2019 -- H 5476

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LC001343

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     STATE OF RHODE ISLAND

IN GENERAL ASSEMBLY

JANUARY SESSION, A.D. 2019

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A N   A C T

RELATING TO FIDUCIARIES --UNIFORM DIRECTED TRUST ACT

     

     Introduced By: Representatives Craven, Millea, and McEntee

     Date Introduced: February 14, 2019

     Referred To: House Judiciary

     It is enacted by the General Assembly as follows:

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     SECTION 1. Title 18 of the General Laws entitled "FIDUCIARIES" is hereby amended

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by adding thereto the following chapter:

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CHAPTER 17

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UNIFORM DIRECTED TRUST ACT

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     18-17-1. Short title.

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     This act shall be known and may be cited as the "Uniform Directed Trust Act".

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     18-17-2. Definitions.

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     As used in this chapter:

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     (1) "Breach of trust" means and includes a violation by a trust director or trustee of a duty

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imposed on that director or trustee by the terms of the trust this chapter or law of this state other

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than this chapter.

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     (2) "Directed trust" means a trust for which the terms of the trust grant a power of

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direction.

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     (3) "Directed trustee" means a trustee who is subject to a trust director's power of

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direction.

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     (4) "Person" means a person, estate, business or nonprofit entity, public corporation,

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government or governmental subdivision, agency, or instrumentality, or other legal entity.

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     (5) "Power of direction" means a power over a trust granted to a person by the terms of a

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trust to the extent the power is exercisable while the person is not serving as a trustee. The term

 

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includes a power over the investment management or distribution of trust property or other

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matters of trust administration. The term excludes the powers described in § 18-17-5(b).

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     (6) "Settlor" means a person, including a testator who creates or contributes property to a

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trust. If more than one person creates or contributes property to a trust, each person is a settlor of

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the portion of the trust property attributable to that person's contribution, except to the extent

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another person has the power to revoke or withdraw that portion.

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     (7) "State" means a state of the United States, the District of Columbia, Puerto Rico, the

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United States Virgin Islands, or any other territory or possession subject to the jurisdiction of the

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United States.

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     (8) "Terms of a trust" means:

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     (i) Except as otherwise provided in subsection (2) of this section, the manifestation of the

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settlor's intent regarding a trust's provisions as:

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     (A) Expressed in the trust instrument: or

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     (B) Established by other evidence that would be admissible in a judicial proceeding; or

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     (ii) The trust's provisions as established, determined, or amended by:

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     (A) A trustee or trust director in accordance with applicable law: or

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     (B) Court order.

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     (9) "Trust director'' means a person who is granted a power of direction by the terms of a

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trust to the extent the power is exercisable while the person is not serving as a trustee. The person

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is a trust director whether or not the terms of the trust refer to the person as a trust director and

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whether or not the person is a beneficiary or settlor of the trust.

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     (10) "Trustee" includes an original, additional and successor trustee, and a co-trustee.

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     18-17-3. Application; Principal place of administration.

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     (a) This chapter applies to a trust wherever created, that has its principal place of

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administration in this state, subject to the following rules:

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     (1) If the trust was created before the effective date of this chapter, this chapter applies

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only to a decision or action occurring on or after the effective date of this chapter.

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     (2) If the principal place of administration of the trust is changed to this state on or after

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the effective date of this chapter, this chapter applies only to a decision or action occurring on or

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after the date of the change.

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     (b) Without precluding other means to establish a sufficient connection with the

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designated jurisdiction in a directed trust, terms of the trust which designate the principal place of

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administration of the trust are valid and controlling if:

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     (1) A trustee's principal place of business is located in or a trustee is a resident of the

 

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designated jurisdiction:

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     (2) A trust director's principal place of business is located in or a trust director is a

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resident of the designated jurisdiction: or

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     (3) All or part of the administration occurs in the designated jurisdiction.

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     18-17-4. Common law and principles of equity.

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     The common law and principles of equity supplement this chapter except to the extent

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modified by this chapter or law of this state other than this chapter.

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     18-17-5. Exclusions.

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     (a) As used in this section, "power of appointment'' means a power that enables a person

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acting in a non-fiduciary capacity to designate a recipient or an ownership interest in or another

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power of appointment over trust property.

