PRINTER'S NO. 1633
No. 1203 Session of 2007
INTRODUCED BY GREENLEAF, COSTA, TARTAGLIONE, FONTANA, KITCHEN,
O'PAKE AND WOZNIAK, DECEMBER 7, 2007
REFERRED TO JUDICIARY, DECEMBER 7, 2007
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 enforcement of contribution or
5 exoneration of Federal estate tax, for implementation of
6 power of attorney, for applicability of rule against
7 perpetuities, for modification of conveyance by divorce, for
8 effect of divorce on designation of beneficiaries, for notice
9 of representation, for creditor's claim against settlor, for
10 actions contesting validity of revocable trusts, for claims
11 and distribution after settlor's death, for trustee's duty to
12 inform and report, for illustrative powers of trustee, for
13 limitation of action against trustee, for power to convert to
14 unitrust and for retirement benefits, individual retirement
15 accounts, deferred compensation, annuities and similar
16 payments; and making conforming amendments to Title 15.
17 The General Assembly of the Commonwealth of Pennsylvania
18 hereby enacts as follows:
19 Section 1. Sections 2106(a), 2507(2), 3162, 3706, 5603(p)
20 and (q), 6107.1, 6111.1, 6111.2, 7725 and 7745 of Title 20 of
21 the Pennsylvania Consolidated Statutes are amended to read:
22 § 2106. Forfeiture.
23 (a) Spouse's share.--
24 (1) A spouse who, for one year or upwards previous to
1 the death of the other spouse, has willfully neglected or
2 refused to perform the duty to support the other spouse, or
3 who for one year or upwards has willfully and maliciously
4 deserted the other spouse, shall have no right or interest
5 under this chapter in the real or personal estate of the
6 other spouse.
7 (2) A spouse shall have no right or interest under this
8 chapter in the real or personal estate of the other spouse
9 if:
10 (i) the other spouse dies domiciled in this
11 Commonwealth during the course of divorce proceedings;
12 (ii) no decree of divorce has been entered pursuant
13 to 23 Pa.C.S. § 3323 (relating to decree of court); and
14 (iii) grounds have been established as provided in
15 23 Pa.C.S. § 3323(g).
16 * * *
17 § 2507. Modification by circumstances.
18 Wills shall be modified upon the occurrence of any of the
19 following circumstances, among others:
20 * * *
21 (2) Divorce or pending divorce.--[If the testator is
22 divorced from the bonds of matrimony after making a will,
23 any] Any provision in [the] a testator's will in favor of or
24 relating to [his] the testator's spouse [so divorced] shall
25 [thereby] become ineffective for all purposes unless it
26 appears from the will that the provision was intended to
27 survive [the divorce.] a divorce, if the testator:
28 (i) is divorced from such spouse after making the
29 will; or
30 (ii) dies domiciled in this Commonwealth during the
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1 course of divorce proceedings, no decree of divorce has
2 been entered pursuant to 23 Pa.C.S. § 3323 (relating to
3 decree of court) and grounds have been established as
4 provided in 23 Pa.C.S. § 3323(g).
5 * * *
6 § 3162. Advertisement of grant of letters.
7 (a) Notice generally.--The personal representative,
8 immediately after the grant of letters, shall cause notice
9 thereof to be given in one newspaper of general circulation
10 published at or near the place where the decedent resided or, in
11 the case of a nonresident decedent, at or near the place where
12 the letters were granted, and in the legal periodical, if any,
13 designated by rule of court for the publication of legal
14 notices, once a week for three successive weeks, together with
15 his name and address; and in every such notice, he shall request
16 all persons having claims against the estate of the decedent to
17 make known the same to him or his attorney, and all persons
18 indebted to the decedent to make payment to him without delay.
19 (b) Proofs of advertisement to trustee.--A personal
20 representative who has advertised the grant of letters and
21 received the notice required by section 7780.3(c) (relating to
22 duty to inform and report) shall promptly send copies of the
23 proofs of that advertisement to the trustee.
24 § 3706. Enforcement of contribution or exoneration of Federal
25 estate tax.
26 (a) Duty to pay.--Parties liable for apportionment of the
27 Federal estate tax, whether residents or nonresidents of this
28 Commonwealth, shall pay the amounts apportioned against them
29 [respectively.] at the time the Federal estate tax is due,
30 without regard to any extension of time for paying such tax.
