Bill Text: PA HB120 | 2009-2010 | Regular Session | Amended


Bill Title: Further providing for forfeiture, for modification of wills, for advertisement of grant of letters, for duty of personal representative, for enforcement of contribution or exoneration of Federal estate tax, for implementation of power of attorney, for applicability of rule against perpetuities, for modification of conveyance by divorce, for effect of divorce on designation of beneficiaries, for notice of representation, for creditor's claim against settlor, for actions contesting validity of revocable trusts, for claims and distribution after settlor's death, for removal of trustee, for trustee's duty to inform and report, for illustrative powers of trustee, for limitation of action against trustee, for power to convert to unitrust and for retirement benefits, individual retirement accounts, deferred compensation, annuities and similar payments; and making conforming amendments to Title 15.

Spectrum: Moderate Partisan Bill (Republican 5-1)

Status: (Engrossed - Dead) 2009-07-01 - Referred to JUDICIARY [HB120 Detail]

Download: Pennsylvania-2009-HB120-Amended.html

  

 

PRIOR PRINTER'S NOS. 116, 344

PRINTER'S NO.  2296

  

THE GENERAL ASSEMBLY OF PENNSYLVANIA

  

HOUSE BILL

 

No.

120

Session of

2009

  

  

INTRODUCED BY MARSICO, DALLY, GODSHALL, HARHART, REICHLEY AND CALTAGIRONE, JANUARY 30, 2009

  

  

AS AMENDED ON SECOND CONSIDERATION, HOUSE OF REPRESENTATIVES, JUNE 25, 2009   

  

  

  

AN ACT

  

1

Amending Title 20 (Decedents, Estates and Fiduciaries) of the

2

Pennsylvania Consolidated Statutes, further providing for

3

forfeiture, for modification of wills, for advertisement of

4

grant of letters, for duty of personal representative, for

5

enforcement of contribution or exoneration of Federal estate

6

tax, for implementation of power of attorney, for

7

applicability of rule against perpetuities, for modification

8

of conveyance by divorce, for effect of divorce on

9

designation of beneficiaries, for notice of representation,

10

for creditor's claim against settlor, for actions contesting

11

validity of revocable trusts, for claims and distribution

12

after settlor's death, for removal of trustee, for trustee's

<--

13

duty to inform and report, for illustrative powers of

14

trustee, for limitation of action against trustee, for power

15

to convert to unitrust and for retirement benefits,

16

individual retirement accounts, deferred compensation,

17

annuities and similar payments; and making conforming

18

amendments to Title 15.

19

The General Assembly of the Commonwealth of Pennsylvania

20

hereby enacts as follows:

21

Section 1.  Sections 2106(a), 2507(2), 3162, 3301(c), 3706,

22

5603(p) and (q), 6107.1, 6111.1, 6111.2, 7725 and 7745 of Title

23

20 of the Pennsylvania Consolidated Statutes are amended to

24

read:

25

§ 2106.  Forfeiture.

 


1

(a)  Spouse's share.--

2

(1)  A spouse who, for one year or upwards previous to

3

the death of the other spouse, has willfully neglected or

4

refused to perform the duty to support the other spouse, or

5

who for one year or upwards has willfully and maliciously

6

deserted the other spouse, shall have no right or interest

7

under this chapter in the real or personal estate of the

8

other spouse.

9

(2)  A spouse shall have no right or interest under this

10

chapter in the real or personal estate of the other spouse

11

if:

12

(i)  the other spouse dies domiciled in this

13

Commonwealth during the course of divorce proceedings;

14

(ii)  no decree of divorce has been entered pursuant

15

to 23 Pa.C.S. § 3323 (relating to decree of court); and

16

(iii)  grounds have been established as provided in

17

23 Pa.C.S. § 3323(g).

18

* * *

19

§ 2507.  Modification by circumstances.

20

Wills shall be modified upon the occurrence of any of the

21

following circumstances, among others:

22

* * *

23

(2)  Divorce or pending divorce.--[If the testator is

24

divorced from the bonds of matrimony after making a will,

25

any] Any provision in [the] a testator's will in favor of or

26

relating to [his] the testator's spouse [so divorced] shall

27

[thereby] become ineffective for all purposes unless it

28

appears from the will that the provision was intended to

29

survive [the divorce.] a divorce, if the testator:

30

(i)  is divorced from such spouse after making the

- 2 -

 


1

will; or

2

(ii)  dies domiciled in this Commonwealth during the

3

course of divorce proceedings, no decree of divorce has

4

been entered pursuant to 23 Pa.C.S. § 3323 (relating to

5

decree of court) and grounds have been established as

6

provided in 23 Pa.C.S. § 3323(g).

7

* * *

8

§ 3162.  Advertisement of grant of letters.

