LEGISLATIVE GENERAL COUNSEL H.B. 574
6 Approved for Filing: J. Carlton 6
6 02-19-24 10:40 AM 6
1 ESTATE PLANNING AMENDMENTS
2 2024 GENERAL SESSION
3 STATE OF UTAH
4 Chief Sponsor: Ken Ivory
5 Senate Sponsor: ____________
6
7 LONG TITLE
8 General Description:
9 This bill amends provisions related to estate planning.
10 Highlighted Provisions:
11 This bill:
12 < amends the rule against perpetuities for a new power of appointment;
13 < defines terms related to trusts;
14 < allows a trustee to exercise a decanting power in certain circumstances; and
15 < makes technical and conforming changes.
16 Money Appropriated in this Bill:
17 None
18 Other Special Clauses:
19 None
20 Utah Code Sections Affected:
21 AMENDS:
22 22-3-203, as last amended by Laws of Utah 2020, Chapter 348
23 22-3-303, as last amended by Laws of Utah 2020, Chapter 348
24 22-3-304, as last amended by Laws of Utah 2020, Chapter 348
25 75-2-1203, as last amended by Laws of Utah 2013, Chapter 364
H.B. 574
26 75-7-103, as last amended by Laws of Utah 2020, Chapter 348
27 ENACTS:
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28 75-7-812.5, Utah Code Annotated 1953
29
30 Be it enacted by the Legislature of the state of Utah:
31 Section 1. Section 22-3-203 is amended to read:
32 22-3-203. Fiduciary's power to adjust.
33 (1) Except as otherwise provided in the terms of a trust or this section, a fiduciary, in a
34 record, without court approval, may adjust between income and principal if the fiduciary
35 determines the exercise of the power to adjust will assist the fiduciary to administer the trust or
36 estate impartially.
37 (2) This section does not create a duty to exercise or consider the power to adjust under
38 Subsection (1) or to inform a beneficiary about the applicability of this section.
39 (3) A fiduciary that in good faith exercises or fails to exercise the power to adjust under
40 Subsection (1) is not liable to a person affected by the exercise or failure to exercise.
41 (4) In deciding whether and to what extent to exercise the power to adjust under
42 Subsection (1), a fiduciary shall consider all factors the fiduciary considers relevant, including
43 the relevant factors in Subsection 22-3-201(5) and the application of Subsection 22-3-401(9),
44 Section 22-3-408, and Section 22-3-413.
45 (5) A fiduciary may not exercise the power to make an adjustment under Subsection
46 (1) or the power to make a determination that an allocation is insubstantial under Section
47 22-3-408 if:
48 (a) the adjustment or determination would reduce the amount payable to a current
49 income beneficiary from a trust that qualifies for a special tax benefit, except to the extent the
50 adjustment is made to provide for a reasonable apportionment of the total return of the trust
51 between the current income beneficiary and successor beneficiaries;
52 (b) the adjustment or determination would change the amount payable to a beneficiary,
53 as a fixed annuity or a fixed fraction of the value of the trust assets, under the terms of the trust;
54 (c) the adjustment or determination would reduce an amount that is permanently set
55 aside for a charitable purpose under the terms of the trust, unless both income and principal are
56 set aside for the charitable purpose;
57 (d) possessing or exercising the power would cause a person to be treated as the owner
58 of all or part of the trust for federal income tax purposes;
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59 (e) possessing or exercising the power would cause all or part of the value of the trust
60 assets to be included in the gross estate of an individual for federal estate tax purposes;
61 (f) possessing or exercising the power would cause an individual to be treated as
62 making a gift for federal gift tax purposes;
63 (g) the fiduciary is not an independent person;
64 (h) the trust is irrevocable and provides for income to be paid to the settlor and
65 possessing or exercising the power would cause the adjusted principal or income to be
66 considered an available resource or available income under a public-benefit program; or
67 (i) the trust is a unitrust under Part 3, Unitrust.
68 (6) If Subsection (5)(d), (e), (f), or (g) applies to a fiduciary:
69 (a) a co-fiduciary to which Subsections (5)(d) through (g) do not apply may exercise
70 the power to adjust, unless the exercise of the power to adjust by the remaining co-fiduciary or
71 co-fiduciaries is not permitted by the terms of the trust or law other than this chapter; or
72 (b) (i) if there is no co-fiduciary to which Subsections (5)(d) through (g) do not apply:
73 (A) except as otherwise provided in Subsection (6)(b)(ii)(A), the fiduciary may
74 appoint a co-fiduciary to which Subsections (5)(d) through (g) do not apply;
75 (B) except as otherwise provided in Subsection (6)(b)(ii)(B), the appointed co-fiduciary
76 may exercise the power to adjust under Subsection (1); and
77 (C) the appointed co-fiduciary may be a special fiduciary with limited powers.
