PRINTER'S NO. 754
No. 660 Session of 2005
INTRODUCED BY GREENLEAF, O'PAKE, RAFFERTY, LEMMOND AND FERLO,
APRIL 28, 2005
REFERRED TO JUDICIARY, APRIL 28, 2005
AN ACT
1 Amending Title 20 (Decedents, Estates and Fiduciaries) of the
2 Pennsylvania Consolidated Statutes, adding the Uniform Trust
3 Act; making conforming amendments; and making a repeal.
4 The General Assembly of the Commonwealth of Pennsylvania
5 hereby enacts as follows:
6 Section 1. Sections 723, 724 and 725 of Title 20 of the
7 Pennsylvania Consolidated Statutes are repealed.
8 Section 2. Sections 751(6) and 908(a) of Title 20 are
9 amended to read:
10 § 751. Appointment; purpose.
11 The orphans' court division may appoint:
12 * * *
13 (6) Representation of parties in interest.--Persons
14 interested in an estate [or trust] as beneficiary or heir, if
15 minors or otherwise legally incapacitated, and possible
16 unborn or unascertained persons, may be represented in a
17 judicial proceeding by a guardian or trustee ad litem if the
18 court deems necessary. The court may dispense with the
1 appointment of a guardian or trustee ad litem for a person
2 who is a minor or otherwise legally incapacitated, unborn or
3 unascertained if there is a living person sui juris having a
4 similar interest or if such person is or would be issue of a
5 living ancestor sui juris and interested in the estate [or
6 trust] whose interest is not adverse to his. If the
7 whereabouts of any beneficiary or heir is unknown or if there
8 is doubt as to his existence, the court shall provide for
9 service of notice and representation in the judicial
10 proceeding as it deems proper.
11 § 908. Appeals.
12 (a) When allowed.--Any party in interest seeking to
13 challenge the probate of a will or who is otherwise aggrieved by
14 a decree of the register, or a fiduciary whose estate or trust
15 is so aggrieved, may appeal therefrom to the court within one
16 year of the decree: Provided, That the executor designated in an
17 instrument shall not by virtue of such designation be deemed a
18 party in interest who may appeal from a decree refusing probate
19 of it. The court, upon petition of a party in interest, may
20 limit the time for appeal to three months.
21 * * *
22 Section 3. Title 20 is amended by adding sections to read:
23 § 3384.1. Notice after settlor of revocable trust has died.
24 No later than 30 days after the date on which the trustee of
25 a revocable trust learns that a personal representative has been
26 appointed for the deceased settlor's estate, the trustee shall
27 send to the settlor's personal representative the notice
28 described in section 7780.3(i) (relating to duty to inform and
29 report).
30 § 3534.1. Cost of distribution of tangible personal property.
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1 Except as otherwise provided in the will, if any, the
2 personal representative shall pay as an expense of
3 administration the reasonable expenses of storage, insurance,
4 packing and delivery of tangible personal property to a
5 beneficiary.
6 Section 4. Sections 3543, 3702(h) and 6101 of Title 20 are
7 amended to read:
8 § 3543. [Interest or income] Income on distributive shares.
9 (a) Pecuniary legacy.--A pecuniary legacy bequeathed in
10 trust shall [bear interest] be entitled to income at the rate of
11 5% per annum from the death of the decedent until the payment of
12 the legacy, and when not in trust [shall bear interest at the
13 rate of 5% per annum] from one year after the death of the
14 decedent until the payment of the legacy.
15 (b) Specific legacy or devise.--A specific legatee or
16 devisee shall be entitled to the net income from property given
17 to him accrued from the date of the death of the decedent.
18 (c) Demonstrative legacy.--A demonstrative legacy shall
19 [bear interest] be entitled to income from the death of the
20 decedent until the payment of the legacy at the rate earned by
21 the property out of which it is primarily payable, and to the
22 extent that it is not paid from that source, [shall bear
23 interest] at the rate of 5% per annum from one year after the
24 death of the decedent until the payment of the legacy.
25 (d) Residuary legacy or devise.--All income from real and
26 personal estate earned during the period of administration and
27 not payable to others pursuant to the governing instrument or
28 this section shall be distributed pro rata among the income
29 beneficiaries of any trust created out of the residuary estate
30 and the other persons entitled to the residuary estate.
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1 (e) Future date.--A legacy payable at a future date, unless
2 earlier set aside as a separate trust, shall not begin to bear
3 [interest or] income until three months after the date fixed for
4 payment or delivery.
5 (f) Relationship.--[Interest or income] Income shall be paid
6 on distributive shares with no distinction because of the
7 relationship of the distributee to the decedent.
8 (g) Testamentary provisions.--All rules set forth in this
9 section are subject to the provisions of the decedent's will.
10 § 3702. Equitable apportionment of Federal estate tax.
11 * * *
12 (h) Interest and penalties.--Interest and penalties shall be
13 apportioned in the same manner as the principal amount of the
14 Federal estate tax unless the court finds it inequitable to do
15 so by reason of special circumstances in which case the court
16 may direct a different apportionment of interest and penalties.
17 To the extent the interest or penalties are apportioned to or
18 are payable out of a residuary estate or a trust, they shall be
19 paid from income or principal in the same manner as the Federal
20 estate tax, subject to a fiduciary's power to adjust under
21 Chapter 81 (relating to principal and income).
22 * * *
23 § 6101. Definitions.
24 The following words and phrases, when used in this chapter,
25 unless the context clearly indicates otherwise, shall have the
26 meanings ascribed to them in this section:
27 ["Charity" or "charitable purposes." Includes but is not
28 limited to the relief of poverty, the advancement of education,
29 the advancement of religion, the promotion of health,
30 governmental or municipal purposes, and other purposes the
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1 accomplishment of which is beneficial to the community.]
2 "Conveyance." An act by which it is intended to create an
3 interest in real or personal property whether the act is
4 intended to have inter vivos or testamentary operation. It shall
5 include an act by which a power of appointment whenever given is
6 exercised.
7 Section 5. Section 6102 of Title 20 is repealed.
8 Section 6. Sections 6104(b) and 6106(b) of Title 20 are
9 amended to read:
10 § 6104. Rule against perpetuities.
11 * * *
12 (b) Void interest; exceptions.--Upon the expiration of the
13 period allowed by the common law rule against perpetuities as
14 measured by actual rather than possible events, any interest not
15 then vested and any interest in members of a class the
16 membership of which is then subject to increase shall be void.
17 This subsection shall not apply to:
18 (1) Interest exempt at common law.--Interests which
19 would not have been subject to the common law rule against
20 perpetuities.
21 (2) Cemetery trusts.--Interests which are directed to be
22 used for the maintenance, care, or adornment of any cemetery,
23 churchyard, or other place for the burial of the dead, or any
24 portion thereof, or any grave therein or any improvement on
25 or about the same, and which are subject to no condition
26 precedent at the end of the period described in subsection
27 (b).
28 (3) Pension or profit-sharing plans.--Interests created
29 by a bona fide trust inter vivos primarily for the benefit of
30 business employees, their families or appointees, under a
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1 stock bonus, pension, disability or death benefit, profit-
2 sharing or other employee-benefit plan.
3 (4) Administrative powers.--Powers which contribute to
4 the effective management of trust assets, including powers to
5 sell, mortgage, or lease trust assets, powers relating to
6 investment of trust assets, powers to determine what is
7 principal and what is income, and powers to name successor
8 trustees.
9 (5) One hundred fifty years.--Interests that vest not
10 more than 150 years after the date provided in subsection
11 (c).
12 * * *
13 § 6106. Income accumulations; when valid.
14 * * *
15 (b) Void accumulations; exceptions.--Upon the later of the
16 expiration of the period allowed by the common law rule against
17 perpetuities as measured by actual rather than possible events
18 and the expiration of 150 years from the date at which one
19 person who while living had the unrestricted power to transfer
20 to himself the entire legal and beneficial interest in the
21 property from which the income is derived, any direction or
22 authorization to accumulate income shall be void. This
23 subsection shall not apply to:
24 (1) Directions or authorizations to accumulate income in
25 a trust for any charitable purpose or purposes.
26 (2) Directions or authorizations to accumulate income in
27 a bona fide trust inter vivos primarily for the benefit of
28 business employees, their families or appointees, under a
29 stock bonus, pension, disability or death benefit, profit-
30 sharing or other employee-benefit plan.
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1 * * *
2 Section 7. Sections 6110 and 6112 of Title 20 are repealed.
3 Section 8. Section 6114 of Title 20 is amended to read:
4 § 6114. Rules of interpretation.
5 [In] (a) General rule.--Except as provided in subsection
6 (b), in the absence of a contrary intent appearing therein,
7 conveyances shall be construed, as to real and personal estate,
8 in accordance with the following rules:
9 (1) Meaning of "heirs" and "next of kin," etc.; time of
10 ascertaining class.--A conveyance of real or personal
11 property, whether directly or in trust, to the conveyor's or
12 another designated person's "heirs" or "next of kin" or
13 "relatives" or "family" or to "the persons thereunto entitled
14 under the intestate laws," or to persons described by words
15 of similar import, shall mean those persons, including the
16 spouse, who would take under the intestate laws if such
17 conveyor or other designated person were to die intestate at
18 the time when such class is to be ascertained, a resident of
19 the Commonwealth, and owning the property so conveyed:
20 Provided, That the share of a spouse other than the spouse of
21 the conveyor, shall not include the allowance under the
22 intestate laws. The time when such class is to be ascertained
23 shall be when the conveyance to the class is to take effect
24 in enjoyment.
25 (2) Time for ascertaining class.--In construing a
26 conveyance to a class other than a class described in
27 paragraph (1) of this section, the class shall be ascertained
28 at the time the conveyance is to take effect in enjoyment,
29 except that the issue then living of any member of the class
30 who is then dead shall take per stirpes the share which their
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1 deceased ancestor would have taken if he had then been
2 living.
3 (3) Meaning of "die without issue" and similar
4 phrases.--In any conveyance of real or personal estate, the
5 words "die without issue," "die without leaving issue," "have
6 no issue," or other words importing either a want or failure
7 of issue of any person in his lifetime or at the time of his
8 death, or an indefinite failure of his issue, shall be
9 construed to mean a want or failure of issue in his lifetime
10 or at his death, and not an indefinite failure of his issue.
11 (4) Adopted children.--In construing a conveyance to a
12 person or persons described by relationship to the conveyor
13 or to another, any adopted person shall be considered the
14 child of his adopting parent or parents, except that, in
15 construing the conveyance of a conveyor who is not the
16 adopting parent, an adopted person shall not be considered
17 the child of his adopting parent or parents unless the
18 adoption occurred during the adopted person's minority or
19 reflected an earlier parent-child relationship that existed
20 during the child's minority. An adopted person who is
21 considered the child of his adopting parent or parents under
22 this paragraph shall not be considered as continuing to be
23 the child of his natural parents except in construing the
24 conveyance of a natural kin, other than the natural parent,
25 who has maintained a family relationship with the adopted
26 person. If a natural parent shall have married the adopting
27 parent, the adopted person shall also be considered the child
28 of such natural parent.
29 (5) Persons born out of wedlock.--In construing a
30 conveyance to a person or persons described by relationship
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1 to the conveyor or to another, a person born out of wedlock
2 shall be considered the child of the natural mother and also
3 of the natural father if the paternity of the natural father
4 has been determined according to the provisions of section
5 2107 (relating to persons born out of wedlock).
6 (6) Inheritance tax.--The inheritance tax imposed by the
7 Inheritance and Estate Tax Act of 1961 upon the conveyance of
8 any estate, income or interest, for a term of years, for
9 life, or for other limited period, shall be paid out of the
10 principal of the property by which the estate, income or
11 interest is supported.
12 (7) Employee benefits.--Benefits received by a trust
13 under a Federally qualified profit sharing, pension or stock
14 bonus plan shall not be available for the payment of
15 obligations of the decedent or of his estate.
16 (8) Corporate fiduciaries.--Provisions authorizing or
17 restricting investment in the securities or common trust
18 funds of a corporate fiduciary or the exercise of voting
19 rights in its securities shall also apply to the securities
20 or common trust funds of any corporation which is an
21 affiliate of the corporate fiduciary within the meaning of
22 section 1504 of the Internal Revenue Code of 1986 (Public Law
23 99-514, 26 U.S.C. § 1504).
24 (b) Exception.--This section does not apply to trusts under
25 Chapter 77 (relating to trusts).
26 Section 9. Chapter 71 of Title 20 is repealed.
27 Section 10. The definition of "mutual fund" in section 7201
28 of Title 20 is amended to read:
29 § 7201. Definitions.
30 The following words and phrases when used in this chapter
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1 shall have the meanings given to them in this section unless the
2 context clearly indicates otherwise:
3 * * *
4 "Mutual fund." The securities of an [open-end or closed-end
5 management] investment company [or investment trust] registered
6 under the Investment Company Act of 1940 (54 Stat. 789, 15
7 U.S.C. § 80a-1 et seq.).
8 * * *
9 Section 11. Sections 7314.1 and 7503(b) of Title 20 are
10 amended to read:
11 § 7314.1. Mutual funds.
12 Notwithstanding that a bank or trust company or an affiliate
13 provides services to the investment company or investment trust,
14 including that of an investment advisor, custodian, transfer
15 agent, registrar, sponsor, distributor or manager, and receives
16 reasonable compensation for those services and notwithstanding
17 any other provision of law, a bank or trust company acting as a
18 fiduciary, agent or otherwise may invest and reinvest in the
19 securities of an [open-end or closed-end management] investment
20 company [or investment trust] registered under the Investment
21 Company Act of 1940 (54 Stat. 789, 15 U.S.C. § 80a-1 et seq.) if
22 the portfolio of the investment company or investment trust
23 consists substantially of investments not prohibited by the
24 governing instrument. With respect to any funds invested, the
25 basis upon which compensation is calculated, expressed as a
26 percentage of asset value or otherwise, shall be disclosed by
27 prospectus, account statement or otherwise to all persons to
28 whom statements of the account are rendered.
29 § 7503. Application of chapter.
30 * * *
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1 (b) Exclusion.--This chapter shall not apply to:
2 (1) Any trust during the time that the trust is
3 revocable or amendable by its settlor.
4 (2) A spouse of a decedent or settlor where the spouse
5 is the trustee of a testamentary or inter vivos trust for
6 which a marital deduction has been allowed.
7 [(3) A trustee who possesses in his individual capacity
8 an unlimited right to withdraw the entire principal of the
9 trust or has a general testamentary power of appointment over
10 the entire principal of the trust.]
11 (4) A trust under a governing instrument that by
12 specific reference expressly rejects the application of this
13 chapter.
14 [(5) A trust created under governing instrument executed
15 on or before March 21, 1999, if no part of the principal of
16 the trust would be included in the gross estate of the
17 trustee for Federal estate tax purposes if the trustee had
18 died on March 21, 1999, without having exercised the power
19 under the governing instrument to make discretionary
20 distributions of principal or income to or for the benefit of
21 the trustee, the trustee's estate or the creditors of
22 either.]
23 Section 12. Section 7504 of Title 20 is amended by adding a
24 subsection to read:
25 § 7504. Certain trustee powers not exercisable.
26 * * *
27 (c) Exceptions.--This section shall not apply to:
28 (1) A trustee who possesses in his individual capacity
29 an unlimited right to withdraw the entire principal of the
30 trust or has a general testamentary power of appointment over
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1 the entire principal of the trust.
2 (2) A trust created under a governing instrument
3 executed on or before March 21, 1999, if no part of the
4 principal of the trust would have been included in the gross
5 estate of the trustee for Federal estate tax purposes if the
6 trustee had died on March 21, 1999, without having exercised
7 the power under the governing instrument to make
8 discretionary distributions of principal or income to or for
9 the benefit of the trustee, the trustee's estate or the
10 creditors of either.
11 Section 13. Section 7506 of Title 20 is amended to read:
12 § 7506. Certain powers of beneficiaries not exercisable.
13 (a) General rule.--No beneficiary of a trust in an
14 individual, trustee or other capacity may appoint himself or
15 herself as trustee or remove a trustee and appoint in place of
16 the trustee so removed a trustee who is related or subordinate
17 to the beneficiary within the meaning of section 672(c) of the
18 Internal Revenue Code of 1986 (Public Law 99-514, 26 U.S.C. §
19 672(c) [(relating to definitions and rules)]) in each case
20 unless:
21 (1) the trustee's discretionary power to make
22 distributions to or for the beneficiary is limited by an
23 ascertainable standard relating to the beneficiary's health,
24 education, support or maintenance within the meaning of
25 sections 2041 and 2514 of the Internal Revenue Code of 1986
26 (26 U.S.C. §§ 2041 [(relating to powers of appointment)] and
27 2514 [(relating to powers of appointment]);
28 (2) the trustee's discretionary power may not be
29 exercised to satisfy any of the beneficiary's legal
30 obligations for support or other purposes; and
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1 (3) the trustee's discretionary power may not be
2 exercised to grant to the beneficiary a general power to
3 appoint property of the trust to the beneficiary, the
4 beneficiary's estate or the creditors [thereof] of either
5 within the meaning of section 2041 of the Internal Revenue
6 Code of 1986 (26 U.S.C. § 2041).
7 (b) [Exception] Exceptions.--This section shall not apply:
8 (1) if the appointment of the trustee by the beneficiary
9 may be made only in conjunction with another person having a
10 substantial interest in the property of the trust subject to
11 the power which is adverse to the exercise of the power in
12 favor of the beneficiary within the meaning of section
13 2041(b)(1)(C)(ii) of the Internal Revenue Code of 1986 (26
14 U.S.C. § 2041(b)(1)(C)(ii)) or the appointment is in
15 conformity with a procedure governing appointments approved
16 by the court before December 21, 1998[.];
17 (2) to any beneficiary who possesses in an individual
18 capacity an unlimited right to withdraw the entire principal
19 of the trust or has a general testamentary power of
20 appointment over the entire principal of the trust; or
21 (3) to a trust created under a governing instrument
22 executed on or before March 21, 1999, if no part of the
23 principal of the trust would have been included in the gross
24 estate of the beneficiary for Federal estate tax purposes if
25 the beneficiary had died on March 21, 1999.
26 Section 14. Title 20 is amended by adding a chapter to read:
27 CHAPTER 77
28 TRUSTS
29 Subchapter
30 A. General Provisions
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1 B. Judicial Proceedings
2 C. Representation
3 D. Creation, Validity, Modification and Termination of Trust
4 E. Creditor's Claims; Spendthrift and Discretionary Trusts
5 F. Revocable Trusts
6 G. Office of Trustee
7 H. Duties and Powers of Trustee
8 I. Liability of Trustees and Rights of Persons Dealing with
9 Trustees
10 J. Miscellaneous Provisions
11 SUBCHAPTER A
12 GENERAL PROVISIONS
13 Sec.
14 7701. Short title - UTC 101.
15 7702. Scope - UTC 102.
16 7703. Definitions - UTC 103.
17 7704. Knowledge - UTC 104.
18 7705. Trust instrument controls; mandatory rules - UTC 105.
19 7706. Common law of trusts; principles of equity - UTC 106.
20 7707. Governing law - UTC 107.
21 7708. Situs of trust.
22 7709. Methods and waiver of notice - UTC 109.
23 7710. Notice; others treated as beneficiaries - UTC 110.
24 7710.1. Nonjudicial settlement agreements - UTC 111.
25 7710.2. Rules of construction - UTC 112.
26 § 7701. Short title - UTC 101.
27 Subchapters A (relating to general provisions) through I
28 (relating to liability of trustees and rights of persons dealing
29 with trustees) shall be known and may be cited as the
30 Pennsylvania Uniform Trust Act.
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1 § 7702. Scope - UTC 102.
2 This chapter applies to express trusts, charitable and
3 noncharitable, and trusts created pursuant to a statute,
4 judgment or decree that requires the trust to be administered in
5 the manner of an express trust.
6 § 7703. Definitions - UTC 103.
7 The following words and phrases when used in this chapter
8 shall have the meanings given to them in this section unless the
9 context clearly indicates otherwise:
10 "Action." With respect to an act of a trustee, includes a
11 failure to act.
12 "Beneficiary." A person that:
13 (1) has a present or future beneficial interest in a
14 trust, vested or contingent; or
15 (2) in a capacity other than that of trustee or
16 protector, holds a power of appointment over trust property.
17 "Charitable trust." A trust, or portion of a trust, created
18 for a charitable purpose described in section 7735(a) (relating
19 to charitable purposes; enforcement - UTC 405).
