67th Legislature HB 293.1
1 HOUSE BILL NO. 293
2 INTRODUCED BY B. MERCER, S. FITZPATRICK
3
4 A BILL FOR AN ACT ENTITLED: “AN ACT GENERALLY REVISING LAWS RELATED TO PROVIDING FOR
5 THE UNIFORM TRUST DECANTING ACT; ESTABLISHING THE SCOPE OF THE ACT; REQUIRING
6 DECANTING POWER TO BE USED IN ACCORDANCE WITH FIDUCIARY DUTIES; ESTABLISHING WHICH
7 TRUSTS ARE GOVERNED BY THE ACT; REQUIRING NOTICE WHEN EXERCISING THE DECANTING
8 POWER; SPECIFYING HOW NOTICE WORKS; PROVIDING FOR JUDICIAL INVOLVEMENT; REQUIRING
9 THE DECANTING POWER BE MADE IN A SIGNED RECORD; PROVIDING REQUIREMENTS FOR THE
10 SIGNED RECORD; PROVIDING FOR DECANTING IN CASES OF EXPANDED AND LIMITED DISTRIBUTIVE
11 DISCRETION AND FOR TRUSTS FOR BENEFICIARIES WITH DISABILITIES AND FOR TRUSTS FOR
12 CARE OF ANIMALS; PROTECTING CHARITABLE INTERESTS; PROVIDING LIMITATIONS ON
13 DECANTING; LIMITING CHANGES IN AN AUTHORIZED FIDUCIARY'S COMPENSATION; LIMITING USE
14 OF DECANTING POWER FOR RELIEF FROM LIABILITY OR INDEMNIFICATION; LIMITING LIABILITY FOR
15 CERTAIN TRUSTEES AND OTHER PERSONS; LIMITING USE OF DECANTING POWER TO MODIFY
16 GRANTS OF POWER TO REMOVE OR REPLACE A FIDUCIARY; PROVIDING TAX-RELATED
17 LIMITATIONS; PROVIDING FOR DURATIONS OF SECOND TRUSTS; ALLOWING USE OF DECANTING
18 POWER WHETHER OR NOT A FIRST TRUST'S DISCRETIONARY DISTRIBUTION STANDARD COULD
19 COMPEL A DISTRIBUTION OF PRINCIPAL; PROVIDING FOR DETERMINATIONS OF A SETTLOR'S
20 INTENT; AND PROVIDING FOR LATER-DISCOVERED PROPERTY.”
21
22 BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF MONTANA:
23
24 NEW SECTION. Section 1. Short title. [Sections 1 through 30] may be cited as the "Uniform Trust
25 Decanting Act".
26
27 NEW SECTION. Section 2. Definitions. In [sections 1 through 30]:
28 (1) "Appointive property” has the meaning in section 72-7-102(2).
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1 (2) "Ascertainable standard” means a standard relating to an individual’s health, education, support,
2 or maintenance within the meaning of 26 U.S.C. 2041(b)(1)(A), as amended, or 26 U.S.C. 2514(c)(1), as
3 amended, and any applicable regulations.
4 (3) "Authorized fiduciary" means:
5 (a) a trustee or other fiduciary, other than a settlor, that has discretion to distribute or direct a trustee
6 to distribute part or all of the principal of the first trust to one or more current beneficiaries;
7 (b) a special fiduciary appointed under [section 9]; or
8 (c) a special-needs fiduciary under [section 13].
9 (4) "Beneficiary" means a person that:
10 (a) has a present or future, vested or contingent, beneficial interest in a trust;
11 (b) holds a power of appointment over trust property; or
12 (c) is an identified charitable organization that will or may receive distributions under the terms of the
13 trust.
14 (5) "Charitable interest" means an interest in a trust that:
15 (a) is held by an identified charitable organization and makes the organization a qualified beneficiary;
16 (b) benefits only charitable organizations and, if the interest were held by an identified charitable
17 organization, would make the organization a qualified beneficiary; or
18 (c) is held solely for charitable purposes and, if the interest were held by an identified charitable
19 organization, would make the organization a qualified beneficiary.
20 (6) "Charitable organization" means:
21 (a) a person, other than an individual, organized and operated exclusively for charitable purposes; or
22 (b) a government or governmental subdivision, agency, or instrumentality, to the extent it holds funds
23 exclusively for a charitable purpose.
24 (7) "Charitable purpose" means the relief of poverty, the advancement of education or religion, the
25 promotion of health, a municipal or other governmental purpose, or another purpose the achievement of which
26 is beneficial to the community.
27 (8) "Court" means the court in this state having jurisdiction in matters relating to trusts.
