Senate File 240 - Enrolled
Senate File 240
AN ACT
RELATING TO THE CREATION, ADMINISTRATION, AND TERMINATION OF
CUSTODIAL TRUSTS.
3 BE IT ENACTED BY THE GENERAL ASSEMBLY OF THE STATE OF IOWA:
1 DIVISION I
2 IOWA UNIFORM CUSTODIAL TRUST ACT
3 Section 1. NEW SECTION. 633F.1 Definitions.
4 For purposes of this chapter:
5 1. “Adult” means an individual who is at least eighteen
6 years of age.
7 2. “Beneficiary” means an individual for whom property has
8 been transferred to or held under a declaration of trust by a
9 custodial trustee for the individual’s use and benefit under
10 this chapter.
11 3. “Consent” means affirmation given by a person who is
12 not incapacitated; or if a person is incapacitated and there
13 is no conflict of interest between the representer and the
14 incapacitated person with respect to the fiduciary manner,
15 the following may consent on behalf of the incapacitated
16 individual:
17 a. A conservator may represent and bind the person whose
18 estate the conservator controls.
19 b. A trustee may represent and bind the beneficiary of a
20 trust.
21 c. A personal representative may represent and bind the
22 persons interested in the decedent’s estate.
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23 d. If no conservator has been appointed, a parent may
24 represent and bind a minor child.
25 4. “Conservator” means a person appointed or qualified by a
26 court to manage the estate of an individual or a person legally
27 authorized to perform substantially the same functions.
28 5. “Court” means the probate court of this state.
29 6. “Custodial trust property” means an interest in property
30 transferred to or held under a declaration of trust by a
31 custodial trustee under this chapter and the income from and
32 proceeds of that interest.
33 7. “Custodial trustee” means a person designated as trustee
34 of a custodial trust under this chapter or a substitute or
35 successor to the person designated.
1 8. “Guardian” means a person appointed or qualified by
2 a court as a guardian of an individual, including a limited
3 guardian, but not a person who is only a court visitor.
4 9. “Incapacitated” means the inability of an individual to
5 manage property or business affairs because the individual is
6 any of the following:
7 a. An individual whose decision-making is so impaired that
8 the individual is unable to make, communicate, or carry out
9 important decisions concerning the individual’s financial
10 affairs.
11 b. Detailed or incarcerated in a penal system.
12 c. Outside the United States and unable to return.
13 d. A minor.
14 10. “Legal representative” means a living person’s
15 agent acting under a durable financial power of attorney or
16 conservator, a living or deceased person’s trustee acting
17 under a revocable trust created by such person, or a deceased
18 person’s personal representative.
19 11. “Member of the beneficiary’s family” means the following
20 persons who are competent adults at the time of acting
21 hereunder, with such action to be taken in the following order
22 of priority:
23 a. The surviving spouse, if not legally separated from the
24 beneficiary, whose whereabouts are reasonably ascertainable.
25 b. The surviving child of the beneficiary, or, if there
26 is more than one, a majority of the surviving children whose
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27 whereabouts are reasonably ascertainable.
28 c. The surviving parents of the beneficiary whose
29 whereabouts are reasonably ascertainable.
30 d. A surviving grandchild of the beneficiary, or if there is
31 more than one, a majority of the surviving grandchildren whose
32 whereabouts are reasonably ascertainable.
33 e. A surviving sibling of the beneficiary, or if there
34 is more than one, a majority of the surviving siblings whose
35 whereabouts are reasonably ascertainable.
1 f. A surviving grandparent of the beneficiary, or if there
2 is more than one, a majority of the surviving grandparents
3 whose whereabouts are reasonably ascertainable.
4 g. A person in the next degree of kinship to the beneficiary
5 in the order named by law who would inherit the estate of
6 the beneficiary under the rules of inheritance for intestate
7 succession, or if there is more than one, a majority of
8 such surviving persons whose whereabouts are reasonably
9 ascertainable.
10 12. “Person” means an individual, corporation, business
11 trust, estate, trust, partnership, joint venture, association,
12 or any other legal or commercial entity.
13 13. “Personal representative” means an executor,
14 administrator, or special administrator of a decedent’s estate,
15 a person legally authorized to perform substantially the same
16 functions, or a successor to any of them as defined in section
17 633.3.
18 14. “State” means a state, territory, or possession of the
19 United States, the District of Columbia, or the Commonwealth
20 of Puerto Rico.
21 15. “Transferor” means a person who creates a custodial
22 trust by transfer or declaration.
23 16. “Trust company” means a financial institution,
24 corporation, or other legal entity, authorized to exercise
25 general trust powers.
26 Sec. 2. NEW SECTION. 633F.2 Custodial trust —— general.
27 1. A person may create a custodial trust of property by a
28 written transfer of the property to another person, evidenced
29 by registration or by other instrument of transfer, executed in
30 any lawful manner, naming as beneficiary, an individual who may
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31 be the transferor, in which the transferee is designated, in
32 substance, as custodial trustee under this chapter.
