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68th Legislature 2023 SB 555.1
1 SENATE BILL NO. 555
2 INTRODUCED BY G. HERTZ
3
4 A BILL FOR AN ACT ENTITLED: “AN ACT PROVIDING FOR A SPECIAL SPOUSAL TRUST; PROVIDING
5 FOR THE CREATION, AMENDMENT, AND REVOCATION OF A SPECIAL SPOUSAL TRUST; REQUIRING
6 THAT PROPERTY HELD IN A SPECIAL SPOUSAL TRUST IS TREATED AS COMMUNITY PROPERTY;
7 PROVIDING FOR ADJUSTMENTS IN CALCULATING MONTANA TAXABLE INCOME FOR PROPERTY
8 THAT IS SPECIAL SPOUSAL PROPERTY; PROVIDING RULEMAKING AUTHORITY; PROVIDING
9 DEFINITIONS; AMENDING SECTION 15-30-2120, MCA; AND PROVIDING A DELAYED EFFECTIVE DATE
10 AND AN APPLICABILITY DATE.”
11
12 BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF MONTANA:
13
14 NEW SECTION. Section 1. Short title. [Sections 1 through 15] may be cited as the "Montana
15 Special Spousal Trust Act".
16
17 NEW SECTION. Section 2. Definitions. As used in [sections 1 through 15], unless the context
18 clearly indicates otherwise, the following definitions apply:
19 (1) "Bona fide purchaser" means a purchaser of property for value who has not knowingly been a
20 party to fraud or illegality affecting the interest of the spouses or other parties to the transaction, does not have
21 notice of an adverse claim by a spouse, and has acted in the transaction in good faith.
22 (2) "Purchaser" means a person who acquires property by sale, lease, discount, negotiation,
23 mortgage, pledge, or lien, or otherwise deals with property in a voluntary transaction other than making a gift. A
24 purchaser gives value for property if the property is acquired:
25 (a) in return for a binding commitment to extend credit;
26 (b) as security for or in total or partial satisfaction of a preexisting claim;
27 (c) by accepting delivery under a preexisting contract for purchase; or
28 (d) in return for other consideration sufficient to support a contract.
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68th Legislature 2023 SB 555.1
1 (3) "Qualified person" means, without regard to whether the person is the transferor:
2 (a) an individual who, except for brief intervals, military service, attendance at an educational or
3 training institution, or for absences for good cause shown, resides in this state, whose true and permanent
4 home is in this state, who does not have a present intention of moving from this state, and who has the
5 intention of returning to this state when away;
6 (b) a trust company that is organized under the laws of this state or under federal law and that has
7 its principal place of business in this state; or
8 (c) a bank or savings association that possesses and exercises trust powers, has its principal
9 place of business in this state, and the deposits of which are insured by the federal deposit insurance
10 corporation.
11 (4) "Special spousal property" means property in trust that is treated as community property as
12 provided in [section 7].
13 (5) "Surviving spouse's property" means the property that consists of the surviving spouse's
14 property that is not Montana special spousal property and the surviving spouse's share of the special spousal
15 property determined as of the date of the first spouse's death.
16
17 NEW SECTION. Section 3. Arrangement qualifying as special spousal trust -- state law or
18 jurisdiction provision valid, effective, and conclusive. (1) An arrangement is a Montana special spousal
19 trust if one or both spouses in a marriage transfer property to a trust, the trust expressly declares that some or
20 all the property transferred is Montana special spousal property as provided in [sections 1 through 15], and at
21 least one trustee is a qualified person. A Montana special spousal trust is enforceable without consideration.
22 Both spouses or either spouse may be a trustee. The trust must be signed by both spouses. The trust may be
23 revocable or irrevocable.
24 (2) (a) Except as expressly provided by the terms of a governing instrument or by a court order, a
25 general law or a state jurisdiction provision stating that the laws of this state govern is valid, effective, and
26 conclusive for a Montana special spousal trust if all of the following are true:
27 (i) some or all of the trust assets are deposited in this state or physical evidence of the assets is
28 held in this state and the trust is being administered by a qualified person;
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68th Legislature 2023 SB 555.1
1 (ii) a trustee is a qualified person who is designated as a trustee under the governing instrument, a
2 successor trusteeship, or designated by a court having jurisdiction over the trust; and
3 (iii) the administration, for example, physically maintaining trust records in this state and preparing
4 or arranging for the preparation of, on an exclusive basis or a nonexclusive basis, an income tax return that
5 must be filed by the trust, occurs wholly or partly in this state.
6 (b) For the purpose of subsection (2)(a), deposited in this state includes being held in a checking
7 account, time deposit, certificate of deposit, brokerage account, trust company fiduciary account, or other
8 similar account or deposit that is located in this state, including state investments.