20 "Current beneficiary." A person 18 years of age or older to
21 or for whom income or principal of a trust must be distributed
22 currently or a person 25 years of age or older to or for whom
23 income or principal of a trust may, in the trustee's discretion,
24 be distributed currently.
25 "Guardian." A person other than a guardian ad litem who is
26 appointed by the court to make decisions regarding the property
27 of an individual.
28 "Interests of the beneficiaries." The beneficial interests
29 provided in the trust instrument.
30 "Jurisdiction." With reference to a geographic area, a
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1 country, state or county.
2 "Power of withdrawal." The unrestricted power of a
3 beneficiary, acting as a beneficiary and not as a trustee, to
4 transfer to himself or herself the entire legal and beneficial
5 interest in all or a portion of trust property. However, a power
6 to withdraw the greater of the amount specified in section
7 2041(b)(2), 2503(b) or 2514(e) of the Internal Revenue Code of
8 1986 (Public Law 99-514, 26 U.S.C. § 2041(b)(2), 2503(b) or
9 2514(e)), or any lesser amount determined by reference to one or
10 more of these provisions, may not be treated as a power of
11 withdrawal.
12 "Property." Anything that may be the subject of ownership,
13 whether real or personal, legal or equitable, or any interest
14 therein.
15 "Qualified beneficiary." Assuming nonexercise of all
16 testamentary powers of appointment, a beneficiary who on the
17 date the beneficiary's qualification is determined:
18 (1) is a distributee or permissible distributee of trust
19 income or principal;
20 (2) would be a distributee or permissible distributee of
21 trust income or principal if the interests of the
22 distributees described in paragraph (1) terminated on that
23 date; or
24 (3) would be a distributee or permissible distributee of
25 trust income or principal if the trust terminated on that
26 date.
27 "Revocable trust." A trust is revocable to the extent the
28 settlor, immediately before the time as of which the
29 determination is made, had the power, acting without the consent
30 of the trustee or any person holding an interest adverse to
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1 revocation, to prevent the transfer of the trust property at the
2 settlor's death by revocation or amendment of or withdrawal of
3 property from the trust.
4 "Settlor." A person, including a testator, who creates or
5 contributes property to a trust. If more than one person creates
6 or contributes property to a trust, each person is a settlor of
7 the portion of the trust property attributable to that person's
8 contribution except to the extent another person has the power
9 to revoke or withdraw that portion.
10 "Spendthrift provision." A provision in a trust instrument
11 that restrains both voluntary and involuntary transfer of a
12 beneficiary's interest.
13 "Trust instrument." A will or other written instrument
14 executed by the settlor that contains trust provisions,
15 including any amendments thereto.
16 "Trustee." Includes an original, additional and successor
17 trustee and a cotrustee.
18 § 7704. Knowledge - UTC 104.
19 (a) When person has knowledge.--For the purposes of this
20 chapter and subject to subsection (b), a person has knowledge of
21 a fact involving a trust if the person has:
22 (1) actual knowledge of it;
23 (2) received a notice or notification of it; or
24 (3) reason to know it from all the facts and
25 circumstances known to the person at the time in question.
26 (b) Employees.--For the purposes of this chapter, an
27 organization that conducts activities through employees has
28 notice or knowledge of a fact involving a trust only from the
29 time the information was received by an employee having
30 responsibility to act for the trust, or would have been brought
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1 to the employee's attention if the organization had exercised
2 reasonable diligence. An organization exercises reasonable
3 diligence if it maintains reasonable routines for communicating
4 significant information to the employee having responsibility to
5 act for the trust and there is reasonable compliance with the
6 routines. Reasonable diligence does not require an employee of
7 the organization to communicate information unless the
8 communication is part of the individual's regular duties or the
9 individual knows a matter involving the trust would be
10 materially affected by the information.
11 § 7705. Trust instrument controls; mandatory rules - UTC 105.
12 (a) Trust instrument controls.--Except as provided in
13 subsection (b), the provisions of a trust instrument prevail
14 over any contrary provisions of this chapter.
15 (b) Mandatory rules.--Notwithstanding a contrary provision
16 in the trust instrument, the following rules apply:
17 (1) The requirements for creating a trust set forth in
18 section 7732 (relating to requirements for creation - UTC
19 402).
20 (2) The duty of a trustee to act in good faith and in
21 accordance with the purposes of the trust as set forth in
22 section 7771 (relating to duty to administer trust - UTC
23 801).
24 (3) The requirement in section 7734 (relating to trust
25 purposes - UTC 404) that a trust's purpose be lawful and not
26 contrary to public policy.
27 (4) The power of the court to modify or terminate a
28 trust under sections 7740 (relating to termination of trusts;
29 proceedings for termination or modification of trusts - UTC
30 410) through 7740.6 (relating to modification to achieve
20050S0660B0754 - 18 -
1 settlor's tax objectives - UTC 416).
2 (5) The effect of a spendthrift provision and the rights
3 of certain creditors and assignees to reach a trust as
4 provided in Subchapter E (relating to creditor's claims;
5 spendthrift and discretionary trusts).
6 (6) The power of the court under section 7762 (relating
7 to trustee's bond - UTC 702).
8 (7) The power of the court under section 7768(b)
9 (relating to compensation of trustee - UTC 708) to adjust a
10 trustee's compensation specified in the trust instrument.
11 (8) The duty of a trustee under section 7780.3 (relating
12 to duty to inform and report).
13 (9) (Reserved).
14 (10) The effect of an exculpatory term under section
15 7788 (relating to exculpation of trustee - UTC 1008).
16 (11) The rights under sections 7790 (relating to
17 limitation on personal liability of trustee - UTC 1010)
18 through 7790.3 (relating to certification of trust - UTC
19 1013) of a person other than a trustee or beneficiary.
20 (12) Periods of limitation for commencing a judicial
21 proceeding.
22 (13) The power of the court to take action and exercise
23 jurisdiction as may be necessary in the interests of justice.
24 (14) The subject matter jurisdiction of the court
25 described in Chapter 7 (relating to orphans' court divisions)
26 and venue for commencing a proceeding as provided in section
27 7714 (relating to venue - UTC 204).
28 § 7706. Common law of trusts; principles of equity - UTC 106.
29 The common law of trusts and principles of equity supplement
30 this chapter, except to the extent modified by this chapter or
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1 another statute of this Commonwealth.
2 § 7707. Governing law - UTC 107.
3 The meaning and effect of the provisions of a trust
4 instrument shall be determined by:
5 (1) the law of the jurisdiction designated in the trust
6 instrument, but the mandatory rules of section 7705(b)
7 (relating to trust instrument controls; mandatory rules - UTC
8 105) shall govern if different from the law of the
9 jurisdiction designated in the trust instrument; or
10 (2) in the absence of an effective designation in the
11 trust instrument, the law of the jurisdiction in which the
12 settlor is domiciled when the trust becomes irrevocable.
13 § 7708. Situs of trust.
14 (a) Specified in trust instrument.--Without precluding other
15 means for establishing a sufficient connection with the
16 designated jurisdiction, provisions of a trust instrument
17 designating the situs of the trust are valid and controlling if:
18 (1) a trustee's principal place of business is located
19 in or a trustee is a resident of the designated jurisdiction;
20 (2) all or part of the trust administration occurs in
21 the designated jurisdiction; or
22 (3) one or more of the beneficiaries resides in the
23 designated jurisdiction.
24 (b) Unspecified in trust instrument.--If the trust
25 instrument does not specify a situs:
26 (1) The situs of a testamentary trust shall be:
27 (i) in the county where letters were granted to the
28 personal representative;
29 (ii) if letters under subparagraph (i) have not been
30 granted, in a county where the letters might have been
20050S0660B0754 - 20 -
1 granted; or
2 (iii) if letters under subparagraph (i) have not
3 been granted and are not subject to being granted, in a
4 county in which any trustee resides or has a place of
5 business.
6 (2) The situs of an inter vivos trust whose settlor is
7 domiciled in this Commonwealth when the trust becomes
8 irrevocable or, in the case of a revocable trust, when the
9 first application is made to a court concerning the trust
10 shall be:
11 (i) during the settlor's lifetime, either in the
12 county of the settlor's principal residence or in the
13 county in which any of the trustees resides or has a
14 place of business; and
15 (ii) after the settlor's death:
16 (A) in the county in which letters have been
17 granted to the settlor's personal representative;
18 (B) in a county in which letters might have been
19 granted;
20 (C) in a county which is the principal place of
21 the trust's administration; or
22 (D) in a county in which any trustee resides or
23 has a place of business.
24 (3) The situs of an inter vivos trust, whose settlor
25 either is living and not domiciled in this Commonwealth at
26 the time when the first application is made to a court
27 concerning the trust or was not domiciled in this
28 Commonwealth at the settlor's death after which the first
29 application to a court concerning the trust is made
30 thereafter, shall be in a county where:
20050S0660B0754 - 21 -
1 (i) a trustee's principal place of business is
2 located or a trustee is a resident;
3 (ii) all or part of the trust administration occurs;
4 or
5 (iii) one or more of the beneficiaries reside.
6 (c) Transfer.--By complying with subsections (d) and (e),
7 the trustee may transfer the trust's situs to another
8 jurisdiction if either immediately before or immediately after
9 the proposed transfer:
10 (1) a trustee's principal place of business is located
11 in or a trustee is a resident of the proposed jurisdiction;
12 (2) all or part of the trust administration occurs in
13 the proposed jurisdiction; or
14 (3) one or more of the beneficiaries reside in the
15 proposed jurisdiction.
16 (d) Notice of transfer.--The trustee shall notify the
17 qualified beneficiaries of a proposed transfer of a trust's
18 situs at least 60 days before the date as of which the trustee
19 intends to change the situs. The notice of proposed transfer
20 must include the following:
21 (1) The name of the jurisdiction to which the situs is
22 to be transferred.
23 (2) The address and telephone number at the new location
24 at which the trustee can be contacted.
25 (3) The reasons for the proposed transfer.
26 (4) The date on which the proposed transfer is
27 anticipated to occur.
28 (5) A statement that if the situs is changed as the
29 trustee proposes, venue will thereafter be in the county of
30 the new situs consistent with section 7714 (relating to venue
20050S0660B0754 - 22 -
1 - UTC 204).
2 (6) The name and address of the court before which
3 judicial actions involving the trust will be heard after the
4 situs is changed as the trustee proposes.
5 (7) A statement that the change in situs will occur only
6 if all qualified beneficiaries of the trust consent in
7 writing to the change.
8 (e) Consent to transfer.--A trustee may transfer a trust's
9 situs under this section without court approval if all the
10 qualified beneficiaries of the trust consent in writing to the
11 change.
12 (f) Successor trustee.--In connection with a transfer of the
13 trust's situs, the trustee may transfer some or all of the trust
14 property to a successor trustee designated in the trust
15 instrument or appointed pursuant to section 7764 (relating to
16 vacancy in trusteeship; appointment of successor - UTC 704).
17 (g) Court-directed change in situs.--A court having
18 jurisdiction of a testamentary or inter vivos trust, on
19 application of a trustee or any party in interest, after notice
20 as the court shall direct and aided if necessary by the report
21 of a master, and after accounting as the court shall require,
22 may direct, notwithstanding any other provision of this chapter,
23 that the situs of the trust shall be changed to any other place
24 within or without this Commonwealth if the court shall find the
25 change necessary or desirable for the proper administration of
26 the trust.
27 (h) Claims not discharged.--A change in situs under this
28 section does not discharge any claim against the trustee.
29 § 7709. Methods and waiver of notice - UTC 109.
30 (a) Notice generally.--Notice to a person under this chapter
20050S0660B0754 - 23 -
1 or the sending of a document to a person under this chapter must
2 be accomplished in a manner reasonably suitable under the
3 circumstances and likely to result in receipt of the notice or
4 document. Permissible methods of notice or for sending a
5 document include first-class mail, personal delivery, delivery
6 to the person's last known place of residence or place of
7 business and a properly directed electronic message.
8 (b) Unknown identity or location.--Notice otherwise required
9 under this chapter or a document otherwise required to be sent
10 under this chapter need not be provided to a person whose
11 identity or location is unknown to and not reasonably
12 ascertainable by the trustee, but the trustee shall create and
13 maintain indefinitely a written record of the steps the trustee
14 took to identify or locate the person.
15 (c) Waiver.--Notice under this chapter or the sending of a
16 document under this chapter may be waived in writing by the
17 person to be notified or sent the document.
18 (d) Notice of judicial proceeding.--Notice of a judicial
19 proceeding must be given as provided in the applicable rules of
20 court.
21 § 7710. Notice; others treated as beneficiaries - UTC 110.
22 (a) Notice.--Whenever notice to qualified or current
23 beneficiaries of a trust is required under this chapter, the
24 trustee must also give notice to any other beneficiary who has
25 sent the trustee a written request for notice.
26 (b) Enforcement by charitable organization expressly named
27 in instrument.--A charitable organization expressly named in the
28 trust instrument to receive distributions from the trust has the
29 rights of a beneficiary under this chapter.
30 (c) Enforcement by others.--A person appointed to enforce a
20050S0660B0754 - 24 -
1 trust created for the care of an animal or another noncharitable
2 purpose as provided in section 7738 (relating to trust for care
3 of animal - UTC 408) or 7739 (relating to noncharitable trust
4 without ascertainable beneficiary - UTC 409) has the rights of a
5 beneficiary under this chapter.
6 (d) Office of Attorney General.--The Office of Attorney
7 General has the rights of a charitable organization expressly
8 named in the trust instrument to receive distributions from a
9 trust having its situs in this Commonwealth.
10 § 7710.1. Nonjudicial settlement agreements - UTC 111.
11 (a) (Reserved).
12 (b) General rule.--Except as otherwise provided in
13 subsection (c), all beneficiaries and trustees of a trust may
14 enter into a binding nonjudicial settlement agreement with
15 respect to any matter involving the trust. The rules of
16 Subchapter C (relating to representation) shall apply to a
17 settlement agreement under this section.
18 (c) Exception.--A nonjudicial settlement agreement is valid
19 only to the extent it does not violate a material purpose of the
20 trust and includes terms and conditions that could be properly
21 approved by the court under this chapter or other applicable
22 law.
23 (d) Matters that may be resolved.--Matters that may be
24 resolved by a nonjudicial settlement agreement include the
25 following:
26 (1) The interpretation or construction of the provisions
27 of a trust instrument.
28 (2) The approval of a trustee's report or accounting or
29 waiver of the preparation of a trustee's report or
30 accounting.
20050S0660B0754 - 25 -
1 (3) Direction to a trustee to perform or refrain from
2 performing a particular act.
3 (4) The resignation or appointment of a trustee and the
4 determination of a trustee's compensation.
5 (5) Transfer of a trust's situs.
6 (6) Liability or release from liability of a trustee for
7 an action relating to the trust.
8 (7) The grant to a trustee of any necessary or desirable
9 power.
10 (8) The exercise or nonexercise of any power by a
11 trustee.
12 (9) Questions relating to the property or an interest in
13 property held as part of a trust.
14 (10) An action or proposed action by or against a trust
15 or trustee.
16 (11) The modification or termination of a trust.
17 (12) An investment decision, policy, plan or program of
18 a trustee.
19 (13) Any other matter concerning the administration of a
20 trust.
21 (e) Request of court.--Any beneficiary or trustee of a trust
22 may request the court to approve a nonjudicial settlement
23 agreement to determine whether the representation as provided in
24 Subchapter C was adequate or whether the agreement contains
25 terms and conditions the court could have properly approved.
26 § 7710.2. Rules of construction - UTC 112.
27 The rules of construction that apply in this Commonwealth to
28 the provisions of testamentary trusts also apply as appropriate
29 to the provisions of inter vivos trusts.
30 SUBCHAPTER B
20050S0660B0754 - 26 -
1 JUDICIAL PROCEEDINGS
2 Sec.
3 7711. Role of court in administration of trust - UTC 201.
4 7712. Jurisdiction over trustee and beneficiary - UTC 202.
5 7713. (Reserved).
6 7714. Venue - UTC 204.
7 § 7711. Role of court in administration of trust - UTC 201.
8 (a) Judicial intervention.--The court may intervene in the
9 administration of a trust to the extent its jurisdiction is
10 invoked by an interested person or as provided by law.
11 (b) Judicial supervision.--A trust is not subject to
12 continuing judicial supervision unless ordered by the court.
13 (c) Scope of proceeding.--A judicial proceeding involving a
14 trust may relate to any matter involving the trust's
15 administration, including a request for declaratory judgment.
16 § 7712. Jurisdiction over trustee and beneficiary - UTC 202.
17 (a) Personal jurisdiction over trustee.--By accepting the
18 trusteeship of a trust having its situs in this Commonwealth or
19 by moving the situs to this Commonwealth, the trustee submits
20 personally to the jurisdiction of the courts of this
21 Commonwealth regarding any matter involving the trust.
22 (b) Personal jurisdiction over beneficiary.--With respect to
23 their interests in the trust, the beneficiaries of a trust
24 having its situs in this Commonwealth are subject to the
25 jurisdiction of the courts of this Commonwealth regarding any
26 matter involving the trust. By not releasing or disclaiming the
27 beneficiary's beneficial interest in the trust, a beneficiary of
28 a trust having its situs in this Commonwealth submits personally
29 to the jurisdiction of the courts of this Commonwealth regarding
30 any matter involving the trust.
20050S0660B0754 - 27 -
1 (c) Additional jurisdictional methods.--This section does
2 not preclude other methods of obtaining jurisdiction over a
3 trustee, beneficiary or other person receiving property from the
4 trust.
5 § 7713. (Reserved).
6 § 7714. Venue - UTC 204.
7 (a) General rule.--Except as otherwise provided in
8 subsection (b), venue for a judicial proceeding involving a
9 trust is in the county of this Commonwealth in which the trust's
10 situs is located and, if the trust is created by will and the
11 estate is not yet closed, in the county in which the decedent's
12 estate is being administered.
13 (b) Exceptions.--
14 (1) If a trust has no trustee, venue for a judicial
15 proceeding for the appointment of a trustee is in:
16 (i) any county in which a beneficiary resides;
17 (ii) any county in which trust property is located;
18 or
19 (iii) if the trust is created by will, the county in
20 which the decedent's estate was or is being administered.
21 (2) The venue of proceedings that are pending on the
22 effective date of this section shall not be disturbed.
23 SUBCHAPTER C
24 REPRESENTATION
25 Sec.
26 7721. Scope; definition of trust matter.
27 7722. Representation of parties in interest in general.
28 7723. Representatives and persons represented.
29 7724. Appointment of representative.
30 7725. Notice of representation.
20050S0660B0754 - 28 -
1 7726. Representation ineffective if person objects.
2 § 7721. Scope; definition of trust matter.
3 (a) Scope.--This subchapter shall apply to this entire
4 chapter unless the context clearly specifies the contrary.
5 (b) Definition.--As used in this subchapter, the term "trust
6 matter" includes a judicial proceeding and a nonjudicial
7 settlement, agreement or act pertaining to any matter listed in
8 section 7710.1(d) (relating to nonjudicial settlement agreements
9 - UTC 111).
10 § 7722. Representation of parties in interest in general.
11 (a) Judicial proceeding.--In a judicial proceeding involving
12 a trust matter, an order or decree of the court that binds the
13 representative or representatives is binding upon a person,
14 class of persons or both represented in accordance with section
15 7723 (relating to representatives and persons represented) if
16 the trustee notifies the representatives in writing whom they
17 represent, they do not decline the representation as provided in
18 section 7725 (relating to notice of representation) and they act
19 in good faith.
20 (b) Nonjudicial resolution.--In a nonjudicial resolution of
21 a trust matter, notice to, the consent or approval of or the
22 waiver or release by the representative or representatives is
23 binding upon a person, class of persons or both represented in
24 accordance with section 7723 if the trustee notifies the
25 representatives in writing whom they represent, they do not
26 decline the representation as provided in section 7725 and they
27 act in good faith.
28 (c) Permissible consideration.--In making decisions, a
29 representative may consider general benefit accruing to the
30 living members of the family of the person represented.
20050S0660B0754 - 29 -
1 § 7723. Representatives and persons represented.
