PRIOR PRINTER'S NOS. 38, 190, 195

PRINTER'S NO.  1663

  

THE GENERAL ASSEMBLY OF PENNSYLVANIA

  

SENATE BILL

 

No.

53

Session of

2009

  

  

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

  

  

SENATOR CORMAN, APPROPRIATIONS, RE-REPORTED AS AMENDED, FEBRUARY 1, 2010   

  

  

  

AN ACT

  

1

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

2

Pennsylvania Consolidated Statutes, in intestate succession,

3

further providing for forfeiture; in wills, further providing

4

for modification of wills; in grant of letters, further

5

providing for advertisement of grant of letters; in

6

administration and personal representatives, further

7

providing for duty of personal representative; in

8

apportionment of death taxes, further providing for

9

enforcement of contribution or exoneration of Federal estate

10

tax; in powers of attorney, further providing for

11

implementation of power of attorney; in estates, further

12

providing for applicability of rule against perpetuities and

13

for modification of conveyance by divorce and for effect of

14

divorce on designation of beneficiaries; in trusts, further

15

providing for notice of representation, for creditor's claim

16

against settlor, for actions contesting validity of revocable

17

trusts, for claims and distribution after settlor's death, 

18

for removal of trustee, for trustee's duty to inform and

<--

19

report, for illustrative powers of trustee and for limitation

20

of action against trustee; in principal and income, further

21

providing for power to convert to unitrust and for retirement

22

benefits, individual retirement accounts, deferred

23

compensation, annuities and similar payments; and making

24

conforming amendments to Title 15.

25

The General Assembly of the Commonwealth of Pennsylvania

26

hereby enacts as follows:

27

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

28

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

 


1

20 of the Pennsylvania Consolidated Statutes are amended to

2

read:

3

§ 2106.  Forfeiture.

4

(a)  Spouse's share.--

5

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

6

the death of the other spouse, has willfully neglected or

7

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

8

who for one year or upwards has willfully and maliciously

9

deserted the other spouse, shall have no right or interest

10

under this chapter in the real or personal estate of the

11

other spouse.

12

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

13

chapter in the real or personal estate of the other spouse

14

if:

15

(i)  the other spouse dies domiciled in this

16

Commonwealth during the course of divorce proceedings;

17

(ii)  no decree of divorce has been entered pursuant

18

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

19

(iii)  grounds have been established as provided in

20

23 Pa.C.S. § 3323(g).

21

* * *

22

§ 2507.  Modification by circumstances.

23

Wills shall be modified upon the occurrence of any of the

24

following circumstances, among others:

25

* * *

26

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

27

divorced from the bonds of matrimony after making a will,

28

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

29

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

30

[thereby] become ineffective for all purposes unless it

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1

appears from the will that the provision was intended to

2

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

3

(i)  is divorced from such spouse after making the

4

will; or

5

(ii)  dies domiciled in this Commonwealth during the

6

course of divorce proceedings, no decree of divorce has

7

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

8

decree of court) and grounds have been established as

9

provided in 23 Pa.C.S. § 3323(g).

10

* * *

11

§ 3162.  Advertisement of grant of letters.

12

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

13

immediately after the grant of letters, shall cause notice

14

thereof to be given in one newspaper of general circulation

15

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

16

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

17

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

18

designated by rule of court for the publication of legal

19

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

20

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

21

all persons having claims against the estate of the decedent to

22

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

23

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

24

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

25

representative who has advertised the grant of letters and

26

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

27

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

28

proofs of that advertisement to the trustee.

29

§ 3301.  Duty of personal representative.

30

* * *

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1

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

2

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

3

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

4

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

5

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

6

inventory at an earlier date by writing delivered to the

7

personal representative or his attorney in which event an

8

inventory shall be filed within three months after the

9

appointment of the personal representative or within 30 days

10

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

11

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

12

file an inventory of estate assets at any time.

13

§ 3706.  Enforcement of contribution or exoneration of Federal

14

estate tax.

15

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

16

Federal estate tax, whether residents or nonresidents of this

17

Commonwealth, shall pay the amounts apportioned against them

18

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

19

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

20

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

21

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

22

liable to apportionment the amounts of Federal estate tax

23

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

24

fiduciary pays the tax apportioned against another party, the

25

fiduciary may recover from the other party the tax payment so

26

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

27

of payment.