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     (b) This chapter does not apply to a:

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     (1) Power of appointment;

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     (2) Power to appoint or remove a trustee or trust director:

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     (3) Power of a settlor over a trust to the extent the settlor has a power to revoke the trust;

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     (4) Power of a beneficiary over a trust to the extent the exercise or non-exercise of the

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power affects the beneficial interest of the beneficiary.

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     (5) Power over a trust if:

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     (i) The terms of the trust provide that the power is held in a non-fiduciary capacity; and

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     (ii) The power must be held in a non-fiduciary capacity to achieve the settlor's tax

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objectives under the United States Internal Revenue Code, as amended, and regulations issued

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thereunder, as amended.

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     (c) Unless the terms of a trust provide otherwise, a power granted to a person to designate

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a recipient of an ownership interest in or power of appointment over trust property which is

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exercisable while the person is not serving as a trustee is a power of appointment and not a power

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of direction

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     18-17-6. Powers of trust director.

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     (a) Subject to § 18-17-7, the terms of a trust may grant a power of direction to a trust

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director.

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     (b) Unless the terms of a trust provide otherwise:

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     (1) A trust director may exercise any further power appropriate to the exercise or non-

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exercise of a power of direction granted to the director under subsection (a) of this section; and

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     (2) Trust directors with joint powers must act by majority decision.

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     18-17-7. Limitations on trust director.

 

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     A trust director is subject to the same rules as a trustee in a like position and under similar

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circumstances in the exercise or non-exercise of a power of direction or further power under § 18-

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17-6(b)(1).

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     (1) A payback provision in the terms of a trust necessary to comply with the

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reimbursement requirements of Medicaid law in section 1917 of the Social Security Act 42

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U.S.C. § 1396p(d)(4)(A), as amended, and regulations thereunder, as amended; and

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     (2) A charitable interest in the trust including notice regarding the interest of the attorney

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general.

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     18-17-8. Duty and liability of trust director.

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     (a) Subject to subsection (b) of this section, with respect to a power of direction or further

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power under § 18-17- 6(b)(1):

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     (1) A trust director has the same fiduciary duty and liability in the exercise or non-

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exercise of the powers granted in any trust:

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     (i) If the power is held individually, as a sole trustee in a like position and under similar

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circumstances: and

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     (ii) If the power is held jointly with a trustee or another trust director, as a co-trustee in a

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like position and under similar circumstances;

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     (2) The terms of the trust may vary the director's duty or liability to the same extent the

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terms of the trust could vary the duty or liability of a trustee in a like position and under similar

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circumstances.

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     (b) Unless the terms of a trust provide otherwise, if a trust director is licensed, certified or

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otherwise authorized or permitted by law other than this chapter to provide health care in the

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ordinary course of the director's business or practice of a profession, to the extent the director acts

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in that capacity, the director has no duty or liability under this chapter.

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     (c) The terms of a trust may impose a duty or liability on a trust director in addition to the

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duties and liabilities under this section.

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     18-17-9. Duty and liability of directed trustee.

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     (a) Subject to subsection (b) of this section, a directed trustee shall take reasonable action

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to comply with a trust director's exercise or non-exercise of a power of direction or further power

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under § 18-17-6(b)(l ), and the trustee is not liable for the action.

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     (b) A directed trustee must refuse to comply with a trust director's exercise or non-

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exercise of a power of direction, or further power under § 18-17-6(b)(1), to the extent that by

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complying the trustee would engage in willful misconduct.

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     (c) An exercise of a power of direction under which a trust director may release a trustee

 

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or another trust director from liability for breach of trust is not effective if:

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     (1) The breach involved the trustee's or other director's willful misconduct;

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     (2) The release was induced by improper conduct of the trustee or other director in

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procuring the release: or

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     (3) At the time of the release, the director did not know the material facts relating to the

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breach.

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     (d) A directed trustee that has reasonable doubt about its duty under this section may

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petition the superior court for instructions.

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     (e) The terms of a trust may impose a duty or liability on a directed trustee in addition to

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the duties and liabilities under this section.

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     18-17-10. Duty to provide information to trust director or trustee.

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     (a) Subject to § 18-17-11, a trustee shall provide information to a trust director to the

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extent the information is reasonably related both to:

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     (1) The powers or duties of the trustee; and

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     (2) The powers or duties of the director.