9

(a)  Notice generally.--The personal representative,

10

immediately after the grant of letters, shall cause notice

11

thereof to be given in one newspaper of general circulation

12

published at or near the place where the decedent resided or, in

13

the case of a nonresident decedent, at or near the place where

14

the letters were granted, and in the legal periodical, if any,

15

designated by rule of court for the publication of legal

16

notices, once a week for three successive weeks, together with

17

his name and address; and in every such notice, he shall request

18

all persons having claims against the estate of the decedent to

19

make known the same to him or his attorney, and all persons

20

indebted to the decedent to make payment to him without delay.

21

(b)  Proofs of advertisement to trustee.--A personal

22

representative who has advertised the grant of letters and

23

received the notice required by section 7780.3(c) (relating to

24

duty to inform and report) shall promptly send copies of the

25

proofs of that advertisement to the trustee.

26

§ 3301.  Duty of personal representative.

27

* * *

28

(c)  Time for filing.--The personal representative shall file

29

his inventory no later than the date he files his account or the

30

due date, including any extension, for the filing of the

- 3 -

 


1

inheritance tax return for the estate, whichever is earlier. Any

2

party in interest in the estate may request the filing of an

3

inventory at an earlier date by writing delivered to the

4

personal representative or his attorney in which event an

5

inventory shall be filed within three months after the

6

appointment of the personal representative or within 30 days

7

after the request, whichever is later. The court[, upon cause

8

shown,] may direct the [filing of] personal representative to

9

file an inventory of estate assets at any time.

10

§ 3706.  Enforcement of contribution or exoneration of Federal

11

estate tax.

12

(a)  Duty to pay.--Parties liable for apportionment of the

13

Federal estate tax, whether residents or nonresidents of this

14

Commonwealth, shall pay the amounts apportioned against them

15

[respectively.] at the time the Federal estate tax is due,

16

without regard to any extension of time for paying such tax.

17

(b)  [Duty] Power of fiduciary.--The fiduciary charged with

18

the duty to pay the Federal estate tax may recover from parties

19

liable to apportionment the amounts of Federal estate tax

20

[apportionable] apportioned to them [respectively]. If the

21

fiduciary pays the tax apportioned against another party, the

22

fiduciary may recover from the other party the tax payment so

23

advanced, together with interest of 5% per annum from the date

24

of payment.

25

(c)  Suspending distribution.--Distribution or delivery of

26

property to any party, other than a fiduciary charged with a

27

duty to pay the Federal estate tax, shall not be required of any

28

fiduciary until [the Federal estate tax apportionable with

29

respect thereto is paid or, if the Federal estate tax has not

30

been determined and apportionment made, until adequate security

- 4 -

 


1

for payment is furnished to the fiduciary making the

2

distribution or delivery.] that party pays the Federal estate

3

tax apportioned to that party.

4

(d)  Court decrees.--[The] Notwithstanding subsections (a)

5

and (b), the court, upon petition or at an accounting or in any

6

appropriate action or proceeding, shall make such decrees or

7

orders as it shall deem advisable apportioning the Federal

8

estate tax. The court may direct a fiduciary to collect the

9

apportioned amounts from the property or interests in his

10

possession of any parties against whom apportionment has been

11

made and may direct all other parties against whom the Federal

12

estate tax has been or may be apportioned or from whom any part

13

of the Federal estate tax may be recovered to make payment of

14

the apportioned amounts to the fiduciary. When a fiduciary holds

15

property of a party liable to apportionment insufficient to

16

satisfy the apportioned Federal estate tax, the court may direct

17

that the balance of the apportioned amount of Federal estate tax

18

shall be paid to the fiduciary by the party liable. Should an

19

overpayment of the Federal estate tax be made by any party or on

20

his behalf, the court may direct an appropriate reimbursement

21

for the overpayment. If the court apportions any part of the

22

Federal estate tax against any party interested in

23

nontestamentary property or among the respective interests

24

created by any nontestamentary instrument, the court, in its

25

discretion, may assess against those properties or interests an

26

equitable share of the expenses incurred in connection with the

27

determination and apportionment of the Federal estate tax. If

28

the fiduciary cannot recover the Federal estate tax apportioned

29

against a party benefited, the unrecovered amount shall be

30

charged in such manner as the court may determine.

- 5 -

 


1

§ 5603.  Implementation of power of attorney.

2

* * *

3

(p)  Power to engage in insurance transactions.--A power to

4

"engage in insurance transactions" shall mean that the agent

5

may:

6

(1)  Purchase, continue, renew, convert or terminate any

7

type of insurance (including, but not limited to, life,

8

accident, health, disability or liability insurance) and pay

9

premiums and collect benefits and proceeds under insurance

10

policies.

11

(2)  Exercise nonforfeiture provisions under insurance

12

policies.

13

(3)  In general, exercise all powers with respect to

14

insurance that the principal could if present; however, the

15

agent cannot designate himself beneficiary of a life

16

insurance policy unless the agent is the spouse, child,

17

grandchild, parent, brother or sister of the principal. An

18

agent and a beneficiary of a life insurance policy shall be

19

liable as equity and justice may require to the extent that,

20

as determined by the court, a beneficiary designation made by

21

the agent is inconsistent with the known or probable intent

22

of the principal.

