THE GENERAL ASSEMBLY OF PENNSYLVANIA

SENATE BILL

INTRODUCED BY GREENLEAF, TARTAGLIONE, RAFFERTY, FERLO, BROWNE, COSTA, O'PAKE AND KITCHEN, JANUARY 20, 2009

SENATOR GREENLEAF, JUDICIARY, AS AMENDED, FEBRUARY 10, 2009   

AN ACT

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

Pennsylvania Consolidated Statutes, in intestate succession,

further providing for forfeiture; in wills, further providing

for modification of wills; in grant of letters, further

providing for advertisement of grant of letters; in

administration and personal representatives, further

providing for duty of personal representative; in

apportionment of death taxes, further providing for

enforcement of contribution or exoneration of Federal estate

tax; in powers of attorney, further providing for

implementation of power of attorney; in estates, further

providing for applicability of rule against perpetuities and

for modification of conveyance by divorce and for effect of

divorce on designation of beneficiaries; in trusts, further

providing 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 trustee's duty to inform and report, for illustrative

powers of trustee and for limitation of action against

trustee; in principal and income, further providing 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.

The General Assembly of the Commonwealth of Pennsylvania

hereby enacts as follows:

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

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

20 of the Pennsylvania Consolidated Statutes are amended to

read:

§ 2106.  Forfeiture.

(a)  Spouse's share.--

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

the death of the other spouse, has willfully neglected or

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

who for one year or upwards has willfully and maliciously

deserted the other spouse, shall have no right or interest

under this chapter in the real or personal estate of the

other spouse.

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

chapter in the real or personal estate of the other spouse

if:

(i)  the other spouse dies domiciled in this

Commonwealth during the course of divorce proceedings;

(ii)  no decree of divorce has been entered pursuant

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

(iii)  grounds have been established as provided in

23 Pa.C.S. § 3323(g).

* * *

§ 2507.  Modification by circumstances.

Wills shall be modified upon the occurrence of any of the

following circumstances, among others:

* * *

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

divorced from the bonds of matrimony after making a will,

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

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

[thereby] become ineffective for all purposes unless it

appears from the will that the provision was intended to

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

(i)  is divorced from such spouse after making the

will; or

(ii)  dies domiciled in this Commonwealth during the

course of divorce proceedings, no decree of divorce has

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

decree of court) and grounds have been established as

provided in 23 Pa.C.S. § 3323(g).

* * *

§ 3162.  Advertisement of grant of letters.

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

immediately after the grant of letters, shall cause notice

thereof to be given in one newspaper of general circulation

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

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

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

designated by rule of court for the publication of legal

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

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

all persons having claims against the estate of the decedent to

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

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

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

representative who has advertised the grant of letters and

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

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

proofs of that advertisement to the trustee.

§ 3301.  Duty of personal representative.

* * *

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

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

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

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

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

inventory at an earlier date by writing delivered to the

personal representative or his attorney in which event an

inventory shall be filed within three months after the

appointment of the personal representative or within 30 days

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

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

file an inventory of estate assets at any time.

§ 3706.  Enforcement of contribution or exoneration of Federal

estate tax.

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

Federal estate tax, whether residents or nonresidents of this

Commonwealth, shall pay the amounts apportioned against them

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

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

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

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

liable to apportionment the amounts of Federal estate tax

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

fiduciary pays the tax apportioned against another party, the

fiduciary may recover from the other party the tax payment so

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

of payment.

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

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

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

fiduciary until [the Federal estate tax apportionable with

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

been determined and apportionment made, until adequate security

for payment is furnished to the fiduciary making the

distribution or delivery.] that party pays the Federal estate

tax apportioned to that party.

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

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

appropriate action or proceeding, shall make such decrees or

orders as it shall deem advisable apportioning the Federal

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

apportioned amounts from the property or interests in his

possession of any parties against whom apportionment has been

made and may direct all other parties against whom the Federal

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

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

the apportioned amounts to the fiduciary. When a fiduciary holds

property of a party liable to apportionment insufficient to

satisfy the apportioned Federal estate tax, the court may direct

that the balance of the apportioned amount of Federal estate tax

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

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

his behalf, the court may direct an appropriate reimbursement

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

Federal estate tax against any party interested in

nontestamentary property or among the respective interests

created by any nontestamentary instrument, the court, in its

discretion, may assess against those properties or interests an

equitable share of the expenses incurred in connection with the

determination and apportionment of the Federal estate tax. If

the fiduciary cannot recover the Federal estate tax apportioned

against a party benefited, the unrecovered amount shall be

charged in such manner as the court may determine.

