Bill Summary – FastDemocracy

WEST VIRGINIA LEGISLATURE
REGULAR SESSION
                 ENROLLED
         Committee Substitute for House Bill 5561
    BY DELEGATES BARNHART, CRISS, ANDERSON,
           ZATEZALO, WESTFALL, AND HOTT
  [Passed March 8, 2024; in effect ninety days from passage.]
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  AN ACT to amend and reenact §44D-1-103, §44D-4-402, §44D-5-503c, §44D-7-701, §44D-7-
         704, §44D-7-705, §44D-8B-2, and §44D-10-1011 of the Code of West Virginia, 1931, as
         amended, all relating to permitting the electronic execution of trusts; defining terms;
         clarifying that a trust instrument may be executed in an electronic format; clarifying
         inapplicability to wills unless duly admitted to probate; and making consistent certain
         provisions with allowing electronic execution of trusts.
     Be it enacted by the Legislature of West Virginia:
     ARTICLE 1. GENERAL PROVISIONS AND DEFINITIONS.
     §44D-1-103. Definitions.
         In this chapter:
         (1) "Action", with respect to an act of a trustee, includes a failure to act.
         (2) "Ascertainable standard" means a standard relating to an individual's health,
  education, support, or maintenance within the meaning of Section 2041(b)(1)(A) or 2514(c)(1) of
  the Internal Revenue Code.
         (3) "Beneficiary" means a person that:
         (A) Has a present or future beneficial interest in a trust, vested or contingent;
         (B) In a capacity other than that of trustee, holds a power of appointment over trust
  property; or
        (C) A charitable organization that is expressly designated in the terms of the trust
 instrument to receive distributions.
        (4) "Charitable trust" means a trust, or portion of a trust, created for a charitable purpose
 described in §44D-4-405 of this code.
        (5) "Conservator" means a person appointed by the court to administer the estate and
 financial affairs of a protected person.
        (6) "Court" means a court of this state having proper jurisdiction under §44D-2-203 of this
 code, and venue under §44D-2-204 of this code.
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         (7) "Current beneficiary" means a beneficiary that, on the date the beneficiary's
 qualification is determined, is a distributee or permissible distributee of trust income or principal.
         (8) "Environmental law" means a federal, state, or local law, rule, regulation, or ordinance
 relating to protection of the environment.
         (9) "Grantor" means a person, including a testator, who creates or contributes property to
 a trust. If more than one person creates or contributes property to a trust, each person is a grantor
 of the portion of the trust property attributable to that person's contribution except to the extent
 another person has the power to revoke or withdraw that portion.
         (10) "Guardian" means a person appointed by the court who is responsible for the personal
 affairs of a protected person or a parent to make decisions regarding the support, care, education,
 health, and welfare of a minor. The term does not include a guardian ad litem.
         (11) "Interested person" means heirs, devisees, children, spouses, creditors,
 beneficiaries, and any others having a property right in or claim against a trust or the property in
 a trust. It also includes persons having priority for appointment as personal representative and
 other fiduciaries representing interested persons. The meaning as it relates to particular persons
 may vary from time to time and shall be determined according to the particular purposes of, and
 matter involved, in any proceeding.
         (12) "Interests of the beneficiaries" means the beneficial interests provided in the terms of
 the trust.
         (13) "Internal Revenue Code" or "Internal Revenue Code of 1986" has the same meaning
 as when used in a comparable context in the laws of the United States then in effect relating to
 income, estate, generation-skipping transfer, and other taxes, including all amendments made to
 the laws of the United States and amendments which have been adopted and incorporated into
 West Virginia law by the West Virginia Legislature in §11-21-9 of this code.
         (14) "Jurisdiction" with respect to a geographic area, includes a state or country.
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        (15) "Person" means an individual, corporation, business trust, estate, trust, partnership,
 limited liability company, association, joint venture, unincorporated nonprofit association,
 charitable organization, government, governmental subdivision, agency, or instrumentality, public
 corporation, or any other legal or commercial entity.
        (16) "Power of withdrawal" means a presently exercisable general power of appointment
 other than a power:
        (A) Exercisable by a trustee and limited by an ascertainable standard; or
        (B) Exercisable by another person only upon consent of the trustee or a person holding
 an adverse interest.
        (17) "Property" means anything that may be the subject of ownership, whether real or
 personal, legal or equitable, or any interest therein.
        (18) "Qualified beneficiary" means a beneficiary who, on the date the beneficiary's
 qualification is determined:
        (A) Is a distributee or permissible distributee of trust income or principal;
        (B) Would be a distributee or permissible distributee of trust income or principal if the
 interests of the distributees described in paragraph (B) of this subdivision terminated on that date
 without causing the trust to terminate; or
        (C) Would be a distributee or permissible distributee of trust income or principal if the trust
 terminated on that date.