78 (ii) (A) If the appointment of a co-fiduciary is not permitted by the terms of the trust or
79 by a provision of law outside this chapter, a fiduciary may not appoint a co-fiduciary.
80 (B) If the exercise of the power to adjust by a co-fiduciary is not permitted by the terms
81 of the trust or by a provision of law outside this chapter, the co-fiduciary may not exercise the
82 power to adjust under Subsection (1).
83 (7) A fiduciary may release or delegate to a co-fiduciary the power to adjust under
84 Subsection (1) if the fiduciary determines that the fiduciary's possession or exercise of the
85 power to adjust will or may:
86 (a) cause a result described in Subsections (5)(a) through (f) or (h); or
87 (b) deprive the trust of a tax benefit or impose a tax burden not described in
88 Subsections (5)(a) through (f).
89 (8) A fiduciary's release or delegation to a co-fiduciary under Subsection (7) of the
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90 power to adjust under Subsection (1):
91 (a) must be in a record;
92 (b) applies to the entire power to adjust, unless the release or delegation provides a
93 limitation, which may be a limitation to the power to adjust:
94 (i) from income to principal;
95 (ii) from principal to income;
96 (iii) for specified property; or
97 (iv) in specified circumstances;
98 (c) for a delegation, may be modified by a redelegation under this subsection by the
99 co-fiduciary to which the delegation is made; and
100 (d) subject to Subsection (8)(c), is permanent, unless the release or delegation provides
101 a specified period, including a period measured by the life of an individual or the lives of more
102 than one individual.
103 (9) Terms of a trust that deny or limit the power to adjust between income and
104 principal do not affect the application of this section, unless the terms of the trust expressly
105 deny or limit the power to adjust under Subsection (1).
106 (10) The exercise of the power to adjust under Subsection (1) in any accounting period
107 may apply to the current accounting period, the immediately preceding accounting period, and
108 one or more subsequent accounting periods.
109 (11) A description of the exercise of the power to adjust under Subsection (1) shall be:
110 (a) included in a report, if any, sent to beneficiaries under Subsection 75-7-811(3); or
111 (b) communicated at least annually to the qualified beneficiaries determined under
112 [Subsection 75-7-103(1)(h)] Section 75-7-103.
113 Section 2. Section 22-3-303 is amended to read:
114 22-3-303. Authority of fiduciary.
115 (1) A fiduciary, without court approval, by complying with Subsections (2) and (6),
116 may:
117 (a) convert an income trust to a unitrust if the fiduciary adopts, in a record, a unitrust
118 policy for the trust providing:
119 (i) that, in administering the trust, the net income of the trust will be a unitrust amount
120 rather than net income determined without regard to this part; and
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121 (ii) the percentage and method used to calculate the unitrust amount;
122 (b) change the percentage or method used to calculate a unitrust amount for a unitrust
123 if the fiduciary adopts in a record a unitrust policy or an amendment or replacement of a
124 unitrust policy providing changes in the percentage or method used to calculate the unitrust
125 amount; or
126 (c) convert a unitrust to an income trust if the fiduciary adopts, in a record, a
127 determination that, in administering the trust, the net income of the trust will be net income
128 determined without regard to this part rather than a unitrust amount.
129 (2) A fiduciary may take an action under Subsection (1) if:
130 (a) the fiduciary determines that the action will assist the fiduciary to administer a trust
131 impartially;
132 (b) the fiduciary sends a notice in a record, in the manner required by Section
133 22-3-304, describing and proposing to take the action;
134 (c) the fiduciary sends a copy of the notice under Subsection (2)(b) to each settlor of
135 the trust which is:
136 (i) if an individual, living; or
137 (ii) if not an individual, in existence;
138 (d) at least one member of each class of the qualified beneficiaries determined under
139 [Subsection 75-7-103(1)(h)] Section 75-7-103 receiving the notice under Subsection (2)(b) is:
140 (i) if an individual, legally competent;
141 (ii) if not an individual, in existence; or
142 (iii) represented in the manner provided in Subsection 22-3-304(2); and
143 (e) the fiduciary does not receive, by the date specified in the notice under Subsection
144 22-3-304(4)(e), an objection in a record to the action proposed under Subsection (2)(b) from a
145 person to which the notice under Subsection (2)(b) is sent.
146 (3) (a) If a fiduciary receives, not later than the date stated in the notice under
147 Subsection 22-3-304(4)(e), an objection in a record described in Subsection 22-3-304(4)(d) to a
148 proposed action, the fiduciary or a beneficiary may request that the court:
149 (i) require the fiduciary to take the proposed action;
150 (ii) require the fiduciary to take the proposed action with modifications; or
151 (iii) prevent the proposed action.
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152 (b) A person described in Subsection 22-3-304(1) may oppose the proposed action in
153 the proceeding under Subsection (3)(a), regardless of whether the person:
154 (i) consented under Subsection 22-3-304(3); or
155 (ii) objected under Subsection 22-3-304(4)(d).