23

(q)  Power to engage in retirement plan transactions.--A

24

power to "engage in retirement plan transactions" shall mean

25

that the agent may contribute to, withdraw from and deposit

26

funds in any type of retirement plan (including, but not limited

27

to, any tax qualified or nonqualified pension, profit sharing,

28

stock bonus, employee savings and retirement plan, deferred

29

compensation plan or individual retirement account), select and

30

change payment options for the principal, make roll-over

- 6 -

 


1

contributions from any retirement plan to other retirement plans

2

and, in general, exercise all powers with respect to retirement

3

plans that the principal could if present. However, the agent

4

cannot designate himself beneficiary of a retirement plan unless

5

the agent is the spouse, child, grandchild, parent, brother or

6

sister of the principal. An agent and a beneficiary of a

7

retirement plan shall be liable as equity and justice may

8

require to the extent that, as determined by the court, a

9

beneficiary designation made by the agent is inconsistent with

10

the known or probable intent of the principal.

11

* * *

12

§ 6107.1.  Applicability of rule against perpetuities.

13

(a)  Traditional rule.--Sections 6104 (relating to rule

14

against perpetuities), 6105 (relating to rule against

15

perpetuities; disposition when invalidity occurs), 6106

16

(relating to income accumulations; when valid) and 6107

17

(relating to income accumulations; disposition when invalidity

18

occurs):

19

(1)  shall apply to every interest created before January

20

1, 2007; but

21

(2)  shall not apply to any interest created after

22

December 31, 2006.

23

(b)  Modern rule.--All of the following apply to every

24

interest created after December 31, 2006:

25

(1)  [No] Except as provided in paragraph (3), no

26

interest shall be void as a perpetuity.

27

(2)  No direction or authorization to [accumulated] 

28

accumulate income shall be void as a perpetuity.

29

(3)  If a power of appointment is exercised to create a

30

new power of appointment, any interest created by the

- 7 -

 


1

exercise of the new power of appointment is invalid if it

2

does not vest within 360 years of the creation of the

3

original power of appointment, unless the exercise of the new

4

power of appointment expressly states that this provision

5

shall not apply to the interests created by the exercise.

6

(4)  Void interests shall be disposed of in the manner

7

provided in section 6105.

8

§ 6111.1.  Modification by divorce or pending divorce.

9

[If the conveyor is divorced from the bonds of matrimony

10

after making a conveyance, any] Any provision in [the] a 

11

conveyance which was revocable by [him] a conveyor at the time

12

of [his] the conveyor's death and which was to take effect at or

13

after [his] the conveyor's death in favor of or relating to [his

14

spouse so divorced shall thereby] the conveyor's spouse shall 

15

become ineffective for all purposes unless it appears in the

16

governing instrument that the provision was intended to survive

17

[the divorce.] a divorce, if the conveyor:

18

(1)  is divorced from such spouse after making the

19

conveyance; or

20

(2)  dies domiciled in this Commonwealth during the

21

course of divorce proceedings, no decree of divorce has been

22

entered pursuant to 23 Pa.C.S. § 3323 (relating to decree of

23

court) and grounds have been established as provided in 23

24

Pa.C.S. § 3323(g).

25

§ 6111.2.  Effect of divorce or pending divorce on designation

26

of beneficiaries.

27

[If a person domiciled in this Commonwealth at the time of

28

his death is divorced from the bonds of matrimony after

29

designating his spouse as beneficiary of a life insurance

30

policy, annuity contract, pension or profit-sharing plan or

- 8 -

 


1

other contractual arrangement providing for payments to his

2

spouse, any designation in favor of his former spouse which was

3

revocable by him after the divorce shall become ineffective for

4

all purposes and shall be construed as if such former spouse had

5

predeceased him unless it appears from the wording of the

6

designation, a court order or a written contract between the

7

person and such former spouse that the designation was intended

8

to survive the divorce.]

9

(a)  Applicability.--This section is applicable if an

10

individual:

11

(1)  is domiciled in this Commonwealth;

12

(2)  designates the individual's spouse as beneficiary of

13

the individual's life insurance policy, annuity contract,

14

pension or profit-sharing plan or other contractual

15

arrangement providing for payments to the spouse; and

16

(3)  either:

17

(i)  at the time of the individual's death is

18

divorced from the spouse; or

19

(ii)  dies during the course of divorce proceedings,

20

no decree of divorce has been entered pursuant to 23

21

Pa.C.S. § 3323 (relating to decree of court) and grounds

22

have been established as provided in 23 Pa.C.S. §

23

3323(g).

24

(b)  General rule.--Any designation described in subsection

25

(a)(2) in favor of the individual's spouse or former spouse that

26

was revocable by the individual at the individual's death shall

27

become ineffective for all purposes and shall be construed as if

28

the spouse or former spouse had predeceased the individual,

29

unless it appears the designation was intended to survive the

30

divorce based on:

- 9 -

 


1

(1)  the wording of the designation;

2

(2)  a court order; or

<--

3

(3)  a written contract between the individual and the

4

spouse or former spouse; or

<--

5

(4)  a designation of the former spouse as beneficiary

6

after the decree of divorce has been entered.