§ 5603.  Implementation of power of attorney.

* * *

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

"engage in insurance transactions" shall mean that the agent

may:

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

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

accident, health, disability or liability insurance) and pay

premiums and collect benefits and proceeds under insurance

policies.

(2)  Exercise nonforfeiture provisions under insurance

policies.

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

insurance that the principal could if present; however, the

agent cannot designate himself beneficiary of a life

insurance policy unless the agent is the spouse, child,

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

agent and a beneficiary of a life insurance policy shall be

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

as determined by the court, a beneficiary designation made by

the agent is inconsistent with the known or probable intent

of the principal.

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

power to "engage in retirement plan transactions" shall mean

that the agent may contribute to, withdraw from and deposit

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

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

stock bonus, employee savings and retirement plan, deferred

compensation plan or individual retirement account), select and

change payment options for the principal, make roll-over

contributions from any retirement plan to other retirement plans

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

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

cannot designate himself beneficiary of a retirement plan unless

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

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

retirement plan shall be liable as equity and justice may

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

beneficiary designation made by the agent is inconsistent with

the known or probable intent of the principal.

* * *

§ 6107.1.  Applicability of rule against perpetuities.

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

against perpetuities), 6105 (relating to rule against

perpetuities; disposition when invalidity occurs), 6106

(relating to income accumulations; when valid) and 6107

(relating to income accumulations; disposition when invalidity

occurs):

(1)  shall apply to every interest created before January

1, 2007; but

(2)  shall not apply to any interest created after

December 31, 2006.

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

interest created after December 31, 2006:

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

interest shall be void as a perpetuity.

(2)  No direction or authorization to [accumulated] 

accumulate income shall be void as a perpetuity.

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

new power of appointment, any interest created by the

exercise of the new power of appointment is invalid if it

does not vest within 360 years of the creation of the

original power of appointment, unless the exercise of the new

power of appointment expressly states that this provision

shall not apply to the interests created by the exercise.

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

provided in section 6105.

§ 6111.1.  Modification by divorce or pending divorce.

[If the conveyor is divorced from the bonds of matrimony

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

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

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

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

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

become ineffective for all purposes unless it appears in the

governing instrument that the provision was intended to survive

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

(1)  is divorced from such spouse after making the

conveyance; or

(2)  dies domiciled in this Commonwealth during the

course of divorce proceedings, no decree of divorce has been

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

court) and grounds have been established as provided in 23

Pa.C.S. § 3323(g).

§ 6111.2.  Effect of divorce or pending divorce on designation

of beneficiaries.

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

his death is divorced from the bonds of matrimony after

designating his spouse as beneficiary of a life insurance

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

other contractual arrangement providing for payments to his

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

revocable by him after the divorce shall become ineffective for

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

predeceased him unless it appears from the wording of the

designation, a court order or a written contract between the

person and such former spouse that the designation was intended

to survive the divorce.]

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

individual:

(1)  is domiciled in this Commonwealth;

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

the individual's life insurance policy, annuity contract,

pension or profit-sharing plan or other contractual

arrangement providing for payments to the spouse; and

(3)  either:

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

divorced from the spouse; or

(ii)  dies during the course of divorce proceedings,

no decree of divorce has been entered pursuant to 23

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

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

3323(g).

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

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

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

become ineffective for all purposes and shall be construed as if

the spouse or former spouse had predeceased the individual,

unless it appears the designation was intended to survive the

divorce based on:

(1)  the wording of the designation;

(2)  a court order; or

(3)  a written contract between the individual and the

spouse or former spouse.

(c)  Liability.--

(1)  Unless restrained by court order, no insurance

company, pension or profit-sharing plan trustee or other

obligor shall be liable for making payments to a spouse or 

former spouse which would have been proper in the absence of

this section.

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

shall be answerable to anyone prejudiced by the payment.

§ 7725.  Notice of representation.

A person representing another must be given written notice by

the trustee that the person is representing the other person.

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

representation by a writing that is given to the trustee no

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

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

representation unless the person declines the representation in

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

receipt of the notice.

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

Whether or not a trust instrument contains a spendthrift

provision and notwithstanding section 7744 (relating to

discretionary trusts; effect of standard - UTC 504):

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

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

creditors.