2 The following rules except as set forth in paragraph (7)
3 apply to the extent there is no conflict of interest with
4 respect to the matter at issue between the representative and
5 the person or persons represented that might affect the
6 impartiality of the representative and, if two or more persons
7 are being represented, to the extent there is no conflict of
8 interest with respect to the matter at issue between or among
9 the persons represented that might affect the impartiality of
10 the representative:
11 (1) A plenary guardian represents the person whose
12 estate the guardian supervises, and a limited guardian
13 represents the person whose estate the guardian supervises
14 within the scope of authority prescribed by the court order
15 that defines the guardian's authority.
16 (2) An agent under a general power of attorney
17 represents the agent's principal, and an agent under a
18 limited power of attorney represents the principal within the
19 scope of the agent's authority under the power of attorney.
20 (3) Where property or an interest in property is vested
21 in a class of persons, the living sui juris class members
22 represent the class members who are minors, unborn, unknown
23 or unascertained.
24 (4) Where property or an interest in property will pass
25 to a class of persons upon the occurrence of a future event,
26 the living sui juris class members represent the class
27 members who are minors, unborn, unknown or unascertained. The
28 class members entitled to represent other class members or
29 potential class members are the persons who would take the
30 property or interest in property if the future event had
20050S0660B0754 - 30 -
1 occurred immediately before the commencement of the judicial
2 proceeding relating to the property or interest in property
3 or immediately before the effective date of the nonjudicial
4 resolution of the matter.
5 (5) Where property or an interest in property will pass
6 to a person, class of persons or both upon the occurrence of
7 a future event, but the property or interest in property will
8 pass to another person, class of persons or both upon the
9 occurrence of an additional future event, the person, class
10 of persons or both who would take upon the occurrence of the
11 first event represents the person, class of persons or both
12 who would take upon the occurrence of the additional event,
13 provided their interests are identical or substantially
14 similar for purposes of the particular trust matter. If a
15 class of persons would take upon the occurrence of the first
16 event, paragraph (4) applies to representation between or
17 among the class.
18 (6) A person represents all minors or unborn individuals
19 and persons whose identity or location is unknown and not
20 reasonably ascertainable, to the extent such persons are not
21 otherwise represented, if the interests of the person and the
22 person represented are substantially identical with respect
23 to the particular question or dispute involved.
24 (7) Whether or not there is a conflict of interest
25 described in this section, the sole holder or all coholders
26 of a presently exercisable or testamentary power of
27 appointment represent all potential appointees and all takers
28 in default of exercise of the power of appointment if the
29 holder may appoint to:
30 (i) the holder's estate, the holder's creditors or
20050S0660B0754 - 31 -
1 the creditors of the holder's estate; or
2 (ii) anyone other than the holder's estate, the
3 holder's creditors and the creditors of the holder's
4 estate.
5 (8) The sole holder or all coholders of a presently
6 exercisable or testamentary power of appointment not
7 described in paragraph (7) represent all potential appointees
8 and all takers in default of exercise of the power who are
9 also potential appointees.
10 (9) Except as provided in paragraph (1), a person
11 represents the person's minor and unborn descendants.
12 § 7724. Appointment of representative.
13 Notwithstanding any other provision of this subchapter, if in
14 any judicial proceeding involving a trust matter the court
15 determines that the representation provided by section 7723
16 (relating to representatives and persons represented) is or
17 might be inadequate, the court may appoint a guardian ad litem
18 or trustee ad litem to represent the inadequately represented
19 person, class of persons or both.
20 § 7725. Notice of representation.
21 A person representing another must be given written notice by
22 the trustee that the person is representing the other person.
23 The person to whom the notice is given may decline the
24 representation by a writing that is given to the trustee no
25 later than 60 days after receipt of the trustee's notice.
26 § 7726. Representation ineffective if person objects.
27 Notwithstanding the provisions of this subchapter, a person
28 may not represent another who is sui juris and files a written
29 objection to representation with the trustee.
30 SUBCHAPTER D
20050S0660B0754 - 32 -
1 CREATION, VALIDITY, MODIFICATION
2 AND TERMINATION OF TRUST
3 Sec.
4 7731. Creation of trust - UTC 401.
5 7732. Requirements for creation - UTC 402.
6 7733. Written trusts created in other jurisdictions - UTC
7 403.
8 7734. Trust purposes - UTC 404.
9 7735. Charitable purposes; enforcement - UTC 405.
10 7736. Creation of trust induced by fraud, duress or undue
11 influence - UTC 406.
12 7737. Oral trusts unenforceable.
13 7738. Trust for care of animal - UTC 408.
14 7739. Noncharitable trust without ascertainable beneficiary -
15 UTC 409.
16 7740. Termination of trusts; proceedings for termination or
17 modification of trusts - UTC 410.
18 7740.1. Modification or termination of noncharitable
19 irrevocable trust by consent - UTC 411.
20 7740.2. Modification or termination of noncharitable
21 irrevocable trust by court - UTC 412.
22 7740.3. Charitable trusts - UTC 413.
23 7740.4. Modification or termination of noncharitable trust -
24 UTC 414.
25 7740.5. Reformation to correct mistakes - UTC 415.
26 7740.6. Modification to achieve settlor's tax objectives - UTC
27 416.
28 7740.7. Division of trusts.
29 7740.8. Combination of trusts.
30 § 7731. Creation of trust - UTC 401.
20050S0660B0754 - 33 -
1 A trust may be created by:
2 (1) transfer of property under a written instrument to
3 another person as trustee during the settlor's lifetime or by
4 will or other written disposition taking effect upon the
5 settlor's death;
6 (2) written declaration, signed by or on behalf and at
7 the direction of the owner of property as required by section
8 7732 (relating to requirements for creation - UTC 402), that
9 the owner holds identifiable property as trustee; or
10 (3) written exercise of a power of appointment in favor
11 of a trustee.
12 § 7732. Requirements for creation - UTC 402.
13 (a) Requirements.--A trust is created only if:
14 (1) the settlor has capacity to create a trust;
15 (2) the settlor signs a writing that indicates an
16 intention to create the trust and contains provisions of the
17 trust;
18 (3) the trust has a definite beneficiary or is:
19 (i) a charitable trust;
20 (ii) a trust for the care of an animal, as provided
21 in section 7738 (relating to trust for care of animal -
22 UTC 408); or
23 (iii) a trust for a noncharitable purpose, as
24 provided in section 7739 (relating to noncharitable trust
25 without ascertainable beneficiary - UTC 409);
26 (4) the trustee has duties to perform; and
27 (5) the same person is not the sole trustee and sole
28 beneficiary of the trust.
29 (b) (Reserved).
30 (b.1) Signature by mark or another.--A trust instrument
20050S0660B0754 - 34 -
1 other than a will may be signed by mark or by a person other
2 than the settlor on behalf of and at the direction of the
3 settlor in the same manner as a power of attorney under Chapter
4 56 (relating to powers of attorney).
5 (c) Power to select beneficiary from indefinite class.--A
6 power in a trustee to select a beneficiary from an indefinite
7 class is valid. If the power is not exercised within a
8 reasonable time, the power fails and the property subject to the
9 power passes to the persons who would have taken the property
10 had the power not been conferred.
11 (d) Definition.--As used in this section, the term "definite
12 beneficiary" means a beneficiary that can be ascertained now or
13 in the future, subject to any applicable rule against
14 perpetuities.
15 § 7733. Written trusts created in other jurisdictions - UTC
16 403.
17 A written trust not created by will is validly created if its
18 creation complies with the law of the jurisdiction in which the
19 trust instrument was executed or the law of the jurisdiction in
20 which, at the time of creation:
21 (1) the settlor was domiciled, had a residence or was a
22 national;
23 (2) a trustee was domiciled or had a place of business;
24 or
25 (3) any trust property was located.
26 § 7734. Trust purposes - UTC 404.
27 A trust may be created only to the extent its purposes are
28 lawful and not contrary to public policy.
29 § 7735. Charitable purposes; enforcement - UTC 405.
30 (a) Purposes.--A charitable trust may be created for the
20050S0660B0754 - 35 -
1 relief of poverty, the advancement of education or religion, the
2 promotion of health, governmental or municipal purposes, or
3 other purposes the achievement of which is beneficial to the
4 community.
5 (b) Selection by court.--If the provisions of a charitable
6 trust instrument do not indicate or authorize the trustee to
7 select a particular charitable purpose or beneficiary, the court
8 may select one or more charitable purposes or beneficiaries. The
9 selection must be consistent with the settlor's intention to the
10 extent it can be ascertained.
11 (c) Proceeding to enforce trust.--A proceeding to enforce a
12 charitable trust may be brought by the settlor during the
13 settlor's lifetime or at any time by the Attorney General, a
14 charitable organization expressly named in the trust instrument
15 to receive distributions from the trust or any other person who
16 has standing to do so.
17 § 7736. Creation of trust induced by fraud, duress or undue
18 influence - UTC 406.
19 A trust or an amendment to a trust is voidable to the extent
20 its creation was induced by fraud, duress or undue influence.
21 § 7737. Oral trusts unenforceable.
22 Oral trusts are unenforceable in this Commonwealth.
23 § 7738. Trust for care of animal - UTC 408.
24 (a) Creation and termination.--A trust may be created to
25 provide for the care of an animal alive during the settlor's
26 lifetime. The trust terminates upon the death of the animal or,
27 if the trust was created to provide for the care of more than
28 one animal alive during the settlor's lifetime, upon the death
29 of the last surviving animal.
30 (b) Enforcement.--A trust authorized by this section may be
20050S0660B0754 - 36 -
1 enforced by a person appointed in the trust instrument or, if no
2 person is so appointed, by a person appointed by the court. A
3 person having an interest in the welfare of the animal may
4 request the court to appoint a person to enforce the trust or to
5 remove a person appointed.
6 (c) Limitation.--Property of a trust authorized by this
7 section may be applied only to its intended use, except to the
8 extent the court determines that the value of the trust property
9 exceeds the amount required for the intended use. Except as
10 otherwise provided in the trust instrument, property not
11 required for the intended use must be distributed to the settlor
12 if then living, otherwise to the settlor's successors in
13 interest.
14 § 7739. Noncharitable trust without ascertainable beneficiary -
15 UTC 409.
16 Except as otherwise provided in section 7738 (relating to
17 trust for care of animal - UTC 408) or by another statute:
18 (1) A trust may be created for a noncharitable purpose
19 without a definite or definitely ascertainable beneficiary or
20 for a noncharitable but otherwise valid purpose to be
21 selected by the trustee. The trust may not be enforced for
22 more than 21 years.
23 (2) A trust authorized by this section may be enforced
24 by a person appointed in the trust instrument or, if no
25 person is so appointed, by a person appointed by the court.
26 (3) Property of a trust authorized by this section may
27 be applied only to its intended use, except to the extent the
28 court determines that the value of the trust property exceeds
29 the amount required for the intended use. Except as otherwise
30 provided in the trust instrument, property not required for
20050S0660B0754 - 37 -
1 the intended use must be distributed to the settlor if then
2 living, otherwise to the settlor's successors in interest.
3 § 7740. Termination of trusts; proceedings for termination or
4 modification of trusts - UTC 410.
5 (a) Termination.--A trust terminates to the extent it is
6 revoked or expires pursuant to its terms, no purpose of the
7 trust remains to be achieved or the purposes of the trust have
8 become unlawful or contrary to public policy. In addition, a
9 trust may be terminated by the methods prescribed by sections
10 7740.1 (relating to modification or termination of noncharitable
11 irrevocable trust by consent - UTC 411) through 7740.4 (relating
12 to modification or termination of noncharitable trust - UTC
13 414).
14 (b) Proceedings for termination or modification.--The
15 settlor, the trustee or a beneficiary may commence a proceeding
16 to approve or disapprove a proposed modification or termination
17 under sections 7740.1 through 7740.6 (relating to modification
18 to achieve settlor's tax objectives - UTC 416), the division of
19 a trust under section 7740.7 (relating to division of trusts) or
20 the combination of trusts under section 7740.8 (relating to
21 combination of trusts). The settlor of a charitable trust may
22 commence a proceeding to modify the trust under section 7740.3
23 (relating to charitable trusts - UTC 413).
24 § 7740.1. Modification or termination of noncharitable
25 irrevocable trust by consent - UTC 411.
26 (a) Consent by settlor and beneficiaries.--A noncharitable
27 irrevocable trust may be modified or terminated upon consent of
28 the settlor and all beneficiaries even if the modification or
29 termination is inconsistent with a material purpose of the
30 trust. A settlor's power to consent to a trust's modification or
20050S0660B0754 - 38 -
1 termination may be exercised by a guardian, an agent under the
2 settlor's general power of attorney or an agent under the
3 settlor's limited power of attorney that specifically authorizes
4 that action. Notwithstanding Subchapter C (relating to
5 representation), the settlor may not represent a beneficiary in
6 the modification or termination of a trust under this
7 subsection.
8 (b) Consent by beneficiaries with court approval.--A
9 noncharitable irrevocable trust may be modified upon the consent
10 of all the beneficiaries only if the court concludes that the
11 modification is not inconsistent with a material purpose of the
12 trust. A noncharitable irrevocable trust may be terminated upon
13 consent of all the beneficiaries only if the court concludes
14 that continuance of the trust is not necessary to achieve any
15 material purpose of the trust.
16 (b.1) Spendthrift provision.--A spendthrift provision in a
17 trust instrument is presumed to constitute a material purpose of
18 the trust.
19 (c) Distribution upon termination.--Upon termination of a
20 trust under subsection (a) or (b), the trustee shall distribute
21 the trust property as agreed by the beneficiaries.
22 (d) Consent by some beneficiaries with court approval.--If
23 not all the beneficiaries consent to a proposed modification or
24 termination of the trust under subsection (a) or (b), the
25 modification or termination may be approved by the court only if
26 the court is satisfied that:
27 (1) if all the beneficiaries had consented, the trust
28 could have been modified or terminated under this section;
29 and
30 (2) the interests of a beneficiary who does not consent
20050S0660B0754 - 39 -
1 will be adequately protected.
2 § 7740.2. Modification or termination of noncharitable
3 irrevocable trust by court - UTC 412.
4 (a) Unanticipated circumstances.--The court may modify the
5 administrative or dispositive provisions of a noncharitable
6 irrevocable trust, make an allowance from the principal of the
7 trust or terminate the trust if, because of circumstances that
8 apparently were not anticipated by the settlor, modification,
9 allowance or termination will further the purposes of the trust.
10 To the extent practicable, the modification or allowance shall
11 approximate the settlor's probable intention.
12 (b) Inability to administer effectively.--The court may
13 modify the administrative provisions of a noncharitable
14 irrevocable trust if adherence to the existing provisions would
15 be impracticable or wasteful or impair the trust's
16 administration.
17 (c) Distribution of property.--Upon termination of a trust
18 under this section, the trustee shall distribute the trust
19 property in a manner consistent with the purposes of the trust.
20 § 7740.3. Charitable trusts - UTC 413.
21 (a) General rule.--Except as otherwise provided in
22 subsection (b), if a particular charitable purpose becomes
23 unlawful, impracticable or wasteful:
24 (1) the trust does not fail, in whole or in part;
25 (2) the trust property does not revert to the settlor or
26 the settlor's successors in interest; and
27 (3) the court shall apply cy pres to fulfill as nearly
28 as possible the settlor's charitable intention, whether it be
29 general or specific.
30 (b) Exception.--A provision in the terms of a charitable
20050S0660B0754 - 40 -
1 trust that would result in distribution of the trust property to
2 a noncharitable beneficiary prevails over the power of the court
3 under subsection (a) to apply cy pres.
4 (c) Administrative deviation.--A court may modify an
5 administrative provision of a charitable trust only to the
6 extent necessary to preserve the trust.
7 (d) Administrative termination of small charitable trusts.--
8 A trust solely for charitable purposes having assets of less
9 than $100,000 may be terminated at its inception or at any time
10 thereafter by the trustee with the consent of the Attorney
11 General and all charitable organizations that are designated as
12 beneficiaries by name in the trust instrument. Upon termination,
13 the assets, subject to the approval of the Attorney General,
14 shall be delivered to the organizations, if any, designated in
15 the trust instrument or, if none, to organizations selected by
16 the trustee, in either case to be held and applied for the
17 general or specific charitable purposes and on the terms that
18 will, in the trustee's discretion, fulfill as nearly as possible
19 the settlor's intention.
20 (e) Judicial termination of charitable trusts.--If the
21 separate existence of a trust, whenever created, solely for
22 charitable purposes results or will result in administrative
23 expense or other burdens unreasonably out of proportion to the
24 charitable benefits, the court may, upon application of the
25 trustee or any interested person and after notice to the
26 Attorney General, terminate the trust, either at its inception
27 or at any time thereafter, and award the assets outright, free
28 of the trust, to the charitable organizations, if any,
29 designated in the trust instrument or, if none, to charitable
30 organizations selected by the court, in either case for the
20050S0660B0754 - 41 -
1 purposes and on the terms that the court may direct to fulfill
2 as nearly as possible the settlor's intentions other than any
3 intent to continue the trust, if the court is satisfied that the
4 charitable organizations will properly use or administer the
5 assets.
6 § 7740.4. Modification or termination of noncharitable trust -
7 UTC 414.
8 (a) Trustee's authority.--A trustee of a noncharitable trust
9 may terminate the trust if the trustee concludes that the value
10 of the trust property is insufficient to justify the cost of
11 administration, the trustee has given written notice to the
12 qualified beneficiaries at least 60 days before the proposed
13 termination and no qualified beneficiary provides the trustee
14 with a written objection to the proposed termination on or
15 before the date specified in the notice.
16 (b) Court authority.--The court may modify or terminate a
17 noncharitable trust, or remove the trustee and appoint a
18 different trustee, if it determines that the value of the trust
19 property is insufficient to justify the cost of administration.
20 (c) Distribution of trust property.--Upon termination of a
21 trust under this section, the trustee shall distribute the trust
22 property in a manner consistent with the purposes of the trust.
23 § 7740.5. Reformation to correct mistakes - UTC 415.
24 The court may reform a trust instrument, even if unambiguous,
25 to conform to the settlor's probable intention if it is proved
26 by clear and convincing evidence that the settlor's intent as
27 expressed in the trust instrument was affected by a mistake of
28 fact or law, whether in expression or inducement. The court may
29 provide that the modification have retroactive effect.
30 § 7740.6. Modification to achieve settlor's tax objectives -
20050S0660B0754 - 42 -
1 UTC 416.
2 The court may modify a trust instrument in a manner that is
3 not contrary to the settlor's probable intention in order to
4 achieve the settlor's tax objectives. The court may provide that
5 the modification have retroactive effect.
6 § 7740.7. Division of trusts.
7 (a) Without court approval.--A trustee may, without court
8 approval, divide a trust into separate trusts, allocating to
9 each separate trust either a fractional share of each asset and
10 each liability held by the original trust or assets having an
11 appropriate aggregate fair market value and fairly representing
12 the appreciation or depreciation in the assets of the original
13 trust as a whole. The beneficiaries of the separate trusts may
14 be different so long as their rights are not impaired. If the
15 division reflects disclaimers or different tax elections, the
16 division shall relate back to the date to which the disclaimer
17 or tax election relates.
18 (b) With court approval.--The court, for cause shown, may
19 authorize the division of a trust into two separate trusts upon
20 such terms and conditions and with notice as the court shall
21 direct.
22 (c) Separate fund.--A trustee may, without court approval,
23 set aside property in a separate fund prior to actual
24 distribution, after which income earned on the separate fund and
25 appreciation or depreciation of the fund set-aside shall belong
26 to the separate fund.
27 § 7740.8. Combination of trusts.
28 (a) With court approval.--The court, for cause shown, may
29 authorize the combination of separate trusts with substantially
30 similar provisions upon terms and conditions and with notice as
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1 the court shall direct notwithstanding that the trusts may have
2 been created by separate instruments and by different persons.
3 If necessary to protect possibly different future interests, the
4 assets shall be valued at the time of the combination and a
5 record made of the proportionate interest of each separate trust
6 in the combined fund.
7 (b) Without court approval.--A trustee may, without court
8 approval, combine trusts that were created under the same or
9 different instruments if the trusts have identical provisions,
10 tax attributes and trustees.
11 SUBCHAPTER E
12 CREDITOR'S CLAIMS; SPENDTHRIFT AND
13 DISCRETIONARY TRUSTS
14 Sec.
15 7741. Rights of beneficiary's creditor or assignee - UTC 501.
16 7742. Spendthrift provision - UTC 502.
17 7743. Exceptions to spendthrift provision - UTC 503.
18 7744. Discretionary trusts; effect of standard - UTC 504.