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1 (b) [Duty] Power of fiduciary.--The fiduciary charged with
2 the duty to pay the Federal estate tax may recover from parties
3 liable to apportionment the amounts of Federal estate tax
4 [apportionable] apportioned to them [respectively]. If the
5 fiduciary pays the tax apportioned against another party, the
6 fiduciary may recover from the other party the tax payment so
7 advanced, together with interest of 5% per annum from the date
8 of payment.
9 (c) Suspending distribution.--Distribution or delivery of
10 property to any party, other than a fiduciary charged with a
11 duty to pay the Federal estate tax, shall not be required of any
12 fiduciary until [the Federal estate tax apportionable with
13 respect thereto is paid or, if the Federal estate tax has not
14 been determined and apportionment made, until adequate security
15 for payment is furnished to the fiduciary making the
16 distribution or delivery.] that party pays the Federal estate
17 tax apportioned to that party.
18 (d) Court decrees.--[The] Notwithstanding subsections (a)
19 and (b), the court, upon petition or at an accounting or in any
20 appropriate action or proceeding, shall make such decrees or
21 orders as it shall deem advisable apportioning the Federal
22 estate tax. The court may direct a fiduciary to collect the
23 apportioned amounts from the property or interests in his
24 possession of any parties against whom apportionment has been
25 made and may direct all other parties against whom the Federal
26 estate tax has been or may be apportioned or from whom any part
27 of the Federal estate tax may be recovered to make payment of
28 the apportioned amounts to the fiduciary. When a fiduciary holds
29 property of a party liable to apportionment insufficient to
30 satisfy the apportioned Federal estate tax, the court may direct
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1 that the balance of the apportioned amount of Federal estate tax
2 shall be paid to the fiduciary by the party liable. Should an
3 overpayment of the Federal estate tax be made by any party or on
4 his behalf, the court may direct an appropriate reimbursement
5 for the overpayment. If the court apportions any part of the
6 Federal estate tax against any party interested in
7 nontestamentary property or among the respective interests
8 created by any nontestamentary instrument, the court, in its
9 discretion, may assess against those properties or interests an
10 equitable share of the expenses incurred in connection with the
11 determination and apportionment of the Federal estate tax. If
12 the fiduciary cannot recover the Federal estate tax apportioned
13 against a party benefited, the unrecovered amount shall be
14 charged in such manner as the court may determine.
15 § 5603. Implementation of power of attorney.
16 * * *
17 (p) Power to engage in insurance transactions.--A power to
18 "engage in insurance transactions" shall mean that the agent
19 may:
20 (1) Purchase, continue, renew, convert or terminate any
21 type of insurance (including, but not limited to, life,
22 accident, health, disability or liability insurance) and pay
23 premiums and collect benefits and proceeds under insurance
24 policies.
25 (2) Exercise nonforfeiture provisions under insurance
26 policies.
27 (3) In general, exercise all powers with respect to
28 insurance that the principal could if present; however, the
29 agent cannot designate himself beneficiary of a life
30 insurance policy unless the agent is the spouse, child,
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1 grandchild, parent, brother or sister of the principal. An
2 agent and a beneficiary of a life insurance policy shall be
3 liable as equity and justice may require to the extent that,
4 as determined by the court, a beneficiary designation made by
5 the agent is inconsistent with the known or probable intent
6 of the principal.
7 (q) Power to engage in retirement plan transactions.--A
8 power to "engage in retirement plan transactions" shall mean
9 that the agent may contribute to, withdraw from and deposit
10 funds in any type of retirement plan (including, but not limited
11 to, any tax qualified or nonqualified pension, profit sharing,
12 stock bonus, employee savings and retirement plan, deferred
13 compensation plan or individual retirement account), select and
14 change payment options for the principal, make roll-over
15 contributions from any retirement plan to other retirement plans
16 and, in general, exercise all powers with respect to retirement
17 plans that the principal could if present. However, the agent
18 cannot designate himself beneficiary of a retirement plan unless
19 the agent is the spouse, child, grandchild, parent, brother or
20 sister of the principal. An agent and a beneficiary of a
21 retirement plan shall be liable as equity and justice may
22 require to the extent that, as determined by the court, a
23 beneficiary designation made by the agent is inconsistent with
24 the known or probable intent of the principal.
25 * * *
26 § 6107.1. Applicability of rule against perpetuities.
