-
The audio portion of the conference may be accessed via the
telephone or by using your computer's
speakers. Please refer to the instructions emailed to
registrants for additional information. If you
have any questions, please contact Customer Service at
1-800-926-7926 ext. 1.
NOTE: If you are seeking CPE credit, you must listen via your
computer — phone listening is no
longer permitted.
Modifying Irrevocable Trusts Using
Nonjudicial Settlement AgreementsStructuring NJSA Wrappers,
Relocating Trust Situs, Resolving Disputes, Remedying Trust
Construction Issues
Today’s faculty features:
1pm Eastern | 12pm Central | 11am Mountain | 10am Pacific
TUESDAY, SEPTEMBER 18, 2018
Presenting a live 90-minute webinar with interactive Q&A
Alissa B. Gorman, J.D., LL.M. (Taxation), Shareholder, McAndrews
Law Offices, Berwyn, Pa.
Miguel Pena, Atty, Law Office of Miguel D. Pena, Esq.,
Wilmington, Del.
-
Tips for Optimal Quality
Sound Quality
If you are listening via your computer speakers, please note
that the quality
of your sound will vary depending on the speed and quality of
your internet connection.
If the sound quality is not satisfactory, you may listen via the
phone: dial
1-866-961-9091 and enter your PIN when prompted. Otherwise,
please
send us a chat or e-mail [email protected] immediately so
we can address the
problem.
If you dialed in and have any difficulties during the call,
press *0 for assistance.
NOTE: If you are seeking CPE credit, you must listen via your
computer — phone
listening is no longer permitted.
Viewing Quality
To maximize your screen, press the F11 key on your keyboard. To
exit full screen,
press the F11 key again.
FOR LIVE EVENT ONLY
-
Continuing Education Credits
In order for us to process your continuing education credit, you
must confirm your
participation in this webinar by completing and submitting the
Attendance
Affirmation/Evaluation after the webinar.
A link to the Attendance Affirmation/Evaluation will be in the
thank you email that you
will receive immediately following the program.
For CPE credits, attendees must participate until the end of the
Q&A session and
respond to five prompts during the program plus a single
verification code. In addition,
you must confirm your participation by completing and submitting
an Attendance
Affirmation/Evaluation after the webinar.
For additional information about continuing education, call us
at 1-800-926-7926 ext. 2.
FOR LIVE EVENT ONLY
-
Program Materials
If you have not printed the conference materials for this
program, please
complete the following steps:
• Click on the ^ symbol next to “Conference Materials” in the
middle of the left-
hand column on your screen.
• Click on the tab labeled “Handouts” that appears, and there
you will see a
PDF of the slides for today's program.
• Double click on the PDF and a separate page will open.
• Print the slides by clicking on the printer icon.
FOR LIVE EVENT ONLY
-
Modifying Irrevocable Trusts Using NonjudicialSettlement
Agreements
Alissa B. Gorman
McAndrews Law Offices, P.C.
[email protected]
Berwyn, Pennsylvania 5
-
Amending an Irrevocable Trust
6
-
Irrevocable Trust
• Settlor establishes trust and transfers assets to a trustee
for the benefit of an individual
• Permits the settlor to reduce death taxes and transfer wealth
in a protective arrangement
• Settlor cannot amend or revoke the trust; gives up all control
over property
• Changing circumstances warrant modifications to trust
7
-
Common Reasons to Modify Improve Administrative Provisions
Modernize Trust
• Appoint Trust Protector• Clarify Trustee Succession• Adjust
Trustee Powers• Change Situs/governing
law
• Clarify scrivener’s error• Update Language• Merge trusts• Add
Tax Planning
Provisions• Address
incapacity/special needs of beneficiary
• Grantor to non-grantor• Change investment
provisions
8
-
How Do I Amend anIrrevocable Trust?
