4) "Disposition" means a transfer, conveyance or assignment of property, or the exercise of a power so as to cause a transfer of property, to a trustee. ADD}
{ADD (5) "Property" includes real property, personal property, and interests in real or personal property. ADD}
{ADD (6) "Qualified Disposition" means a disposition by or from a transferor to a trustee, with or without consideration, by means of a trust instrument. ADD}
{ADD (7) "Transferor" means a person who, as an owner of property or as a holder of a general power of appointment, directly or indirectly, makes a disposition or causes a disposition to be made. ADD}
{ADD (8) "Trustee" means a person who: ADD}
{ADD (a) in the case of natural person, is a resident of this State or, in all other cases, is authorized by the provisions of the general or public laws to act as a trustee, and whose activities are subject to supervision by the Department of Business Regulation of the State, The Federal Deposit Insurance Corporation, the Comptroller of the Currency, or the Office of Thrift Supervision, or any successor thereto; and ADD}
{ADD (b) maintains or arranges for custody in this state of some or all of the property transferred to the trustee, maintains records for the trust on an exclusive or nonexclusive basis, prepares or arranges for the preparation of fiduciary income tax returns for the trust, or otherwise materially participates in the administration of the trust. ADD}
{ADD (9) "Trust Instrument" means an instrument appointing a trustee for the property that is the subject of a disposition, which instrument: ADD}
{ADD (a) expressly incorporates the general or public laws of this state to govern the validity, construction and administration of the trust; ADD}
{ADD (b) is irrevocable; provided, however, that a trust instrument shall not be deemed revocable due to its inclusion in one or more of the following: a transferor's power to veto a distribution from a trust, a testamentary special power of appointment or similar power vested in the transferor, or the transferor's potential or actual receipt of a distribution of income, principal, or both, in the sole discretion of a trustee who is neither the transferor nor a related or subordinate party of the transferor within the meaning of 26 U.S.C. section 672(c); and ADD}
{ADD (c) provides that the interest of a beneficiary in the trust property or the income therefrom may not be transferred or assigned, whether voluntarily or involuntarily, before the trustee distributes the property or income to the beneficiary. ADD}
{ADD 18-9.2-3. No retained interest of transferor. -- ADD} {ADD A disposition which is otherwise qualified but which requires a trustee to distribute all or any part of the trust's income or principal, or both, to the transferor shall not be entitled to any rights or benefits arising under section 18-9.2-4 of this chapter; but a disposition which is otherwise qualified shall be entitled to the rights and benefits arising under section 18-9.2-4 notwithstanding that the trustee has discretion, exercisable without regard to any ascertainable standard, to distribute trust income or principal, or both, to the transferor if such trustee is neither the transferor nor a related party or subordinate party of the transferor within the meaning of 26 U.S.C. section 672(c). ADD}
{ADD 18-9.2-4. Avoidance of qualified dispositions. -- ADD} {ADD (a) Notwithstanding any other provision of Rhode Island General Laws, no action of any kind, including, without limitation, an action to enforce a judgment entered by a court or other body having adjudicative authority, shall be brought at law or in equity for an attachment or other provisional remedy against property that is the subject of a qualified disposition or for avoidance of a qualified disposition unless such action shall be brought pursuant to the provisions of section 6-16-7. ADD}
{ADD (b) Notwithstanding the provisions of section 6-16-9, a creditor may not bring an action under subsection (a) hereof if: ADD}
{ADD (1) the creditor's claim against the transferor arose before the qualified disposition was made, unless the action is brought within four (4) years after the qualified disposition is made or, if later, within one (1) year after the qualified disposition was or could reasonably have been discovered by the creditor; or ADD}
{ADD (2) the creditor's claim against the transferor arose subsequent to the qualified disposition, unless the action is brought within four (4) years after the qualified disposition is made. ADD}
{ADD 18-9.2-5. Persons not subject to qualified dispositions. -- ADD} {ADD Notwithstanding the provisions of section 18-9.2-4, this chapter shall not apply to defeat a claim brought by: ADD}
{ADD (a) any person to whom the transferor is indebted on or before the date of a qualified disposition on account of an agreement or order of court for the payment of support or alimony in favor of such transferor's spouse, former spouse or children, or for a division of distribution of property in favor of such transferor's spouse or former spouse, to the extent of such debt; or ADD}
{ADD (b) to any person who suffers death, personal injury or property damage on or before the date of a qualified disposition by a transferor, which death, personal injury or property damage is at any time determined to have been caused in whole or in part by the act or omission of either such transferor or by another person for whom such transferor is or was vicariously liable. ADD} {ADD ADD}
{ADD 18-9.2-6. Effect of avoidance of qualified dispositions. -- ADD} {ADD (a) A qualified disposition shall be avoided only to the extent necessary to satisfy the transferor's debt to the creditor at whose instance the disposition had been avoided, together with such costs, including attorney's fees, as the court may allow. ADD}
{ADD (b) In the event any qualified disposition shall be avoided as provided in subsection (a) of this section, then: ADD}
{ADD (1) If the court is satisfied that the trustee has not acted in bad faith in accepting or administering the property that is the subject of the qualified disposition; ADD}
{ADD (a) the trustee shall have a first and paramount lien against the property that is the subject of the qualified disposition in an amount equal to the entire cost, including attorney's fees, properly incurred by the trustee in the defense of the action or proceedings to avoid the qualified disposition; and ADD}
{ADD (b) the qualified disposition shall be avoided subject to the proper fees, costs, preexisting rights, claims and interest of the trustee (and of any predecessor trustee that has not acted in bad faith); and ADD}
{ADD (c) for purposes of this subparagraph (1), it shall be presumed that the trustee did not act in bad faith merely by accepting such property; and ADD}
{ADD (2) If the court is satisfied that a beneficiary of a trust has not acted in bad faith, the avoidance of the qualified disposition shall be subject to the right of such beneficiary to retain any distribution made upon the exercise of a trust power or discretion vested in the trustee of such trust, which power or discretion was properly exercised prior to the creditor's commencement of an action to avoid the qualified disposition. ADD}
{ADD 18-9.2-7. Application of chapter. -- ADD} {ADD This chapter shall apply to qualified dispositions made on or after July 1, 1999. ADD}
SECTION 2. This act shall take effect upon passage.