        (19) “Record” means information that is inscribed on a tangible medium or that is stored
 in an electronic or other medium and is retrievable in perceivable form. “Record” does not include
 a will of the grantor, unless the will is duly admitted to probate.
        (20) "Revocable", as applied to a trust, means revocable by the grantor without the
 consent of the trustee or a person holding an adverse interest.
        (21) "Sign" means, with present intent to authenticate or adopt a record:
        (A) To execute or adopt a tangible symbol; or
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        (B) To attach to or logically associate with the record an electronic symbol, sound, or
 process.
        (22) "Spendthrift provision" means a term of a trust which restrains both voluntary and
 involuntary transfer of a beneficiary’s interest.
        (23) "State" means a state of the United States, the District of Columbia, Puerto Rico, the
 United States Virgin Islands, or any territory or insular possession subject to the jurisdiction of the
 United States. The term includes an Indian tribe or band recognized by federal law or formally
 acknowledged by a state.
        (24) "Terms of a trust" means:
        (A) Except as otherwise provided in paragraph (B); and the manifestation of the grantor’s
 intent regarding a trust's provisions as:
        (i) Expressed in the trust instrument; or
        (ii) Established by other evidence that would be admissible in a judicial proceeding; or
        (B) The trust's provisions as established, determined, or amended by:
        (i) A trustee or trust director in accordance with applicable law;
        (ii) A court order; or
        (iii) A nonjudicial settlement agreement under §44D-1-111 of this code.
        (25) "Trust instrument" means a will of the grantor which is duly admitted to probate, or a
 record, signed by the grantor, that contains terms of the trust, including any amendments thereto.
        (26) "Trustee" includes an original, additional, successor trustee and a cotrustee.
     ARTICLE 4. CREATION, VALIDITY, MODIFICATION, AND TERMINATION OF TRUST.
     §44D-4-402. Requirement for creation.
         (a) Except as created by an order of the court, a trust is created only if:
         (1) The grantor has capacity to create a trust;
         (2) The grantor indicates an intention, in a trust instrument, to create the trust;
         (3) The trust has a definite beneficiary or is:
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          (A) A charitable trust;
          (B) A trust for the care of an animal, as provided in §44D-4-408 of this code; or
          (C) A trust for a noncharitable purpose, as provided in §44D-4-409 of this code;
          (4) The trustee has duties to perform; and
          (5) The same person is not the sole trustee and sole beneficiary.
         (b) A beneficiary is definite if the beneficiary can be ascertained now or in the future,
 subject to any applicable rule against perpetuities.
         (c) A power in a trustee to select a beneficiary from an indefinite class is valid. If the power
 is not exercised within a reasonable time, the power fails, and the property subject to the power
 passes to the persons who would have taken the property had the power not been conferred.
         (d) Notwithstanding the foregoing:
         (1) In accordance with §41-3-8 of this code, a trust is valid regardless of the existence,
 value, or character of the corpus of the trust.
         (2) The grantor need not have capacity to create a trust if the trust is created in a record
 during the grantor's lifetime by the grantor's agent acting in accordance with authority granted
 under a durable power of attorney which expressly authorizes the agent to create a trust on the
 grantor's behalf.
         (e) A trust is not invalid or terminated, and title to trust assets is not merged, because the
 trustee or trustees are the same person or persons as the beneficiaries of the trust.
     ARTICLE 5. CREDITOR'S CLAIMS; SPENDTHRIFT AND DISCRETIONARY TRUSTS.
     §44D-5-503c. Vacancies; revocability of trust; right to withdraw.
          (a) A vacancy in the position of qualified trustee that occurs for any reason, whether or not
  there is then serving another trustee, shall be filled in the following order of priority:
          (1) By a person eligible to be a qualified trustee and who is designated pursuant to the
  terms of the trust instrument to act as successor trustee;
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          (2) By a person eligible to be a qualified trustee and who is designated by unanimous
  agreement of the qualified beneficiaries; or
          (3) By a person eligible to be a qualified trustee and who is appointed by the court pursuant
  to any of the provisions of §44D-7-1 et seq. of this code.
          (b) A vacancy in the position of independent qualified trustee that occurs for any reason,
 whether or not there is then serving another trustee, shall be filled in the following order of priority:
         (1) By a person eligible to be an independent qualified trustee and who is designated
 pursuant to the terms of the trust instrument to act as successor trustee; or
         (2) By a person eligible to be an independent qualified trustee and who is designated by
 unanimous agreement of the qualified beneficiaries; or
         (3) By a person eligible to be an independent qualified trustee and who is appointed by
 the court pursuant to any of the provisions of §44D-7-1 et seq. of this code.