28

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

29

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

30

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

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1

fiduciary until [the Federal estate tax apportionable with

2

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

3

been determined and apportionment made, until adequate security

4

for payment is furnished to the fiduciary making the

5

distribution or delivery.] that party pays the Federal estate

6

tax apportioned to that party.

7

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

8

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

9

appropriate action or proceeding, shall make such decrees or

10

orders as it shall deem advisable apportioning the Federal

11

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

12

apportioned amounts from the property or interests in his

13

possession of any parties against whom apportionment has been

14

made and may direct all other parties against whom the Federal

15

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

16

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

17

the apportioned amounts to the fiduciary. When a fiduciary holds

18

property of a party liable to apportionment insufficient to

19

satisfy the apportioned Federal estate tax, the court may direct

20

that the balance of the apportioned amount of Federal estate tax

21

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

22

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

23

his behalf, the court may direct an appropriate reimbursement

24

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

25

Federal estate tax against any party interested in

26

nontestamentary property or among the respective interests

27

created by any nontestamentary instrument, the court, in its

28

discretion, may assess against those properties or interests an

29

equitable share of the expenses incurred in connection with the

30

determination and apportionment of the Federal estate tax. If

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1

the fiduciary cannot recover the Federal estate tax apportioned

2

against a party benefited, the unrecovered amount shall be

3

charged in such manner as the court may determine.

4

§ 5603.  Implementation of power of attorney.

5

* * *

6

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

7

"engage in insurance transactions" shall mean that the agent

8

may:

9

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

10

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

11

accident, health, disability or liability insurance) and pay

12

premiums and collect benefits and proceeds under insurance

13

policies.

14

(2)  Exercise nonforfeiture provisions under insurance

15

policies.

16

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

17

insurance that the principal could if present; however, the

18

agent cannot designate himself beneficiary of a life

19

insurance policy unless the agent is the spouse, child,

20

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

21

agent and a beneficiary of a life insurance policy shall be

22

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

23

as determined by the court, a beneficiary designation made by

24

the agent is inconsistent with the known or probable intent

25

of the principal.

26

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

27

power to "engage in retirement plan transactions" shall mean

28

that the agent may contribute to, withdraw from and deposit

29

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

30

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

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1

stock bonus, employee savings and retirement plan, deferred

2

compensation plan or individual retirement account), select and

3

change payment options for the principal, make roll-over

4

contributions from any retirement plan to other retirement plans

5

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

6

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

7

cannot designate himself beneficiary of a retirement plan unless

8

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

9

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

10

retirement plan shall be liable as equity and justice may

11

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

12

beneficiary designation made by the agent is inconsistent with

13

the known or probable intent of the principal.

14

* * *

15

§ 6107.1.  Applicability of rule against perpetuities.

16

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

17

against perpetuities), 6105 (relating to rule against

18

perpetuities; disposition when invalidity occurs), 6106

19

(relating to income accumulations; when valid) and 6107

20

(relating to income accumulations; disposition when invalidity

21

occurs):

22

(1)  shall apply to every interest created before January

23

1, 2007; but

24

(2)  shall not apply to any interest created after

25

December 31, 2006.

26

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

27

interest created after December 31, 2006:

28

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

29

interest shall be void as a perpetuity.

30

(2)  No direction or authorization to [accumulated] 

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1

accumulate income shall be void as a perpetuity.

2

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

3

new power of appointment, any interest created by the

4

exercise of the new power of appointment is invalid if it

5

does not vest within 360 years of the creation of the

6

original power of appointment, unless the exercise of the new

7

power of appointment expressly states that this provision

8

shall not apply to the interests created by the exercise.

9

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

10

provided in section 6105.

11

§ 6111.1.  Modification by divorce or pending divorce.

12

[If the conveyor is divorced from the bonds of matrimony

13

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

14

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

15

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

16

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

17

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

18

become ineffective for all purposes unless it appears in the

19

governing instrument that the provision was intended to survive

20

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

21

(1)  is divorced from such spouse after making the

22

conveyance; or

23

(2)  dies domiciled in this Commonwealth during the

24

course of divorce proceedings, no decree of divorce has been

25

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

26

court) and grounds have been established as provided in 23

27

Pa.C.S. § 3323(g).