33 2. A person may create a custodial trust of property by a
34 written declaration, evidenced by registration of the property
35 or by other instrument of declaration executed in any lawful
1 manner, describing the property and naming as beneficiary an
2 individual other than the declarant, in which the declarant as
3 titleholder is designated, in substance, as custodial trustee
4 under this chapter. A registration or other declaration of
5 trust for the sole benefit of the declarant is not a custodial
6 trust under this chapter.
7 3. Title to custodial trust property is in the custodial
8 trustee and the beneficial interest is in the beneficiary.
9 4. Except as provided in subsection 5, a transferor shall
10 not terminate a custodial trust.
11 5. The beneficiary, if not incapacitated, or the legal
12 representative of an incapacitated beneficiary, may terminate
13 a custodial trust by delivering to the custodial trustee a
14 writing signed by the beneficiary or legal representative
15 declaring the termination. If not previously terminated, the
16 custodial trust terminates on the death of the beneficiary.
17 6. Any person may augment existing custodial trust property
18 by the addition of other property pursuant to this chapter,
19 only upon receipt and acceptance by the custodial trustee.
20 7. The transferor may designate, or authorize the
21 designation of, a successor custodial trustee in the trust
22 instrument.
23 8. This chapter does not displace or restrict other means
24 of creating trusts. A trust whose terms do not conform to this
25 chapter may be enforceable according to its terms under other
26 law.
27 Sec. 3. NEW SECTION. 633F.3 Custodial trustee for future
28 payment or transfer.
29 1. A person having the right to designate the recipient of
30 property payable or transferable upon a future event may create
31 a custodial trust upon the occurrence of the future event by
32 designating in writing the recipient, followed in substance
33 by: “as custodial trustee for __________________ (name of
34 beneficiary) under the Iowa Uniform Custodial Trust Act”.
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35 2. Persons may be designated as substitute or successor
1 custodial trustees to whom the property must be paid or
2 transferred in the order named if the first designated
3 custodial trustee is unable or unwilling to serve.
4 3. A designation under this section may be made in a will,
5 a trust, a multiple-party account, an insurance policy, an
6 instrument exercising a power of appointment, or a writing
7 designating a beneficiary of contractual rights. Otherwise,
8 to be effective, the designation must be registered with or
9 delivered to the fiduciary, payor, issuer, or obligor of the
10 future right.
11 Sec. 4. NEW SECTION. 633F.4 Form and effect of receipt and
12 acceptance by custodial trustee —— jurisdiction.
13 1. Obligations of a custodial trustee, including the
14 obligation to follow directions of the beneficiary, arise under
15 this chapter upon the custodial trustee’s acceptance, express
16 or implied, of the custodial trust property.
17 2. The custodial trustee’s acceptance may be evidenced by a
18 writing stating in substance:
19 CUSTODIAL TRUSTEE’S RECEIPT AND ACCEPTANCE
20 I, _______ (name of custodial trustee) acknowledge receipt
21 of the custodial trust property described below or in the
22 attached instrument and accept the custodial trust as custodial
23 trustee for __________________ (name of beneficiary) under the
24 Iowa Uniform Custodial Trust Act. I undertake to administer
25 and distribute the custodial trust property pursuant to the
26 Iowa Uniform Custodial Trust Act. My obligations as custodial
27 trustee are subject to the directions of the beneficiary
28 unless the beneficiary is designated as, is, or becomes
29 incapacitated. The custodial trust property consists of
30 _____________________________.
31 Dated: _____________________________
32 (Signature of Custodial Trustee)
33 3. Upon accepting custodial trust property, a person
34 designated as custodial trustee under this chapter is subject
35 to personal jurisdiction of the court with respect to any
1 matter relating to the custodial trust.
2 Sec. 5. NEW SECTION. 633F.5 Transfer to custodial trustee
3 by fiduciary or obligor —— facility of payment.
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4 1. Unless otherwise directed by an instrument designating
5 a custodial trustee pursuant to section 633F.3, a person,
6 including a fiduciary other than a custodial trustee, who holds
7 property of or owes a debt to an incapacitated individual may
8 make a transfer to a beneficiary’s legal representative and
9 if none, to a member of the beneficiary’s family, or a trust
10 company, as custodial trustee for the use and benefit of the
11 incapacitated individual. If the value of the property or
12 the debt exceeds fifty thousand dollars, the transfer is not
13 effective unless authorized by the court.
14 2. A written acknowledgment of delivery, signed by a
15 custodial trustee, is a sufficient receipt and discharge for
16 property transferred to the custodial trustee pursuant to this
17 section.
18 Sec. 6. NEW SECTION. 633F.6 Single beneficiaries ——
19 separate trust accounts.
20 1. Beneficial interests in a custodial trust shall not be
21 created for multiple beneficiaries.