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     (b) Subject to § 18-17-11, a trust director shall provide the information to a trustee or

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another trust director to the extent the information is reasonably related both to:

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     (1) The powers and duties of the director; and

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     (2) The powers or duties of the trustee or other director.

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     (c) A trustee who acts in reliance on information provided by a trust director is not liable

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for a breach of trust to the extent the breach resulted from the reliance, unless by so acting the

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trustee would engage in willful misconduct.

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     (d) A trust director who acts in reliance on information provided by a trustee or another

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trust director is not liable for a breach of trust to the extent the breach resulted from the reliance,

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unless by acting the trust director would engage in willful misconduct.

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     18-17-11. No duty to monitor, inform or advise.

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     (a) Unless the terms of a trust provide otherwise:

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     (1) A trustee does not have a duty to:

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     (i) Monitor a trust director: or

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     (ii) Inform or give advice to a settlor, beneficiary, trustee, or trust director concerning an

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instance in which the trustee might have acted differently than the director; and

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     (2) By taking an action described in this section, a trustee does not assume the duty

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excluded by this section.

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     (b) Unless the terms of a trust provide otherwise:

 

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     (1) A trust director does not have a duty to:

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     (i) Monitor a trustee or another trust director; or

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     (ii) Inform or give advice to a settlor, beneficiary, trustee, or another trust director

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concerning an instance in which the director might have acted differently than a trustee or another

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trust director; and

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     (2) By taking an action described in this section, a trust director does not assume the duty

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excluded by this section.

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     18-17-12. Application to co-trustee.

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     The terms of a trust may relieve a co-trustee from duty and liability with respect to

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another co-trustee's exercise or non-exercise of a power of the other co-trustee to the same extent

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that in a directed trust a directed trustee is relieved from duty and liability with respect to a trust

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director's power of direction under §§18-17-9 through 18-17-11.

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     18-17-13. Limitation of action against trust director.

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     (a) An action against a trust director for breach of trust must be commenced within the

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same limitation period as for an action for breach of trust against a trustee in a like position.

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     (b) A report or accounting has the same effect on the limitation period for an action

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against a trust director for breach of trust that the report or accounting would have in an action for

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breach of trust against a trustee in a like position and under similar circumstances.

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     18-17-14. Defenses in action against trust director.

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     In an action against a trust director for breach of trust, the director may assert the same

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defenses a trustee in a like position and under similar circumstances could assert in an action for

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breach of trust against the trustee.

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     18-17-15. Jurisdiction over trust director.

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     (a) By accepting appointment as a trust director of a trust subject to this chapter, the

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director submits to personal jurisdiction of the courts of this state regarding any matter related to

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a power or duty of the director.

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     (b) This section does not preclude other methods of obtaining jurisdiction over a trust

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director.

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     18-17-16. Office of trust director.

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     Unless the terms of a trust provide otherwise, the rules applicable to a trustee apply to a

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trust director regarding the following matters.

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     (1) Acceptance;

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     (2) Giving of bond to secure performance;

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     (3) Reasonable compensation;

 

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     (4) Resignation;

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     (5) Removal:

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     (6) Vacancy and appointment of successors.

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     18-17-17. Uniformity of application and construction.

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     In applying and construing this chapter consideration must be given to the need to

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promote uniformity of the law with respect to its subject matter among states that enact it.

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     18-17-18. Relation to electronic signatures in global and national commerce act.

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     This chapter modifies, limits or supersedes the Electronic Signatures in Global and

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National Commerce Act, 15 U.S.C. § 7001 et seq., but does not modify, limit or supersede §

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101(c) of that act, 15 U.S.C. Section 7001(b), or authorize electronic delivery of any of the

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notices described in § 103(b) of that act, 15 U.S.C. § 7003(b).

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     SECTION 2. This act shall take effect upon passage and shall apply to all trusts,

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whenever executed.

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LC001343

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EXPLANATION

BY THE LEGISLATIVE COUNCIL

OF

A N   A C T

RELATING TO FIDUCIARIES --UNIFORM DIRECTED TRUST ACT

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     This act would permit the settlor of a trust to designate a trust director who shall be a

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person other than the trustee to direct actions relative to a trust and pursuant to any power of

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direction.

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     This act would take effect upon passage and would apply to all trusts, whenever

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executed.

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