27 (a) Traditional rule.--Sections 6104 (relating to rule
28 against perpetuities), 6105 (relating to rule against
29 perpetuities; disposition when invalidity occurs), 6106
30 (relating to income accumulations; when valid) and 6107
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1 (relating to income accumulations; disposition when invalidity
2 occurs):
3 (1) shall apply to every interest created before January
4 1, 2007; but
5 (2) shall not apply to any interest created after
6 December 31, 2006.
7 (b) Modern rule.--All of the following apply to every
8 interest created after December 31, 2006:
9 (1) [No] Except as provided in paragraph (3), no
10 interest shall be void as a perpetuity.
11 (2) No direction or authorization to [accumulated]
12 accumulate income shall be void as a perpetuity.
13 (3) If a power of appointment is exercised to create a
14 new power of appointment, any interest created by the
15 exercise of the new power of appointment is invalid if it
16 does not vest within 360 years of the creation of the
17 original power of appointment, unless the exercise of the new
18 power of appointment expressly states that this provision
19 shall not apply to the interests created by the exercise.
20 (4) Void interests shall be disposed of in the manner
21 provided in section 6105.
22 § 6111.1. Modification by divorce or pending divorce.
23 [If the conveyor is divorced from the bonds of matrimony
24 after making a conveyance, any] Any provision in [the] a
25 conveyance which was revocable by [him] a conveyor at the time
26 of [his] the conveyor's death and which was to take effect at or
27 after [his] the conveyor's death in favor of or relating to [his
28 spouse so divorced shall thereby] the conveyor's spouse shall
29 become ineffective for all purposes unless it appears in the
30 governing instrument that the provision was intended to survive
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1 [the divorce.] a divorce, if the conveyor:
2 (1) is divorced from such spouse after making the
3 conveyance; or
4 (2) dies domiciled in this Commonwealth during the
5 course of divorce proceedings, no decree of divorce has been
6 entered pursuant to 23 Pa.C.S. § 3323 (relating to decree of
7 court) and grounds have been established as provided in 23
8 Pa.C.S. § 3323(g).
9 § 6111.2. Effect of divorce or pending divorce on designation
10 of beneficiaries.
11 [If a person domiciled in this Commonwealth at the time of
12 his death is divorced from the bonds of matrimony after
13 designating his spouse as beneficiary of a life insurance
14 policy, annuity contract, pension or profit-sharing plan or
15 other contractual arrangement providing for payments to his
16 spouse, any designation in favor of his former spouse which was
17 revocable by him after the divorce shall become ineffective for
18 all purposes and shall be construed as if such former spouse had
19 predeceased him unless it appears from the wording of the
20 designation, a court order or a written contract between the
21 person and such former spouse that the designation was intended
22 to survive the divorce.]
23 (a) Applicability.--This section is applicable if an
24 individual:
25 (1) is domiciled in this Commonwealth;
26 (2) designates the individual's spouse as beneficiary of
27 the individual's life insurance policy, annuity contract,
28 pension or profit-sharing plan or other contractual
29 arrangement providing for payments to the spouse; and
30 (3) either:
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1 (i) at the time of the individual's death is
2 divorced from the spouse; or
3 (ii) dies during the course of divorce proceedings,
4 no decree of divorce has been entered pursuant to 23
5 Pa.C.S. § 3323 (relating to decree of court) and grounds
6 have been established as provided in 23 Pa.C.S. §
7 3323(g).
8 (b) General rule.--Any designation described in subsection
9 (a)(2) in favor of the individual's spouse or former spouse that
10 was revocable by the individual at the individual's death shall
11 become ineffective for all purposes and shall be construed as if
12 the spouse or former spouse had predeceased the individual,
13 unless it appears the designation was intended to survive the
14 divorce based on:
15 (1) the wording of the designation;
16 (2) a court order; or
17 (3) a written contract between the individual and the
18 spouse or former spouse.
19 (c) Liability.--
20 (1) Unless restrained by court order, no insurance
21 company, pension or profit-sharing plan trustee or other
22 obligor shall be liable for making payments to a spouse or
23 former spouse which would have been proper in the absence of
24 this section.
25 (2) Any spouse or former spouse to whom payment is made
26 shall be answerable to anyone prejudiced by the payment.
27 § 7725. Notice of representation.
28 A person representing another must be given written notice by
29 the trustee that the person is representing the other person.