7

(c)  Liability.--

8

(1)  Unless restrained by court order, no insurance

9

company, pension or profit-sharing plan trustee or other

10

obligor shall be liable for making payments to a spouse or 

11

former spouse which would have been proper in the absence of

12

this section.

13

(2)  Any spouse or former spouse to whom payment is made

14

shall be answerable to anyone prejudiced by the payment.

15

§ 7725.  Notice of representation.

16

A person representing another must be given written notice by

17

the trustee that the person is representing the other person.

18

[The person to whom the notice is given may decline the

19

representation by a writing that is given to the trustee no

20

later than 60 days after receipt of the trustee's notice.] A

21

person to whom the notice is given is presumed to accept the

22

representation unless the person declines the representation in

23

a writing delivered to the trustee no later than 30 days after

24

receipt of the notice.

25

§ 7745.  Creditor's claim against settlor - UTC 505(a).

26

Whether or not a trust instrument contains a spendthrift

27

provision and notwithstanding section 7744 (relating to

28

discretionary trusts; effect of standard - UTC 504):

29

(1)  During the lifetime of the settlor, the property of

30

a revocable trust is subject to claims of the settlor's

- 10 -

 


1

creditors.

2

(2)  A judgment creditor or assignee of the settlor of an

3

irrevocable trust may reach the maximum amount that can be

4

distributed to or for the settlor's benefit. If a trust has

5

more than one settlor, the creditor or assignee of a

6

particular settlor may reach the portion of the trust

7

attributable to that settlor's contribution. However, the

8

assets of an irrevocable trust are not subject to the claims

9

of a creditor of the settlor solely because of the existence

10

of the trustee's discretionary power to pay directly to the

11

taxing authorities or to reimburse the settlor for any income

12

tax payable by the settlor attributable to trust income or

13

principal.

14

(3)  After the death of the settlor and subject to the

15

settlor's right to direct the source from which liabilities

16

will be paid, the property of a revocable trust is subject to

17

claims of the settlor's creditors, costs of administration of

18

the settlor's estate, the expenses of the settlor's funeral

19

and disposal of remains and the family exemption to the

20

extent the settlor's probate estate is inadequate to satisfy

21

those claims, costs, expenses and exemption and no other

22

statute specifically exempts the property from those claims.

23

Section 2.  Section 7754 of Title 20 is amended by adding a

24

subsection to read:

25

§ 7754.  Actions contesting validity of revocable trust.

26

* * *

27

(d)  Competency of witnesses.--The competency of a witness in

28

an action contesting the validity of a revocable trust shall be

29

governed by the same rules that apply in actions contesting the

30

validity of a will.

- 11 -

 


1

Section 3.  Sections 7755(c), 7766(b), 7780.3(a), (f), (g),

<--

2

(i), (k) and (l), 7780.6(a), 7785(a), 8105(d) and (e) and

3

8149(c) of Title 20 are amended to read:

4

§ 7755.  Claims and distribution after settlor's death.

5

* * *

6

(c)  [No personal representative.--If no personal

7

representative is appointed within 90 days after the settlor's

8

death, the trustee shall advertise the trust's existence and the

9

name and address of the trustee in the manner set forth in

10

section 3162 (relating to advertisement of grant of letters).] 

11

Trustee's duty to advertise.--

12

(1)  A trustee of a revocable trust:

13

(i)  May advertise at any time after the settlor's

14

death.

15

(ii)  Shall advertise if the first advertisement of

16

the grant of letters by the settlor's personal

17

representative does not occur within 90 days after the

18

settlor's death.

19

(2)  Advertisements by the trustee under this subsection

20

shall be in the manner set forth in section 3162 (relating to

21

advertisement of grant of letters) and shall include:

22

(i)  The fact of the trust's existence.

23

(ii)  The trustee's name and address.

24

(3)  The personal representative of the settlor of a

25

revocable trust shall send to the trustee copies of the proof

26

of publication of the advertisement of the grant of letters.

27

* * *

28

§ 7766.  Removal of trustee - UTC 706.

<--

29

* * *

30

(b)  When court may remove trustee.--The court may remove a

- 12 -

 


1

trustee if it finds that removal of the trustee best serves the

2

interests of the beneficiaries of the trust and is not

3

inconsistent with a material purpose of the trust, a suitable

4

cotrustee or successor trustee is available and:

5

(1)  the trustee has committed a serious breach of trust;

6

(2)  lack of cooperation among cotrustees substantially

7

impairs the administration of the trust;

8

(3)  the trustee has not effectively administered the

9

trust because of the trustee's unfitness, unwillingness or

10

persistent failures; or

11

(4)  there has been a substantial change of

12

circumstances. However, a corporate reorganization of an

13

institutional trustee, including a plan of merger or

14

consolidation, is not itself a substantial change of

15

circumstances.

