Chapter 418
2013 -- S 0286
Enacted 07/15/13
A N A C T
RELATING TO
FIDUCIARIES
Introduced By: Senators Jabour, Lombardi, Ottiano, and McCaffrey
Date Introduced: February 12, 2013
It is enacted by the
General Assembly as follows:
SECTION 1. Section 18-4-31 of the General Laws in Chapter
18-4 entitled "Powers of
Fiduciaries" is hereby
amended to read as follows:
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 authority 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 such
authority 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)(1) The beneficiaries of the second
trust may include only beneficiaries of the first
trust;
(ii)(2)
The second trust may not reduce any fixed income, annuity or unitrust interest in
the assets of the first trust; and
(iii)(3)
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 Qualified Beneficiaries (as
hereinafter defined) of the first trust, in writing, of the
manner in which the trustee intends to
exercise the power, such notice to be 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 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 and shall
apply to all trusts,
whenever created.
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LC01071
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