30 [The person to whom the notice is given may decline the
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1 representation by a writing that is given to the trustee no
2 later than 60 days after receipt of the trustee's notice.] A
3 person to whom the notice is given is presumed to accept the
4 representation unless the person declines the representation in
5 a writing delivered to the trustee no later than 30 days after
6 receipt of the notice.
7 § 7745. Creditor's claim against settlor - UTC 505(a).
8 Whether or not a trust instrument contains a spendthrift
9 provision and notwithstanding section 7744 (relating to
10 discretionary trusts; effect of standard - UTC 504):
11 (1) During the lifetime of the settlor, the property of
12 a revocable trust is subject to claims of the settlor's
13 creditors.
14 (2) A judgment creditor or assignee of the settlor of an
15 irrevocable trust may reach the maximum amount that can be
16 distributed to or for the settlor's benefit. If a trust has
17 more than one settlor, the creditor or assignee of a
18 particular settlor may reach the portion of the trust
19 attributable to that settlor's contribution. However, the
20 assets of an irrevocable trust are not subject to the claims
21 of a creditor of the settlor solely because of the existence
22 of the trustee's discretionary power to pay directly to the
23 taxing authorities or to reimburse the settlor for any income
24 tax payable by the settlor attributable to trust income or
25 principal.
26 (3) After the death of the settlor and subject to the
27 settlor's right to direct the source from which liabilities
28 will be paid, the property of a revocable trust is subject to
29 claims of the settlor's creditors, costs of administration of
30 the settlor's estate, the expenses of the settlor's funeral
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1 and disposal of remains and the family exemption to the
2 extent the settlor's probate estate is inadequate to satisfy
3 those claims, costs, expenses and exemption and no other
4 statute specifically exempts the property from those claims.
5 Section 2. Section 7754 of Title 20 is amended by adding a
6 subsection to read:
7 § 7754. Actions contesting validity of revocable trust.
8 * * *
9 (d) Competency of witnesses.--The competency of a witness in
10 an action contesting the validity of a revocable trust shall be
11 governed by the same rules that apply in actions contesting the
12 validity of a will.
13 Section 3. Sections 7755(c), 7780.3(a), (f), (g), (i), (k)
14 and (l), 7780.6(a), 7785(a), 8105(d) and (e) and 8149(c) of
15 Title 20 are amended to read:
16 § 7755. Claims and distribution after settlor's death.
17 * * *
18 (c) [No personal representative.--If no personal
19 representative is appointed within 90 days after the settlor's
20 death, the trustee shall advertise the trust's existence and the
21 name and address of the trustee in the manner set forth in
22 section 3162 (relating to advertisement of grant of letters).]
23 Trustee's duty to advertise.--
24 (1) A trustee of a revocable trust:
25 (i) May advertise at any time after the settlor's
26 death.
27 (ii) Shall advertise if the first advertisement of
28 the grant of letters by the settlor's personal
29 representative does not occur within 90 days after the
30 settlor's death.
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1 (2) Advertisements by the trustee under this subsection
2 shall be in the manner set forth in section 3162 (relating to
3 advertisement of grant of letters) and shall include:
4 (i) The fact of the trust's existence.
5 (ii) The trustee's name and address.
6 (3) The personal representative of the settlor of a
7 revocable trust shall send to the trustee copies of the proof
8 of publication of the advertisement of the grant of letters.
9 * * *
10 § 7780.3. Duty to inform and report.
11 (a) Duty to respond to requests.--A trustee shall promptly
12 respond to a [beneficiary's] reasonable request by the settlor
13 of a trust or by a beneficiary of an irrevocable trust for
14 information related to the trust's administration.
15 * * *
16 (f) Notice to current beneficiaries.--No later than 30 days
17 after the date on which the trustee of an irrevocable trust
18 learns that a person who did not previously receive the notice
19 described in subsection (i) is a current beneficiary of the
20 trust, the trustee shall send the notice described in subsection
21 (i) to the current beneficiary if, at that time, the trustee
22 knows that the settlor is then deceased or has been adjudicated
23 incapacitated. With respect to a testamentary trust, the time
24 specified in this subsection commences to run when the trust is
25 first funded, whether or not the trust is completely funded on
26 that date.
27 (g) Change in trusteeship.--[Apart from the other
28 requirements of this section, the trustee shall send the notice
29 described in subsection (i) to the current beneficiaries each
30 time there is a change in trusteeship.]