19 7745. Creditor's claim against settlor - UTC 505(a).
20 7746. Overdue distribution - UTC 506.
21 7747. Personal obligations of trustee - UTC 507.
22 7748. Property subject to power of withdrawal - UTC 505(b).
23 § 7741. Rights of beneficiary's creditor or assignee - UTC 501.
24 A judgment creditor or assignee of the beneficiary may reach
25 the beneficiary's interest by attachment of present or future
26 distributions to or for the benefit of the beneficiary or other
27 means to the extent the beneficiary's interest is not subject to
28 a spendthrift provision.
29 § 7742. Spendthrift provision - UTC 502.
30 (a) Validity.--A spendthrift provision is valid only if it
20050S0660B0754 - 44 -
1 restrains both voluntary and involuntary transfer of a
2 beneficiary's interest.
3 (b) Creation.--A trust instrument providing that the
4 interest of a beneficiary is held subject to a "spendthrift
5 trust," or words of similar import, is sufficient to restrain
6 both voluntary and involuntary transfer of the beneficiary's
7 interest.
8 (c) Effect.--A beneficiary may not transfer an interest in a
9 trust in violation of a valid spendthrift provision. Except as
10 otherwise provided in this subchapter, a creditor or assignee of
11 the beneficiary of a spendthrift trust may not reach the
12 interest or a distribution by the trustee before its receipt by
13 the beneficiary.
14 § 7743. Exceptions to spendthrift provision - UTC 503.
15 (a) (Reserved).
16 (b) Who may override.--A spendthrift provision is
17 unenforceable against:
18 (1) a beneficiary's child who has a judgment or court
19 order against the beneficiary for support or maintenance, to
20 the extent of the beneficiary's interests in the income and
21 principal of the trust;
22 (2) any other person who has a judgment or court order
23 against the beneficiary for support or maintenance, to the
24 extent of the beneficiary's interest in the trust's income;
25 (3) a judgment creditor who has provided services for
26 the protection of the beneficiary's interest in the trust;
27 and
28 (4) a claim of the United States or the Commonwealth to
29 the extent Federal law or a statute of this Commonwealth
30 provides.
20050S0660B0754 - 45 -
1 (c) Remedy if unenforceable.--A claimant against whom a
2 spendthrift provision cannot be enforced may obtain from a court
3 an order attaching present or future distributions to or for the
4 benefit of the beneficiary. The court may limit the award to
5 such relief as is appropriate under the circumstances.
6 (d) Definition.--As used in this section, the term "child"
7 includes any person for whom an order or judgment for child
8 support has been entered in this Commonwealth or another state.
9 § 7744. Discretionary trusts; effect of standard - UTC 504.
10 (a) (Reserved).
11 (b) Distribution not compelled.--Except as otherwise
12 provided in subsection (c), whether or not a trust contains a
13 spendthrift provision, a creditor of a beneficiary may not
14 compel a distribution that is subject to the trustee's
15 discretion, even if:
16 (1) the discretion is expressed in the form of a
17 standard of distribution;
18 (2) the trustee has abused the discretion; or
19 (3) the beneficiary is the trustee or a cotrustee of the
20 trust.
21 (c) Exception.--To the extent a trustee has not complied
22 with a standard of distribution or has abused a discretion:
23 (1) a distribution from the trust's income, principal or
24 both may be ordered by the court to satisfy a judgment or
25 court order against the beneficiary for support or
26 maintenance of the beneficiary's child to the extent of the
27 beneficiary's interests in the trust's income, principal or
28 both, and the court shall direct the trustee to pay the child
29 from the trust an amount as is equitable under the
30 circumstances, but not more than the amount the trustee would
20050S0660B0754 - 46 -
1 have been required to distribute to or for the benefit of the
2 beneficiary had the trustee complied with the standard or not
3 abused the discretion; and
4 (2) a distribution from trust income may be ordered by
5 the court to satisfy a judgment or court order against the
6 beneficiary for support or maintenance of any person other
7 than the beneficiary's child to the extent of the
8 beneficiary's interest in the income of the trust, and the
9 court shall direct the trustee to pay the person an amount
10 from the income of the trust as is equitable under the
11 circumstances, but not more than the amount of income the
12 trustee would have been required to distribute to or for the
13 benefit of the beneficiary had the trustee complied with the
14 standard or not abused the discretion.
15 (d) Proceeding against trustee.--This section does not limit
16 the right of a beneficiary to maintain a judicial proceeding
17 against a trustee for an abuse of discretion or failure to
18 comply with a standard for distribution.
19 (e) (Reserved).
20 (f) Definition.--As used in this section, the term "child"
21 includes any person for whom an order or judgment for child
22 support has been entered in this Commonwealth or another state.
23 § 7745. Creditor's claim against settlor - UTC 505(a).
24 Whether or not a trust instrument contains a spendthrift
25 provision and notwithstanding section 7744 (relating to
26 discretionary trusts; effect of standard - UTC 504):
27 (1) During the lifetime of the settlor, the property of
28 a revocable trust is subject to claims of the settlor's
29 creditors.
30 (2) A judgment creditor or assignee of the settlor of an
20050S0660B0754 - 47 -
1 irrevocable trust may reach the maximum amount that can be
2 distributed to or for the settlor's benefit. If a trust has
3 more than one settlor, the creditor or assignee of a
4 particular settlor may reach the portion of the trust
5 attributable to that settlor's contribution.
6 (3) After the death of the settlor and subject to the
7 settlor's right to direct the source from which liabilities
8 will be paid, the property of a revocable trust is subject to
9 claims of the settlor's creditors, costs of administration of
10 the settlor's estate, the expenses of the settlor's funeral
11 and disposal of remains and the family exemption to the
12 extent the settlor's probate estate is inadequate to satisfy
13 those claims, costs, expenses and exemption and no other
14 statute specifically exempts the property from those claims.
15 § 7746. Overdue distribution - UTC 506.
16 (a) Distribution not made within reasonable time.--Whether
17 or not the interest of the beneficiary in the trust is subject
18 to a spendthrift provision, a creditor or assignee of a
19 beneficiary may reach a mandatory distribution of income or
20 principal, including a distribution upon termination of the
21 trust, if the trustee has not made the distribution to the
22 beneficiary within a reasonable time after the mandated
23 distribution date.
24 (b) Definition.--As used in this section, the term
25 "mandatory distribution" means a distribution of income or
26 principal that the trustee is required by the trust instrument
27 to make to a beneficiary, including a distribution upon the
28 termination of the trust. The term excludes a distribution that
29 is subject to the exercise of the trustee's discretion
30 regardless of whether the trust instrument includes a support or
20050S0660B0754 - 48 -
1 other standard to guide the trustee in making distribution
2 decisions or provides that the trustee "may" or "shall" make
3 discretionary distributions, including distributions pursuant to
4 a support or other standard.
5 § 7747. Personal obligations of trustee - UTC 507.
6 Trust property is not subject to personal obligations of the
7 trustee, even if the trustee becomes insolvent or bankrupt.
8 § 7748. Property subject to power of withdrawal - UTC 505(b).
9 Trust property that is subject to a power of withdrawal,
10 during the period the power may be exercised and after its
11 lapse, release or waiver, may be reached by a creditor or an
12 assignee of the holder of the power whether or not the interest
13 of the holder in the trust is subject to a spendthrift
14 provision.
15 SUBCHAPTER F
16 REVOCABLE TRUSTS
17 Sec.
18 7751. Capacity of settlor of revocable trust - UTC 601.
19 7752. Revocation or amendment of revocable trust - UTC 602.
20 7753. Trustee's duties; powers of withdrawal - UTC 603.
21 7754. Actions contesting validity of revocable trust.
22 7755. Claims and distribution after settlor's death.
23 § 7751. Capacity of settlor of revocable trust - UTC 601.
24 The capacity required to create, amend, revoke or add
25 property to a revocable trust or to direct the actions of the
26 trustee of a revocable trust is the same as that required to
27 make a will.
28 § 7752. Revocation or amendment of revocable trust - UTC 602.
29 (a) Power to revoke or amend.--The settlor may revoke or
30 amend a trust unless the trust instrument expressly provides
20050S0660B0754 - 49 -
1 that the trust is irrevocable.
2 (b) More than one settlor.--If a revocable trust is created
3 or funded by more than one settlor:
4 (1) to the extent the trust consists of community
5 property, either spouse alone who notifies the other spouse
6 may revoke the trust, but the trust may be amended only by
7 joint action of both spouses;
8 (2) to the extent the trust consists of property other
9 than community property, each settlor may revoke or amend the
10 trust with respect to the portion of the trust property
11 attributable to that settlor's contribution upon notice to
12 each other settlor; and
13 (3) upon the revocation or amendment of the trust by
14 fewer than all the settlors, the trustee shall promptly
15 notify the other settlors of the revocation or amendment.
16 (c) How to revoke or amend.--The settlor may revoke or amend
17 a revocable trust only:
18 (1) by substantial compliance with a method provided in
19 the trust instrument; or
20 (2) if the trust instrument does not provide a method or
21 the method provided in the trust instrument is not expressly
22 made exclusive, by a later writing, other than a will or
23 codicil, that is signed by the settlor and expressly refers
24 to the trust or specifically conveys property that would
25 otherwise have passed according to the trust instrument.
26 (d) Delivery of property.--Upon revocation of a revocable
27 trust, the trustee shall deliver the trust property as the
28 settlor directs.
29 (e) Agent.--A settlor's powers with respect to revocation or
30 amendment of the nondispositive provisions of or withdrawal of
20050S0660B0754 - 50 -
1 property from a trust may be exercised by an agent under a power
2 of attorney only to the extent expressly authorized by the trust
3 instrument or the power. The agent under a power of attorney
4 that expressly authorizes the agent to do so may amend the
5 dispositive provisions of a revocable trust as the court may
6 direct.
7 (f) Guardian.--A guardian of the settlor's estate may
8 exercise the settlor's powers with respect to revocation or
9 amendment of or withdrawal of property from a revocable trust as
10 the court may direct.
11 (g) Liability.--A trustee who does not know that a trust has
12 been revoked or amended is not liable to the settlor, the
13 settlor's successors in interest or the beneficiaries for
14 distributions made and other actions taken on the assumption
15 that the trust had not been amended or revoked.
16 § 7753. Trustee's duties; powers of withdrawal - UTC 603.
17 (a) Power of settlor.--Regardless of the legal capacity of
18 the settlor, the rights of the beneficiaries are subject to the
19 control of, and the duties of the trustee are owed exclusively
20 to, the settlor while a trust is revocable.
21 (b) Holder of power of withdrawal.--The holder of a power of
22 withdrawal has the rights of a settlor of a revocable trust
23 under this section to the extent of the property subject to the
24 power during the period the power may be exercised.
25 § 7754. Actions contesting validity of revocable trust.
26 (a) How action may be commenced.--A person having standing
27 to do so may contest the validity of a revocable trust by filing
28 a petition with the court.
29 (b) Time limit.--The petition described in subsection (a)
30 must be filed no later than one year after the date on which the
20050S0660B0754 - 51 -
1 trustee gave the notice required by section 7780.3(c) (relating
2 to duty to inform and report). The court, upon petition of a
3 party in interest and with such notice as the court may direct,
4 may limit the time by which a petition under this section must
5 be filed to six months after the date on which the trustee gave
6 the notice required by section 7780.3(c).
7 (c) Grounds for contest.--The grounds for contesting the
8 validity of a revocable trust shall be the same as those for
9 contesting the validity of a will.
10 § 7755. Claims and distribution after settlor's death.
11 (a) Creditors' rights.--Creditors of the settlor of a
12 revocable trust shall have the same rights against the trust
13 assets determined immediately before the settlor's death as they
14 have against the settlor's estate, but the assets of the
15 settlor's estate shall be applied first toward satisfaction of
16 the creditors' claims. This subsection shall not expose to
17 creditors' claims trust assets for which other provisions of
18 substantive law provide exemption from the claims of the
19 settlor's creditors.
20 (b) Enforcement of claim against revocable trust.--A
21 creditor may make a claim against a revocable trust by notifying
22 the settlor's personal representative as provided in section
23 3384 (relating to notice of claim) or, if no personal
24 representative has been appointed, by notifying the trustee
25 according to the methods set forth in section 3384. A personal
26 representative who receives notice shall within 20 days notify
27 the trustee in writing and upon doing so shall have no liability
28 under this section to the creditor.
29 (c) No personal representative.--If no personal
30 representative is appointed within 90 days after the settlor's
20050S0660B0754 - 52 -
1 death, the trustee shall advertise the trust's existence and the
2 name and address of the trustee in the manner set forth in
3 section 3162 (relating to advertisement of grant of letters).
4 (d) Liability of personal representative.--A personal
5 representative who has received the notice required by section
6 7780.3(c) (relating to duty to inform and report) and does not
7 notify the trustee of a revocable trust of a creditor's claim
8 known to the personal representative within one year after the
9 first complete advertisement of the grant of letters to the
10 personal representative shall be liable to the creditor to the
11 extent the creditor's interest is prejudiced thereby. A personal
12 representative shall have no liability under this section to a
13 creditor whose claim is not known to the personal representative
14 within one year after the first complete advertisement of the
15 grant of letters to the personal representative. The provisions
16 of this section shall not affect the liability of the settlor's
17 personal representative under other provisions of law.
18 (e) Liability to any creditor.--At the trustee's own risk
19 and without the filing, audit or confirmation of the trustee's
20 account, a trustee of a revocable trust who has either given the
21 settlor's personal representative the notice required by section
22 7780.3(c) or given the notice required by subsection (c) may
23 distribute real or personal property of the revocable trust.
24 That distribution shall be without liability to any creditor of
25 the settlor unless the claim of that creditor is known to the
26 trustee within 13 months after the first complete advertisement
27 of the grant of letters to the personal representative or, if no
28 personal representative has been appointed, within one year
29 after the first complete advertisement under subsection (c).
30 (f) Rights of creditors against distributed property.--
20050S0660B0754 - 53 -
1 (1) No creditor shall have any claim against personal
2 property distributed by the trustee of a revocable trust at
3 the trustee's own risk under subsection (e) unless the claim
4 of the creditor is known to the trustee within 13 months
5 after the first complete advertisement of the grant of
6 letters to the personal representative or, if no personal
7 representative has been appointed, within one year after the
8 first complete advertisement of the trust under subsection
9 (c).
10 (2) No creditor shall have any claim against real
11 property distributed by the trustee of a revocable trust at
12 the trustee's own risk under subsection (e) unless the
13 creditor, within one year after the settlor's death, files a
14 written notice of claim with the clerk. The claim against
15 real property shall expire at the end of five years after the
16 settlor's death unless within that time the trustee files an
17 account or the creditor files a petition to compel an
18 accounting.
19 (g) Judicial principles.--In any proceeding by a creditor
20 against a trustee or beneficiary of a revocable trust, the court
21 shall apply principles analogous to:
22 (1) section 3387 (relating to claims not due; certain to
23 become due);
24 (2) section 3388 (relating to claims not certain to
25 become due);
26 (3) section 3392 (relating to classification and order
27 of payment); and
28 (4) section 3393 (relating to notice to Commonwealth and
29 political subdivisions).
30 SUBCHAPTER G
20050S0660B0754 - 54 -
1 OFFICE OF TRUSTEE
2 Sec.
3 7761. Accepting or declining trusteeship - UTC 701.
4 7762. Trustee's bond - UTC 702.
5 7763. Cotrustees - UTC 703.
6 7764. Vacancy in trusteeship; appointment of successor - UTC
7 704.
8 7765. Resignation of trustee; filing resignation.
9 7766. Removal of trustee - UTC 706.
10 7767. Delivery of property by former trustee - UTC 707.
11 7768. Compensation of trustee - UTC 708.
12 7769. Reimbursement of expenses - UTC 709.
13 7770. Liability of successor trustee.
14 § 7761. Accepting or declining trusteeship - UTC 701.
15 (a) Accepting trusteeship.--Except as otherwise provided in
16 subsection (c), a person designated as trustee accepts the
17 trusteeship:
18 (1) by substantially complying with a method of
19 acceptance provided in the trust instrument; or
20 (2) if the trust instrument does not provide a method or
21 the method provided in the trust instrument is not expressly
22 made exclusive, by accepting delivery of the trust property,
23 exercising powers or performing duties as trustee or by
24 otherwise indicating acceptance of the trusteeship.
25 (b) Rejecting trusteeship.--A person designated as trustee
26 who has not yet accepted the trusteeship may reject the
27 trusteeship. A designated trustee who does not accept the
28 trusteeship within a reasonable time after knowing of the
29 designation is deemed to have rejected the trusteeship.
30 (c) Actions not constituting acceptance of trusteeship.--A
20050S0660B0754 - 55 -
1 person designated as trustee, without accepting the trusteeship,
2 may:
3 (1) act to preserve the trust property if, within a
4 reasonable time after acting, the person sends a written
5 rejection of the trusteeship to the settlor or, if the
6 settlor is dead or lacks capacity, to a qualified
7 beneficiary; and
8 (2) inspect or investigate trust property to determine
9 potential liability under environmental or other law or for
10 any other purpose.
11 § 7762. Trustee's bond - UTC 702.
12 (a) When required.--A trustee shall give bond to secure
13 performance of the trustee's duties only if the court finds that
14 a bond is needed to protect the interests of the beneficiaries
15 or is required by the provisions of the trust instrument and the
16 court has not dispensed with the requirement.
17 (b) Judicial authority.--The court may specify the amount of
18 a bond, its liabilities and whether sureties are necessary. The
19 court may modify or terminate a bond at any time.
20 (c) Institutional trustees.--An institution qualified to do
21 trust business in this Commonwealth need not give bond even if
22 required by the trust instrument.
23 § 7763. Cotrustees - UTC 703.
24 (a) Majority decision.--Cotrustees who do not reach a
25 unanimous decision may act by majority decision.
26 (a.1) When no majority.--When a dispute arises among
27 trustees as to the exercise or nonexercise of any of their
28 powers and there is no agreement by a majority of them, unless
29 otherwise provided by the trust instrument, the court in its
30 discretion, upon petition filed by any of the trustees or any
20050S0660B0754 - 56 -
1 party in interest, aided if necessary by the report of a master,
2 may direct the exercise or nonexercise of the power as it deems
3 necessary for the best interest of the trust.
4 (b) Vacancy.--If a vacancy occurs in a cotrusteeship, the
5 remaining cotrustees may act for the trust.
6 (c) Performance.--A cotrustee shall participate in the
7 performance of a trustee's function unless the cotrustee is
8 unavailable to perform the function because of absence, illness,
9 disqualification under the law or other reason or the cotrustee
10 has properly delegated the performance of the function to
11 another trustee.
12 (d) Unavailability.--If a cotrustee is unavailable to
13 perform duties and prompt action is necessary to achieve the
14 purposes of the trust or to avoid injury or loss to the trust
15 property, the remaining cotrustee or a majority of the remaining
16 cotrustees may act for the trust.
17 (e) (Reserved).
18 (f) Liability.--Except as otherwise provided in subsection
19 (g), a trustee who does not join in an action of another trustee
20 is not liable for the action.
21 (g) Reasonable care.--Each trustee shall exercise reasonable
22 care to:
23 (1) prevent a cotrustee from committing a breach of
24 trust involving fraud or self-dealing; and
25 (2) compel a cotrustee to redress a breach of trust
26 involving fraud or self-dealing.
27 (h) Dissenting trustee.--A dissenting trustee shall join the
28 majority to carry out a majority decision requiring affirmative
29 action and may be ordered to do so by the court. A dissenting
30 trustee who joins in an action at the direction of the majority
20050S0660B0754 - 57 -
1 of the trustees and who notified any cotrustee of the dissent at
2 or before the time of the action is not liable for the action
3 unless the action is a breach of trust involving fraud or self-
4 dealing.
5 § 7764. Vacancy in trusteeship; appointment of successor - UTC
6 704.
7 (a) When vacancy occurs.--A vacancy in a trusteeship occurs
8 if:
9 (1) a person designated as trustee rejects the
10 trusteeship;
11 (2) a person designated as trustee cannot be identified
12 or does not exist;
13 (3) a trustee resigns;
14 (4) a trustee is disqualified or removed;
15 (5) a trustee dies; or
16 (6) a trustee is determined by the court to be
17 incapacitated pursuant to section 5511 (relating to petition
18 and hearing; independent evaluation).