• Trust provisions
• Decanting
• Statutory authority
• Judicial and Nonjudicial
9
-
Authority to Amend
• Trust Provisions
• Power to substitute assets
• Power to terminate if small corpus
• Trustee succession
• Trustee removal and resignation
• Convert to unitrust
• Merge trusts
• Amend for change in law
• Transfer situs
10
-
Authority to Amend
• Decanting
• Trustee “decants” or pours trust assets into another trust
• Trustee has inherit authority through general trustee
powers
• Some states have decanting statutes• Statutes vary in regard
to Trustee power
• Some state that beneficial interests of beneficiaries cannot
change
• Some require court approval 11
-
Authority to Amend
• Statutory: Uniform Trust Code
• Intended to streamline existing trust case law and statutes
into an updated body of laws governing trusts
• Provides a framework for all 50 states on trust law
• Passed in 31 states and District of Columbia
12
-
Uniform Trust Code
13
Source: Uniform Law Commission
-
Uniform Trust Code
• Judicial & Nonjudicial modification
• Nonjudicial: UTC 111, 411(a)
• Agreement between interested persons to modify or terminate a
trust without petitioning the court to approve new provisions
• Judicial: UTC 410 – 416
• Court proceeding by interested person to modify or terminate a
trust
14
-
Nonjudicial Amendment
• Nonjudicial Settlement Agreement (NJSA)
• UTC 111
• Modification by Consent
• UTC 411
15
-
NJSA –UTC §111
Nonjudicial Settlement Agreements
UTC §111
(a) For purposes of this section, “interested persons” means
persons whose consent would be required in order to achieve a
binding settlement were the settlement to be approved by the
court.
16
-
Nonjudicial Settlement Agreements
(b) Except as otherwise provided in subsection (c), interested
persons may enter into a binding nonjudicialsettlement agreement
with respect to any matter involving a trust.
(c) A nonjudicial settlement agreement is valid only to the
extent it does not violate a material purpose of the trust and
includes terms and conditions that could be properly approved by
the court under this Code or other applicable law.
17
-
Nonjudicial Settlement Agreements –UTC 111
(d) Matters that may be resolved by a nonjudicial settlement
agreement include:
(1) the interpretation or construction of the terms of the
trust;
(2) the approval of a trustee’s report or accounting;
(3) direction to a trustee to refrain from performing a
particular act or the grant to a trustee of any necessary or
desirable power;
(4) the resignation or appointment of a trustee and the
determination of a trustee’s compensation;
(5) transfer of a trust’s principal place of administration;
(6) liability of a trustee for an action relating to the
trust.
18
-
Nonjudicial Settlement Agreements –UTC 111
(e) Any interested person may request the court to approve a
nonjudicial settlement agreement, to determine whether the
representation as provided in Article 3 was adequate, and to
determine whether the agreement contains terms and conditions the
court could have properly approved.
UTC 111 Comment: “resolution of disputes by nonjudicial means is
encouraged”
19
-
Nonjudicial Settlement Agreements –UTC 111
• Typically used in situations where settlor passed away, and
trustee and beneficiaries agree
• Cannot violate a material purpose of the Trust
• Does not require a court proceeding to approve the settlement
agreement
20
-
NJSA – Interested Person• Who must agree to the amendment?
• UTC §111(a) “Interested Persons”• Does not identify specific
parties
• Consent of settlor, trustee, and beneficiaries
• Consent of trustee and beneficiaries
• Consent of settlor and beneficiaries
• Consent of all beneficiaries
• Consent of some beneficiaries
• State trust code may define interested person• UTC 111 in PA:
Substitutes “interested persons” with
“Trustee and all beneficiaries”
• When charity involved, state Attorney General typically
noticed
21
-
NJSA – Interested Person
• UTC §103 Definitions
• (3) “Beneficiary” means a person that:• (A) has a present or
future beneficial interest in a trust, vested
or contingent; or
• (B) in a capacity other than that of trustee, holds a power of
appointment over trust property.