9 (3) This state and the courts of this state have jurisdiction over a trust created in a foreign
10 jurisdiction if the administration of the trust meets the three requirements in subsection (2)(a).
11 (4) Nothing in this section may be construed to be the exclusive means of providing a valid,
12 effective, and conclusive state jurisdiction provision.
13
14 NEW SECTION. Section 4. Required language. A Montana special spousal trust must contain the
15 following language in at least 14-point type and capital letters at the beginning of the trust:
16 "THE CONSEQUENCES OF THIS TRUST MAY BE VERY EXTENSIVE, INCLUDING YOUR RIGHTS
17 WITH RESPECT TO CREDITORS AND OTHER THIRD PARTIES, AND YOUR RIGHTS WITH YOUR
18 SPOUSE BOTH DURING THE COURSE OF YOUR MARRIAGE, AT THE TIME OF A DIVORCE, AND AT
19 THE DEATH OF YOU OR YOUR SPOUSE. ACCORDINGLY, THIS TRUST AGREEMENT SHOULD ONLY BE
20 SIGNED AFTER CAREFUL CONSIDERATION. IF YOU HAVE ANY QUESTIONS ABOUT THIS TRUST
21 AGREEMENT, YOU SHOULD SEEK INDEPENDENT LEGAL ADVICE."
22
23 NEW SECTION. Section 5. Classification of property -- interest of each spouse. Spouses may
24 classify all or any of their property as special spousal property by transferring property to a Montana special
25 spousal trust established pursuant to [sections 1 through 15], and by expressly declaring in the trust that the
26 property is community property. Unless there is a specific provision in the governing instrument stating
27 otherwise, each spouse's respective interest in the special spousal property is 50%.
28
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68th Legislature 2023 SB 555.1
1 NEW SECTION. Section 6. Amendment and revocation. A Montana special spousal trust may not
2 be amended or revoked unless the trust agreement provides for amendment or revocation, or unless the trust
3 agreement is amended or revoked by a later Montana special spousal trust. To amend or revoke the trust, the
4 later Montana special spousal trust is not required to declare any property held by the trustee as special
5 spousal property. The amended trust or the revocation is enforceable without consideration. However,
6 notwithstanding the other provisions of [sections 1 through 15], unless the Montana special spousal trust
7 expressly provides otherwise, at any time after the death of the first spouse the surviving spouse may amend
8 the Montana special spousal trust with regard to the surviving spouse's property to be disposed of at the
9 surviving spouse's death.
10
11 NEW SECTION. Section 7. Application of Internal Revenue Code -- community property
12 classified by another jurisdiction -- state income taxes. (1) For purposes of the application of section
13 1014(b)(6) of the Internal Revenue Code, 26 U.S.C. 1014(b)(6), a Montana special spousal trust is considered
14 a trust established under the community property laws of Montana. Community property as classified by a
15 jurisdiction other than Montana transferred to a Montana special spousal trust retains its character as
16 community property while in the trust. If the trust is revoked and property is transferred on revocation of the
17 trust, the community property as classified by a jurisdiction other than Montana retains its character as
18 community property to the extent otherwise provided by law.
19 (2) The provisions of subsection (1) apply to determining the gain or loss from the sale or transfer
20 of property under Title 15, chapter 30, regardless of whether the property is considered community property
21 under the Internal Revenue Code.
22
23 NEW SECTION. Section 8. Types of transfers to special spousal trust. In addition to other
24 transfers of property to a Montana special spousal trust, property is considered transferred to a Montana
25 special spousal trust if the property is subject to a nonprobate transfer on death under an insurance policy,
26 contract of employment, bond, mortgage, promissory note, certificated or uncertificated security, account
27 agreement, custodial agreement, deposit agreement, compensation plan, pension plan, individual retirement
28 plan, employee benefit plan, trust, conveyance, deed of gift, marital property agreement, or other written
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1 instrument of a similar nature and the Montana special spousal trust is designated as a beneficiary to receive
2 the property under the transfer. The property is considered the surviving spouse's property that is not Montana
3 special spousal property.
4
5 NEW SECTION. Section 9. Records. The trustee of a Montana special spousal trust shall maintain
6 records that identify which property held by the trust is Montana special spousal property and which property
7 held by the trust is not Montana special spousal property.