19 (b) Filling of vacancy.--A vacancy in a trusteeship need not
20 be filled if one or more cotrustees remain in office and the
21 trust instrument does not require that it be filled. A vacancy
22 shall be filled if the trust has no remaining trustee.
23 (c) Filling vacancy for noncharitable trust.--A vacancy in a
24 trusteeship of a noncharitable trust that is required to be
25 filled shall be filled in the following order of priority:
26 (1) by a person designated in or pursuant to the
27 provisions of the trust instrument to act as successor
28 trustee;
29 (2) by a person appointed by unanimous written agreement
30 of the qualified beneficiaries; or
20050S0660B0754 - 58 -
1 (3) by a person appointed by the court.
2 (d) Filling vacancy for charitable trust.--A vacancy in a
3 trusteeship of a charitable trust that is required to be filled
4 shall be filled in the following order of priority:
5 (1) by a person designated in or under the provisions of
6 the trust instrument to act as successor trustee;
7 (2) by a person selected by unanimous written agreement
8 of the qualified beneficiaries if the Office of Attorney
9 General concurs in the selection; or
10 (3) by a person appointed by the court.
11 (e) Appointment by court.--Whether or not a vacancy in a
12 trusteeship exists or is required to be filled, the court may
13 appoint an additional trustee or special fiduciary if the court
14 considers the appointment desirable for the administration of
15 the trust.
16 (f) Filing appointment.--An appointment of a trustee and an
17 acceptance of an appointment of a trustee may be filed with the
18 clerk of court having jurisdiction over the trust.
19 § 7765. Resignation of trustee; filing resignation.
20 (a) Court approval.--A trustee may resign with court
21 approval.
22 (b) Without court approval if authorized by trust
23 instrument.--A trustee may resign without court approval if
24 authorized to resign by the trust instrument.
25 (c) Without court approval and without authorization in
26 trust instrument.--
27 (1) Unless expressly provided to the contrary in the
28 trust instrument, an individual trustee may resign without
29 court approval and without authorization in the trust
30 instrument if:
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1 (i) there is at least one cotrustee and all
2 cotrustees consent in writing to the resignation; and
3 (ii) all the qualified beneficiaries consent in
4 writing to the resignation.
5 (2) This subsection shall not authorize the sole trustee
6 of a trust to resign unless the trust instrument names a
7 successor trustee or provides a method for appointing a
8 successor trustee, and in either case the resignation shall
9 not be effective until the successor trustee accepts the
10 appointment in writing.
11 (d) Liability.--The resignation of a trustee shall not by
12 itself relieve the resigning trustee of liability in connection
13 with the administration of the trust.
14 (e) Filing resignation.--A resignation of a trustee may be
15 filed with the clerk of the court having jurisdiction over the
16 trust.
17 § 7766. Removal of trustee - UTC 706.
18 (a) Request to remove trustee; court authority.--The
19 settlor, a cotrustee or a beneficiary may request the court to
20 remove a trustee or a trustee may be removed by the court on its
21 own initiative.
22 (b) When court may remove trustee.--The court may remove a
23 trustee if it finds that removal of the trustee best serves the
24 interests of the beneficiaries of the trust and is not
25 inconsistent with a material purpose of the trust, a suitable
26 cotrustee or successor trustee is available and:
27 (1) the trustee has committed a serious breach of trust;
28 (2) lack of cooperation among cotrustees substantially
29 impairs the administration of the trust;
30 (3) the trustee has not effectively administered the
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1 trust because of the trustee's unfitness, unwillingness or
2 persistent failures; or
3 (4) there has been a substantial change of
4 circumstances.
5 (c) Court remedies.--Pending a final decision on a request
6 to remove a trustee, or in lieu of or in addition to removing a
7 trustee, the court may order appropriate relief under section
8 7781(b) (relating to remedies for breach of trust - UTC 1001) as
9 may be necessary to protect the trust property or the interests
10 of the beneficiaries.
11 (d) Procedure.--The procedure for removal and discharge of a
12 trustee and the effect of removal and discharge shall be the
13 same as that set forth in sections 3183 (relating to procedure
14 for and effect of removal) and 3184 (relating to discharge of
15 personal representative and surety).
16 § 7767. Delivery of property by former trustee - UTC 707.
17 (a) Duties and powers of trustee.--Unless a cotrustee
18 remains in office or the court otherwise orders, a trustee who
19 has resigned or been removed has the duties of a trustee and the
20 powers necessary to protect the trust property until the trust
21 property is delivered to a successor trustee or other person
22 entitled to it.
23 (b) Delivery of trust property.--A trustee who has resigned
24 or been removed shall proceed expeditiously to deliver the trust
25 property within the trustee's possession to the cotrustee,
26 successor trustee or other person entitled to it.
27 § 7768. Compensation of trustee - UTC 708.
28 (a) If unspecified.--If neither the trust instrument nor a
29 separate written agreement signed by the settlor or anyone who
30 is authorized by the trust instrument to do so specifies the
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1 trustee's compensation, the trustee is entitled to compensation
2 that is reasonable under the circumstances. Neither a
3 compensation provision in a trust instrument nor a fee agreement
4 governs compensation payable from trust principal unless it
5 explicitly so provides.
6 (b) If specified; adjustment.--If a trust instrument or
7 written fee agreement signed by the settlor or anyone who is
8 authorized by the trust instrument to do so specifies a
9 trustee's compensation, the trustee is entitled to the specified
10 compensation. The court may allow reasonable compensation that
11 is more or less than that specified if:
12 (1) the duties of the trustee have become substantially
13 different from those contemplated when the trust was created
14 or when the fee agreement was executed;
15 (2) the compensation specified in the trust instrument
16 or fee agreement would be unreasonable; or
17 (3) the trustee performed extraordinary services, and
18 the trust instrument or fee agreement does not specify the
19 trustee's compensation for those services.
20 (c) Entitlement not barred.--None of the following shall bar
21 a trustee's entitlement to compensation from the income or
22 principal of the trust:
23 (1) The trust is perpetual or for any other reason has
24 not yet terminated.
25 (2) The trustee's term of office has not yet ended.
26 (3) The trustee of a testamentary trust also acted as a
27 personal representative of the settlor and was or might have
28 been compensated for services as a personal representative
29 from the principal of the settlor's estate.
30 (d) Court authority.--In determining reasonable
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1 compensation, the court may consider, among other facts, the
2 market value of the trust and may determine compensation as a
3 fixed or graduated percentage of the trust's market value. The
4 court may allow compensation from principal, income or both and
5 determine the frequency with which compensation may be
6 collected.
7 (e) Cemetery lots.--The authority in this section to pay
8 compensation from trust principal shall not apply to trusts
9 created by cemetery lot owners as endowments for the endowed
10 care and maintenance of burial or cemetery lots if the principal
11 sum involved is less than $20,000. Compensation shall be paid
12 exclusively from the income of such trusts.
13 § 7769. Reimbursement of expenses - UTC 709.
14 (a) Reimbursement from trust property.--A trustee is
15 entitled to be reimbursed out of the trust property, with
16 interest as appropriate, for:
17 (1) expenses that were properly incurred in the
18 administration of the trust; and
19 (2) to the extent necessary to prevent unjust enrichment
20 of the trust, expenses that were not properly incurred in the
21 administration of the trust.
22 (b) Advance.--An advance by the trustee of money for the
23 protection of the trust gives rise to a lien against trust
24 property to secure reimbursement with reasonable interest.
25 § 7770. Liability of successor trustee.
26 A successor trustee shall not be personally liable for the
27 acts or omissions of the trustee's predecessor and shall have no
28 duty to investigate the acts or omissions of the predecessor.
29 SUBCHAPTER H
30 DUTIES AND POWERS OF TRUSTEE
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1 Sec.
2 7771. Duty to administer trust - UTC 801.
3 7772. Duty of loyalty - UTC 802.
4 7773. Impartiality - UTC 803.
5 7774. Prudent administration - UTC 804.
6 7775. Costs of administration - UTC 805.
7 7776. Trustee's skills - UTC 806.
8 7777. Delegation by trustee.
9 7778. Powers to direct - UTC 808.
10 7779. Control and protection of trust property - UTC 809.
11 7780. Recordkeeping and identification of trust property -
12 UTC 810.
13 7780.1. Enforcement and defense of claims - UTC 811.
14 7780.2. (Reserved).
15 7780.3. Duty to inform and report.
16 7780.4. Discretionary powers.
17 7780.5. Powers of trustees - UTC 815.
18 7780.6. Illustrative powers of trustee.
19 7780.7. Distribution upon termination.
20 § 7771. Duty to administer trust - UTC 801.
21 Upon acceptance of a trusteeship, the trustee shall
22 administer the trust in good faith, in accordance with its
23 provisions and purposes and the interests of the beneficiaries
24 and in accordance with applicable law.
25 § 7772. Duty of loyalty - UTC 802.
26 (a) Duty of trustee.--A trustee shall administer the trust
27 solely in the interests of the beneficiaries.
28 (b) Effect of conflict of interest.--Subject to the rights
29 of persons dealing with or assisting the trustee as provided in
30 section 7790.2 (relating to protection of person dealing with
20050S0660B0754 - 64 -
1 trustee - UTC 1012), a sale, purchase, exchange, encumbrance or
2 other disposition of property between a trust and either the
3 trustee in the trustee's individual capacity or one of the
4 persons identified in subsection (c) is voidable by a court upon
5 application by a beneficiary affected by the transaction unless:
6 (1) the transaction was authorized by the trust
7 instrument;
8 (2) the transaction was approved by the court;
9 (3) the beneficiary did not commence a judicial
10 proceeding within the time allowed by section 7785 (relating
11 to limitation of action against trustee);
12 (4) the beneficiary consented to the trustee's conduct,
13 ratified the transaction or released the trustee in
14 compliance with section 7789 (relating to beneficiary's
15 consent, release or ratification - UTC 1009); or
16 (5) the transaction involves a contract entered into or
17 claim acquired by the trustee before the person became or
18 contemplated becoming a trustee.
19 (c) What constitutes conflict of interest.--A sale,
20 purchase, exchange, encumbrance or other disposition of property
21 is presumed to be affected by a conflict between personal and
22 fiduciary interests if it is entered into by the trustee with:
23 (1) the trustee's spouse;
24 (2) the trustee's parent or a spouse of the parent;
25 (3) a descendant of the trustee's parent or a spouse of
26 the descendant;
27 (4) an agent of the trustee unless the trustee is a
28 corporation and the agent is an affiliate of the corporation
29 or the transaction is authorized by section 7209 (relating to
30 mutual funds);
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1 (5) a corporation or other person or enterprise in which
2 the trustee or a person that owns a significant interest in
3 the trustee has an interest that might affect the trustee's
4 judgment, but this paragraph does not apply to an affiliate
5 of a corporate trustee or to a transaction authorized by
6 section 7209; or
7 (6) the trustee personally.
8 (d) Transactions between trustee and beneficiary.--A
9 transaction between a trustee and a beneficiary that does not
10 concern trust property but that occurs during the existence of
11 the trust or while the trustee retains significant influence
12 over the beneficiary and from which the trustee obtains an
13 advantage is voidable by a court upon application by the
14 beneficiary unless the trustee establishes that the transaction
15 was fair to the beneficiary.
16 (e) Conflict regarding trust opportunity.--A transaction not
17 concerning trust property in which the trustee engages in the
18 trustee's individual capacity involves a conflict between
19 personal and fiduciary interests if the transaction concerns an
20 opportunity properly belonging to the trust.
21 (f) (Reserved).
22 (g) Business enterprises.--In voting shares of stock or in
23 exercising powers of control over similar interests in other
24 forms of business enterprise, the trustee shall act in the best
25 interests of the beneficiaries. If the trust is the sole owner
26 of a corporation or other form of enterprise, the trustee shall
27 elect or appoint directors or other managers who will manage the
28 corporation or business enterprise in the best interests of the
29 beneficiaries.
30 (h) Permissible transactions.--This section does not
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1 preclude the following transactions if fair to the
2 beneficiaries:
3 (1) an agreement between a trustee and a beneficiary
4 relating to the appointment or compensation of the trustee;
5 (2) payment of reasonable compensation to the trustee
6 and payment of reasonable compensation to affiliates of a
7 corporate trustee if the compensation is disclosed to the
8 current beneficiaries;
9 (3) a transaction between a trust and another trust,
10 decedent's estate or guardianship, of which the trustee is a
11 fiduciary or in which a beneficiary has an interest;
12 (4) a deposit of trust money in a regulated financial-
13 service institution operated by the trustee;
14 (5) an advance by the trustee of money for the
15 protection of the trust; or
16 (6) a transaction authorized by section 7209.
17 (i) (Reserved).
18 § 7773. Impartiality - UTC 803.
19 If a trust has two or more beneficiaries, the trustee shall
20 act impartially in investing, managing and distributing the
21 trust property, giving due regard to the beneficiaries'
22 respective interests in light of the purposes of the trust. The
23 duty to act impartially does not mean that the trustee must
24 treat the beneficiaries equally. Rather, the trustee must treat
25 the beneficiaries equitably in light of the purposes of the
26 trust.
27 § 7774. Prudent administration - UTC 804.
28 A trustee shall administer the trust as a prudent person
29 would, by considering the purposes, provisions, distributional
30 requirements and other circumstances of the trust and by
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1 exercising reasonable care, skill and caution.
2 § 7775. Costs of administration - UTC 805.
3 In administering a trust, the trustee may incur only costs
4 that are reasonable in relation to the trust property, the
5 purposes of the trust and the skills of the trustee.
6 § 7776. Trustee's skills - UTC 806.
7 A trustee who has special skills or expertise relevant to a
8 trust or who is named trustee in reliance upon the trustee's
9 representation that the trustee has special skills or expertise
10 relevant to a trust shall use those special skills or expertise
11 in the administration of the trust.
12 § 7777. Delegation by trustee.
13 (a) Standards for delegation.--A trustee may delegate duties
14 and powers that a prudent trustee of comparable skills might
15 delegate under the circumstances. The trustee shall exercise
16 reasonable care, skill and caution in:
17 (1) selecting an agent;
18 (2) establishing the scope and specific terms of the
19 delegation, consistent with the purposes and provisions of
20 the trust; and
21 (3) reviewing periodically the agent's actions in order
22 to monitor the agent's performance and compliance with the
23 scope and specific terms of the delegation.
24 (b) Agent's duty.--The agent shall comply with the scope and
25 terms of the delegation and shall exercise the delegated duties
26 and powers with reasonable care, skill and caution and shall be
27 liable to the trust for failure to do so. An agent who
28 represents having special skills or expertise shall use those
29 special skills or that expertise.
30 (c) Liability.--A trustee who complies with subsection (a)
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1 is not liable to the beneficiaries or to the trust for an action
2 of the agent to whom the function was delegated.
3 (d) Jurisdiction.--An agent who accepts the delegation of
4 duties or powers from a trustee who is subject to the
5 jurisdiction of a court of this Commonwealth shall be deemed to
6 have submitted to the jurisdiction of that court even if the
7 terms of the delegation provide for a different jurisdiction or
8 venue.
9 (e) When one trustee may delegate to another.--A trustee may
10 delegate duties and powers to another trustee if the delegating
11 trustee reasonably believes that the other trustee has greater
12 skills than the delegating trustee with respect to those duties
13 and powers and the other trustee accepts the delegation. The
14 delegating trustee shall not be responsible for the decisions,
15 actions or inactions of the trustee to whom those duties and
16 powers have been delegated if the delegating trustee has
17 exercised reasonable care, skill and caution in establishing the
18 scope and specific terms of the delegation and in reviewing
19 periodically the performance of the trustee to whom the duties
20 and powers have been delegated and that trustee's compliance
21 with the scope and specific terms of the delegation.
22 § 7778. Powers to direct - UTC 808.
23 (a) Direction of settlor.--While a trust is revocable, the
24 trustee may follow a written direction of the settlor that is
25 contrary to the trust instrument.
26 (b) Compliance with power.--If a trust instrument confers
27 upon a person other than the settlor of a revocable trust power
28 to direct certain actions of the trustee, the trustee shall act
29 in accordance with a written exercise of the power unless the
30 attempted exercise is manifestly contrary to the trust
20050S0660B0754 - 69 -
1 instrument or the trustee knows the attempted exercise would
2 constitute a serious breach of a fiduciary duty that the person
3 holding the power owes to the beneficiaries of the trust.
4 (c) Modification or termination of trust.--A trust
5 instrument may confer upon a trustee or other person a power to
6 modify or terminate the trust.
7 (d) Fiduciary relationship.--A person other than a
8 beneficiary who holds a power to direct certain actions of a
9 trustee is presumptively a fiduciary who, as such, is required
10 to act in good faith with regard to the purposes of the trust
11 and the interests of the beneficiaries. The holder of a power to
12 direct is liable for any loss that results from breach of the
13 holder's fiduciary duty.
14 § 7779. Control and protection of trust property - UTC 809.
15 A trustee shall take reasonable steps to take control of and
16 protect the trust property.
17 § 7780. Recordkeeping and identification of trust property -
18 UTC 810.
19 (a) Records.--A trustee shall keep adequate records of the
20 administration of the trust.
21 (b) Commingling trust property prohibited.--A trustee shall
22 keep trust property separate from the trustee's own property.
23 (c) Designating trust property.--Except as otherwise
24 provided in subsection (d) and section 3321 (relating to nominee
25 registration; corporate fiduciary as agent; deposit of
26 securities in a clearing corporation; book-entry securities), a
27 trustee shall cause the trust property to be designated so that
28 the interest of the trust, to the extent feasible, appears in
29 records maintained by a party other than a trustee or
30 beneficiary.
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1 (d) Investing property of separate trusts.--If the trustee
2 maintains records clearly indicating the respective interests, a
3 trustee may invest as a whole the property of two or more
4 separate trusts.
5 § 7780.1. Enforcement and defense of claims - UTC 811.
6 Except as provided in section 7770 (relating to liability of
7 successor trustee), a trustee shall take reasonable steps to
8 enforce claims of the trust and to defend claims against the
9 trust. When one of several trustees is individually liable to
10 the trust, the other trustee or trustees shall take any legal
11 action against that trustee necessary to protect the trust.
12 § 7780.2. (Reserved).
13 § 7780.3. Duty to inform and report.
14 (a) Duty to respond to requests.--A trustee shall promptly
15 respond to a beneficiary's reasonable request for information
16 related to the trust's administration.
17 (b) Notice after settlor of revocable trust has been
18 adjudicated incapacitated.--No later than 30 days after the date
19 on which the trustee of a revocable trust learns that the
20 settlor has been adjudicated incapacitated, the trustee shall
21 send the notice described in subsection (i) to the settlor's
22 guardian.
23 (c) Notice after settlor of revocable trust has died.--No
24 later than 30 days after the date on which the trustee of a
25 revocable trust learns that the settlor has died, the trustee
26 shall send the notice described in subsection (i) to:
27 (1) the settlor's personal representative;
28 (2) the settlor's spouse or, if the settlor's spouse is
29 incapacitated, the spouse's guardian;
30 (3) each of the settlor's children who is sui juris and
20050S0660B0754 - 71 -
1 the guardian, if any, of each child who is not sui juris; and
2 (4) the trust's current beneficiaries.
3 (d) Notice after settlor of irrevocable trust has been
4 adjudicated incapacitated.--No later than 30 days after the date
5 on which the trustee of an irrevocable trust learns that the
6 settlor has been adjudicated incapacitated, the trustee shall
7 send the notice described in subsection (i) to the trust's
8 current beneficiaries. A revocable trust shall not be deemed
9 irrevocable for the purposes of this subsection merely because
10 the settlor has been adjudicated incapacitated.
11 (e) Notice after settlor of irrevocable trust has died.--No
12 later than 30 days after the date on which the trustee of an
13 irrevocable trust learns that the settlor has died, the trustee
14 shall send the notice described in subsection (i) to the trust's
15 current beneficiaries unless the settlor had been adjudicated
16 incapacitated and the trustee sent notices to the current
17 beneficiaries as required by subsection (d).
18 (f) Notice to current beneficiaries.--No later than 30 days
19 after the date on which the trustee of an irrevocable trust
20 learns that a person who did not previously receive the notice
21 described in subsection (i) is a current beneficiary of the
22 trust, the trustee shall send the notice described in subsection
23 (i) to the current beneficiary if, at that time, the trustee
24 knows that the settlor is then deceased or has been adjudicated
25 incapacitated.