22
-
NJSA – Interested Person
• Trustee• UTC Comment: …[T]his section does not attempt to
precisely define the “interested persons” whose consent is
required to obtain a binding settlement as provided in subsection
(a). However, the consent of the trustee would ordinarily be
required to obtain a binding settlement with respect to matters
involving a trustee’s administration, such as approval of a
trustee’s report or resignation.
23
-
NJSA –Material Purpose
• UTC 411: Spendthrift provision presumed NOT to be a material
purpose of the trust. • UTC Comment: “In order to be material, the
purpose remaining
to be performed must be of some significance…”
• UTC Comment: “A finding of such a purpose generally requires
some showing of a particular concern or objective on the part of
the settlor, such as concern with regard to the beneficiary’s
management skills, judgment, or level of maturity.”
• Spendthrift language considered boilerplate?
• State differences
• PA: Spendthrift clause is presumed to constitute a material
purpose
25
-
Matters Resolved by NJSA
• Resignation/appointment of Trustee & Trustee
compensation
• Transfer of trust situs
• Interpret trust terms
• Grant to Trustee of any power
• Any other matter concerning trust administration
• Include special needs trust for beneficiary with
disabilities
• In PA, can modify or terminate a trust by NJSA• Only if
trustee and all beneficiaries agree and does
not violate material purpose26
-
NJSA – Court approval
• Interested persons may petition court to approve NJSA
• Determine if representation was adequate and
• Determine whether the agreement contains terms and conditions
the court could have approved.
• If don’t have consent from all interested persons, an
interested person can turn a NJSA into a judicial settlement.
• Court is limited to determining whether the beneficiaries were
adequately represented and whether the terms of the NJSA are terms
that the court could otherwise approve.
• Parties seeking court review beyond the limited review of the
NJSA must petition for review under another code provision and not
UTC §111. 27
-
Judicial Approval of NJSA
• Why petition court for approval of NJSA if not required under
statute?
• Protection from liability
• Required by corporate trustee
• Charity as beneficiary
• Clarify whether amendment violates material purpose
28
-
Modification by Consent
• UTC 411(a)• Modification by consent of settlor and all
beneficiaries• Even if inconsistent with material purpose
• Broader authority than NJSA
• Court approval may not be necessary if settlor and all
beneficiaries agree (state specific)
• Agent for settlor may consent if the Power of Attorney
expressly authorizes such power; Guardian may consent if approved
by the court with jurisdiction over guardianship
• Settlor may not represent beneficiary in modification or
consent of the Trust
29
-
Modification by Consent
• UTC 411(a)
• Allows a trust to be modified or terminated over a trustee’s
objection –however, under UTC §410(b) the trustee would have
standing to object
• Distribution if consent to terminate – If the trust is
terminated by a nonjudicial consent modification, the trustee
distributes the property as agreed upon by the beneficiaries
30
-
Modification by Consent
• Gift Tax Consequences
• Generally, there is no gift by settlor or beneficiary.
• Settlor joining the beneficiaries in the termination or
modification does not cause this to be a gift by the settlor. Treas
Reg §20.2038-1(a)(2)
• If termination, provided the beneficiaries agree to distribute
the trust property in accordance with their proportionate
interests, no gift by a beneficiary to the trust
31
-
Modification by Consent
• Estate Tax Inclusion
• Should not cause inclusion in settlor’s estate
• Some practitioners were concerned the settlor’s consent would
cause inclusion under 2036 or 2038 (i.e., has the settlor retained
the power to modify trust in conjunction with others ).
• In response, the UTC was revised to require that the settlor
cannot represent any beneficiaries in the modification or
termination of the trust.
32
-
Modification by Consent
• Estate Tax Inclusion
• Some states have specifically provided that the settlor has a
mere “veto power” – thus the settlor’s power is more passive and
should not cause inclusion.