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

irrevocable trust may reach the maximum amount that can be

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

more than one settlor, the creditor or assignee of a

particular settlor may reach the portion of the trust

attributable to that settlor's contribution. However, the

assets of an irrevocable trust are not subject to the claims

of a creditor of the settlor solely because of the existence

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

taxing authorities or to reimburse the settlor for any income

tax payable by the settlor attributable to trust income or

principal.

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

settlor's right to direct the source from which liabilities

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

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

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

and disposal of remains and the family exemption to the

extent the settlor's probate estate is inadequate to satisfy

those claims, costs, expenses and exemption and no other

statute specifically exempts the property from those claims.

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

subsection to read:

§ 7754.  Actions contesting validity of revocable trust.

* * *

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

an action contesting the validity of a revocable trust shall be

governed by the same rules that apply in actions contesting the

validity of a will.

Section 3.  Sections 7755(c), 7780.3(a), (f), (g), (i), (k)

and (l), 7780.6(a), 7785(a), 8105(d) and (e) and 8149(c) of

Title 20 are amended to read:

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

* * *

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

representative is appointed within 90 days after the settlor's

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

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

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

Trustee's duty to advertise.--

(1)  A trustee of a revocable trust:

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

death.

(ii)  Shall advertise if the first advertisement of

the grant of letters by the settlor's personal

representative does not occur within 90 days after the

settlor's death.

(2)  Advertisements by the trustee under this subsection

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

advertisement of grant of letters) and shall include:

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

(ii)  The trustee's name and address.

(3)  The personal representative of the settlor of a

revocable trust shall send to the trustee copies of the proof

of publication of the advertisement of the grant of letters.

* * *

§ 7780.3.  Duty to inform and report.

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

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

<--

settlorby:

<--

(1)  The settlor of a trust or by a beneficiary of an

irrevocable trust for information related to the trust's

administration.

(2)  The Department of Public Welfare information related

<--

to the trust's administration when the settlor, trustee or

beneficiary is a resident in a State-owned facility or an

applicant for or recipient of cash or medical assistance from

the Commonwealth.

* * *

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

after the date on which the trustee of an irrevocable trust

learns that a person who did not previously receive the notice

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

trust, the trustee shall send the notice described in subsection

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

knows that the settlor is then deceased or has been adjudicated

incapacitated. With respect to a testamentary trust, the time

specified in this subsection commences to run when the trust is

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

that date.

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

requirements of this section, the trustee shall send the notice

described in subsection (i) to the current beneficiaries each

time there is a change in trusteeship.]

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

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

change.

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

trust whose settlor is deceased or of an irrevocable trust

whose settlor has been adjudicated incapacitated, the trustee

shall notify the current beneficiaries in writing of the

change.

(3)  Notice under this subsection shall include the

trustee's name, address and telephone number.

* * *

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

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

and convey the following information:

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

(2)  The identity of the settlor.

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

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

of the trust instrument.

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

to receive, at least annually, [a written report of the

trust's assets and their market values if feasible, the

trust's liabilities and the trust's receipts and

disbursements since the date of the last such report] upon

request, periodic written financial reports concerning the

trust.

* * *

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

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

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

current beneficiaries of the trust, the notices required by this

section. The trustee giving the notice required by this section

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

named current beneficiary the notice required by this section

if:

(1)  the trustee notifies the appointee that the notice

is being given to the appointee as representing the named

current beneficiary; and

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

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

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

notice.

(l)  Applicability.--

(1)  If the death or adjudication of incapacity described

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

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

subsection shall apply.

(2)  If the death or adjudication of incapacity described

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

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

subsection shall be November 6, 2008.

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

required to be completed until two years after November 6,

2006.

§ 7780.6.  Illustrative powers of trustee.

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

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

815) include the following powers:

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

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

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

against the trust by compromise, arbitration or otherwise;

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

trust.

(3)  To resolve a dispute regarding the interpretation of

the trust or the administration of the trust by mediation,

arbitration or other alternative dispute resolution

procedures.

(4)  To prosecute or defend actions, claims or

proceedings for the protection of trust assets and of the

trustee in the performance of the trustee's duties.

(5)  To abandon or decline to administer any property

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

property and decline to accept title to and administer

property which has or may have environmental or other

liability attached to it.

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

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

the trustee's agents and the beneficiaries from liability to

third persons arising from the administration of the trust.

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

for all expenses, losses and liability sustained in the

administration of the trust or because of the holding or

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

trust assets as against the beneficiary for an advance under

this paragraph, including interest on the advance.