26 (g) Change in trusteeship.--Apart from the other
27 requirements of this section, the trustee shall send the notice
28 described in subsection (i) to the current beneficiaries each
29 time there is a change in trusteeship.
30 (h) Trustee's notice to any beneficiary at any time.--Apart
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1 from the requirements of this section, the trustee may send the
2 notice described in subsection (i) to any beneficiary of the
3 trust at any time.
4 (i) Contents of notice.--Any notice under this section shall
5 be written and convey the following information:
6 (1) The fact of the trust's existence.
7 (2) The identity of the settlor.
8 (3) The trustee's name, address and telephone number.
9 (4) The recipient's right to receive a copy of the trust
10 instrument.
11 (5) The recipient's right to receive, at least annually,
12 a written report of the trust's assets and their market
13 values if feasible, the trust's liabilities and the trust's
14 receipts and disbursements since the date of the last such
15 report.
16 (j) Waiver.--Any beneficiary may waive in writing the right
17 to receive the notice described in subsection (i) and thereafter
18 may rescind in writing that waiver.
19 (k) Notice to settlor's appointee.--The settlor of a trust
20 may in the trust instrument appoint one or more persons or a
21 succession of persons to receive, on behalf of one or more named
22 current beneficiaries of the trust, the notices required by this
23 section. The trustee giving the notice required by this section
24 to that appointee satisfies the trustee's duty to give to the
25 named current beneficiary the notice required by this section
26 if:
27 (1) the trustee notifies the appointee that the notice
28 is being given to the appointee as representing the named
29 current beneficiary; and
30 (2) the appointee does not decline to receive the notice
20050S0660B0754 - 73 -
1 in a writing that is given to the trustee no later than 60
2 days after receipt of the trustee's notice.
3 (l) Applicability.--
4 (1) If the death or adjudication of incapacity described
5 in subsection (b), (c), (d) or (e) occurs on or after (in
6 preparing this act for printing in the Laws of Pennsylvania
7 and the Pennsylvania Consolidated Statutes, the Legislative
8 Reference Bureau shall insert here, in lieu of this
9 statement, the effective date of this section), the time
10 limit for notice set forth in that subsection shall apply.
11 (2) If the death or adjudication of incapacity described
12 in subsection (b), (c), (d) or (e) has occurred before (in
13 preparing this act for printing in the Laws of Pennsylvania
14 and the Pennsylvania Consolidated Statutes, the Legislative
15 Reference Bureau shall insert here, in lieu of this
16 statement, the effective date of this section), the time
17 limit for notice set forth in that subsection shall be (in
18 preparing this act for printing in the Laws of Pennsylvania
19 and the Pennsylvania Consolidated Statutes, the Legislative
20 Reference Bureau shall insert here, in lieu of this
21 statement, the date that is two years after the effective
22 date of this section).
23 (3) The notice under subsection (f) shall not be
24 required to be completed until two years after (in preparing
25 this act for printing in the Laws of Pennsylvania and the
26 Pennsylvania Consolidated Statutes, the Legislative Reference
27 Bureau shall insert here, in lieu of this statement, the
28 effective date of this section).
29 § 7780.4. Discretionary powers.
30 The trustee shall exercise a discretionary power in good
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1 faith and in accordance with the provisions and purposes of the
2 trust and the interests of the beneficiaries, notwithstanding
3 the breadth of discretion granted to a trustee in the trust
4 instrument, including the use of such terms as "absolute,"
5 "sole" or "uncontrolled."
6 § 7780.5. Powers of trustees - UTC 815.
7 (a) Exercise of power.--Except as otherwise provided in the
8 trust instrument or in other provisions of this title, a trustee
9 has all the powers over the trust property that an unmarried
10 competent owner has over individually owned property and may
11 exercise those powers without court approval from the time of
12 creation of the trust until final distribution of the assets of
13 the trust.
14 (b) (Reserved).
15 § 7780.6. Illustrative powers of trustee.
16 (a) Listing.--The powers which a trustee may exercise
17 pursuant to section 7780.5 (relating to powers of trustees - UTC
18 815) include the following powers:
19 (1) To accept, hold, invest in and retain investments as
20 provided in Chapter 72 (relating to prudent investor rule).
21 (2) To pay or contest a claim; settle a claim by or
22 against the trust by compromise, arbitration or otherwise;
23 and release, in whole or in part, any claim belonging to the
24 trust.
25 (3) To resolve a dispute regarding the interpretation of
26 the trust or the administration of the trust by mediation,
27 arbitration or other alternative dispute resolution
28 procedures.
29 (4) To prosecute or defend actions, claims or
30 proceedings for the protection of trust assets and of the
20050S0660B0754 - 75 -
1 trustee in the performance of the trustee's duties.
2 (5) To abandon or decline to administer any property
3 which is of little or no value, transfer title to abandoned
4 property and decline to accept title to and administer
5 property which has or may have environmental or other
6 liability attached to it.
7 (6) To insure the assets of the trust against damage or
8 loss and, at the expense of the trust, protect the trustee,
9 the trustee's agents and the beneficiaries from liability to
10 third persons arising from the administration of the trust.
11 (7) To advance money for the protection of the trust and
12 for all expenses, losses and liability sustained in the
13 administration of the trust or because of the holding or
14 ownership of any trust assets. The trustee has a lien on the
15 trust assets as against the beneficiary for an advance under
16 this paragraph, including interest on the advance.
17 (8) To pay taxes, assessments, compensation of the
18 trustee and employees and agents of the trustee and other
19 expenses incurred in the administration of the trust.
20 (9) To receive additions to the assets of the trust.
21 (10) To sell or exchange any real or personal property
22 at public or private sale, without obligation to repudiate an
23 otherwise binding agreement in favor of better offers. If the
24 trustee has been required to give bond, no proceeds of the
25 sale of real estate, including proceeds arising by the reason
26 of involuntary conversion, shall be paid to the trustee
27 until:
28 (i) the court has made an order excusing the trustee
29 from entering additional security; or
30 (ii) the court has made an order requiring
20050S0660B0754 - 76 -
1 additional security and the trustee has entered the
2 additional security.
3 (11) To enter for any purpose into a lease as lessor or
4 lessee with or without option to purchase or renew for a term
5 within or extending beyond the term of the trust.
6 (12) To grant options for sales or leases of a trust
7 asset and acquire options for the acquisition of assets,
8 including options exercisable after the trust terminates.
9 (13) To join in any reorganization, consolidation,
10 merger, dissolution, liquidation, voting-trust plan or other
11 concerted action of security holders and to delegate
12 discretionary duties with respect thereto.
13 (14) To vote a security, in person or by general or
14 limited proxy, with or without power of substitution.
15 (15) To borrow funds and mortgage or pledge trust assets
16 as security for repayment of the funds borrowed, including
17 repayments after the trust terminates.
18 (16) To make loans to and buy property from the personal
19 representatives of the settlor and the settlor's spouse.
20 Loans under this paragraph shall be adequately secured, and
21 the purchases under this paragraph shall be for fair market
22 value.
23 (17) To partition, subdivide, repair, improve or develop
24 real estate; enter into agreements concerning the partition,
25 subdivision, repair, improvement, development, zoning or
26 management of real estate; impose or extinguish restrictions
27 on real estate; dedicate land and easements to public use;
28 adjust boundaries; and do anything else regarding real estate
29 which is commercially reasonable or customary under the
30 circumstances.
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1 (18) With respect to possible liability for violation of
2 environmental law:
3 (i) to inspect or investigate property the trustee
4 holds or has been asked to hold or property owned or
5 operated by an organization in which the trustee holds or
6 has been asked to hold an interest, for the purpose of
7 determining the application of environmental law with
8 respect to the property;
9 (ii) to take action to prevent, abate or otherwise
10 remedy any actual or potential violation of environmental
11 law affecting property held directly or indirectly by the
12 trustee, whether taken before or after the assertion of a
13 claim or the initiation of governmental enforcement;
14 (iii) to decline to accept property into trust or
15 disclaim a power with respect to property that is or may
16 be burdened with liability for violation of environmental
17 law;
18 (iv) to compromise claims against the trust which
19 may be asserted for an alleged violation of environmental
20 law; and
21 (v) to pay the expense of inspection, review,
22 abatement or remedial action to comply with environmental
23 law.
24 (19) To operate, repair, maintain, equip and improve any
25 farm or farm operation; to purchase and sell livestock,
26 crops, feed and other property that is normally perishable;
27 and to purchase, use and dispose of farm equipment and employ
28 one or more farm managers and others in connection with farm
29 equipment and pay them reasonable compensation.
30 (20) To make ordinary or extraordinary repairs or
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1 alterations in buildings or other structures; demolish
2 improvements; and raze existing or erect new party walls or
3 buildings.
4 (21) To enter into a lease or arrangements for
5 exploration and removal of minerals or other natural
6 resources or enter into a pooling or unitization agreement.
7 (22) To exercise all rights and incidents of ownership
8 of life insurance policies held by the trust, including
9 borrowing on policies, entering into and terminating split-
10 dollar plans, exercising conversion privileges and rights to
11 acquire additional insurance and selecting settlement
12 options.
13 (23) To employ a custodian; hold property unregistered
14 or in the name of a nominee, including the nominee of any
15 institution employed as custodian, without disclosing the
16 fiduciary relationship and without retaining possession and
17 control of securities or other property so held or
18 registered; and pay reasonable compensation to the custodian.
19 (24) To apply funds distributable to a beneficiary who
20 is, in the trustee's opinion, disabled by illness or other
21 cause and unable properly to manage the funds directly for
22 the beneficiary's benefit or to pay such funds for
23 expenditure on the beneficiary's behalf to:
24 (i) the beneficiary;
25 (ii) a guardian of the beneficiary's estate;
26 (iii) an agent acting under a general power of
27 attorney for the beneficiary; or
28 (iv) if there is no agent or guardian, a relative or
29 other person having legal or physical custody or care of
30 the beneficiary.
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1 (25) To pay funds distributable to a minor beneficiary
2 to the minor or to a guardian of the minor's estate or to
3 apply the funds directly for the minor's benefit.
4 (26) To do any of the following:
5 (i) Pay any funds distributable to a beneficiary who
6 is not 21 years of age or older to:
7 (A) the beneficiary;
8 (B) an existing custodian for the beneficiary
9 under Chapter 53 (relating to Pennsylvania Uniform
10 Transfers to Minors Act) or under any other state's
11 version of the Uniform Transfers to Minors Act;
12 (C) an existing custodian for the beneficiary
13 under the former Pennsylvania Uniform Gifts to Minors
14 Act or under any other state's version of the Uniform
15 Gifts to Minors Act; or
16 (D) a custodian for the beneficiary appointed by
17 the trustee under Chapter 53.
18 (ii) Apply the funds for the beneficiary.
19 (27) To pay calls, assessments and other sums chargeable
20 or accruing against or on account of securities.
21 (28) To sell or exercise stock subscription or
22 conversion rights.
23 (29) To continue or participate in the operation of any
24 business or other enterprise and to effect incorporation,
25 merger, consolidation, dissolution or other change in the
26 form of the organization of the business or enterprise.
27 (30) To select a mode of payment under a qualified
28 employee benefit plan or a retirement plan payable to the
29 trustee and exercise rights under the plan.
30 (31) To distribute in cash or in kind or partly in each
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1 and allocate particular assets in proportionate or
2 disproportionate shares.
3 (32) To appoint a trustee to act in another jurisdiction
4 with respect to trust property located in the other
5 jurisdiction, confer upon the appointed trustee all the
6 powers and duties of the appointing trustee, require that the
7 appointed trustee furnish security and remove the appointed
8 trustee.
9 (33) To execute and deliver instruments which will
10 accomplish or facilitate the exercise of the trustee's
11 powers.
12 (b) Effect.--The trustee shall have no further
13 responsibility or liability for funds upon any of the following:
14 (1) Payment under subsection (a)(24).
15 (2) Payment under subsection (a)(25).
16 (3) Payment or application under subsection (a)(26).
17 § 7780.7. Distribution upon termination.
18 Upon the occurrence of an event terminating or partially
19 terminating a trust, the trustee shall proceed to distribute the
20 trust property within a reasonable time to the persons entitled
21 to it, subject to the right of the trustee to retain a
22 reasonable reserve for the payment of debts, expenses and taxes.
23 SUBCHAPTER I
24 LIABILITY OF TRUSTEES AND RIGHTS
25 OF PERSONS DEALING WITH TRUSTEES
26 Sec.
27 7781. Remedies for breach of trust - UTC 1001.
28 7782. Damages for breach of trust - UTC 1002.
29 7783. Damages in absence of breach - UTC 1003.
30 7784. (Reserved).
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1 7785. Limitation of action against trustee.
2 7786. Reliance on trust instrument - UTC 1006.
3 7787. Event affecting administration or distribution - UTC
4 1007.
5 7788. Exculpation of trustee - UTC 1008.
6 7789. Beneficiary's consent, release or ratification - UTC
7 1009.
8 7790. Limitation on personal liability of trustee - UTC 1010.
9 7790.1. Interest as general partner - UTC 1011.
10 7790.2. Protection of person dealing with trustee - UTC 1012.
11 7790.3. Certification of trust - UTC 1013.
12 § 7781. Remedies for breach of trust - UTC 1001.
13 (a) What constitutes breach of trust.--A violation by a
14 trustee of a duty the trustee owes to a beneficiary is a breach
15 of trust.
16 (b) Remedies.--To remedy a breach of trust that has occurred
17 or may occur, the court may order any appropriate relief,
18 including the following:
19 (1) Compelling the trustee to perform the trustee's
20 duties.
21 (2) Enjoining the trustee from committing a breach of
22 trust.
23 (3) Compelling the trustee to redress a breach of trust
24 by paying money, restoring property or other means.
25 (4) Ordering a trustee to file an account.
26 (5) Taking any action authorized by Chapter 43 (relating
27 to temporary fiduciaries).
28 (6) (Reserved).
29 (7) Removing the trustee as provided in section 7766
30 (relating to removal of trustee - UTC 706).
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1 (8) Reducing or denying compensation to the trustee.
2 (9) Subject to section 7790.2 (relating to protection of
3 person dealing with trustee - UTC 1012):
4 (i) voiding an act of the trustee;
5 (ii) imposing a lien or a constructive trust on
6 trust property; or
7 (iii) tracing trust property wrongfully disposed of
8 and recovering the property or its proceeds.
9 (10) (Reserved).
10 § 7782. Damages for breach of trust - UTC 1002.
11 (a) Liability for breach of trust.--A trustee who commits a
12 breach of trust is liable to the beneficiaries affected.
13 (b) Contribution.--
14 (1) Except as otherwise provided in this subsection, if
15 more than one trustee is liable to the beneficiaries for a
16 breach of trust, a trustee is entitled to contribution from
17 the other trustee or trustees.
18 (2) A trustee is not entitled to contribution if the
19 trustee:
20 (i) was substantially more at fault than another
21 trustee; or
22 (ii) committed the breach of trust in bad faith or
23 with reckless indifference to the purposes of the trust
24 or the interests of the beneficiaries.
25 (3) A trustee who received a benefit from the breach of
26 trust is not entitled to contribution from another trustee to
27 the extent of the benefit received.
28 § 7783. Damages in absence of breach - UTC 1003.
29 (a) Profit.--A trustee is accountable to an affected
30 beneficiary for any profit, excluding reasonable compensation,
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1 made by the trustee arising from the administration of the
2 trust, even absent a breach of trust.
3 (b) Loss or depreciation.--Absent a breach of trust, a
4 trustee is not liable to a beneficiary for a loss or
5 depreciation in the value of trust property or for not having
6 made a profit.
7 § 7784. (Reserved).
8 § 7785. Limitation of action against trustee.
9 (a) Imposed by trustee's written reports.--
10 (1) A beneficiary may not challenge a transaction or
11 assert a claim against a trustee for breach of trust on the
12 basis of a transaction if:
13 (i) the trustee provided the beneficiary with a
14 written report of the trust's assets and their market
15 values if feasible, the trust's liabilities and the
16 trust's receipts and disbursements for the year in which
17 the transaction occurred and for each of the four
18 subsequent calendar years;
19 (ii) the transaction was disclosed in the first of
20 the five reports to which subparagraph (i) refers;
21 (iii) the beneficiary did not notify the trustee in
22 writing within six months after receiving the fifth
23 annual report that the beneficiary objects to the
24 transaction and provide the basis in writing for that
25 objection; and
26 (iv) all reports were accompanied by a conspicuous
27 written statement describing the effect of this
28 paragraph.
29 (2) A claim not barred by paragraph (1) may nevertheless
30 be barred by subsection (b).
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1 (b) Five-year absolute bar.--If not previously barred by
2 subsection (a) or section 7798 (relating to failure to present
3 claim at audit):
4 (1) Except as provided in paragraph (2) or (3), a claim
5 by a beneficiary against a trustee, including a claim
6 preserved by the beneficiary notifying the trustee in the
7 manner described in subsection (a), shall be barred five
8 years after the first to occur of the following events:
9 (i) the date after the removal, resignation or death
10 of the trustee on which the beneficiary was given the
11 notice required by section 7780.3(g) (relating to duty to
12 inform and report);
13 (ii) the termination of the beneficiary's interest
14 in the trust; or
15 (iii) the termination of the trust.
16 (2) Except as set forth in paragraph (3), if the first
17 to occur of the events set forth in paragraph (1) occurred
18 before (in preparing this act for printing in the Laws of
19 Pennsylvania and the Pennsylvania Consolidated Statutes, the
20 Legislative Reference Bureau shall insert here, in lieu of
21 this statement, the effective date of this section), a claim
22 described in paragraph (1) shall be barred five years after
23 (in preparing this act for printing in the Laws of
24 Pennsylvania and the Pennsylvania Consolidated Statutes, the
25 Legislative Reference Bureau shall insert here, in lieu of
26 this statement, the effective date of this section).
27 (3) A claim described in paragraph (1) is not barred if,
28 prior to the respective date set forth in either paragraph
29 (1) or (2), the trustee has filed an account with the court
30 or the beneficiary has petitioned the court to compel the
20050S0660B0754 - 85 -
1 trustee to file an account.
2 § 7786. Reliance on trust instrument - UTC 1006.
3 A trustee who acts in reasonable reliance on the express
4 provisions of the trust instrument is not liable to a
5 beneficiary for a breach of trust to the extent the breach
6 resulted from the reliance.
7 § 7787. Event affecting administration or distribution - UTC
8 1007.
9 If the happening of an event, including marriage, divorce,
10 performance of educational requirements, attaining a specific
11 age or death, affects the administration or distribution of a
12 trust, a trustee who has exercised reasonable care to ascertain
13 the happening of the event is not liable for a loss resulting
14 from the trustee's lack of knowledge.
15 § 7788. Exculpation of trustee - UTC 1008.
16 (a) When exculpatory provision unenforceable.--A provision
17 of a trust instrument relieving a trustee of liability for
18 breach of trust is unenforceable to the extent that it:
19 (1) relieves the trustee of liability for breach of
20 trust committed in bad faith or with reckless indifference to
21 the purposes of the trust or the interests of the
22 beneficiaries; or
23 (2) was inserted as the result of an abuse by the
24 trustee of a fiduciary or confidential relationship to the
25 settlor.
26 (b) Exculpatory provision by trustee.--An exculpatory term
27 drafted or caused to be drafted by the trustee is invalid as an
28 abuse of a fiduciary or confidential relationship unless the
29 trustee proves that the exculpatory term is fair under the
30 circumstances and that its existence and contents were
20050S0660B0754 - 86 -
1 adequately communicated to the settlor.
2 § 7789. Beneficiary's consent, release or ratification - UTC
3 1009.
4 A trustee is not liable to a beneficiary for breach of trust
5 if the beneficiary consented to the conduct constituting the
6 breach, released the trustee from liability for the breach or
7 ratified the transaction constituting the breach, unless the
8 consent, release or ratification of the beneficiary was induced
9 by improper conduct of the trustee.
10 § 7790. Limitation on personal liability of trustee - UTC 1010.
11 (a) When trustee not personally liable.--Except as otherwise
12 provided in the contract, a trustee is not personally liable on
13 a contract properly entered into in the trustee's fiduciary
14 capacity in the course of administering the trust if the trustee
15 in the contract disclosed the fiduciary capacity.
16 (b) When trustee personally liable.--A trustee is personally
17 liable for torts committed in the course of administering a
18 trust or for obligations arising from ownership or control of
19 trust property, including liability for violation of
20 environmental law, only if the trustee is personally at fault.