8
9 NEW SECTION. Section 10. Matters upon which spouses may agree. Except as provided in
10 [sections 11 through 13], in a Montana special spousal trust, spouses may agree on:
11 (1) the rights and obligations in the property transferred to the trust, notwithstanding when and
12 where the property is acquired or located;
13 (2) the management and control of the property transferred to the trust;
14 (3) the disposition of the property transferred to the trust on dissolution, death, or the occurrence
15 or nonoccurrence of another event; if there is no provision in the governing instrument on disposition of the
16 property transferred to the trust on dissolution, state law on disposition of property on dissolution applies;
17 (4) the choice of law governing the interpretation of the trust; and
18 (5) any other matter that affects the property transferred to the trust and does not violate public
19 policy or a statute imposing a criminal penalty.
20
21 NEW SECTION. Section 11. Right of child to support. Notwithstanding anything contained in
22 [section 10] to the contrary, a Montana special spousal trust may not adversely affect the right of a child to
23 support.
24
25 NEW SECTION. Section 12. Creditor rights -- good faith between spouses. Notwithstanding
26 anything contained in [section 10] to the contrary:
27 (1) a provision of a revocable Montana special spousal trust does not adversely affect the interest
28 of a creditor unless the creditor has actual knowledge of the trust when the obligation to the creditor is incurred.
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68th Legislature 2023 SB 555.1
1 The interest of a creditor in an irrevocable Montana special spousal trust may be subject to the rights and
2 liabilities of a creditor with respect to transfers in this state.
3 (2) a spouse shall act in good faith with respect to the other spouse in matters involving Montana
4 special spousal property. The obligation under and effect of this section may not be varied by a Montana
5 special spousal trust.
6
7 NEW SECTION. Section 13. Bona fide purchasers. Notwithstanding anything contained in [section
8 10] to the contrary:
9 (1) notice of the existence of a Montana special spousal trust, a marriage, or the termination of a
10 marriage does not affect the status of a purchaser as a bona fide purchaser; and
11 (2) special spousal property purchased by a bona fide purchaser from a spouse having the right to
12 manage and control the property is acquired free of any claim of the other spouse. The effect of this subsection
13 may not be varied by a Montana special spousal trust.
14
15 NEW SECTION. Section 14. Unenforceable trusts. (1) A Montana special spousal trust executed
16 during marriage is not enforceable if the spouse against whom enforcement is sought proves that:
17 (a) the trust was unconscionable when made;
18 (b) the spouse against whom enforcement is sought did not execute the Montana special spousal
19 trust agreement voluntarily; or
20 (c) before execution of the Montana special spousal trust agreement, the spouse against whom
21 enforcement is sought:
22 (i) was not given a fair and reasonable disclosure of the property and financial obligations of the
23 other spouse;
24 (ii) did not voluntarily sign a written waiver expressly waiving right to disclosure of the property and
25 financial obligations of the other spouse beyond the disclosure provided; and
26 (iii) did not have notice of the property or financial obligations of the other spouse.
27 (2) The determination of whether a Montana special spousal trust is unconscionable is determined
28 by a court as a matter of law.
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68th Legislature 2023 SB 555.1
1
2 NEW SECTION. Section 15. Rulemaking. The department of revenue may enact rules and
3 promulgate forms to administer and implement [sections 1 through 15] for the purpose of administering the
4 provisions of Title 15, chapter 30, and the valuation of property to establish the fair market value at death for
5 state income tax purposes.
6
7 Section 16. Section 15-30-2120, MCA, is amended to read:
8 "15-30-2120. (Effective January 1, 2024) Adjustments to federal taxable income to determine
9 Montana taxable income. (1) The items in subsection (2) are added to and the items in subsection (3) are
10 subtracted from federal taxable income to determine Montana taxable income.
11 (2) The following are added to federal taxable income:
12 (a) to the extent that it is not exempt from taxation by Montana under federal law, interest from
13 obligations of a territory or another state or any political subdivision of a territory or another state and exempt-
14 interest dividends attributable to that interest except to the extent already included in federal taxable income;
15 (b) that portion of a shareholder's income under subchapter S. of Chapter 1 of the Internal
16 Revenue Code that has been reduced by any federal taxes paid by the subchapter S. corporation on the
17 income;
18 (c) depreciation or amortization taken on a title plant as defined in 33-25-105;
19 (d) the recovery during the tax year of an amount deducted in any prior tax year to the extent that
20 the amount recovered reduced the taxpayer's Montana income tax in the year deducted;
21 (e) an item of income, deduction, or expense to the extent that it was used to calculate federal
22 taxable income if the item was also used to calculate a credit against a Montana income tax liability;
23 (f) a deduction for an income distribution from an estate or trust to a beneficiary that was included
24 in the federal taxable income of an estate or trust in accordance with sections 651 and 661 of the Internal
25 Revenue Code, 26 U.S.C. 651 and 661;
26 (g) a withdrawal from a medical care savings account provided for in Titl