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1 (1) Each time there is a change in trusteeship of any
2 trust, the trustee shall notify the settlor in writing of the
3 change.
4 (2) Each time there is a change in trusteeship of any
5 trust whose settlor is deceased or of an irrevocable trust
6 whose settlor has been adjudicated incapacitated, the trustee
7 shall notify the current beneficiaries in writing of the
8 change.
9 (3) Notice under this subsection shall include the
10 trustee's name, address and telephone number.
11 * * *
12 (i) Contents of notice.--[Any] Except as provided in
13 subsection (g), any notice under this section shall be written
14 and convey the following information:
15 (1) The fact of the trust's existence.
16 (2) The identity of the settlor.
17 (3) The trustee's name, address and telephone number.
18 (4) The recipient's right to receive upon request a copy
19 of the trust instrument.
20 (5) [The recipient's] Each current beneficiary's right
21 to receive, [at least annually, a] upon request, an annual
22 written report of the trust's assets and their market values
23 if feasible, the trust's liabilities and the trust's receipts
24 and disbursements since the date of the last such report.
25 * * *
26 (k) Notice to settlor's appointee.--The settlor of a trust
27 may in the trust instrument appoint one or more persons or a
28 succession of persons to receive, on behalf of one or more named
29 current beneficiaries of the trust, the notices required by this
30 section. The trustee giving the notice required by this section
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1 to that appointee satisfies the trustee's duty to give to the
2 named current beneficiary the notice required by this section
3 if:
4 (1) the trustee notifies the appointee that the notice
5 is being given to the appointee as representing the named
6 current beneficiary; and
7 (2) the appointee does not decline to receive the notice
8 in a writing [that is given] delivered to the trustee no
9 later than [60] 30 days after receipt of the trustee's
10 notice.
11 (l) Applicability.--
12 (1) If the death or adjudication of incapacity described
13 in subsection (b), (c), (d) or (e) occurs on or after
14 November 6, 2006, the time limit for notice set forth in that
15 subsection shall apply.
16 (2) If the death or adjudication of incapacity described
17 in subsection (b), [(c),] (d) or (e) has occurred before
18 November 6, 2006, the time limit for notice set forth in that
19 subsection shall be November 6, 2008.
20 (3) The notice under subsection (f) shall not be
21 required to be completed until two years after November 6,
22 2006.
23 § 7780.6. Illustrative powers of trustee.
24 (a) Listing.--The powers which a trustee may exercise
25 pursuant to section 7780.5 (relating to powers of trustees - UTC
26 815) include the following powers:
27 (1) To accept, hold, invest in and retain investments as
28 provided in Chapter 72 (relating to prudent investor rule).
29 (2) To pay or contest a claim; settle a claim by or
30 against the trust by compromise, arbitration or otherwise;
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1 and release, in whole or in part, any claim belonging to the
2 trust.
3 (3) To resolve a dispute regarding the interpretation of
4 the trust or the administration of the trust by mediation,
5 arbitration or other alternative dispute resolution
6 procedures.
7 (4) To prosecute or defend actions, claims or
8 proceedings for the protection of trust assets and of the
9 trustee in the performance of the trustee's duties.
10 (5) To abandon or decline to administer any property
11 which is of little or no value, transfer title to abandoned
12 property and decline to accept title to and administer
13 property which has or may have environmental or other
14 liability attached to it.
15 (6) To insure the assets of the trust against damage or
16 loss and, at the expense of the trust, protect the trustee,
17 the trustee's agents and the beneficiaries from liability to
18 third persons arising from the administration of the trust.
19 (7) To advance money for the protection of the trust and
20 for all expenses, losses and liability sustained in the
21 administration of the trust or because of the holding or
22 ownership of any trust assets. The trustee has a lien on the
23 trust assets as against the beneficiary for an advance under
24 this paragraph, including interest on the advance.
25 (8) To pay taxes, assessments, compensation of the
26 trustee and employees and agents of the trustee and other
27 expenses incurred in the administration of the trust.
28 (9) To receive additions to the assets of the trust.