28

§ 6111.2.  Effect of divorce or pending divorce on designation

29

of beneficiaries.

30

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

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1

his death is divorced from the bonds of matrimony after

2

designating his spouse as beneficiary of a life insurance

3

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

4

other contractual arrangement providing for payments to his

5

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

6

revocable by him after the divorce shall become ineffective for

7

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

8

predeceased him unless it appears from the wording of the

9

designation, a court order or a written contract between the

10

person and such former spouse that the designation was intended

11

to survive the divorce.]

12

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

13

individual:

14

(1)  is domiciled in this Commonwealth;

15

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

16

the individual's life insurance policy, annuity contract,

17

pension or profit-sharing plan or other contractual

18

arrangement providing for payments to the spouse; and

19

(3)  either:

20

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

21

divorced from the spouse; or

22

(ii)  dies during the course of divorce proceedings,

23

no decree of divorce has been entered pursuant to 23

24

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

25

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

26

3323(g).

27

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

28

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

29

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

30

become ineffective for all purposes and shall be construed as if

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1

the spouse or former spouse had predeceased the individual,

2

unless it appears the designation was intended to survive the

3

divorce based on:

4

(1)  the wording of the designation;

5

(2)  a court order; or

<--

6

(3)  a written contract between the individual and the

7

spouse or former spouse; or

<--

8

(4)  a designation of a former spouse as a beneficiary

9

after the divorce decree has been issued.

10

(c)  Liability.--

11

(1)  Unless restrained by court order, no insurance

12

company, pension or profit-sharing plan trustee or other

13

obligor shall be liable for making payments to a spouse or 

14

former spouse which would have been proper in the absence of

15

this section.

16

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

17

shall be answerable to anyone prejudiced by the payment.

18

§ 7725.  Notice of representation.

19

A person representing another must be given written notice by

20

the trustee that the person is representing the other person.

21

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

22

representation by a writing that is given to the trustee no

23

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

24

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

25

representation unless the person declines the representation in

26

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

27

receipt of the notice.

28

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

29

Whether or not a trust instrument contains a spendthrift

30

provision and notwithstanding section 7744 (relating to

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1

discretionary trusts; effect of standard - UTC 504):

2

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

3

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

4

creditors.

5

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

6

irrevocable trust may reach the maximum amount that can be

7

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

8

more than one settlor, the creditor or assignee of a

9

particular settlor may reach the portion of the trust

10

attributable to that settlor's contribution. However, the

11

assets of an irrevocable trust are not subject to the claims

12

of a creditor of the settlor solely because of the existence

13

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

14

taxing authorities or to reimburse the settlor for any income

15

tax payable by the settlor attributable to trust income or

16

principal.

17

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

18

settlor's right to direct the source from which liabilities

19

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

20

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

21

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

22

and disposal of remains and the family exemption to the

23

extent the settlor's probate estate is inadequate to satisfy

24

those claims, costs, expenses and exemption and no other

25

statute specifically exempts the property from those claims.

26

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

27

subsection to read:

28

§ 7754.  Actions contesting validity of revocable trust.

29

* * *

30

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

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1

an action contesting the validity of a revocable trust shall be

2

governed by the same rules that apply in actions contesting the

3

validity of a will.

4

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

<--

5

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

6

Title 20 are amended to read:

7

Section 3.  Section 7755(c) of Title 20 is amended to read:

<--

8

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

9

* * *

10

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

11

representative is appointed within 90 days after the settlor's

12

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

13

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

14

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

15

Trustee's duty to advertise.--

16

(1)  A trustee of a revocable trust:

17

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

18

death.

19

(ii)  Shall advertise if the first advertisement of

20

the grant of letters by the settlor's personal

21

representative does not occur within 90 days after the

22

settlor's death.

23

(2)  Advertisements by the trustee under this subsection

24

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

25

advertisement of grant of letters) and shall include:

26

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

27

(ii)  The trustee's name and address.

28

(3)  The personal representative of the settlor of a

29

revocable trust shall send to the trustee copies of the proof

30

of publication of the advertisement of the grant of letters.

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1

* * *

2

Section 4.  Section 7766(b) of Title 20 is amended and the

<--

3

section is amended by adding a subsection to read:

4

§ 7766.  Removal of trustee - UTC 706.