156 (4) If, after sending a notice under Subsection (2)(b), a fiduciary decides not to take the
157 action proposed in the notice, the fiduciary shall notify each person described in Subsection
158 22-3-304(1) in a record of the decision not to take the action and the reasons for the decision.
159 (5) If a beneficiary requests in a record that a fiduciary take an action described in
160 Subsection (1) and the fiduciary declines to act or does not act within 90 days after receiving
161 the request, the beneficiary may request the court to direct the fiduciary to take the action
162 requested.
163 (6) In deciding whether and how to take an action authorized by Subsection (1), or
164 whether and how to respond to a request by a beneficiary under Subsection (5), a fiduciary
165 shall consider all factors relevant to the trust and the beneficiaries, including the relevant
166 factors in Subsection 22-3-201(5).
167 (7) For a reason described in Subsection 22-3-203(7), and in the manner described in
168 Subsection 22-3-203(8), a fiduciary may:
169 (a) release or delegate the power to convert an income trust to a unitrust under
170 Subsection (1)(a);
171 (b) change the percentage or method used to calculate a unitrust amount under
172 Subsection (1)(b); or
173 (c) convert a unitrust to an income trust under Subsection (1)(c).
174 Section 3. Section 22-3-304 is amended to read:
175 22-3-304. Notice.
176 (1) A fiduciary shall send a notice required by Subsection 22-3-303(2)(b) in a manner
177 authorized under Section 75-7-109 to:
178 (a) the qualified beneficiaries determined under [Subsection 75-7-103(1)(h)] Section
179 75-7-103;
180 (b) each person acting, in accordance with Title 75, Chapter 12, Uniform Directed
181 Trust Act, as trust director of the trust; and
182 (c) each person that is granted a power by the terms of the trust to appoint or remove a
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183 trustee or person described in Subsection (1)(b), to the extent the power is exercisable when the
184 person that exercises the power is not then serving as trustee or is a person described in
185 Subsection (1)(b).
186 (2) The representation provisions of Sections 75-7-301 through 75-7-305 apply to
187 notice under this section.
188 (3) (a) A person may consent in a record at any time to action proposed under
189 Subsection 22-3-303(2)(b).
190 (b) If a person required to receive a notice under Subsection (1) consents under
191 Subsection (3)(a) to not receive the notice, the fiduciary is not required to send the person the
192 notice.
193 (4) A notice required by Subsection 22-3-303(2)(b) shall include:
194 (a) the action proposed under Subsection 22-3-303(2)(b);
195 (b) for a conversion of an income trust to a unitrust, a copy of the unitrust policy
196 adopted under Subsection 22-3-303(1)(a);
197 (c) for a change in the percentage or method used to calculate the unitrust amount, a
198 copy of the unitrust policy or amendment or replacement of the unitrust policy adopted under
199 Subsection 22-3-303(1)(b);
200 (d) a statement that the person to which the notice is sent may object to the proposed
201 action by stating in a record the basis for the objection and sending or delivering the record to
202 the fiduciary;
203 (e) the date by which the fiduciary shall receive an objection under Subsection (4)(d),
204 which shall be at least 30 days after the date the notice is sent;
205 (f) the date on which the action is proposed to be taken and the date on which the
206 action is proposed to take effect;
207 (g) the name and contact information of the fiduciary; and
208 (h) the name and contact information of a person that may be contacted for additional
209 information.
210 Section 4. Section 75-2-1203 is amended to read:
211 75-2-1203. Validity of nonvested property interest -- Validity of general power of
212 appointment subject to a condition precedent -- Validity of nongeneral or testamentary
213 power of appointment -- Effect of certain "later-of" type language.
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214 (1) A nonvested property interest is invalid unless within 1,000 years after the interest's
215 creation the interest vests or terminates.
216 (2) A general power of appointment not presently exercisable because of a condition
217 precedent is invalid unless within 1,000 years after the general power of appointment's creation
218 the power of appointment is irrevocably exercised or terminates.
219 (3) A nongeneral power of appointment or a general testamentary power of
220 appointment is invalid unless within 1,000 years after its creation the power of appointment is
221 irrevocably exercised or terminates.
222 (4) The language in a governing instrument is inoperative to the extent it produces a
223 period of time that exceeds 1,000 years after if, in measuring a period from the creation of a
224 trust or other property arrangement, the language:
225 (a) seeks to disallow the vesting or termination of any interest or trust beyond;
226 (b) seeks to postpone the vesting or termination of any interest or trust until; or
227 (c) seeks to operate in effect in any similar fashion upon, the later of:
228 (i) the expiration of a period of time not exceeding 1,000 years; or
229 (ii) the expiration of a period of time that exceeds or might exceed 1,000 years.
230 [(5) If a nongeneral power of appointment is exercised to create a new presently
231 exercisable general power of appointment, all property interests