16

* * *

17

§ 7780.3.  Duty to inform and report.

18

(a)  Duty to respond to requests.--A trustee shall promptly

19

respond to a [beneficiary's] reasonable request by the settlor

20

of a trust or by a beneficiary of an irrevocable trust for

21

information related to the trust's administration. A trustee

22

shall promptly respond to the Department of Public Welfare's

23

reasonable request for information related to the trust's

24

administration when a settlor, trustee or beneficiary is a

25

resident in a State-owned facility or an applicant for or

26

recipient of cash or medical assistance from the Commonwealth.

27

* * *

28

(f)  Notice to current beneficiaries.--No later than 30 days

29

after the date on which the trustee of an irrevocable trust

30

learns that a person who did not previously receive the notice

- 13 -

 


1

described in subsection (i) is a current beneficiary of the

2

trust, the trustee shall send the notice described in subsection

3

(i) to the current beneficiary if, at that time, the trustee

4

knows that the settlor is then deceased or has been adjudicated

5

incapacitated. With respect to a testamentary trust, the time

6

specified in this subsection commences to run when the trust is

7

first funded, whether or not the trust is completely funded on

8

that date.

9

(g)  Change in trusteeship.--[Apart from the other

10

requirements of this section, the trustee shall send the notice

11

described in subsection (i) to the current beneficiaries each

12

time there is a change in trusteeship.]

13

(1)  Each time there is a change in trusteeship of any

14

trust, the trustee shall notify the settlor in writing of the

15

change.

16

(2)  Each time there is a change in trusteeship of any

17

trust whose settlor is deceased or of an irrevocable trust

18

whose settlor has been adjudicated incapacitated, the trustee

19

shall notify the current beneficiaries in writing of the

20

change.

21

(3)  Notice under this subsection shall include the

22

trustee's name, address and telephone number.

23

* * *

24

(i)  Contents of notice.--[Any] Except as provided in

25

subsection (g), any notice under this section shall be written

26

and convey the following information:

27

(1)  The fact of the trust's existence.

28

(2)  The identity of the settlor.

29

(3)  The trustee's name, address and telephone number.

30

(4)  The recipient's right to receive upon request a copy

- 14 -

 


1

of the trust instrument.

2

(5)  [The recipient's] Each current beneficiary's right

3

to receive, [at least annually, [a] upon request, an annual 

<--

4

written report of the trust's assets and their market values

5

if feasible, the trust's liabilities and the trust's receipts

6

and disbursements since the date of the last such report] 

<--

7

upon request, periodic written financial reports concerning

8

the trust.

9

* * *

10

(k)  Notice to settlor's appointee.--The settlor of a trust

11

may in the trust instrument appoint one or more persons or a

12

succession of persons to receive, on behalf of one or more named

13

current beneficiaries of the trust, the notices required by this

14

section. The trustee giving the notice required by this section

15

to that appointee satisfies the trustee's duty to give to the

16

named current beneficiary the notice required by this section

17

if:

18

(1)  the trustee notifies the appointee that the notice

19

is being given to the appointee as representing the named

20

current beneficiary; and

21

(2)  the appointee does not decline to receive the notice

22

in a writing [that is given] delivered to the trustee no

23

later than [60] 30 days after receipt of the trustee's

24

notice.

25

(l)  Applicability.--

26

(1)  If the death or adjudication of incapacity described

27

in subsection (b), (c), (d) or (e) occurs on or after

28

November 6, 2006, the time limit for notice set forth in that

29

subsection shall apply.

30

(2)  If the death or adjudication of incapacity described

- 15 -

 


1

in subsection (b), [(c),] (d) or (e) has occurred before

2

November 6, 2006, the time limit for notice set forth in that

3

subsection shall be November 6, 2008.

4

(3)  The notice under subsection (f) shall not be

5

required to be completed until two years after November 6,

6

2006.

7

§ 7780.6.  Illustrative powers of trustee.

8

(a)  Listing.--The powers which a trustee may exercise

9

pursuant to section 7780.5 (relating to powers of trustees - UTC

10

815) include the following powers:

11

(1)  To accept, hold, invest in and retain investments as

12

provided in Chapter 72 (relating to prudent investor rule).

13

(2)  To pay or contest a claim; settle a claim by or

14

against the trust by compromise, arbitration or otherwise;

15

and release, in whole or in part, any claim belonging to the

16

trust.

17

(3)  To resolve a dispute regarding the interpretation of

18

the trust or the administration of the trust by mediation,

19

arbitration or other alternative dispute resolution

20

procedures.

21

(4)  To prosecute or defend actions, claims or

22

proceedings for the protection of trust assets and of the

23

trustee in the performance of the trustee's duties.

24

(5)  To abandon or decline to administer any property

25

which is of little or no value, transfer title to abandoned

26

property and decline to accept title to and administer

27

property which has or may have environmental or other

28

liability attached to it.