5

* * *

6

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

7

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

8

interests of the beneficiaries of the trust and is not

9

inconsistent with a material purpose of the trust, a suitable

10

cotrustee or successor trustee is available and:

11

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

12

(2)  lack of cooperation among cotrustees substantially

13

impairs the administration of the trust;

14

(3)  the trustee has not effectively administered the

15

trust because of the trustee's unfitness, unwillingness or

16

persistent failures; or

17

(4)  there has been a substantial change of

18

circumstances. A corporate reorganization of an institutional

19

trustee, including a plan of merger or consolidation, is not

20

itself a substantial change of circumstances.

21

* * *

22

(e)  Cross reference.--See section 1608 of the act of

23

November 30, 1965 (P.L.847, No.356), known as the Banking Code

24

of 1965.

25

Section 5.  Sections 7780.3(a), (f), (g), (i), (k) and (l),

26

7780.6(a), 7785, 8105(d) and (e) and 8149(c) of Title 20 are

27

amended to read:

28

§ 7780.3.  Duty to inform and report.

29

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

30

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

<--

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1

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

2

irrevocable trust for information related to the trust's

3

administration.

4

(2)  The Department of Public Welfare for information

5

related to the trust's administration when the settlor,

6

trustee or beneficiary is a resident in a State-owned

7

facility or an applicant for or recipient of cash or medical

8

assistance from the Commonwealth by the settlor of a trust or

<--

9

by a beneficiary of an irrevocable trust for information

10

related to the trust's administration. A trustee shall

11

promptly respond to the Department of Public Welfare's

12

reasonable request for information related to the trust's

13

administration when a settlor or beneficiary is a resident in

14

a State-owned facility or an applicant for or recipient of

15

cash or medical assistance from the Commonwealth and the

16

department certifies in writing that it has obtained a

17

currently valid consent for the disclosure of such

18

information from the settlor or beneficiary of the trust. A

19

trustee may rely upon the department's certification without

20

investigating its accuracy.

21

* * *

22

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

23

after the date on which the trustee of an irrevocable trust

24

learns that a person who did not previously receive the notice

25

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

26

trust, the trustee shall send the notice described in subsection

27

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

28

knows that the settlor is then deceased or has been adjudicated

29

incapacitated. With respect to a testamentary trust, the time

30

specified in this subsection commences to run when the trust is

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1

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

2

that date.

3

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

4

requirements of this section, the trustee shall send the notice

5

described in subsection (i) to the current beneficiaries each

6

time there is a change in trusteeship.]

7

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

8

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

9

change.

10

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

11

trust whose settlor is deceased or of an irrevocable trust

12

whose settlor has been adjudicated incapacitated, the trustee

13

shall notify the current beneficiaries in writing of the

14

change.

15

(3)  Notice under this subsection shall include the

16

trustee's name, address and telephone number.

17

* * *

18

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

19

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

20

and convey the following information:

21

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

22

(2)  The identity of the settlor.

23

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

24

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

25

of the trust instrument.

26

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

27

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

28

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

29

trust's liabilities and the trust's receipts and

30

disbursements since the date of the last such report] upon

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1

request, periodic written financial reports concerning the

2

trust.

3

* * *

4

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

5

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

6

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

7

current beneficiaries of the trust, the notices required by this

8

section. The trustee giving the notice required by this section

9

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

10

named current beneficiary the notice required by this section

11

if:

12

(1)  the trustee notifies the appointee that the notice

13

is being given to the appointee as representing the named

14

current beneficiary; and

15

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

16

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

17

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

18

notice.

19

(l)  Applicability.--

20

(1)  If the death or adjudication of incapacity described

21

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

22

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

23

subsection shall apply.

24

(2)  If the death or adjudication of incapacity described

25

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

26

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

27

subsection shall be November 6, 2008.

28

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

29

required to be completed until two years after November 6,

30

2006.

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1

§ 7780.6.  Illustrative powers of trustee.

2

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

3

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

4

815) include the following powers:

5

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

6

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

7

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

8

against the trust by compromise, arbitration or otherwise;

9

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

10

trust.

11

(3)  To resolve a dispute regarding the interpretation of

12

the trust or the administration of the trust by mediation,

13

arbitration or other alternative dispute resolution

14

procedures.

15

(4)  To prosecute or defend actions, claims or

16

proceedings for the protection of trust assets and of the

17

trustee in the performance of the trustee's duties.