• Some states require court approval even with settlor’s
consent
• PLR 201233008 – settlor’s consent to a trust modification
pursuant to state statute did not cause the trust assets to be
included in the settlor’s gross estate under IRC §§2036 or 2038.
33
-
Judicial ApprovalModification by Consent
• UTC 411(b)• If all beneficiaries consent (but not settlor),
may
petition court to amend trust if not inconsistent with material
purpose of trust • Trustee consent not required (can object
under
410(b))
• UTC 411(e)• If not all beneficiaries consent, may be approved
by
court:• If all beneficiaries had consented, the trust could
have
been modified by court; and• Interest of beneficiary who does
not consent will be
adequately protected 34
-
Judicial Approval of Amendment
• UTC 412 – Unanticipated circumstances
• UTC 413 – Cy Pres (charitable trusts)
• UTC 414 – Trust too small to justify administration
• UTC 415 – Correct mistakes/conform to Settlor’s probable
intention
• UTC 416 – Achieve Settlor’s tax objectives, divide trusts,
merge trusts
35
-
Representation
• Actual representation - based upon an individual’s
relationship to a represented party (Sections 302 and 303 of the
Uniform Trust Code)
• Virtual representation - based upon an individual holding
substantially identical interests to the represented party (Section
304 of the Uniform Trust Code)
36
-
Representation by Holder of General Testamentary Power
of Appointment
Section 302 of the Uniform Trust Code provides for the
representation of persons whose interests, as permissible
appointees, takers in default, or otherwise, are subject to the
power, by a holder of a general testamentary power of appointment
to the extent there is no conflict of interest between the holder
of a general testamentary power of appointment and the person
represented with respect to the particular question or dispute.
37
-
Representation by Fiduciaries and Parents
Section 303 of the Uniform Trust Code provides for
representation by fiduciaries and parents to the extent that there
is no conflict of interest between the representative and the
person represented or among those being represented with respect to
a particular question or dispute
•A conservator or guardian may represent and bind the estate
that the conservator or guardian controls
•An agent having authority to act with respect to the particular
question or dispute may represent and bind the principal
•A trustee may represent and bind the beneficiaries of a
trust
•A personal representative of a decedent’s estate may represent
and bind persons interested in the estate
•A parent may represent and bind the parent’s minor or unborn
child if a conservator or guardian for the child has not been
appointed
38
-
Representation by Person Having Substantially Identical
Interest
Section 304 of the Uniform Trust Code provides for a minor,
incapacitated or unborn individual or person whose identity or
location is unknown and not reasonably ascertainable, to be
represented and bound by a person having the substantially
identical interest with respect to the particular question or
dispute, unless the minor, incapacitated or unborn individual or
person whose identity or location is unknown and not reasonably
ascertainable is otherwise represented, and only to the extent
there is no conflict of interest between the representative and the
person represented
39
-
Appointment of Representative
Section 305 of the Uniform Trust Code provides for the
appointment of a representative
•If the court determines that an interest is not represented or
that the otherwise available representation might be inadequate,
the court may appoint a representative to receive notice, give
consent, and otherwise represent bind and act on behalf of a minor,
incapacitated or unborn individual, or a person whose identity or
location is unknown. A representative may be appointed to represent
several persons or interests
•A representative may act on behalf of the individual
represented with respect to any matter arising under the uniform
trust code, whether or not a judicial proceeding concerning the
trust is pending
•In making decisions, a representative may consider general
benefit accruing to the living members of the individual’s family
40
-
Limitations on Representation
• Representative must not have a conflict of interest with
respect to a particular question at issue in the modification
• A Settlor can never represent a beneficiary in a nonjudicial
consent modification
• A parent can represent a minor or unborn child unless a
guardian has been appointed by a court
• Some states provide priority between parents who both want to
represent a minor child – generally the parent who is a beneficiary
of the trust or whose ancestors created the trust has priority
41
-
Limitations on Representation
• Certain fiduciaries can be actual representatives (i.e.
conservator, guardian, agent under power of attorney, trustee with
respect to trust beneficiaries, and personal representative with
respect to persons interested in the decedents estates)
• Holders of inter vivos or testamentary general powers of
appointment can bind potential appointees
42
-
PA Uniform Trust Act
§ 7710.1. Nonjudicial settlement agreements - UTC 111.