21 (c) Assertion of claim.--A claim based on a contract entered
22 into by a trustee in the trustee's fiduciary capacity on an
23 obligation arising from ownership or control of trust property
24 or on a tort committed in the course of administering a trust
25 may be asserted in a judicial proceeding against the trustee in
26 the trustee's fiduciary capacity, whether or not the trustee is
27 personally liable for the claim.
28 § 7790.1. Interest as general partner - UTC 1011.
29 (a) Contractual liability.--Except as otherwise provided in
30 subsection (c) or unless personal liability is imposed in the
20050S0660B0754 - 87 -
1 contract, a trustee who holds an interest as a general partner
2 in a general or limited partnership is not personally liable on
3 a contract entered into by the partnership after the trust's
4 acquisition of the interest if the fiduciary capacity was
5 disclosed in the contract or in a statement previously filed
6 pursuant to 15 Pa.C.S. Ch. 83 (relating to general partnerships)
7 or 85 (relating to limited partnerships).
8 (b) Tortious liability.--Except as otherwise provided in
9 subsection (c), a trustee who holds an interest as a general
10 partner is not personally liable for torts committed by the
11 partnership or for obligations arising from ownership or control
12 of the interest unless the trustee is personally at fault.
13 (c) When immunity inapplicable.--The immunity provided by
14 this section does not apply if an interest in the partnership is
15 held by:
16 (1) the trustee in a capacity other than that of
17 trustee;
18 (2) the trustee's spouse; or
19 (3) the trustee's descendant, sibling or parent or the
20 spouse of a descendant, sibling or parent.
21 (d) Personal liability of settlor.--If the trustee of a
22 revocable trust holds an interest as a general partner, the
23 settlor is personally liable for contracts and other obligations
24 of the partnership as if the settlor were a general partner.
25 § 7790.2. Protection of person dealing with trustee - UTC 1012.
26 (a) (Reserved).
27 (a.1) Protection from liability.--Unless a person assisting
28 or dealing with a trustee has actual knowledge that the trustee
29 is committing a breach of trust or has knowledge of such facts
30 that the trustee's conduct amounts to bad faith, the person:
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1 (1) may assume without inquiry the existence of trust
2 powers and their proper exercise by the trustee;
3 (2) is not bound to inquire whether the trustee has
4 power to act or is properly exercising the power; and
5 (3) is fully protected in dealing with the trustee as if
6 the trustee possessed and properly exercised the powers the
7 trustee purports to exercise.
8 (b) No requirement to inquire.--A person other than a
9 beneficiary who in good faith deals with a trustee is not
10 required to inquire into the extent of the trustee's powers or
11 the propriety of their exercise.
12 (c) (Reserved).
13 (c.1) Ultra vires.--A trustee's act may not be set aside or
14 not specifically enforced because the trustee's act was not
15 authorized by section 7780.5 (relating to powers of trustees -
16 UTC 815) or 7780.6 (relating to illustrative powers of trustee)
17 or because the trustee's act was authorized but the authority
18 was improperly exercised. A court's power to set aside a
19 transaction for fraud, accident, mistake or self-dealing is
20 unaffected by this subsection.
21 (d) Former trustee.--A person other than a beneficiary who
22 in good faith assists a former trustee, or who in good faith and
23 for value deals with a former trustee, without knowledge that
24 the trusteeship has terminated is protected from liability as if
25 the former trustee were still a trustee.
26 (e) Effect of other laws.--Comparable protective provisions
27 of other laws relating to commercial transactions or transfer of
28 securities by fiduciaries prevail over the protection provided
29 by this section.
30 § 7790.3. Certification of trust - UTC 1013.
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1 (a) Contents of certification.--Instead of furnishing a copy
2 of the trust instrument to a person other than a beneficiary,
3 the trustee may furnish to the person a certification of trust
4 containing the following information:
5 (1) The trust's existence and the date the trust
6 instrument was executed.
7 (2) The identity of the settlor.
8 (3) The identity and address of the currently acting
9 trustee.
10 (4) The powers of the trustee.
11 (5) The revocability or irrevocability of the trust and
12 the identity of any person holding a power to revoke the
13 trust.
14 (6) The authority of cotrustees to sign or otherwise
15 authenticate and whether all or less than all are required in
16 order to exercise powers of the trustee.
17 (7) The trust's taxpayer identification number.
18 (8) The manner of taking title to trust property.
19 (b) Authentication.--A certification of trust may be signed
20 or otherwise authenticated by any trustee.
21 (c) Assurance of representations.--A certification of trust
22 must state that the trust has not been revoked, modified or
23 amended in a manner that would cause the representations
24 contained in the certification of trust to be incorrect.
25 (d) Dispositive trust provisions.--A certification of trust
26 need not contain the dispositive provisions of the trust
27 instrument.
28 (e) Provisions to be made available upon request.--A
29 recipient of a certification of trust may require the trustee to
30 furnish copies of those excerpts from the original trust
20050S0660B0754 - 90 -
1 instrument and later amendments which designate the trustee and
2 confer upon the trustee the power to act in the pending
3 transaction.
4 (f) Reliance on certification.--A person who acts in
5 reliance upon a certification of trust without knowledge that
6 the representations contained in the certification are incorrect
7 is not liable to any person for so acting and may assume without
8 inquiry the existence of the facts contained in the
9 certification. Knowledge of the provisions of the trust
10 instrument may not be inferred solely from the fact that a copy
11 of all or part of the trust instrument is held by the person
12 relying upon the certification.
13 (g) Enforcement.--A person who in good faith enters into a
14 transaction in reliance upon a certification of trust may
15 enforce the transaction against the trust property as if the
16 representations contained in the certification were correct.
17 (h) Liability.--A person making a demand for the trust
18 instrument in addition to a certification of trust or excerpts
19 is liable for damages if the court determines that the person
20 did not act in good faith in demanding the trust instrument.
21 (i) Applicability.--This section does not limit the right of
22 a person to obtain a copy of the trust instrument in a judicial
23 proceeding concerning the trust.
24 SUBCHAPTER J
25 MISCELLANEOUS PROVISIONS
26 Sec.
27 7791. Abandonment of property.
28 7792. Powers, duties and liabilities identical with personal
29 representatives.
30 7793. Effect of removal, or of probate of later will or
20050S0660B0754 - 91 -
1 codicil.
2 7794. Title of purchaser.
3 7795. Reports for school district trustees.
4 7796. Jurisdiction.
5 7797. Filing accounts.
6 7798. Failure to present claim at audit.
7 7799. Income on distributive shares.
8 7799.1. Annexation of account of distributed estate or
9 trust.
10 7799.2. Accounts, audits and distributions.
11 7799.3. Pooled trusts for persons with disabilities.
12 § 7791. Abandonment of property.
13 If any property is so burdensome or is so encumbered or is in
14 such condition that it is of no value to the trust, the trustee
15 may abandon it. If property without value cannot be abandoned
16 without transfer of title to another or without a formal
17 renunciation, the court may authorize the trustee to transfer or
18 renounce it without consideration if it finds that this will be
19 for the best interests of the trust.
20 § 7792. Powers, duties and liabilities identical with personal
21 representatives.
22 The provisions concerning the powers, duties and liabilities
23 of a trustee shall be the same as those set forth in the
24 following provisions of this title for the administration of a
25 decedent's or a minor's estate:
26 Section 3184 (relating to discharge of personal
27 representative and surety).
28 Section 3321(d) and (e) (relating to nominee
29 registration; corporate fiduciary as agent; deposit of
30 securities in a clearing corporation; book-entry securities).
20050S0660B0754 - 92 -
1 Section 3323 (relating to compromise of controversies).
2 Section 3324 (relating to death or incapacity of
3 fiduciary).
4 Section 3332 (relating to inherent powers and duties).
5 Section 3353 (relating to order of court).
6 Section 3354 (relating to power given in governing
7 instrument).
8 Section 3355 (relating to restraint of sale).
9 Section 3356 (relating to purchase by personal
10 representative).
11 Section 3358 (relating to collateral attack).
12 Section 3359 (relating to record of proceedings; county
13 where real estate lies).
14 § 7793. Effect of removal, or of probate of later will or
15 codicil.
16 (a) No impeachment.--No act of administration performed by a
17 testamentary trustee in good faith shall be impeached by the
18 subsequent:
19 (1) revocation of the probate of the will from which the
20 trustee derives authority;
21 (2) probate of a later will or of a codicil; or
22 (3) dismissal of the trustee.
23 (b) Good faith dealings.--Regardless of the good or bad
24 faith of the testamentary trustee, no person who deals in good
25 faith with a testamentary trustee shall be prejudiced by the
26 occurrence of any of the contingencies set forth in subsection
27 (a).
28 § 7794. Title of purchaser.
29 If the trustee has given a bond as required in accordance
30 with this title, any sale, pledge, mortgage or exchange by a
20050S0660B0754 - 93 -
1 trustee, whether pursuant to a decree or to the exercise of a
2 power conferred by the trust instrument or of a power under this
3 title, shall pass the full title of the trust in the property,
4 unless otherwise specified. Persons dealing with the trustee
5 shall have no obligation to see to the proper application of the
6 cash or other assets given in exchange for the property of the
7 trust. A sale or exchange by a trustee pursuant to a decree
8 under section 3353 (relating to order of court) shall have the
9 effect of a judicial sale as to the discharge of liens, but the
10 court may decree a sale or exchange freed and discharged from
11 the lien of any mortgage otherwise preserved from discharge by
12 existing law if the holder of the mortgage consents by writing
13 filed in the proceeding. No sale, mortgage, exchange or
14 conveyance shall be prejudiced by the subsequent dismissal of
15 the trustee. No sale, mortgage, exchange or conveyance by a
16 testamentary trustee shall be prejudiced by the terms of a will
17 or codicil thereafter probated if the person dealing with the
18 trustee did so in good faith.
19 § 7795. Reports for school district trustees.
20 (a) Scope.--This section applies if a school district is a
21 trustee of land in accordance with all of the following:
22 (1) The land is held for the benefit of the public.
23 (2) The land is not used directly for school purposes.
24 (b) Requirement.--
25 (1) By January 30, the school district shall prepare a
26 report for the prior year concerning the trust.
27 (2) The report shall detail all of the following:
28 (i) Revenues generated.
29 (ii) Expenses incurred.
30 (iii) Balance of funds held by the school district
20050S0660B0754 - 94 -
1 as trustee.
2 (iv) A statement regarding the activities taken by
3 the trustee during the prior year to advance the purposes
4 of the trust.
5 (3) The report must be certified as correct by the
6 district superintendent.
7 (4) The report shall be made public as follows:
8 (i) The report shall be published in 14-point type
9 in a newspaper of general circulation in each county in
10 which the land is located.
11 (ii) The report shall be available during business
12 hours for inspection and copying at the office of the
13 district superintendent. A reasonable fee may be charged
14 for copying.
15 § 7796. Jurisdiction.
16 Notwithstanding 42 Pa.C.S. § 931 (relating to original
17 jurisdiction and venue), jurisdiction over an action involving
18 land referred to in section 7795 (relating to reports for school
19 district trustees) shall be vested in the court of common pleas
20 in the judicial district where:
21 (1) all of the land is located; or
22 (2) more than 50% of the land is located.
23 § 7797. Filing accounts.
24 (a) When to file.--A trustee shall file an account of his
25 administration whenever directed to do so by the court and may
26 file an account at any other time.
27 (b) Where to file.--All accounts of trustees shall be filed
28 in the office of the clerk.
29 § 7798. Failure to present claim at audit.
30 (a) Applicability.--This section applies to a person that,
20050S0660B0754 - 95 -
1 at the audit of a trustee's account, has a claim that:
2 (1) arose out of the administration of trust property or
3 arises out of the distribution of trust property upon any
4 interim or final accounting of the trust; and
5 (2) is not reported to the court as an admitted claim.
6 (b) Bar.--A person that fails, at the call for audit or
7 confirmation, to present a claim under subsection (a) shall be
8 forever barred from making a claim against:
9 (1) trust property distributed pursuant to the audit or
10 confirmation;
11 (2) a distributee of trust property distributed pursuant
12 to the audit or confirmation; and
13 (3) except as otherwise provided in section 3521
14 (relating to rehearing; relief granted), trust property
15 awarded back upon further trust pursuant to the audit or
16 confirmation.
17 (c) Liens and charges unimpaired.--Nothing in this section
18 shall be construed as impairing any lien or charge on real or
19 personal estate of the trust existing at the time of the audit.
20 § 7799. Income on distributive shares.
21 Except as otherwise provided by the trust instrument or by
22 the provisions of section 3543 (relating to income on
23 distributive shares):
24 (1) If a sum of money is directed to be set aside at a
25 specified time as a separate trust, it shall be entitled to
26 income at the annual rate of 5% from the date it was to be
27 set aside until it is set aside. If a sum of money is
28 directed to be paid outright, it shall be entitled to income
29 at the annual rate of 5% from three months after it became
30 payable until it is paid.
20050S0660B0754 - 96 -
1 (2) A donee of a gift of specific real or personal
2 property directed to be distributed from a trust shall be
3 entitled to the net income from property given to the donee
4 accrued from the date it became distributable.
5 (3) All income from real and personal property earned
6 during the administration of a trust and not payable to
7 others pursuant to the governing instrument or the provisions
8 of this section shall be distributed pro rata among the
9 income beneficiaries of a continuing trust and other persons
10 entitled to residuary shares of the trust.
11 § 7799.1. Annexation of account of distributed estate or trust.
12 A trustee who has received property from a personal
13 representative or from another trustee in distribution of an
14 estate or another trust may annex a copy of an account of the
15 administration of the estate or other trust to an account filed
16 by the trustee covering the administration of the trust under
17 the trustee's management. If notice of the annexation of the
18 account of the estate or other trust is given to the persons
19 required to be notified of the filing of the trustee's account
20 of the principal trust, confirmation of the principal account
21 shall relieve both the trustee of the principal trust and the
22 personal representative or trustee of the distributed estate or
23 other trust of all liability to beneficiaries of the principal
24 trust for transactions shown in the account so annexed to the
25 same extent as if the annexed account had been separately filed
26 and confirmed. If the fund covered by the annexed account has
27 itself received property from another source under circumstances
28 that would have permitted annexation of an account under this
29 section or under section 3501.2 (relating to annexation of
30 account of terminated trust, guardianship or agency), accounts
20050S0660B0754 - 97 -
1 for both funds may be annexed.
2 § 7799.2. Accounts, audits and distributions.
3 The provisions concerning accounts, audits and distributions
4 in trust estates shall be the same as those set forth in the
5 following provisions of this title for the administration of a
6 decedent's estate:
7 Section 3511 (relating to audits in counties having
8 separate orphans' court division).
9 Section 3512 (relating to audits in counties having no
10 separate orphans' court division).
11 Section 3513 (relating to statement of proposed
12 distribution).
13 Section 3514 (relating to confirmation of account and
14 approval of proposed distribution).
15 Section 3521 (relating to rehearing; relief granted).
16 Section 3533 (relating to award upon final confirmation
17 of account).
18 Section 3536 (relating to recording and registering
19 decrees awarding real estate).
20 Section 3538 (relating to distributions involving persons
21 born out of wedlock).
22 Section 3539 (relating to change in law after pattern of
23 distribution established).
24 Section 3540 (relating to absentee and additional
25 distributees).
26 Section 3541 (relating to order of abatement).
27 Section 3545 (relating to transcripts of balances due by
28 personal representative).
29 § 7799.3. Pooled trusts for persons with disabilities.
30 (a) Scope.--This section relates to pooled trusts.
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1 (b) Organization of pooled trust.--
2 (1) A pooled trust shall be administered by a trustee
3 governed by a board. The trust may employ persons as
4 necessary.
5 (2) The members of a board and employees of a trustee,
6 if any, shall stand in a fiduciary relationship to the
7 beneficiaries and the trustee regarding investment of the
8 trust and shall not profit, either directly or indirectly,
9 with respect to the investment.
10 (3) A trustee shall maintain a separate account for each
11 beneficiary of a pooled trust; but, for purposes of
12 investment and management of funds, the trustee may pool
13 these accounts. The trustee shall have exclusive control and
14 authority to manage and invest the money in the pooled trust
15 in accordance with this section, subject, however, to the
16 exercise of that degree of judgment, skill and care under the
17 prevailing circumstances that persons of prudence, discretion
18 and intelligence who are familiar with investment matters
19 exercise in the management of their affairs, considering the
20 probable income to be derived from the investment and the
21 probable safety of their capital. The trustee may charge a
22 trust management fee to cover the costs of administration and
23 management of the pooled trust.
24 (4) A board member shall disclose and abstain from
25 participation in a discussion or voting on an issue if a
26 conflict of interest arises with the board member on a
27 particular issue or vote.
28 (5) No board member may receive compensation for
29 services provided as a member of the board. No fees or
30 commissions may be paid to a board member. A board member may
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1 be reimbursed for necessary expenses incurred which are in
2 the best interest of the beneficiaries of the pooled trust as
3 a board member upon presentation of receipts.
4 (6) The trustee shall disburse money from a
5 beneficiary's account only on behalf of the beneficiary. A
6 disbursement from a beneficiary's account shall be in the
7 best interest of the beneficiary.
8 (c) Pooled trust fund.--All money received for pooled trust
9 funds shall be deposited with a court-approved corporate
10 fiduciary or with the State Treasury if no court-approved
11 corporate fiduciary is available to the trustee. The funds shall
12 be pooled for investment and management. A separate account
13 shall be maintained for each beneficiary, and quarterly
14 accounting statements shall be provided to each beneficiary by
15 the trustee. The court-approved corporate fiduciary or the State
16 Treasury shall provide quarterly accounting statements to the
17 trustee. The court-approved corporate fiduciary or the State
18 Treasury may charge a trust management fee to cover the costs of
19 managing the funds in the pooled trust.
20 (d) Reporting.--
21 (1) In addition to reports required to be filed under 15
22 Pa.C.S. Pt. III (relating to partnerships and limited
23 liability companies), the trustee shall file an annual report
24 with the Office of Attorney General, along with an itemized
25 statement which shows the funds collected for the year,
26 income earned, salaries paid, other expenses incurred and the
27 opening and final trust balances. A copy of this statement
28 shall be available to the beneficiary, settlor or designee of
29 the settlor upon request.
30 (2) The trustee shall prepare and provide each settlor
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1 or the settlor's designee annually with a detailed individual
2 statement of the services provided to the settlor's
3 beneficiary during the previous 12 months and of the services
4 to be provided during the following 12 months. The trustee
5 shall provide a copy of this statement to the beneficiary
6 upon request.
7 (e) Coordination of services.--
8 (1) In the determination of eligibility for medical
9 assistance benefits, the interest of a disabled beneficiary
10 in a pooled trust shall not be considered as a resource for
11 purposes of determining the beneficiary's eligibility for
12 medical assistance.
13 (2) No State agency may reduce the benefits or services
14 available to an individual because that person is a
15 beneficiary of a pooled trust. The beneficiary's interest in
16 a pooled trust is not reachable in satisfaction of a claim
17 for support and maintenance of the beneficiary.
18 (f) Notice.--The Office of Attorney General shall make
19 available information on the treatment of pooled trusts for the
20 persons with disabilities in the medical assistance program.
21 (g) Applicability.--This section shall apply to all of the
22 following:
23 (1) Pooled trusts established after March 8, 2003.
24 (2) Accounts of individual beneficiaries established
25 after March 8, 2003, in pooled trusts created before March 9,
26 2003.
27 (h) Definitions.--As used in this section, the following
28 words and phrases shall have the meanings given to them in this
29 subsection:
30 "Beneficiary." An individual with a disability who has the
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1 right to receive services and benefits of a pooled trust.
2 "Board." A group of persons vested with the management of
3 the business affairs of a trustee.
4 "Disability." A physical or mental impairment as defined in
5 section 1614 of the Social Security Act (49 Stat. 620, 42 U.S.C.
6 § 1382c).
7 "Pooled trust." A trust which meets all of the following:
8 (1) The trust contains assets of more than one
9 beneficiary.
10 (2) Each beneficiary has a disability.
11 (3) The trust is managed by a nonprofit corporation.
12 (4) A separate account is maintained for each
13 beneficiary of the trust, but, for purposes of investment and
14 management of funds, the trust pools these accounts. Accounts
15 in the trust may be established by the parent, grandparent or
16 legal guardian of the individual with a disability, by the
17 individual with a disability or by a court.
