Chapter 413

2012 -- H 7664

Enacted 06/23/12

 

A N A C T

RELATING TO FIDUCIARIES -- POWERS OF FIDUCIARIES

          

     Introduced By: Representatives Jackson, O`Neill, Gallison, Lally, and Keable

     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 United States Code section 1396p(d)(4)(A), a trustee

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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LC00901

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