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

trustee and employees and agents of the trustee and other

expenses incurred in the administration of the trust.

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

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

at public or private sale, without obligation to repudiate an

otherwise binding agreement in favor of better offers. If the

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

sale of real estate, including proceeds arising by the reason

of involuntary conversion, shall be paid to the trustee

until:

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

from entering additional security; or

(ii)  the court has made an order requiring

additional security and the trustee has entered the

additional security.

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

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

within or extending beyond the term of the trust.

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

asset and acquire options for the acquisition of assets,

including options exercisable after the trust terminates.

(13)  To join in any reorganization, consolidation,

merger, dissolution, liquidation, voting trust plan or other

concerted action of securityholders and to delegate

discretionary duties with respect thereto.

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

limited proxy, with or without power of substitution.

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

as security for repayment of the funds borrowed, including

repayments after the trust terminates.

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

representatives of the settlor and the settlor's spouse.

Loans under this paragraph shall be adequately secured, and

the purchases under this paragraph shall be for fair market

value.

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

real estate; enter into agreements concerning the partition,

subdivision, repair, improvement, development, zoning or

management of real estate; impose or extinguish restrictions

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

adjust boundaries; and do anything else regarding real estate

which is commercially reasonable or customary under the

circumstances.

(18)  With respect to possible liability for violation of

environmental law:

(i)  to inspect or investigate property the trustee

holds or has been asked to hold or property owned or

operated by an organization in which the trustee holds or

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

determining the application of environmental law with

respect to the property;

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

remedy any actual or potential violation of environmental

law affecting property held directly or indirectly by the

trustee, whether taken before or after the assertion of a

claim or the initiation of governmental enforcement;

(iii)  to decline to accept property into trust or

disclaim a power with respect to property that is or may

be burdened with liability for violation of environmental

law;

(iv)  to compromise claims against the trust which

may be asserted for an alleged violation of environmental

law; and

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

abatement or remedial action to comply with environmental

law.

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

farm or farm operation; to purchase and sell livestock,

crops, feed and other property that is normally perishable;

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

one or more farm managers and others in connection with farm

equipment and pay them reasonable compensation.

(20)  To make ordinary or extraordinary repairs or

alterations in buildings or other structures; demolish

improvements; and raze existing or erect new party walls or

buildings.

(21)  To enter into a lease or arrangements for

exploration and removal of minerals or other natural

resources or enter into a pooling or utilization agreement.

(22)  To exercise all rights and incidents of ownership

of life insurance policies held by the trust, including

borrowing on policies, entering into and terminating split-

dollar plans, exercising conversion privileges and rights to

acquire additional insurance and selecting settlement

options.

(23)  To employ a custodian; hold property unregistered

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

institution employed as custodian, without disclosing the

fiduciary relationship and without retaining possession and

control of securities or other property so held or

registered; and pay reasonable compensation to the custodian.

(24)  To apply funds distributable to a beneficiary who

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

cause and unable properly to manage the funds directly for

the beneficiary's benefit or to pay such funds for

expenditure on the beneficiary's behalf to:

(i)  the beneficiary;

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

(iii)  an agent acting under a general power of

attorney for the beneficiary; or

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

other person having legal or physical custody or care of

the beneficiary.

(25)  To pay funds distributable to a minor beneficiary

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

apply the funds directly for the minor's benefit.

(26)  To do any of the following:

(i)  Pay any funds distributable to a beneficiary who

is not 21 years of age or older to:

(A)  the beneficiary;

(B)  an existing custodian for the beneficiary

under Chapter 53 (relating to Pennsylvania Uniform

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

version of the Uniform Transfers to Minors Act;

(C)  an existing custodian for the beneficiary

under the former Pennsylvania Uniform Gifts to Minors

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

Gifts to Minors Act; or

(D)  a custodian for the beneficiary appointed by

the trustee under Chapter 53.

(ii)  Apply the funds for the beneficiary.

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

or accruing against or on account of securities.

(28)  To sell or exercise stock subscription or

conversion rights.

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

business or other enterprise and to effect incorporation,

merger, consolidation, dissolution or other change in the

form of the organization of the business or enterprise.

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

employee benefit plan or a retirement plan payable to the

trustee and exercise rights under the plan.

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

and allocate particular assets in proportionate or

disproportionate shares.

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

with respect to trust property located in the other

jurisdiction, confer upon the appointed trustee all the

powers and duties of the appointing trustee, require that the

appointed trustee furnish security and remove the appointed

trustee.