18 (5) Upon the death of a beneficiary, amounts remaining
19 in the beneficiary's accounts are:
20 (i) retained by the trust for the benefit of other
21 beneficiaries or other individuals with disabilities; or
22 (ii) used to reimburse the Commonwealth in an amount
23 equal to the total amount of medical assistance paid on
24 behalf of the beneficiary.
25 "Trustee." A nonprofit organization that manages a pooled
26 trust.
27 Section 15. The definitions of "principal" and "sui juris
28 beneficiary" in section 8102 of Title 20 are amended to read:
29 § 8102. Definitions.
30 The following words and phrases when used in this chapter
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1 shall have the meanings given to them in this section unless the
2 context clearly indicates otherwise:
3 * * *
4 "Principal." Property held in trust for distribution to a
5 remainder beneficiary when the trust terminates or property held
6 in trust in perpetuity.
7 * * *
8 "Sui juris beneficiary." Includes:
9 (1) a court-appointed guardian of an incapacitated
10 beneficiary;
11 (2) an agent for an incompetent beneficiary; and
12 (3) a court-appointed guardian of a minor beneficiary's
13 estate [or, if none, the parents of the minor beneficiary].
14 * * *
15 Section 16. Sections 8104(c)(4) and 8105 of Title 20 are
16 amended to read:
17 § 8104. Trustee's power to adjust.
18 * * *
19 (c) Prohibited adjustments.--A trustee may not make an
20 adjustment under this section if any of the following apply:
21 * * *
22 (4) The adjustment is from any amount which is
23 permanently set aside for charitable purposes under the
24 governing instrument and for which a Federal estate or gift
25 tax charitable deduction has been taken unless both income
26 and principal are so set aside.
27 * * *
28 § 8105. Power to convert to unitrust.
29 (a) Conversion.--Unless expressly prohibited by the
30 governing instrument, a trustee may release the power under
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1 section 8104 (relating to trustee's power to adjust) and convert
2 a trust into a unitrust as described in this section if all of
3 the following apply:
4 (1) The trustee determines that the conversion will
5 enable the trustee to better carry out the intent of the
6 settlor or testator and the purposes of the trust.
7 (2) The trustee gives written notice of the trustee's
8 intention to release the power to adjust and to convert the
9 trust into a unitrust and of how the unitrust will operate,
10 including what initial decisions the trustee will make under
11 this section, to all the sui juris beneficiaries who:
12 (i) are currently eligible to receive income from
13 the trust; [and]
14 (ii) would be eligible to receive, if no powers of
15 appointment were exercised, income from the trust if the
16 interest of all those eligible to receive income under
17 subparagraph (i) were to terminate immediately prior to
18 the giving of notice; and
19 (iii) would receive, if no powers of appointment
20 were exercised, a distribution of principal if the trust
21 were to terminate immediately prior to the giving of
22 notice.
23 (3) There is at least one sui juris beneficiary under
24 paragraph (2)(i) and at least one sui juris beneficiary under
25 either paragraph (2)(ii) or (iii).
26 (4) No sui juris beneficiary objects to the conversion
27 to a unitrust in a writing delivered to the trustee within 60
28 days of the mailing of the notice under paragraph (2).
29 (b) Judicially approved conversion.--
30 (1) The trustee may petition the court to approve the
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1 conversion to a unitrust if any of the following apply:
2 (i) A beneficiary timely objects to the conversion
3 to a unitrust.
4 (ii) There are no sui juris beneficiaries under
5 subsection (a)(2)(i).
6 (iii) There are no sui juris beneficiaries under
7 either subsection (a)(2)(ii) or (iii).
8 (2) A beneficiary may request a trustee to convert to a
9 unitrust. If the trustee does not convert, the beneficiary
10 may petition the court to order the conversion.
11 (3) The court shall approve the conversion or direct the
12 requested conversion if the court concludes that the
13 conversion will enable the trustee to better carry out the
14 intent of the settlor or testator and the purposes of the
15 trust.
16 (c) Consideration.--In deciding whether to exercise the
17 power conferred by subsection (a), a trustee may consider, among
18 other things, all of the following:
19 (1) The size of the trust.
20 (2) The nature and estimated duration of the trust.
21 (3) The liquidity and distribution requirements of the
22 trust.
23 (4) The needs for regular distributions and preservation
24 and appreciation of capital.
25 (5) The expected tax consequences of the conversion.
26 (6) The assets held in the trust; the extent to which
27 they consist of financial assets, interests in closely held
28 enterprises, tangible and intangible personal property or
29 real property; and the extent to which an asset is used by a
30 beneficiary.
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1 (7) To the extent reasonably known to the trustee, the
2 needs of the beneficiaries for present and future
3 distributions authorized or required by the governing
4 instrument.
5 (8) Whether and to what extent the governing instrument
6 gives the trustee the power to invade principal or accumulate
7 income or prohibits the trustee from invading principal or
8 accumulating income and the extent to which the trustee has
9 exercised a power from time to time to invade principal or
10 accumulate income.
11 (9) The actual and anticipated effect of economic
12 conditions on principal and income and effects of inflation
13 and deflation.
14 (d) Post conversion.--After a trust is converted to a
15 unitrust, all of the following apply:
16 (1) The trustee shall follow an investment policy
17 seeking a total return for the investments held by the trust,
18 whether the return is to be derived:
19 (i) from appreciation of capital;
20 (ii) from earnings and distributions from capital;
21 or
22 (iii) from both.
23 (2) The trustee shall make regular distributions in
24 accordance with the governing instrument construed in
25 accordance with the provisions of this section.
26 (3) The term "income" in the governing instrument shall
27 mean an annual distribution (the unitrust distribution) equal
28 to 4% (the payout percentage) of the net fair market value of
29 the trust's assets, whether such assets would be considered
30 income or principal under other provisions of this chapter,
20050S0660B0754 - 106 -
1 averaged over the lesser of:
2 (i) the three preceding years; or
3 (ii) the period during which the trust has been in
4 existence.
5 (e) Discretion of trustee.--The trustee may, in the
6 trustee's discretion from time to time, determine all of the
7 following:
8 (1) The effective date of a conversion to a unitrust.
9 (2) The provisions for prorating a unitrust distribution
10 for a short year in which a beneficiary's right to payments
11 commences or ceases.
12 (3) The frequency of unitrust distributions during the
13 year.
14 (4) The effect of other payments from or contributions
15 to the trust on the trust's valuation.
16 (5) Whether to value the trust's assets annually or more
17 frequently.
18 (6) What valuation dates to use.
19 (7) How frequently to value nonliquid assets and whether
20 to estimate their value.
21 (8) Whether to omit from the calculations trust property
22 occupied or possessed by a beneficiary.
23 (9) Any other matters necessary for the proper
24 functioning of the unitrust.
25 (f) Allocation.--
26 (1) Expenses which would be deducted from income if the
27 trust were not a unitrust may not be deducted from the
28 unitrust distribution.
29 (2) Unless otherwise provided by the governing
30 instrument, the unitrust distribution shall be considered to
20050S0660B0754 - 107 -
1 have been paid from [net income as such term would be
2 determined if the trust were not a unitrust. To the extent
3 net income is insufficient, the unitrust distribution shall
4 be paid from net realized short-term capital gains. To the
5 extent income and net realized short-term capital gains are
6 insufficient, the unitrust distribution shall be paid from
7 net realized long-term capital gains. To the extent income
8 and net realized short-term and long-term capital gains are
9 insufficient, the unitrust distribution shall be paid from
10 the principal of the trust.] the following sources in order
11 of priority:
12 (i) net income determined as if the trust were not a
13 unitrust;
14 (ii) ordinary income for Federal income tax purposes
15 that is not allocable to net income under subparagraph
16 (i);
17 (iii) net realized short-term capital gains for
18 Federal income tax purposes;
19 (iv) net realized long-term capital gains for
20 Federal income tax purposes; and
21 (v) the principal of the trust estate.
22 (g) Court orders.--The trustee or, if the trustee declines
23 to do so, a beneficiary may petition the court to:
24 (1) Select a payout percentage different than 4%.
25 (2) Provide for a distribution of net income, as would
26 be determined if the trust were not a unitrust, in excess of
27 the unitrust distribution if such distribution is necessary
28 to preserve a tax benefit.
29 (3) Average the valuation of the trust's net assets over
30 a period other than three years.
20050S0660B0754 - 108 -
1 (4) Reconvert from a unitrust. Upon a reconversion, the
2 power to adjust under section 8104 shall be revived.
3 (g.1) Reconversion from unitrust.--A trustee may reconvert a
4 unitrust following the same procedures as in subsection (a) for
5 converting a trust into a unitrust with the exception that the
6 written notice shall state that the intent is to reconvert the
7 unitrust into a trust for which income is defined under this
8 chapter. Upon reconversion, the power to adjust under section
9 8104 shall be revived.
10 (h) Application.--A conversion to a unitrust does not affect
11 a provision in the governing instrument directing or authorizing
12 the trustee to distribute principal or authorizing a beneficiary
13 to withdraw a portion or all of the principal.
14 (i) Prohibited conversions.--A trustee may not convert a
15 trust into a unitrust in any of the following circumstances:
16 (1) If payment of the unitrust distribution would change
17 the amount payable to a beneficiary as a fixed annuity or a
18 fixed fraction of the value of the trust assets.
19 (2) If the unitrust distribution would be made from [any
20 amount] trust funds which [is] are permanently set aside for
21 charitable purposes under the governing instrument and for
22 which a Federal estate or gift tax charitable deduction has
23 been taken, unless both income and principal are so set
24 aside. If both income and principal are so set aside, then
25 section 8113 (relating to charitable trusts) and not this
26 section shall be available.
27 (3) If:
28 (i) possessing or exercising the power to convert
29 would cause an individual to be treated as the owner of
30 all or part of the trust for Federal income tax purposes;
20050S0660B0754 - 109 -
1 and
2 (ii) the individual would not be treated as the
3 owner if the trustee did not possess the power to
4 convert.
5 (4) If:
6 (i) possessing or exercising the power to convert
7 would cause all or part of the trust assets to be subject
8 to Federal estate or gift tax with respect to an
9 individual; and
10 (ii) the assets would not be subject to Federal
11 estate or gift tax with respect to the individual if the
12 trustee did not possess the power to convert.
13 (5) If the conversion would result in the disallowance
14 of a Federal estate tax or gift tax marital deduction which
15 would be allowed if the trustee did not have the power to
16 convert.
17 (6) If the trustee is a beneficiary of the trust.
18 (j) Permissible conversion when otherwise prohibited.--
19 (1) If subsection (i)(3), (4) or (6) applies to a
20 trustee and there is more than one trustee, a co-trustee to
21 whom the provision does not apply may convert the trust
22 unless the exercise of the power by the remaining trustee or
23 trustees is prohibited by the governing instrument.
24 (2) If subsection (i)(3), (4) or (6) applies to all the
25 trustees, the trustees may petition the court to direct a
26 conversion.
27 (k) Release of the power to convert.--
28 (1) A trustee may release the power conferred by
29 subsection (a) to convert to a unitrust if any of the
30 following apply:
20050S0660B0754 - 110 -
1 (i) The trustee is uncertain about whether
2 possessing or exercising the power will cause a result
3 described in subsection (i)(3), (4) or (5).
4 (ii) The trustee determines that possessing or
5 exercising the power will or may deprive the trust of a
6 tax benefit or impose a tax burden not described in
7 subsection (i).
8 (2) The release may be permanent or for a specified
9 period, including a period measured by the life of an
10 individual.
11 Section 17. Section 8107 of Title 20 is amended to read:
12 § 8107. [(Reserved).] Express trusts.
13 (a) General rule.--In the absence of a contrary intent
14 appearing in the governing instrument of an express unitrust,
15 the governing instrument shall be construed in accordance with
16 the following rules:
17 (1) The trustee shall follow an investment policy
18 seeking a total return for the investments held by the trust,
19 whether the return is to be derived from:
20 (i) appreciation of capital;
21 (ii) earnings and distributions from capital; or
22 (iii) both.
23 (2) The unitrust distribution shall be an annual
24 distribution of an amount equal to 4% of the net fair market
25 value of the trust's assets, whether the assets would be
26 considered income or principal under other provisions of this
27 chapter, averaged over the lesser of:
28 (i) the three preceding years; or
29 (ii) the period during which the trust has been in
30 existence.
20050S0660B0754 - 111 -
1 (3) The trustee may, in the trustee's discretion from
2 time to time, determine all of the following:
3 (i) The provisions for prorating a unitrust
4 distribution for a short year in which the beneficiary's
5 right to payments commences or ceases.
6 (ii) The frequency of unitrust distributions during
7 the year.
8 (iii) The effect of other payments from or
9 contributions to the trust on the trust's valuation.
10 (iv) Whether to value the trust's assets annually or
11 more frequently.
12 (v) What valuation dates to use.
13 (vi) How frequently to value nonliquid assets and
14 whether to estimate their value.
15 (vii) Whether to omit from the calculations
16 residential real estate, tangible personal property or
17 other trust property used, occupied or possessed by a
18 beneficiary.
19 (viii) Any other matters necessary for the proper
20 functioning of the unitrust.
21 (4) Expenses which would be deducted from income if the
22 trust were not a unitrust shall not be deducted from the
23 unitrust distribution.
24 (5) The unitrust distribution shall be considered to
25 have been paid from the following sources in order of
26 priority:
27 (i) net income determined as if the trust were not
28 an express unitrust;
29 (ii) ordinary income for Federal income tax purposes
30 that is not allocable to net income under subparagraph
20050S0660B0754 - 112 -
1 (i);
2 (iii) net realized short-term capital gains for
3 Federal income tax purposes;
4 (iv) net realized long-term capital gains for
5 Federal income tax purposes; and
6 (v) the principal of the trust estate.
7 (b) Definition.--As used in this section, the term "express
8 unitrust" shall mean a trust which by its governing instrument
9 creates a trust, other than a trust solely for charitable
10 purposes or a qualified charitable split interest trust under
11 section 664(d) or 170(f)(2)(B) of the Internal Revenue Code of
12 1986 (Public Law 99-514, 26 U.S.C. § 664(d) or 170(f)(2)(B)),
13 and provides for an annual distribution, the unitrust
14 distribution, equal to a fixed percentage of the net fair market
15 value of the trust's assets, valued at least annually, and
16 computed with reference to such value in one or more years. If
17 the fixed percentage is not less than 3% nor more than 5%, the
18 unitrust distribution shall be considered the income of the
19 trust for the purposes of this chapter.
20 Section 18. Section 8113(c) of Title 20 is amended and the
21 section is amended by adding a subsection to read:
22 § 8113. Charitable trusts.
23 * * *
24 (c) Effect of election.--If an election is made to be
25 governed by this section, the term "income" shall mean a
26 percentage of the value of the trust. The trustee shall, in a
27 writing maintained as part of the permanent records of the
28 trust, [annually] select the percentage and determine that it is
29 consistent with the long-term preservation of the real value of
30 the principal of the trust, but in no event shall the percentage
20050S0660B0754 - 113 -
1 be less than 2% nor more than 7% per year. The term "principal"
2 shall mean all other assets held by the trustee with respect to
3 the trust. The selection may be made either annually or subject
4 to change only when the trustee deems such change necessary and
5 prudent.
6 * * *
7 (f) Charitable organizations.--For a charitable organization
8 defined under the act of June 17, 1971 (P.L.181, No.23), known
9 as the Charitable Instruments Act of 1971, the provisions of
10 that act shall supersede subsection (c) if necessary to comply
11 with the minimum investment return requirements.
12 Section 19. Sections 8121(2) and 8141(c) and (d) of Title 20
13 are amended to read:
14 § 8121. Determination and distribution of net income.
15 After a decedent dies in the case of an estate or after an
16 income interest in a trust ends, the following rules apply:
17 * * *
18 (2) A fiduciary shall distribute to a beneficiary who
19 receives a pecuniary amount outright and shall allocate to a
20 pecuniary amount in trust the [interest, other] income or
21 other amount provided by the governing instrument or, in the
22 absence of any such provision, the income provided in section
23 3543 (relating to [interest or] income on distributive
24 shares) or [7187] 7799 (relating to [interest or] income on
25 distributive shares) from net income determined under
26 paragraph (3) or from principal to the extent that net income
27 is insufficient.
28 * * *
29 § 8141. Character of receipts.
30 * * *
20050S0660B0754 - 114 -
1 (c) When received in partial liquidation.--Money is received
2 in partial liquidation:
3 (1) to the extent that the entity, at or near the time
4 of a distribution, indicates that it is a distribution in
5 partial liquidation; or
6 (2) if the total amount of money and property [received]
7 distributed by the entity to its owners in [a] one
8 distribution or a series of related distributions is greater
9 than 20% of the entity's gross assets, as shown by the
10 entity's year-end financial statements immediately preceding
11 the initial receipt.
12 (d) When not received in partial liquidation.--Money is not
13 received in partial liquidation nor may it be taken into account
14 under subsection (c)(2) to the extent that it does not exceed
15 the amount of income tax that a [trustee or] trust beneficiary
16 must pay on taxable income of the entity that distributes the
17 money.
18 * * *
19 Section 20. The act of December 9, 2002 (P.L.1379, No.168),
20 known as the Pooled Trust Act, is repealed.
21 Section 21. The addition of 20 Pa.C.S. § 7799.3 is a
22 consolidation of the act of December 9, 2002 (P.L.1379, No.168),
23 known as the Pooled Trust Act. Any differences between 20
24 Pa.C.S. § 7799.3 and the Pooled Trust Act are intended only to
25 conform to the style of the Pennsylvania Consolidated Statutes
26 and are not intended to change or affect the legislative intent,
27 judicial construction or administration and implementation of
28 the Pooled Trust Act.
29 Section 22. The following apply:
30 (1) The addition of 20 Pa.C.S. § 3534.1 shall apply to
20050S0660B0754 - 115 -
1 the estates of decedents who die on or after the effective
2 date of this paragraph.
3 (2) The amendment of 20 Pa.C.S. § 3702(h) shall apply to
4 the estates of decedents who die on or after the effective
5 date of this paragraph.
6 (3) The amendments of 20 Pa.C.S. §§ 6104(b) and 6106(b)
7 shall apply to any trust that is not irrevocable on the
8 effective date of this paragraph.
9 (4) Except as provided in paragraph (5), the addition of
10 20 Pa.C.S. Ch. 77 shall apply to all trusts created before,
11 on or after the effective date of this paragraph.
12 (5) The following apply:
13 (i) The addition of 20 Pa.C.S. § 7737 shall not
14 apply to oral trusts created before the effective date of
15 this paragraph.
16 (ii) The addition of 20 Pa.C.S. § 7752(a) shall not
17 apply to trusts created before the effective date of this
18 paragraph.
19 Section 23. This act shall take effect as follows:
20 (1) The following provisions shall take effect in 60
21 days:
22 (i) The amendment of 20 Pa.C.S. § 908(a).
23 (ii) The addition of 20 Pa.C.S. § 3534.1.
24 (iii) The amendment of 20 Pa.C.S. § 3543.
25 (iv) The amendment of 20 Pa.C.S. § 7503(b).
26 (v) The addition of 20 Pa.C.S. § 7504(c).
27 (vi) The amendment of 20 Pa.C.S. § 7506.
28 (vii) The amendment of the definitions of
29 "principal" and "sui juris beneficiary" in 20 Pa.C.S. §
30 8102.
20050S0660B0754 - 116 -
1 (viii) The amendment of 20 Pa.C.S. § 8104(c).
2 (ix) The amendment of 20 Pa.C.S. § 8105.
3 (x) The amendment of 20 Pa.C.S. § 8107.
4 (xi) The amendment of 20 Pa.C.S. § 8113.
5 (xii) The amendment of 20 Pa.C.S. § 8141.
6 (xiii) Section 22(1) of this act.
7 (2) The following provisions shall take effect
8 immediately:
9 (i) The amendment of 20 Pa.C.S. § 3702(h).
10 (ii) The amendment of 20 Pa.C.S. § 6104(b).
11 (iii) The amendment of 20 Pa.C.S. § 6106(b).
12 (iv) The amendment of the definition of "mutual
13 fund" in 20 Pa.C.S. § 7201.
14 (v) The amendment of 20 Pa.C.S. § 7314.1.
15 (vi) Section 21 of this act.
16 (vii) Section 22(2) and (3) of this act.
17 (viii) This section.
18 (3) The remainder of this act shall take effect in 120
19 days.
D6L20BIL/20050S0660B0754 - 117 -