18

(5)  To abandon or decline to administer any property

19

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

20

property and decline to accept title to and administer

21

property which has or may have environmental or other

22

liability attached to it.

23

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

24

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

25

the trustee's agents and the beneficiaries from liability to

26

third persons arising from the administration of the trust.

27

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

28

for all expenses, losses and liability sustained in the

29

administration of the trust or because of the holding or

30

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

- 17 -

 


1

trust assets as against the beneficiary for an advance under

2

this paragraph, including interest on the advance.

3

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

4

trustee and employees and agents of the trustee and other

5

expenses incurred in the administration of the trust.

6

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

7

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

8

at public or private sale, without obligation to repudiate an

9

otherwise binding agreement in favor of better offers. If the

10

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

11

sale of real estate, including proceeds arising by the reason

12

of involuntary conversion, shall be paid to the trustee

13

until:

14

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

15

from entering additional security; or

16

(ii)  the court has made an order requiring

17

additional security and the trustee has entered the

18

additional security.

19

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

20

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

21

within or extending beyond the term of the trust.

22

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

23

asset and acquire options for the acquisition of assets,

24

including options exercisable after the trust terminates.

25

(13)  To join in any reorganization, consolidation,

26

merger, dissolution, liquidation, voting trust plan or other

27

concerted action of securityholders and to delegate

28

discretionary duties with respect thereto.

29

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

30

limited proxy, with or without power of substitution.

- 18 -

 


1

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

2

as security for repayment of the funds borrowed, including

3

repayments after the trust terminates.

4

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

5

representatives of the settlor and the settlor's spouse.

6

Loans under this paragraph shall be adequately secured, and

7

the purchases under this paragraph shall be for fair market

8

value.

9

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

10

real estate; enter into agreements concerning the partition,

11

subdivision, repair, improvement, development, zoning or

12

management of real estate; impose or extinguish restrictions

13

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

14

adjust boundaries; and do anything else regarding real estate

15

which is commercially reasonable or customary under the

16

circumstances.

17

(18)  With respect to possible liability for violation of

18

environmental law:

19

(i)  to inspect or investigate property the trustee

20

holds or has been asked to hold or property owned or

21

operated by an organization in which the trustee holds or

22

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

23

determining the application of environmental law with

24

respect to the property;

25

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

26

remedy any actual or potential violation of environmental

27

law affecting property held directly or indirectly by the

28

trustee, whether taken before or after the assertion of a

29

claim or the initiation of governmental enforcement;

30

(iii)  to decline to accept property into trust or

- 19 -

 


1

disclaim a power with respect to property that is or may

2

be burdened with liability for violation of environmental

3

law;

4

(iv)  to compromise claims against the trust which

5

may be asserted for an alleged violation of environmental

6

law; and

7

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

8

abatement or remedial action to comply with environmental

9

law.

10

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

11

farm or farm operation; to purchase and sell livestock,

12

crops, feed and other property that is normally perishable;

13

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

14

one or more farm managers and others in connection with farm

15

equipment and pay them reasonable compensation.

16

(20)  To make ordinary or extraordinary repairs or

17

alterations in buildings or other structures; demolish

18

improvements; and raze existing or erect new party walls or

19

buildings.

20

(21)  To enter into a lease or arrangements for

21

exploration and removal of minerals or other natural

22

resources or enter into a pooling or utilization agreement.

23

(22)  To exercise all rights and incidents of ownership

24

of life insurance policies held by the trust, including

25

borrowing on policies, entering into and terminating split-

26

dollar plans, exercising conversion privileges and rights to

27

acquire additional insurance and selecting settlement

28

options.

29

(23)  To employ a custodian; hold property unregistered

30

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

- 20 -

 


1

institution employed as custodian, without disclosing the

2

fiduciary relationship and without retaining possession and

3

control of securities or other property so held or

4

registered; and pay reasonable compensation to the custodian.

5

(24)  To apply funds distributable to a beneficiary who

6

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

7

cause and unable properly to manage the funds directly for

8

the beneficiary's benefit or to pay such funds for

9

expenditure on the beneficiary's behalf to:

10

(i)  the beneficiary;

11

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

12

(iii)  an agent acting under a general power of

13

attorney for the beneficiary; or

14

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

15

other person having legal or physical custody or care of

16

the beneficiary.