(a) (Reserved).
(b) General rule.--Except as otherwise provided in subsection
(c), all beneficiaries and trustees of a trust may enter into a
binding nonjudicial settlement agreement with respect to any matter
involving the trust. The rules of Subchapter C (relating to
representation) shall apply to a settlement agreement under this
section.
(c) Exception.--A nonjudicial settlement agreement is valid only
to the extent it is not inconsistent with a material purpose of the
trust and includes terms and conditions that could be properly
approved by the court under this chapter or other applicable
law.
43
-
PA Uniform Trust Act
• (d) Matters that may be resolved.--Matters that may be
resolved by a nonjudicial settlement agreement include the
following:
• (1) The interpretation or construction of the provisions of a
trust instrument.• (2) The approval of a trustee's report or
accounting or waiver of the preparation
of a trustee's report or accounting.• (3) Direction to a trustee
to perform or refrain from performing a particular act.• (4) The
resignation or appointment of a trustee and the determination of
a
trustee's compensation.• (5) Transfer of a trust's situs.• (6)
Liability or release from liability of a trustee for an action
relating to the
trust.• (7) The grant to a trustee of any necessary or desirable
power.• (8) The exercise or nonexercise of any power by a trustee.•
(9) Questions relating to the property or an interest in property
held as part of a
trust.• (10) An action or proposed action by or against a trust
or trustee.• (11) The modification or termination of a trust.• (12)
An investment decision, policy, plan or program of a trustee.• (13)
Any other matter concerning the administration of a trust.
44
-
PA Uniform Trust Act
(e) Request of court.--Any beneficiary or trustee of a trust may
request the court to approve a nonjudicial settlement agreement to
determine whether the representation as provided in Subchapter C
was adequate or whether the agreement contains terms and conditions
the court could have properly approved.
45
-
Taylor case:Modification by Consent
• Edward Winslow Taylor, Intervivos Trust (Pennsylvania)
• Facts: Beneficiaries of trust established by settlor in 1928
brought action to modify Trust by consent under 7740.1(d) (UTC
411(e)) to add a portability clause despite a separate Code Section
(7766/UTC 706) on removal and replacement of a trustee. Trust
agreement gave beneficiaries the right to appoint a new Trustee
upon a vacancy in the trusteeship, which included removal as an
example. However, the trust did not contain language addressing
trustee removal. Trustee objected, reasoning that beneficiaries
cannot achieve a “back door” removal through 7740.1, but must meet
the strict requirements of 7766. 46
-
Taylor case:Modification by Consent
• Issue: Can beneficiaries of an irrevocable trust without a
trustee removal provision consent to modify the Trust to allow the
beneficiaries the ability to remove and replace the Trustee at any
time where there is a specific code section that addresses removal?
• Is the lack of removal provision a material
purpose?
• Is the beneficiaries’ intent relevant to the modification?
47
-
Taylor case:Modification by Consent
• Philadelphia Orphans’ Court ruled in favor of trustee.
• Modifying the trust by consent of beneficiaries to include a
removal provision, which has its own UTA section, avoids the
stricter standards of the removal section, and cannot be used to
circumvent those stricter requirements.
• “It clearly was not the manifest intention of the Pennsylvania
legislature to allow beneficiaries to remove a trustee based upon
their agreement and without satisfying the requirements of section
7766 where the settlor made no provision for trustee removal.
• Taylor, Phila. O.C. No. 3563 IV of 193948
-
Taylor Case
• Superior Court ruled in favor of the beneficiaries.