         (c) A trust instrument shall not be deemed revocable on account of the inclusion of any
 one or more of the following rights, powers, and interests:
         (1) A power of appointment, exercisable by the grantor by will or other record effective
 only upon the grantor's death, other than a power to appoint to the grantor's estate or the creditors
 of the grantor's estate;
         (2) The grantor's qualified interest in the trust;
         (3) The grantor's right to receive income or principal pursuant to an ascertainable
 standard;
         (4) The grantor's potential or actual receipt of income or principal from a charitable
 remainder unitrust or charitable remainder annuity trust (each within the meaning of Section
 664(d) of the Internal Revenue Code) and the grantor's right, at any time, and from time to time,
 to release, in a record delivered to the qualified trustee, all or any part of the grantor's retained
 interest in such trust;
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        (5) The grantor's receipt each year of a percentage, not to exceed five percent, specified
 in the trust instrument of the initial value of the trust assets or their value determined from time to
 time pursuant to the trust instrument;
        (6) The grantor's right to remove a qualified trustee or independent qualified trustee and
 to appoint a new trustee who meets the same criteria;
        (7) The grantor's potential or actual use of real property held under a personal residence
 trust (within the meaning of Section 2702(c) of the Internal Revenue Code);
        (8) The grantor's potential or actual receipt or use of a qualified annuity interest (within the
 meaning of Section 2702 of the Internal Revenue Code);
        (9) The ability of a qualified trustee, whether pursuant to discretion or direction, to pay,
 after the grantor's death, all or any part of the grantor's debts outstanding at the time of the
 grantor's death, the expenses of administering the grantor's estate, or any federal or state estate,
 inheritance, or death tax imposed on or with respect to the grantor's estate; and
        (10) A grantor's potential or actual receipt of income or principal to pay, in whole or in part,
 income taxes due on trust income, or the direct payment of such taxes to the applicable tax
 authorities, pursuant to a provision in the trust instrument that expressly provides for the direct
 payment of such taxes or the reimbursement of the grantor for such tax payments.
        (d) A beneficiary who has the right to withdraw his or her entire beneficial interest in a trust
 shall be treated as its grantor to the extent of such withdrawal right, when such right to withdraw
 has lapsed, been released, or otherwise expired, without regard to the limitations otherwise
 imposed by §44D-505(b) of this code.
     ARTICLE 7. OFFICE OF THE TRUSTEE.
     §44D-7-701. Accepting or declining trusteeship.
         (a) Except as otherwise provided in subsection (c) of this section, a person designated as
  trustee accepts the trusteeship:
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          (1) By substantially complying with a method of acceptance provided in the terms of the
  trust instrument; or
          (2) If the terms of the trust instrument do not provide a method or the method provided in
  the terms is not expressly made exclusive, by accepting delivery of the trust property, exercising
  powers or performing duties as trustee, or otherwise indicating acceptance of the trusteeship
  including by signing a record so stating.
          (b) A person designated as trustee who has not yet accepted the trusteeship may reject
 the trusteeship. A person designated as trustee who does not accept the trusteeship within a
 reasonable time after knowing of the designation is deemed to have rejected the trusteeship.
         (c) A person designated as trustee, without accepting the trusteeship, may:
         (1) Act to preserve the trust property if, within a reasonable time after acting, the person
 sends a rejection of the trusteeship to the grantor or, if the grantor is dead or lacks capacity, to a
 qualified beneficiary; and
         (2) Inspect or investigate trust property to determine potential liability under environmental
 or other law or for any other proper purpose.
     §44D-7-704. Vacancy in trusteeship; appointment of successor.
          (a) A vacancy in a trusteeship occurs if:
          (1) A person designated as trustee rejects the trusteeship;
          (2) A person designated as trustee cannot be identified or does not exist;
          (3) A trustee resigns;
          (4) A trustee is disqualified or removed;
          (5) A trustee dies; or
          (6) A guardian or conservator is appointed for an individual serving as trustee.
          (b) If one or more cotrustees remain in office, a vacancy in a trusteeship need not be filled
  unless otherwise provided in the terms of the trust instrument. A vacancy in a trusteeship shall be
 filled if the trust has no remaining trustee.
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         (c) Unless otherwise provided in the terms of the trust instrument, a vacancy in a
 trusteeship of a noncharitable trust that is required to be filled shall be filled in the following order
 of priority:
         (1) By a person designated in the terms of the trust instrument to act as successor trustee;
         (2) By a person appointed by a unanimous record of the qualified beneficiaries; or
         (3) By a person appointed by the court having jurisdiction of the trust.
         (d) Unless otherwise provided, a vacancy in a trusteeship of a charitable trust that is
 required to be filled shall be filled in the following order of priority:
         (1) By a person designated in the terms of the trust to act as successor trustee;
         (2) By a person selected by the charitable organizations expressly designated to receive
 distributions under the terms of the trust instrument if the Attorney General of West Virginia either
 concurs in a record to the selection or fails to make a wri