29

(6)  To insure the assets of the trust against damage or

30

loss and, at the expense of the trust, protect the trustee,

- 16 -

 


1

the trustee's agents and the beneficiaries from liability to

2

third persons arising from the administration of the trust.

3

(7)  To advance money for the protection of the trust and

4

for all expenses, losses and liability sustained in the

5

administration of the trust or because of the holding or

6

ownership of any trust assets. The trustee has a lien on the

7

trust assets as against the beneficiary for an advance under

8

this paragraph, including interest on the advance.

9

(8)  To pay taxes, assessments, compensation of the

10

trustee and employees and agents of the trustee and other

11

expenses incurred in the administration of the trust.

12

(9)  To receive additions to the assets of the trust.

13

(10)  To sell or exchange any real or personal property

14

at public or private sale, without obligation to repudiate an

15

otherwise binding agreement in favor of better offers. If the

16

trustee has been required to give bond, no proceeds of the

17

sale of real estate, including proceeds arising by the reason

18

of involuntary conversion, shall be paid to the trustee

19

until:

20

(i)  the court has made an order excusing the trustee

21

from entering additional security; or

22

(ii)  the court has made an order requiring

23

additional security and the trustee has entered the

24

additional security.

25

(11)  To enter for any purpose into a lease as lessor or

26

lessee with or without option to purchase or renew for a term

27

within or extending beyond the term of the trust.

28

(12)  To grant options for sales or leases of a trust

29

asset and acquire options for the acquisition of assets,

30

including options exercisable after the trust terminates.

- 17 -

 


1

(13)  To join in any reorganization, consolidation,

2

merger, dissolution, liquidation, voting trust plan or other

3

concerted action of securityholders and to delegate

4

discretionary duties with respect thereto.

5

(14)  To vote a security, in person or by general or

6

limited proxy, with or without power of substitution.

7

(15)  To borrow funds and mortgage or pledge trust assets

8

as security for repayment of the funds borrowed, including

9

repayments after the trust terminates.

10

(16)  To make loans to and buy property from the personal

11

representatives of the settlor and the settlor's spouse.

12

Loans under this paragraph shall be adequately secured, and

13

the purchases under this paragraph shall be for fair market

14

value.

15

(17)  To partition, subdivide, repair, improve or develop

16

real estate; enter into agreements concerning the partition,

17

subdivision, repair, improvement, development, zoning or

18

management of real estate; impose or extinguish restrictions

19

on real estate; dedicate land and easements to public use;

20

adjust boundaries; and do anything else regarding real estate

21

which is commercially reasonable or customary under the

22

circumstances.

23

(18)  With respect to possible liability for violation of

24

environmental law:

25

(i)  to inspect or investigate property the trustee

26

holds or has been asked to hold or property owned or

27

operated by an organization in which the trustee holds or

28

has been asked to hold an interest, for the purpose of

29

determining the application of environmental law with

30

respect to the property;

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1

(ii)  to take action to prevent, abate or otherwise

2

remedy any actual or potential violation of environmental

3

law affecting property held directly or indirectly by the

4

trustee, whether taken before or after the assertion of a

5

claim or the initiation of governmental enforcement;

6

(iii)  to decline to accept property into trust or

7

disclaim a power with respect to property that is or may

8

be burdened with liability for violation of environmental

9

law;

10

(iv)  to compromise claims against the trust which

11

may be asserted for an alleged violation of environmental

12

law; and

13

(v)  to pay the expense of inspection, review,

14

abatement or remedial action to comply with environmental

15

law.

16

(19)  To operate, repair, maintain, equip and improve any

17

farm or farm operation; to purchase and sell livestock,

18

crops, feed and other property that is normally perishable;

19

and to purchase, use and dispose of farm equipment and employ

20

one or more farm managers and others in connection with farm

21

equipment and pay them reasonable compensation.

22

(20)  To make ordinary or extraordinary repairs or

23

alterations in buildings or other structures; demolish

24

improvements; and raze existing or erect new party walls or

25

buildings.

26

(21)  To enter into a lease or arrangements for

27

exploration and removal of minerals or other natural

28

resources or enter into a pooling or utilization agreement.

29

(22)  To exercise all rights and incidents of ownership

30

of life insurance policies held by the trust, including

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1

borrowing on policies, entering into and terminating split-

2

dollar plans, exercising conversion privileges and rights to

3

acquire additional insurance and selecting settlement

4

options.

5

(23)  To employ a custodian; hold property unregistered

6

or in the name of a nominee, including the nominee of any

7

institution employed as custodian, without disclosing the

8

fiduciary relationship and without retaining possession and

9

control of securities or other property so held or

10

registered; and pay reasonable compensation to the custodian.