• Modification of trust to include portability provision by
consent of beneficiaries was proper under 7740.1(d) (UTC 411(d))
despite a separate code section (7766/UTC 706) that addresses
Trustee removal• Section 7740.1 is clear and unambiguous on its
face.
• Statute does not exclude any modifications. Because the
requirements of PEF Code Section 7740.1(d) (UTC 411(d)) were met,
the Court approved modification.
• Beneficiaries only seek to modify trust to permit removal, not
asking court to remove trustee
• Taylor, 2015 PA Super 199 (Pa. Super. Ct., 2015) 49
-
Taylor Case
• Supreme Court ruled in favor of the trustee.
• Issue taken up on appeal: “whether the Superior Court erred in
holding that trust beneficiaries may circumvent the requirements
for removal of a trustee in 20 Pa. C.S.A. § 7766 by amending the
Trust Under 20 Pa.C.S.A. §7740.1.”
• “We conclude that the UTA does not permit the removal and
replacement of a trustee without Orphans’ Court approval in
accordance with section 7766.”
• Trust Under Agreement of Edward Winslow Taylor, Appeal of
Wells Fargo Bank, 164 A.3d 1147 (Pa. 2017)
50
-
Taylor Case
• Each provision of the UTC must be read in conjunction with
other provisions.
• In PA, UTA 7766/UTC 706 exclusive provision on removal of
trustees.
• Does silence on trustee removal in the trust agreement
indicate that settlor did not intend for beneficiaries to have
power to remove trustee?
• How is client to know that trustee removal is permissible if
drafting attorney does not tell him/her?
51
-
In re: The Trust ofClarence Hildebrandt
• Clarence Hildebrandt created trust in 2002
• Clarence and brother Wayne named co-trustees
• Clarence’s attorney appointed as successor trustee
• Two senior attorneys of same law firm appointed as alternate
successor trustees
• Clarence died in 2004
• In 2015, Wayne, with agreement of beneficiaries, petitioned
court to name niece as successor trustee because Clarence’s
attorney was deceased
• Court granted petition over law firm’s objection 52
-
In re: The Trust ofClarence Hildebrandt
• Law firm appealed, arguing that the proposed modification
violated a material purpose of the trust
• Appeals court upheld decision.• No definition of material
purpose in statute or in Kansas
case law
• No indication that the successor trustee be independent third
party
• Kansas and Pennsylvania’s statutes on modification by
beneficiary consent and trustee removal statute are very similar•
Kansas court did not consider comment to its trustee
removal statute – 706 is exclusive provision on removal of
trustees 53
-
Modifying Irrevocable Trust
Agreements Using Nonjudicial
Settlement Agreements(Other NJSA Statutory Provisions and
Variances from
UTC Model, Utilization of NJSA to Relocate Trust
Situs)
Miguel D. Pena
Law Office of Miguel D. Pena, Esq.
(302) 559-4752
[email protected]
-
Variances
NJSA STATUTORY PROVISIONS AND VARIANCES FROM UTC MODEL
OVERVIEW:
• All states (including the District of Columbia) have adopted
some version of the UTC with respect to NJSA’s, except for 18 (AK,
AZ, CA, CO, CT, DE, GA, HI, ID, IN, IA, LA, NV, OK, RI, SD, TX,
WA).
• Many states that have not adopted the UTC have adopted their
own statutes providing for NJSA’s.
• In many instances, NJSA statutes in the states that have
adopted the UTC have provisions that vary, to some extent from the
UTC. There is also variance in the NJSA provisions among the states
that have not adopted the UTC, but have adopted their own NJSA
statutes.
• Examples of Variances
• Who may enter into a NJSA? “Interested persons”, “Qualified
beneficiaries”.
• UTC §111(a) defines an interested person as “persons whose
consent would be required in order to achieve a binding settlement
were the settlement to be approved by the court”.
• The required parties to a NJSA vary by jurisdiction and is not
always clear on what consents are required. However, unless
expressly waived consents from all beneficiaries would be
required.