17

(25)  To pay funds distributable to a minor beneficiary

18

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

19

apply the funds directly for the minor's benefit.

20

(26)  To do any of the following:

21

(i)  Pay any funds distributable to a beneficiary who

22

is not 21 years of age or older to:

23

(A)  the beneficiary;

24

(B)  an existing custodian for the beneficiary

25

under Chapter 53 (relating to Pennsylvania Uniform

26

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

27

version of the Uniform Transfers to Minors Act;

28

(C)  an existing custodian for the beneficiary

29

under the former Pennsylvania Uniform Gifts to Minors

30

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

- 21 -

 


1

Gifts to Minors Act; or

2

(D)  a custodian for the beneficiary appointed by

3

the trustee under Chapter 53.

4

(ii)  Apply the funds for the beneficiary.

5

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

6

or accruing against or on account of securities.

7

(28)  To sell or exercise stock subscription or

8

conversion rights.

9

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

10

business or other enterprise and to effect incorporation,

11

merger, consolidation, dissolution or other change in the

12

form of the organization of the business or enterprise.

13

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

14

employee benefit plan or a retirement plan payable to the

15

trustee and exercise rights under the plan.

16

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

17

and allocate particular assets in proportionate or

18

disproportionate shares.

19

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

20

with respect to trust property located in the other

21

jurisdiction, confer upon the appointed trustee all the

22

powers and duties of the appointing trustee, require that the

23

appointed trustee furnish security and remove the appointed

24

trustee.

25

(33)  To exercise elections with respect to Federal,

26

State and local taxes.

27

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

28

will accomplish or facilitate the exercise of the trustee's

29

powers.

30

* * *

- 22 -

 


1

§ 7785.  Limitation of action against trustee.

2

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

3

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

4

assert] is barred from challenging a transaction or asserting 

5

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

6

of a transaction] if:

7

(i)  the trustee provided the beneficiary [with a

8

written report of the trust's assets and their market

9

values if feasible, the trust's liabilities and the

10

trust's receipts and disbursements for the year in which

11

the transaction occurred and for each of the four

12

subsequent calendar years] at least annually with

13

periodic written financial reports concerning the trust;

14

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

15

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

16

refers or such report provided sufficient information so

17

that the beneficiary knew or should have known of the

18

potential claim or should have inquired into its

19

existence;

20

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

21

writing within six months after receiving the fifth

22

annual report that the beneficiary objects to the

23

transaction and provide the basis in writing for that

24

objection] in the 30 months after a report to which

25

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

26

beneficiary, the beneficiary did not notify the trustee

27

in writing that the beneficiary challenges the

28

transaction or asserts a claim and provides in writing

29

the basis for that challenge or assertion; and

30

(iv)  all reports were accompanied by a conspicuous

- 23 -

 


1

written statement describing the effect of this

2

paragraph.

3

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

4

be barred by subsection (b).

5

* * *

<--

6

(b)  Five-year absolute bar.--If not previously barred by

<--

7

subsection (a) or section 7798 (relating to failure to present

8

claim at audit):

9

(1)  Except as provided in paragraph (1.1), (2) or (3), a

10

claim by a beneficiary against a trustee, including a claim

11

preserved by the beneficiary notifying the trustee in the

12

manner described in subsection (a), shall be barred five

13

years after the first to occur of the following events:

14

(i)  the date after the removal, resignation or death

15

of the trustee on which the beneficiary was given the

16

notice required by section 7780.3(g) (relating to duty to

17

inform and report);

18

(ii)  the termination of the beneficiary's interest

19

in the trust; or

20

(iii)  the termination of the trust.

21

(1.1)  A beneficiary who has challenged a transaction or

22

asserted a claim as provided in subsection (a)(1)(iii) may

23

not challenge the transaction or assert the claim against the

24

trustee in a court or an arbitration proceeding commenced

25

more than five years after the date the trustee sent the

26

beneficiary the report described in subsection (a)(1)(i) and

27

(ii).

28

(2)  Except as set forth in paragraph (3), if the first

29

to occur of the events set forth in paragraph (1) occurred

30

before November 6, 2006, a claim described in paragraph (1)

- 24 -

 


1

shall be barred five years after November 6, 2006.