29 (10) To sell or exchange any real or personal property
30 at public or private sale, without obligation to repudiate an
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1 otherwise binding agreement in favor of better offers. If the
2 trustee has been required to give bond, no proceeds of the
3 sale of real estate, including proceeds arising by the reason
4 of involuntary conversion, shall be paid to the trustee
5 until:
6 (i) the court has made an order excusing the trustee
7 from entering additional security; or
8 (ii) the court has made an order requiring
9 additional security and the trustee has entered the
10 additional security.
11 (11) To enter for any purpose into a lease as lessor or
12 lessee with or without option to purchase or renew for a term
13 within or extending beyond the term of the trust.
14 (12) To grant options for sales or leases of a trust
15 asset and acquire options for the acquisition of assets,
16 including options exercisable after the trust terminates.
17 (13) To join in any reorganization, consolidation,
18 merger, dissolution, liquidation, voting trust plan or other
19 concerted action of securityholders and to delegate
20 discretionary duties with respect thereto.
21 (14) To vote a security, in person or by general or
22 limited proxy, with or without power of substitution.
23 (15) To borrow funds and mortgage or pledge trust assets
24 as security for repayment of the funds borrowed, including
25 repayments after the trust terminates.
26 (16) To make loans to and buy property from the personal
27 representatives of the settlor and the settlor's spouse.
28 Loans under this paragraph shall be adequately secured, and
29 the purchases under this paragraph shall be for fair market
30 value.
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1 (17) To partition, subdivide, repair, improve or develop
2 real estate; enter into agreements concerning the partition,
3 subdivision, repair, improvement, development, zoning or
4 management of real estate; impose or extinguish restrictions
5 on real estate; dedicate land and easements to public use;
6 adjust boundaries; and do anything else regarding real estate
7 which is commercially reasonable or customary under the
8 circumstances.
9 (18) With respect to possible liability for violation of
10 environmental law:
11 (i) to inspect or investigate property the trustee
12 holds or has been asked to hold or property owned or
13 operated by an organization in which the trustee holds or
14 has been asked to hold an interest, for the purpose of
15 determining the application of environmental law with
16 respect to the property;
17 (ii) to take action to prevent, abate or otherwise
18 remedy any actual or potential violation of environmental
19 law affecting property held directly or indirectly by the
20 trustee, whether taken before or after the assertion of a
21 claim or the initiation of governmental enforcement;
22 (iii) to decline to accept property into trust or
23 disclaim a power with respect to property that is or may
24 be burdened with liability for violation of environmental
25 law;
26 (iv) to compromise claims against the trust which
27 may be asserted for an alleged violation of environmental
28 law; and
29 (v) to pay the expense of inspection, review,
30 abatement or remedial action to comply with environmental
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1 law.
2 (19) To operate, repair, maintain, equip and improve any
3 farm or farm operation; to purchase and sell livestock,
4 crops, feed and other property that is normally perishable;
5 and to purchase, use and dispose of farm equipment and employ
6 one or more farm managers and others in connection with farm
7 equipment and pay them reasonable compensation.
8 (20) To make ordinary or extraordinary repairs or
9 alterations in buildings or other structures; demolish
10 improvements; and raze existing or erect new party walls or
11 buildings.
12 (21) To enter into a lease or arrangements for
13 exploration and removal of minerals or other natural
14 resources or enter into a pooling or utilization agreement.
15 (22) To exercise all rights and incidents of ownership
16 of life insurance policies held by the trust, including
17 borrowing on policies, entering into and terminating split-
18 dollar plans, exercising conversion privileges and rights to
19 acquire additional insurance and selecting settlement
20 options.
21 (23) To employ a custodian; hold property unregistered
22 or in the name of a nominee, including the nominee of any
23 institution employed as custodian, without disclosing the
24 fiduciary relationship and without retaining possession and
25 control of securities or other property so held or
26 registered; and pay reasonable compensation to the custodian.
27 (24) To apply funds distributable to a beneficiary who
28 is, in the trustee's opinion, disabled by illness or other
29 cause and unable properly to manage the funds directly for
30 the beneficiary's benefit or to pay such funds for
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1 expenditure on the beneficiary's behalf to:
2 (i) the beneficiary;
3 (ii) a guardian of the beneficiary's estate;
4 (iii) an agent acting under a general power of
5 attorney for the beneficiary; or
6 (iv) if there is no agent or guardian, a relative or
7 other person having legal or physical custody or care of
8 the beneficiary.
9 (25) To pay funds distributable to a minor beneficiary
10 to the minor or to a guardian of the minor's estate or to
11 apply the funds directly for the minor's benefit.