(33)  To exercise elections with respect to Federal,

State and local taxes.

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

will accomplish or facilitate the exercise of the trustee's

powers.

* * *

§ 7785.  Limitation of action against trustee.

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

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

assert] is barred from challenging a transaction or asserting 

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

of a transaction] if:

(i)  the trustee provided the beneficiary [with a

written report of the trust's assets and their market

values if feasible, the trust's liabilities and the

trust's receipts and disbursements for the year in which

the transaction occurred and for each of the four

subsequent calendar years] at least annually with

periodic written financial reports concerning the trust;

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

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

refers or such report provided sufficient information so

that the beneficiary knew or should have known of the

potential claim or should have inquired into its

existence;

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

writing within six months after receiving the fifth

annual report that the beneficiary objects to the

transaction and provide the basis in writing for that

objection] in the 30 months after a report to which

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

beneficiary, the beneficiary did not notify the trustee

in writing that the beneficiary challenges the

transaction or asserts a claim and provides in writing

the basis for that challenge or assertion; and

(iv)  all reports were accompanied by a conspicuous

written statement describing the effect of this

paragraph.

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

be barred by subsection (b).

* * *

§ 8105.  Power to convert to unitrust.

* * *

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

unitrust, all of the following apply:

(1)  The trustee shall follow an investment policy

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

whether the return is to be derived:

(i)  from appreciation of capital;

(ii)  from earnings and distributions from capital;

or

(iii)  from both.

(2)  The trustee shall make regular distributions in

accordance with the governing instrument construed in

accordance with the provisions of this section.

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

mean an annual distribution (the unitrust distribution) equal

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

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

income or principal under other provisions of this chapter,

averaged over the lesser of:

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

period selected by the trustee; or

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

existence.

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

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

following:

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

(2)  The provisions for prorating a unitrust distribution

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

commences or ceases.

(3)  The frequency of unitrust distributions during the

year.

(4)  The effect of other payments from or contributions

to the trust on the trust's valuation.

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

frequently.

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

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

(6)  What valuation dates to use.

(7)  How frequently to value nonliquid assets and whether

to estimate their value.

(8)  Whether to omit from the calculations trust property

occupied or possessed by a beneficiary.

(9)  Any other matters necessary for the proper

functioning of the unitrust.

* * *

§ 8149.  Retirement benefits, individual retirement accounts,

deferred compensation, annuities and similar

payments.

* * *

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

ascertained.--

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

exclusively for the benefit of the trust is allocable to

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

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

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

estate or terminating income interest) through] A (relating

to preliminary provisions; power to adjust; power to convert

to unitrust), B (relating to decedent's estate or terminating

income interest), C (relating to apportionment at beginning

and end of income interest), D (relating to allocation of

receipts during administration of trust) and E (relating to

allocation of disbursements during administration of trust)

is readily ascertainable by the trustee, the internal net

income of the fund shall be considered to be the income

earned by the fund, and the portion of the payment equal to

the then undistributed net income of the fund realized since

the trust acquired its interest in the fund shall be deemed

to be a distribution of such income and shall be allocated to

the trust income account.

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

to principal.

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

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

unitrust under section 8105 (relating to power to convert to

unitrust) and the provisions governing express trusts under

section 8107 (relating to express trusts) shall apply to

retirement benefits covered by this subsection which are

payable to a trust. These powers may be exercised separately

and independently by the payee trustee or in the governing

instrument as between the retirement benefits and the trust

as if they were separate trusts subject to this chapter.

* * *

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

amended to read:

§ 5547.  Authority to take and hold trust property.

* * *

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

charitable purposes shall not, by any proceeding under Chapter

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

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

unless and until the board of directors or other body obtains

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

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

modification and termination of trust) specifying the

disposition of the property.

§ 5548.  Investment of trust funds.

* * *

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

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

(relating to creation, validity, modification and termination of

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

assets thus received to the purposes specified in the trust

instrument. The directors or other body shall keep accurate

accounts of all trust funds, separate and apart from the

accounts of other assets of the corporation.

* * *

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

to any interest created after December 31, 2006.

Section 6.  (a)  The following provisions shall be

retroactive to November 6, 2006:

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

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

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

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

retroactive to January 1, 2007.

Section 7.  This act shall take effect as follows:

(1)  The following provisions shall take effect

immediately:

(i)  This section.

(ii)  Sections 5 and 6 of this act.

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

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

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

days.