56
-
Variances
• Arizona:
• Ariz. Rev. Stat. §14-1201(28) provides that an interested
person includes:
• “Any trustee, heir, devisee, child, spouse, creditor,
beneficiary, person holding a
power of appointment and other person who has a property right
in or claim
against a trust estate or the estate of a decedent, ward or
protected person.
Interested person also includes a person who has priority for
appointment as
personal representative and other fiduciaries representing
interested persons.
Interested person, as the term relates to particular persons,
may vary from time to
time and must be determined according to the particular purposes
of, and matter
involved in, any proceeding”.
57
-
Variances• Delaware:
• 12 Del C., § 3338 provides that “interested persons’’ means
persons whose consent would
be required in order to achieve a binding settlement were the
settlement to be approved by
the Court of Chancery. With respect to any nonjudicial
settlement agreement regarding a
trust, the term ‘‘interested persons” means all whose interest
in the trust would be affected
by the proposed nonjudicial settlement agreement, which may
include that an interested
person to a NJSA means all persons whose interest in the trust
would be affected by the
proposed nonjudicial settlement agreement, which may
include:
• Trustees and other fiduciaries, unless they have otherwise
signified their consent or
non-objection to the petition by acting as a petitioner or
accepting a fiduciary position;
• Trust beneficiaries, who will generally be those with a
present interest in the trust and
those whose interest in the trust would vest, without regard to
the exercise or non-
exercise of a power of appointment, if the present interest in
the trust terminated on
the date the petition is filed;
• The trustor of the trust, if living; and
• All other persons having an interest in the trust according to
the express terms of the
trust instrument (such as, but not limited to, holders of powers
and persons having
other rights, held in a nonfiduciary capacity, relating to trust
property).
• Pennsylvania:
• 20 Pa. Cons. Stat. §7710.1(b) provides, in part that “…all
beneficiaries and trustees of a
trust may enter into a binding nonjudicial settlement agreement
with respect to any matter
involving the trust”.
58
-
Variances• Tennessee:
• Tenn. Code Ann. §35-15-111(a) – “…the trustee and the
qualified beneficiaries may enter into a binding nonjudicial
settlement agreement with respect to any matter involving a
trust.”
• Tenn. Code Ann. §35-15-103(24) – “Qualified beneficiary” means
a beneficiary who, assuming the nonexercise of all powers of
appointment and the nonoccurrence of any event not reasonably
expected to occur, on the date the beneficiary’s qualification is
determined:
• Is a distributee or permissible distributee of trust income or
principal;
• Would be a distributee or permissible distributee of trust
income or principal if the interests of the distributes . . .
terminated on that date; or
• Would be a distributee or permissible distributee of trust
income or principal if the trust terminated on that date.
• Tenn. Code Ann §35-15-110 also provides that a charitable
organization expressly designated to receive distributions under
the terms of a charitable trust has the rights of a qualified
beneficiary if the charitable organization, on the date the
charitable organization’s qualification is being determined:
• Is a distributee or a permissible distributee of trust income
or principal;
• Would be a distributee or a permissible distributee of trust
income or principal if the interests of other distributees or
permissible distributees then receiving or eligible to receive
distributions terminated on that date without causing the trust to
terminate; or
• Would be a distribute or a permissible distribute of trust
income or principal if the trust were terminated on that date.
59
-
Matters that may be addressed through
NJSASome states provide a non-exclusive list of matters that can
be addressed by a NJSA:
• Delaware.
• 12 Del. C. § 3338 provides that “. . . interested persons may
enter into a binding
nonjudicial settlement agreement with respect to any matter
involving a trust . . . .”.