12 (26) To do any of the following:
13 (i) Pay any funds distributable to a beneficiary who
14 is not 21 years of age or older to:
15 (A) the beneficiary;
16 (B) an existing custodian for the beneficiary
17 under Chapter 53 (relating to Pennsylvania Uniform
18 Transfers to Minors Act) or under any other state's
19 version of the Uniform Transfers to Minors Act;
20 (C) an existing custodian for the beneficiary
21 under the former Pennsylvania Uniform Gifts to Minors
22 Act or under any other state's version of the Uniform
23 Gifts to Minors Act; or
24 (D) a custodian for the beneficiary appointed by
25 the trustee under Chapter 53.
26 (ii) Apply the funds for the beneficiary.
27 (27) To pay calls, assessments and other sums chargeable
28 or accruing against or on account of securities.
29 (28) To sell or exercise stock subscription or
30 conversion rights.
20070S1203B1633 - 19 -
1 (29) To continue or participate in the operation of any
2 business or other enterprise and to effect incorporation,
3 merger, consolidation, dissolution or other change in the
4 form of the organization of the business or enterprise.
5 (30) To select a mode of payment under a qualified
6 employee benefit plan or a retirement plan payable to the
7 trustee and exercise rights under the plan.
8 (31) To distribute in cash or in kind or partly in each
9 and allocate particular assets in proportionate or
10 disproportionate shares.
11 (32) To appoint a trustee to act in another jurisdiction
12 with respect to trust property located in the other
13 jurisdiction, confer upon the appointed trustee all the
14 powers and duties of the appointing trustee, require that the
15 appointed trustee furnish security and remove the appointed
16 trustee.
17 (33) To exercise elections with respect to Federal,
18 State and local taxes.
19 [(33)] (34) To execute and deliver instruments which
20 will accomplish or facilitate the exercise of the trustee's
21 powers.
22 * * *
23 § 7785. Limitation of action against trustee.
24 (a) Imposed by trustee's written reports.--
25 (1) A beneficiary may not challenge a transaction or
26 assert a claim against a trustee for breach of trust on the
27 basis of a transaction if:
28 (i) the trustee provided the beneficiary with a
29 single written report of the trust's assets and their
30 market values if feasible, the trust's liabilities and
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1 the trust's receipts and disbursements for the full
2 calendar year or entire part of the calendar year during
3 which the trust was in existence in which the transaction
4 occurred and for each of the four subsequent calendar
5 years;
6 (ii) the transaction was disclosed in the first of
7 the five reports to which subparagraph (i) refers;
8 (iii) the beneficiary did not notify the trustee in
9 writing within six months after receiving the fifth
10 [annual] report that the beneficiary objects to the
11 transaction and provide the basis in writing for that
12 objection; and
13 (iv) all five reports were accompanied by a
14 conspicuous written statement describing the effect of
15 this paragraph.
16 (2) A claim not barred by paragraph (1) may nevertheless
17 be barred by subsection (b).
18 * * *
19 § 8105. Power to convert to unitrust.
20 * * *
21 (d) Post conversion.--After a trust is converted to a
22 unitrust, all of the following apply:
23 (1) The trustee shall follow an investment policy
24 seeking a total return for the investments held by the trust,
25 whether the return is to be derived:
26 (i) from appreciation of capital;
27 (ii) from earnings and distributions from capital;
28 or
29 (iii) from both.
30 (2) The trustee shall make regular distributions in
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1 accordance with the governing instrument construed in
2 accordance with the provisions of this section.
3 (3) The term "income" in the governing instrument shall
4 mean an annual distribution (the unitrust distribution) equal
5 to 4% (the payout percentage) of the net fair market value of
6 the trust's assets, whether such assets would be considered
7 income or principal under other provisions of this chapter,
8 averaged over the lesser of:
9 (i) the [three] preceding years in the smoothing
10 period selected by the trustee; or
11 (ii) the period during which the trust has been in
12 existence.
13 (e) Discretion of trustee.--The trustee may, in the
14 trustee's discretion from time to time, determine all of the
15 following:
16 (1) The effective date of a conversion to a unitrust.
17 (2) The provisions for prorating a unitrust distribution
18 for a short year in which a beneficiary's right to payments
19 commences or ceases.
20 (3) The frequency of unitrust distributions during the
21 year.