22 2. All custodial trust property held under this chapter by
23 the same custodial trustee for the use and benefit of a single
24 beneficiary may be administered as a single custodial trust.
25 Sec. 7. NEW SECTION. 633F.7 General duties of custodial
26 trustee.
27 1. If appropriate, a custodial trustee shall register
28 or record the instrument vesting title to custodial trust
29 property.
30 2. If the beneficiary is not incapacitated, a custodial
31 trustee shall follow the directions of the beneficiary in the
32 management, control, investment, or retention of the custodial
33 trust property. In the absence of effective contrary direction
34 by the beneficiary while not incapacitated, the custodial
35 trustee shall observe the prudent investment standards set
1 forth in section 633.123. However, a custodial trustee, in the
2 custodial trustee’s discretion, may retain any custodial trust
3 property received from the transferor. If a custodial trustee
4 has a special skill or expertise or is named custodial trustee
5 on the basis of representation of a special skill or expertise,
6 the custodial trustee shall use that skill or expertise.
7 3. Subject to subsection 2, a custodial trustee shall take
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8 control of and collect, hold, manage, invest, and reinvest
9 custodial trust property.
10 4. A custodial trustee at all times shall keep custodial
11 trust property of which the custodial trustee has control,
12 separate from all other property in a manner sufficient
13 to identify it clearly as custodial trust property of the
14 beneficiary. Custodial trust property, the title to which is
15 subject to recordation, is so identified if an appropriate
16 instrument so identifying the property is recorded, and
17 custodial trust property subject to registration is so
18 identified if it is registered, or held in an account in the
19 name of the custodial trustee, designated in substance: “as
20 custodial trustee for __________________ (name of beneficiary)
21 under the Iowa Uniform Custodial Trust Act”.
22 5. A custodial trustee shall keep records of all
23 transactions with respect to custodial trust property,
24 including information necessary for the preparation of tax
25 returns, and shall make the records and information available
26 at reasonable times to the beneficiary or legal representative
27 of the beneficiary.
28 6. The exercise of a durable power of attorney for an
29 incapacitated beneficiary is not effective to terminate or
30 direct the administration or distribution of a custodial trust.
31 Sec. 8. NEW SECTION. 633F.8 General powers of custodial
32 trustee.
33 1. A custodial trustee, acting in a fiduciary capacity, has
34 all the rights and powers over custodial trust property which
35 an unmarried adult owner has over individually owned property,
1 but a custodial trustee may exercise those rights and powers
2 in a fiduciary capacity only.
3 2. This section does not relieve a custodial trustee from
4 liability for a violation of section 633F.7.
5 Sec. 9. NEW SECTION. 633F.9 Use of custodial trust
6 property.
7 1. A custodial trustee shall pay to the beneficiary or
8 expend for the beneficiary’s use and benefit so much or all
9 of the custodial trust property as the beneficiary while not
10 incapacitated may direct from time to time.
11 2. If the beneficiary is incapacitated, the custodial
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12 trustee shall expend so much or all of the custodial trust
13 property as the custodial trustee considers advisable for the
14 use and benefit of the beneficiary and individuals who are
15 legally entitled to support by the beneficiary. Expenditures
16 may be made in the manner, when, and to the extent that the
17 custodial trustee determines suitable and proper, without court
18 order and without regard to other support, income, or property
19 of the beneficiary.
20 3. To facilitate distributions to the beneficiary, a
21 custodial trustee may establish checking, savings, or other
22 similar accounts of reasonable amounts under which either
23 the custodial trustee or the beneficiary, if authorized, may
24 withdraw funds from, or draw checks against, the accounts in
25 amounts authorized by the custodian. Funds withdrawn from,
26 or checks written against, the account by the beneficiary are
27 distributions of custodial trust property by the custodial
28 trustee to the beneficiary.
29 Sec. 10. NEW SECTION. 633F.10 Determination of incapacity
30 —— effect.
31 1. The custodial trustee shall administer the custodial
32 trust as for an incapacitated beneficiary in any of the
33 following circumstances:
34 a. The custodial trust was created under section 633F.5.
35 b. The transferor has so directed in the instrument creating
1 the custodial trust.
2 c. The custodial trustee has determined that the beneficiary
3 is incapacitated.
4 2. A custodial trustee may determine that the beneficiary is
5 incapacitated in reliance upon any of the following:
6 a. Previous direction or authority given by the beneficiary
7 while not incapacitated, including direction or authority
8 pursuant to a durable power of attorney.
9 b. Written documentation from the beneficiary’s physician.
10 c. Other persuasive evidence.
11 3. If a custodial trustee for an incapacitated beneficiary
12 reasonably concludes that the beneficiary’s incapacity has
13 ceased, or that circumstances concerning the beneficiary’s
14 ability to manage property and business affairs have
15 changed since the creation of a custodial trust directing
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16 administration as for an incapacitated beneficiary, the
17 custodial trustee may administer the trust