11

(24)  To apply funds distributable to a beneficiary who

12

is, in the trustee's opinion, disabled by illness or other

13

cause and unable properly to manage the funds directly for

14

the beneficiary's benefit or to pay such funds for

15

expenditure on the beneficiary's behalf to:

16

(i)  the beneficiary;

17

(ii)  a guardian of the beneficiary's estate;

18

(iii)  an agent acting under a general power of

19

attorney for the beneficiary; or

20

(iv)  if there is no agent or guardian, a relative or

21

other person having legal or physical custody or care of

22

the beneficiary.

23

(25)  To pay funds distributable to a minor beneficiary

24

to the minor or to a guardian of the minor's estate or to

25

apply the funds directly for the minor's benefit.

26

(26)  To do any of the following:

27

(i)  Pay any funds distributable to a beneficiary who

28

is not 21 years of age or older to:

29

(A)  the beneficiary;

30

(B)  an existing custodian for the beneficiary

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1

under Chapter 53 (relating to Pennsylvania Uniform

2

Transfers to Minors Act) or under any other state's

3

version of the Uniform Transfers to Minors Act;

4

(C)  an existing custodian for the beneficiary

5

under the former Pennsylvania Uniform Gifts to Minors

6

Act or under any other state's version of the Uniform

7

Gifts to Minors Act; or

8

(D)  a custodian for the beneficiary appointed by

9

the trustee under Chapter 53.

10

(ii)  Apply the funds for the beneficiary.

11

(27)  To pay calls, assessments and other sums chargeable

12

or accruing against or on account of securities.

13

(28)  To sell or exercise stock subscription or

14

conversion rights.

15

(29)  To continue or participate in the operation of any

16

business or other enterprise and to effect incorporation,

17

merger, consolidation, dissolution or other change in the

18

form of the organization of the business or enterprise.

19

(30)  To select a mode of payment under a qualified

20

employee benefit plan or a retirement plan payable to the

21

trustee and exercise rights under the plan.

22

(31)  To distribute in cash or in kind or partly in each

23

and allocate particular assets in proportionate or

24

disproportionate shares.

25

(32)  To appoint a trustee to act in another jurisdiction

26

with respect to trust property located in the other

27

jurisdiction, confer upon the appointed trustee all the

28

powers and duties of the appointing trustee, require that the

29

appointed trustee furnish security and remove the appointed

30

trustee.

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1

(33)  To exercise elections with respect to Federal,

2

State and local taxes.

3

[(33)] (34)  To execute and deliver instruments which

4

will accomplish or facilitate the exercise of the trustee's

5

powers.

6

* * *

7

§ 7785.  Limitation of action against trustee.

8

(a)  Imposed by trustee's written reports.--

9

(1)  A beneficiary [may not challenge a transaction or

<--

10

assert] is barred from challenging a transaction or asserting 

<--

11

a claim against a trustee for breach of trust [on the basis

<--

12

of a transaction] if:

<--

13

(i)  the trustee provided the beneficiary [with a

<--

14

single written report of the trust's assets and their

<--

15

market values if feasible, the trust's liabilities and

16

the trust's receipts and disbursements for the full

<--

17

calendar year or entire part of the calendar year during

<--

18

which the trust was in existence in which the transaction

19

occurred and for each of the four subsequent calendar

20

years] at least annually with periodic written financial

<--

21

reports concerning the trust;

22

(ii)  the transaction was disclosed in [the first of

<--

23

the five reports] a report to which subparagraph (i)

<--

24

refers or such report provided sufficient information so

<--

25

that the beneficiary knew or should have known of the

26

potential claim or should have inquired into its

27

existence;

28

(iii)  [the beneficiary did not notify the trustee in

<--

29

writing within six months after receiving the fifth

30

[annual] report that the beneficiary objects to the

<--

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1

transaction and provide the basis in writing for that

2

objection] in the 30 months after a report to which

<--

3

subparagraph (ii) refers was sent by the trustee to the

4

beneficiary, the beneficiary did not notify the trustee

5

in writing that the beneficiary challenges the

6

transaction or asserts a claim and provides in writing

7

the basis for the challenge or assertion; and

8

(iv)  all five reports were accompanied by a

<--

9

conspicuous written statement describing the effect of

10

this paragraph.

11

(2)  A claim not barred by paragraph (1) may nevertheless

12

be barred by subsection (b).

13

* * *

14

§ 8105.  Power to convert to unitrust.

15

* * *

16

(d)  Post conversion.--After a trust is converted to a

17

unitrust, all of the following apply:

18

(1)  The trustee shall follow an investment policy

19

seeking a total return for the investments held by the trust,

20

whether the return is to be derived:

21

(i)  from appreciation of capital;

22

(ii)  from earnings and distributions from capital;

23

or

24

(iii)  from both.

25

(2)  The trustee shall make regular distributions in

26

accordance with the governing instrument construed in

27

accordance with the provisions of this section.

28

(3)  The term "income" in the governing instrument shall

29

mean an annual distribution (the unitrust distribution) equal

30

to 4% (the payout percentage) of the net fair market value of

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1

the trust's assets, whether such assets would be considered

2

income or principal under other provisions of this chapter,

3

averaged over the lesser of:

4

(i)  the [three] preceding years in the smoothing

5

period selected by the trustee; or

6

(ii)  the period during which the trust has been in

7

existence.