2

(3)  A claim described in paragraph (1) or (1.1) is not

3

barred if, prior to the respective date set forth in either

4

paragraph (1) or (2), the trustee has filed an account with

5

the court or the beneficiary has petitioned the court to

6

compel the trustee to file an account.

7

§ 8105.  Power to convert to unitrust.

8

* * *

9

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

10

unitrust, all of the following apply:

11

(1)  The trustee shall follow an investment policy

12

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

13

whether the return is to be derived:

14

(i)  from appreciation of capital;

15

(ii)  from earnings and distributions from capital;

16

or

17

(iii)  from both.

18

(2)  The trustee shall make regular distributions in

19

accordance with the governing instrument construed in

20

accordance with the provisions of this section.

21

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

22

mean an annual distribution (the unitrust distribution) equal

23

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

24

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

25

income or principal under other provisions of this chapter,

26

averaged over the lesser of:

27

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

28

period selected by the trustee; or

29

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

30

existence.

- 25 -

 


1

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

2

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

3

following:

4

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

5

(2)  The provisions for prorating a unitrust distribution

6

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

7

commences or ceases.

8

(3)  The frequency of unitrust distributions during the

9

year.

10

(4)  The effect of other payments from or contributions

11

to the trust on the trust's valuation.

12

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

13

frequently.

14

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

15

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

16

(6)  What valuation dates to use.

17

(7)  How frequently to value nonliquid assets and whether

18

to estimate their value.

19

(8)  Whether to omit from the calculations trust property

20

occupied or possessed by a beneficiary.

21

(9)  Any other matters necessary for the proper

22

functioning of the unitrust.

23

* * *

24

§ 8149.  Retirement benefits, individual retirement accounts,

25

deferred compensation, annuities and similar

26

payments.

27

* * *

28

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

29

ascertained.--

30

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

- 26 -

 


1

exclusively for the benefit of the trust is allocable to

2

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

3

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

4

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

5

estate or terminating income interest) through] A (relating

6

to preliminary provisions; power to adjust; power to convert

7

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

8

income interest), C (relating to apportionment at beginning

9

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

10

receipts during administration of trust) and E (relating to

11

allocation of disbursements during administration of trust)

12

is readily ascertainable by the trustee, the internal net

13

income of the fund shall be considered to be the income

14

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

15

the then undistributed net income of the fund realized since

16

the trust acquired its interest in the fund shall be deemed

17

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

18

the trust income account.

19

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

20

to principal.

21

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

22

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

23

unitrust under section 8105 (relating to power to convert to

24

unitrust) and the provisions governing express trusts under

25

section 8107 (relating to express trusts) shall apply to

26

retirement benefits covered by this subsection which are

27

payable to a trust. These powers may be exercised separately

28

and independently by the payee trustee or in the governing

29

instrument as between the retirement benefits and the trust

30

as if they were separate trusts subject to this chapter.

- 27 -

 


1

* * *

2

Section 4 6.  Sections 5547(b) and 5548(b) of Title 15 are

<--

3

amended to read:

4

§ 5547.  Authority to take and hold trust property.

5

* * *

6

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

7

charitable purposes shall not, by any proceeding under Chapter

8

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

9

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

10

unless and until the board of directors or other body obtains

11

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

12

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

13

modification and termination of trust) specifying the

14

disposition of the property.

15

§ 5548.  Investment of trust funds.

16

* * *

17

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

18

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

19

(relating to creation, validity, modification and termination of

20

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

21

assets thus received to the purposes specified in the trust

22

instrument. The directors or other body shall keep accurate

23

accounts of all trust funds, separate and apart from the

24

accounts of other assets of the corporation.

25

* * *

26

Section 5 7.  The amendment of 20 Pa.C.S. § 6107.1 shall

<--

27

apply to any interest created after December 31, 2006.

28

Section 6 8.  (a)  The following provisions shall be

<--

29

retroactive to November 6, 2006:

30

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

- 28 -

 


1

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

2

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

3

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

4

retroactive to January 1, 2007.

5

Section 7 9.  This act shall take effect as follows:

<--

6

(1)  The following provisions shall take effect

7

immediately:

8

(i)  This section.

9

(ii)  Sections 5 and 6 7 and 8 of this act.

<--

10

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

11

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

12

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

13

days.

- 29 -