22 (4) The effect of other payments from or contributions
23 to the trust on the trust's valuation.
24 (5) Whether to value the trust's assets annually or more
25 frequently.
26 (5.1) Whether to average the net assets of the trust
27 over a smoothing period of three, four or five years.
28 (6) What valuation dates to use.
29 (7) How frequently to value nonliquid assets and whether
30 to estimate their value.
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1 (8) Whether to omit from the calculations trust property
2 occupied or possessed by a beneficiary.
3 (9) Any other matters necessary for the proper
4 functioning of the unitrust.
5 * * *
6 § 8149. Retirement benefits, individual retirement accounts,
7 deferred compensation, annuities and similar
8 payments.
9 * * *
10 (c) Allocation when internal net income of fund is readily
11 ascertained.--
12 (1) If no portion of a payment from a separate fund held
13 exclusively for the benefit of the trust is allocable to
14 income under subsections (a) and (b) but the internal net
15 income of the fund determined as if the fund were a separate
16 trust subject to Subchapters [B (relating to decedent's
17 estate or terminating income interest)] A (relating to
18 preliminary provisions; power to adjust; power to convert to
19 unitrust) through E (relating to allocation of disbursements
20 during administration of trust) is readily ascertainable by
21 the trustee, the internal net income of the fund shall be
22 considered to be the income earned by the fund, and the
23 portion of the payment equal to the then undistributed net
24 income of the fund realized since the trust acquired its
25 interest in the fund shall be deemed to be a distribution of
26 such income and shall be allocated to the trust income
27 account.
28 (2) The balance of any such payment shall be allocated
29 to principal.
30 (3) The power to adjust under section 8104 (relating to
20070S1203B1633 - 23 -
1 trustee's power to adjust), the power to convert to a
2 unitrust under section 8105 (relating to power to convert to
3 unitrust) and the provisions governing express trusts under
4 section 8107 (relating to express trusts) shall apply to
5 retirement benefits covered by this subsection which are
6 payable to a trust. These powers may be exercised separately
7 and independently by the payee trustee or in the governing
8 instrument as between the retirement benefits and the trust
9 as if they were separate trusts subject to this chapter.
10 * * *
11 Section 4. Sections 5547(b) and 5548(b) of Title 15 are
12 amended to read:
13 § 5547. Authority to take and hold trust property.
14 * * *
15 (b) Nondiversion of certain property.--Property committed to
16 charitable purposes shall not, by any proceeding under Chapter
17 59 (relating to fundamental changes) or otherwise, be diverted
18 from the objects to which it was donated, granted or devised,
19 unless and until the board of directors or other body obtains
20 from the court an order under 20 Pa.C.S. [Ch. 61 (relating to
21 estates)] Ch. 77 Subch. D (relating to creation, validity,
22 modification and termination of trust) specifying the
23 disposition of the property.
24 § 5548. Investment of trust funds.
25 * * *
26 (b) Use and management.--Except as otherwise permitted under
27 20 Pa.C.S. [Ch. 61 (relating to estates)] Ch. 77 Subch. D
28 (relating to creation, validity, modification and termination of
29 trust), the board of directors or other body shall apply all
30 assets thus received to the purposes specified in the trust
20070S1203B1633 - 24 -
1 instrument. The directors or other body shall keep accurate
2 accounts of all trust funds, separate and apart from the
3 accounts of other assets of the corporation.
4 * * *
5 Section 5. The amendment of 20 Pa.C.S. § 6107.1 shall apply
6 to any interest created after December 31, 2006.
7 Section 6. (a) The following provisions shall be
8 retroactive to November 6, 2006:
9 (1) The amendment of 20 Pa.C.S. § 7745.
10 (2) The amendment of 20 Pa.C.S. § 7780.3(l)(2).
11 (3) The amendment of 20 Pa.C.S. § 7780.6(a).
12 (b) The amendment of 20 Pa.C.S. § 6107.1 shall be
13 retroactive to January 1, 2007.
14 Section 7. This act shall take effect as follows:
15 (1) The following provisions shall take effect
16 immediately:
17 (i) This section.
18 (ii) Sections 5 and 6 of this act.
19 (iii) The amendment of 20 Pa.C.S. §§ 6107.1, 7745,
20 7780.3(l)(2) and 7780.6(a).
21 (2) The remainder of this act shall take effect in 60
22 days.
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