28 (9) "Current beneficiary" means a beneficiary that on the date the beneficiary’s qualification is
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1 determined is a distributee or permissible distributee of trust income or principal. The term includes the holder
2 of a presently exercisable general power of appointment but does not include a person that is a beneficiary only
3 because the person holds any other power of appointment.
4 (10) "Decanting power" or “the decanting power” means the power of an authorized fiduciary under
5 [sections 1 through 30] to distribute property of a first trust to one or more second trusts or to modify the terms
6 of the first trust.
7 (11) "Expanded distributive discretion” means a discretionary power of distribution that is not limited to
8 an ascertainable standard or a reasonably definite standard.
9 (12) "First trust” means a trust over which an authorized fiduciary may exercise the decanting power.
10 (13) "First-trust instrument” means the trust instrument for a first trust.
11 (14) "General power of appointment” has the meaning in section 72-7-102(6).
12 (15) "Jurisdiction", with respect to a geographic area, includes a state or country.
13 (16) "Person" has the meaning in section 72-38-103(12).
14 (17) "Power of appointment” has the meaning in section 72-7-102(13).
15 (18) "Powerholder" has the meaning in section 72-7-102(14).
16 (19) "Presently exercisable power of appointment” means a power of appointment exercisable by the
17 powerholder at the relevant time. The term:
18 (a) includes a power of appointment exercisable only after the occurrence of a specified event, the
19 satisfaction of an ascertainable standard, or the passage of a specified time only after:
20 (i) the occurrence of the specified event;
21 (ii) the satisfaction of the ascertainable standard; or
22 (iii) the passage of the specified time; and
23 (b) does not include a power exercisable only at the powerholder's death.
24 (20) "Qualified beneficiary" means a beneficiary that on the date the beneficiary’s qualification is
25 determined:
26 (a) is a distributee or permissible distributee of trust income or principal;
27 (b) would be a distributee or permissible distributee of trust income or principal if the interests of the
28 distributees described in subsection (20)(a) terminated on that date without causing the trust to terminate; or
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1 (c) would be a distributee or permissible distributee of trust income or principal if the trust terminated
2 on that date.
3 (21) "Reasonably definite standard” means a clearly measurable standard under which a holder of a
4 power of distribution is legally accountable within the meaning of 26 U.S.C. 674(b)(5)(A), as amended, and any
5 applicable regulations.
6 (22) "Record" means information that is inscribed on a tangible medium or that is stored in an
7 electronic or other medium and is retrievable in perceivable form.
8 (23) "Second trust" means:
9 (a) a first trust after modification under [sections 1 through 30]; or
10 (b) a trust to which a distribution of property from a first trust is or may be made under [sections 1
11 through 30].
12 (24) "Second-trust instrument" means the trust instrument for a second trust.
13 (25) "Settlor", except as otherwise provided in [section 25], means a person, including a testator, that
14 creates or contributes property to a trust. If more than one person creates or contributes property to a trust,
15 each person is a settlor of the portion of the trust property attributable to the person’s contribution except to the
16 extent another person has power to revoke or withdraw that portion.
17 (26) "Sign" means, with present intent to authenticate or adopt a record:
18 (a) to execute or adopt a tangible symbol; or
19 (b) to attach to or logically associate with the record an electronic symbol, sound, or process.
20 (27) "State" has the meaning in section 72-38-103(20).
21 (28) "Terms of the trust" means:
22 (a) except as otherwise provided in subsection (28)(b), the manifestation of the settlor’s intent
23 regarding a trust’s provisions as:
24 (i) expressed in the trust instrument; or
25 (ii) established by other evidence that would be admissible in a judicial proceeding; or
26 (b) the trust’s provisions as established, determined, or amended by:
27 (i) a trustee or other person in accordance with applicable law;
28 (ii) a court order; or
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1 (iii) a nonjudicial settlement agreement under 72-38-111.
2 (29) "Trust instrument" means a record executed by the settlor to create a trust or by any person to
3 create a second trust that contains some or all of the terms of the trust, including any amendments.
4
5 NEW SECTION. Section 3. Scope. (1) Except as provided in subsections (2) and (3), [sections 1
6 through 30] applies to an express trust that is irrevocable or revocable by the settlor only with the consent of the
7 trustee or a person holding an adverse interest.
8 (2) [Sections 1 through 30] does not apply to a trust held solely for charitable purposes.
9 (3) Subject to [section 15], a trust instrument may restrict or prohibit exercise of the decanting power.
10 (4) [Sections 1 through 30] does not limit the power of a trustee, powerholder, or other person to
11 distribute or appoint property in further trust or to modify a trust under the trust instrument, law of this state
12 other than [sections 1 through 30], common law, a court order, or a nonjudicial settlement agreement.