• 12 Del. C. § 3338(d) provides a non-exclusive list of matters
that may be resolved by a
nonjudicial settlement agreement:
• The interpretation or construction of the terms of the
trust;
• The approval of a trustee’s report or accounting;
• The direction to a trustee to refrain from performing a
particular act or the grant to a
trustee of any necessary or desirable power;
• The resignation or appointment of a trustee and the
determination of a trustee’s
compensation;
• The transfer of a trust’s principal place of administration;
and
• The liability of a trustee for an action relating to the
trust.
• Florida.
• Fla. Stat. §736.0111(3) provides that “A nonjudicial
settlement may not be used to
produce a result not authorized by other provisions of this
code, including, but not
limited to, terminating or modifying a trust in an impermissible
manner.”
60
-
Matters that may be addressed through
NJSA• Illinois.
• 760 Ill. Comp. Stat. §5/16.1(d)(4)(K) – “The following matters
may be resolved by a nonjudicial settlement agreement….
Modification of the terms of the trust pertaining to administration
of the trust.”
• Kansas.
• Kan. Stat. Ann. §58a-111(d) states that matters that may be
resolved by a nonjudicial settlement agreement are limited to:
• The approval of a trustee’s report or accounting;
• The resignation or appointment of a trustee and the
determination of a trustee’s compensation;
• The transfer of a trust’s principal place of administration;
and
• Liability of a trustee for an action relating to the
trust.
• Massachusetts.
• Mass. Gen Laws. Ch. 203E. §111(d) provides that matters that
may be resolved by a NJSA include:
• The interpretation or construction of the terms of a
trust;
• The approval of a trustee’s report or accounting;
• Direction to a trustee to refrain from performing a particular
act or the grant to a trustee of any necessary or desirable
power;
• The resignation or appointment of a trustee and the
determination of a trustee’s compensation;
• Transfer of a trust’s principal place of administration.
61
-
Matters that may be addressed through
NJSA
• New Hampshire.
• N.H. Rev. Stat. §564-B:1-111(d)(7) provides that “Matters that
may be resolved by a nonjudicial settlement agreement include
without limitation…. the termination or modification of a
trust.”
• North Carolina/South Carolina.
• The Carolinas copy all of the above Massachusetts provisions
except for resolving the interpretation or construction of the
terms of the trust. N.C.G.S. §36C-1-111(b) and S.C.
§62-7-111(b):
• Interested persons may enter into a binding nonjudicial
settlement agreement with respect to any of the following matters
involving a trust:
• The approval of a trustee’s report or accounting;
• Direction to a trustee to perform or refrain from performing a
particular administrative act or the grant to a trustee of any
necessary or desirable administrative power, including a power
granted under G.S. §36C-8-816;
• The resignation or appointment of a trustee and the
determination of a trustee’s compensation;
• Transfer of a trust’s principal place of administration;
and
• Liability of a trustee for any action taken under subdivisions
(1) through (4) of this subsection. 62
-
Matters that may be addressed through
NJSA• Ohio.
• Ohio Rev. Code §5801.10(C)(4)-(6)provides: “Matters that may
be resolved by a private
settlement agreement [i.e., NJSA] include, but are not limited
to, all of the following:
• Modifying the terms of the trust, if the modification is not
inconsistent with any
material purpose of the trust;
• Modifying the terms of the trust in the manner required to
qualify the gift under the
terms of the trust for the charitable estate or gift tax
deduction permitted by federal
law, including the addition of mandatory governing instrument
requirements for a
charitable remainder trust as required by the Internal Revenue
Code and regulations
promulgated under it in any case in which the parties interested
in the trust have
submitted written agreements to the proposed changes or written
disclaimer of
interest; and
• Modifying the terms of the trust in the manner required to
qualify any gift under the
terms of the trust for the estate tax marital deduction
available to noncitizen spouses,
including the addition of mandatory governing instrument
requirements for a
qualified domestic trust under section 2056A of the Internal
Revenue Code and
regulations promulgated under it in any case in which the
parties interested in the trust
have submitted written agreements to the proposed changes or
written disclaimer of
interest.
63