8

(e)  Discretion of trustee.--The trustee may, in the

9

trustee's discretion from time to time, determine all of the

10

following:

11

(1)  The effective date of a conversion to a unitrust.

12

(2)  The provisions for prorating a unitrust distribution

13

for a short year in which a beneficiary's right to payments

14

commences or ceases.

15

(3)  The frequency of unitrust distributions during the

16

year.

17

(4)  The effect of other payments from or contributions

18

to the trust on the trust's valuation.

19

(5)  Whether to value the trust's assets annually or more

20

frequently.

21

(5.1)  Whether to average the net assets of the trust

22

over a smoothing period of three, four or five years.

23

(6)  What valuation dates to use.

24

(7)  How frequently to value nonliquid assets and whether

25

to estimate their value.

26

(8)  Whether to omit from the calculations trust property

27

occupied or possessed by a beneficiary.

28

(9)  Any other matters necessary for the proper

29

functioning of the unitrust.

30

* * *

- 24 -

 


1

§ 8149.  Retirement benefits, individual retirement accounts,

2

deferred compensation, annuities and similar

3

payments.

4

* * *

5

(c)  Allocation when internal net income of fund is readily

6

ascertained.--

7

(1)  If no portion of a payment from a separate fund held

8

exclusively for the benefit of the trust is allocable to

9

income under subsections (a) and (b) but the internal net

10

income of the fund determined as if the fund were a separate

11

trust subject to Subchapters [B (relating to decedent's

12

estate or terminating income interest)] A (relating to

13

preliminary provisions; power to adjust; power to convert to

14

unitrust) through E (relating to allocation of disbursements

15

during administration of trust) is readily ascertainable by

16

the trustee, the internal net income of the fund shall be

17

considered to be the income earned by the fund, and the

18

portion of the payment equal to the then undistributed net

19

income of the fund realized since the trust acquired its

20

interest in the fund shall be deemed to be a distribution of

21

such income and shall be allocated to the trust income

22

account.

23

(2)  The balance of any such payment shall be allocated

24

to principal.

25

(3)  The power to adjust under section 8104 (relating to

26

trustee's power to adjust), the power to convert to a

27

unitrust under section 8105 (relating to power to convert to

28

unitrust) and the provisions governing express trusts under

29

section 8107 (relating to express trusts) shall apply to

30

retirement benefits covered by this subsection which are

- 25 -

 


1

payable to a trust. These powers may be exercised separately

2

and independently by the payee trustee or in the governing

3

instrument as between the retirement benefits and the trust

4

as if they were separate trusts subject to this chapter.

5

* * *

6

Section 4.  Sections 5547(b) and 5548(b) of Title 15 are

7

amended to read:

8

§ 5547.  Authority to take and hold trust property.

9

* * *

10

(b)  Nondiversion of certain property.--Property committed to

11

charitable purposes shall not, by any proceeding under Chapter

12

59 (relating to fundamental changes) or otherwise, be diverted

13

from the objects to which it was donated, granted or devised,

14

unless and until the board of directors or other body obtains

15

from the court an order under 20 Pa.C.S. [Ch. 61 (relating to

16

estates)] Ch. 77 Subch. D (relating to creation, validity,

17

modification and termination of trust) specifying the

18

disposition of the property.

19

§ 5548.  Investment of trust funds.

20

* * *

21

(b)  Use and management.--Except as otherwise permitted under

22

20 Pa.C.S. [Ch. 61 (relating to estates)] Ch. 77 Subch. D

23

(relating to creation, validity, modification and termination of

24

trust), the board of directors or other body shall apply all

25

assets thus received to the purposes specified in the trust

26

instrument. The directors or other body shall keep accurate

27

accounts of all trust funds, separate and apart from the

28

accounts of other assets of the corporation.

29

* * *

30

Section 5.  The amendment of 20 Pa.C.S. § 6107.1 shall apply

- 26 -

 


1

to any interest created after December 31, 2006.

2

Section 6.  (a)  The following provisions shall be

3

retroactive to November 6, 2006:

4

(1)  The amendment of 20 Pa.C.S. § 7745.

5

(2)  The amendment of 20 Pa.C.S. § 7780.3(l)(2).

6

(3)  The amendment of 20 Pa.C.S. § 7780.6(a).

7

(b)  The amendment of 20 Pa.C.S. § 6107.1 shall be

8

retroactive to January 1, 2007.

9

Section 7.  This act shall take effect as follows:

10

(1)  The following provisions shall take effect

11

immediately:

12

(i)  This section.

13

(ii)  Sections 5 and 6 of this act.

14

(iii)  The amendment of 20 Pa.C.S. §§ 6107.1, 7745,

15

7780.3(l)(2) and 7780.6(a).

16

(2)  The remainder of this act shall take effect in 60

17

days.

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