13 (5) [Sections 1 through 30] does not affect the ability of a settlor to provide in a trust instrument for the
14 distribution of the trust property or appointment in further trust of the trust property or for modification of the trust
15 instrument.
16
17 NEW SECTION. Section 4. Fiduciary duty. (1) In exercising the decanting power, an authorized
18 fiduciary shall act in accordance with its fiduciary duties, including the duty to act in accordance with the
19 purposes of the first trust.
20 (2) [Sections 1 through 30] does not create or imply a duty to exercise the decanting power or to
21 inform beneficiaries about the applicability of [sections 1 through 30].
22 (3) Except as otherwise provided in a first-trust instrument, for purposes of [sections 1 through 30]
23 and sections 72-38-801 and 72-38-802(1), the terms of the first trust are deemed to include the decanting
24 power.
25
26 NEW SECTION. Section 5. Application -- governing law. [Sections 1 through 30] applies to a trust
27 created before, on, or after [the effective date of sections 1 through 30] that:
28 (1) has its principal place of administration in this state, including a trust whose principal place of
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1 administration has been changed to this state; or
2 (2) provides by its trust instrument that is governed by the law of this state or is governed by the law
3 of this state for the purpose of:
4 (a) administration, including administration of a trust whose governing law for purposes of
5 administration has been changed to the law of this state;
6 (b) construction of terms of the trust; or
7 (c) determining the meaning or effect of terms of the trust.
8
9 NEW SECTION. Section 6. Reasonable reliance. A trustee or other person that reasonably relies
10 on the validity of a distribution of part or all of the property of a trust to another trust, or a modification of a trust,
11 under [sections 1 through 30], law of this state other than [sections 1 through 30], or the law of another
12 jurisdiction is not liable to any person for any action or failure to act as a result of the reliance.
13
14 NEW SECTION. Section 7. Notice -- exercise of decanting power. (1) In this section, a notice
15 period begins on the day notice is given under subsection (3) and ends 60 days after the day notice is given.
16 (2) Except as otherwise provided in [sections 1 through 30], an authorized fiduciary may exercise the
17 decanting power without the consent of any person and without court approval.
18 (3) Except as otherwise provided in subsection (6), an authorized fiduciary shall give notice in a
19 record of the intended exercise of the decanting power not later than 60 days, exclusive of the day notice is
20 given, before the exercise to:
21 (a) each settlor of the first trust, if living or then in existence;
22 (b) each qualified beneficiary of the first trust;
23 (c) each holder of a presently exercisable power of appointment over any part or all of the first trust;
24 (d) each person that currently has the right to remove or replace the authorized fiduciary;
25 (e) each other fiduciary of the first trust;
26 (f) each fiduciary of the second trust; and
27 (g) the attorney general, if [section 14(2)] applies.
28 (4) An authorized fiduciary is not required to give notice under subsection (3) to a person that is not
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1 known to the fiduciary or is known to the fiduciary but cannot be located by the fiduciary after reasonable
2 diligence.
3 (5) A notice under subsection (3) must:
4 (a) specify the manner in which the authorized fiduciary intends to exercise the decanting power;
5 (b) specify the proposed effective date for exercise of the power;
6 (c) include a copy of the first-trust instrument; and
7 (d) include a copy of all second-trust instruments.
8 (6) The decanting power may be exercised before expiration of the notice period under subsection (1)
9 if all persons entitled to receive notice waive the period in a signed record.
10 (7) The receipt of notice, waiver of the notice period, or expiration of the notice period does not affect
11 the right of a person to file an application under [section 9] asserting that:
12 (a) an attempted exercise of the decanting power is ineffective because it did not comply with
13 [sections 1 through 30] or was an abuse of discretion or breach of fiduciary duty; or
14 (b) [section 22] applies to the exercise of the decanting power.
15 (8) An exercise of the decanting power is not ineffective because of the failure to give notice to one or
16 more persons under subsection (3) if the authorized fiduciary acted with reasonable care to comply with
17 subsection (3).
18
19 NEW SECTION. Section 8. Representation. (1) Notice to a person with authority to represent and
20 bind another person under a first-trust instrument or Title 72, chapter 38, part 3, has the same effect as notice
21 given directly to the person represented.
22 (2) Consent of or waiver by a person with authority to represent and bind another person under a first-
23 trust instrument or Title 72, chapter 38, part 3, is binding on the person represented unless the person
24 represented objects to the representation before the consent or waiver otherwise would become effective.
25 (3) A person with authority to represent and bind another person under a first-trust instrument or Title
26 72, chapter 38, part 3, may file an application under [section 9