HOUSE AMENDED
PRIOR PRINTER'S NOS. 754, 1423 PRINTER'S NO. 1969
No. 660 Session of 2005
INTRODUCED BY GREENLEAF, O'PAKE, RAFFERTY, LEMMOND, FERLO AND
PILEGGI, APRIL 28, 2005
AS AMENDED ON THIRD CONSIDERATION, HOUSE OF REPRESENTATIVES,
JUNE 29, 2006
AN ACT
1 Amending Title 20 (Decedents, Estates and Fiduciaries) of the
2 Pennsylvania Consolidated Statutes, adding the Uniform Trust
3 Act; abolishing the rule against perpetuities; making
4 conforming amendments; and making a related repeal.
5 The General Assembly of the Commonwealth of Pennsylvania
6 hereby enacts as follows:
7 Section 1. Sections 723, 724, 725, 751(6) and 908(a) of
8 Title 20 of the Pennsylvania Consolidated Statutes are amended
9 to read:
10 [§ 723. Situs of testamentary trust.
11 The situs of a testamentary trust shall be in the county
12 where letters were granted to the personal representative, and
13 in the absence of such letters, then in a county where such
14 letters could have been granted, and if no such letters could
15 have been granted, then in a county in which any trustee resides
16 or is located.
17 § 724. Situs of inter vivos trust.
1 (a) When provided for in trust instrument.--If the trust
2 instrument expressly provides for the situs of the inter vivos
3 trust, its situs shall be at the place within or without the
4 Commonwealth which is in accord with such provision.
5 (b) Not provided for in trust instrument.--If the trust
6 instrument does not expressly provide for the situs of the inter
7 vivos trust, its situs shall be:
8 (1) Resident settlor.--In the case of an inter vivos
9 trust whose settlor is domiciled in the Commonwealth:
10 (i) in the settlor's lifetime, either in the county
11 of his principal residence or in the county in which any
12 of the trustees resides or has a place of business; and
13 (ii) after the settlor's death, either in the county
14 in which letters have been granted to his personal
15 representative, or in a county in which letters could
16 have been granted, or in a county which is the principal
17 place of the trust's administration in which any trustee
18 resides or has a place of business.
19 (2) Nonresident settlor.--In the case of an inter vivos
20 trust whose settlor:
21 (i) is not domiciled in the Commonwealth at the time
22 when during his lifetime the first application is made to
23 a court concerning the trust; or
24 (ii) was not domiciled in the Commonwealth at his
25 death if the first application to a court concerning the
26 trust was made thereafter,
27 in a county which is the principal place of the trust's
28 administration or in which any trustee resides or has a place
29 of business and if there is no such trustee, then in a county
30 where property of the trust is located.
20050S0660B1969 - 2 -
1 § 725. Change of situs; order of court.
2 A court having jurisdiction of a testamentary or inter vivos
3 trust, on application of a trustee or of any party in interest,
4 after such notice to all parties in interest as it shall direct
5 and aided if necessary by the report of a master, and after such
6 accounting and such provision to insure the proper payment of
7 all taxes to the Commonwealth and any political subdivision
8 thereof as the court shall require, may direct, notwithstanding
9 any of the other provisions of this chapter, that the situs of
10 the trust shall be changed to any other place within or without
11 the Commonwealth if the court shall find the change necessary or
12 desirable for the proper administration of the trust. Upon such
13 change of situs becoming effective by the assumption of
14 jurisdiction by another court, the jurisdiction of the court as
15 to the trust shall cease and thereupon the situs of the trust
16 for all purposes shall be as directed by the court.]
17 § 751. Appointment; purpose.
18 The orphans' court division may appoint:
19 * * *
20 (6) Representation of parties in interest.--Persons
21 interested in an estate [or trust] as beneficiary or heir, if
22 minors or otherwise legally incapacitated, and possible
23 unborn or unascertained persons, may be represented in a
24 judicial proceeding by a guardian or trustee ad litem if the
25 court deems necessary. The court may dispense with the
26 appointment of a guardian or trustee ad litem for a person
27 who is a minor or otherwise legally incapacitated, unborn or
28 unascertained if there is a living person sui juris having a
29 similar interest or if such person is or would be issue of a
30 living ancestor sui juris and interested in the estate [or
20050S0660B1969 - 3 -
1 trust] whose interest is not adverse to his. If the
2 whereabouts of any beneficiary or heir is unknown or if there
3 is doubt as to his existence, the court shall provide for
4 service of notice and representation in the judicial
5 proceeding as it deems proper.
6 § 908. Appeals.
7 (a) When allowed.--Any party in interest seeking to
8 challenge the probate of a will or who is otherwise aggrieved by
9 a decree of the register, or a fiduciary whose estate or trust
10 is so aggrieved, may appeal therefrom to the court within one
11 year of the decree: Provided, That the executor designated in an
12 instrument shall not by virtue of such designation be deemed a
13 party in interest who may appeal from a decree refusing probate
14 of it. The court, upon petition of a party in interest, may
15 limit the time for appeal to three months.
16 * * *
17 Section 2. Title 20 is amended by adding sections to read:
18 § 3384.1. Notice after settlor of revocable trust has died.
19 No later than 30 days after the date on which the trustee of
20 a revocable trust learns that a personal representative has been
21 appointed for the deceased settlor's estate, the trustee shall
22 send to the settlor's personal representative the notice
23 described in section 7780.3(i) (relating to duty to inform and
24 report).
25 § 3534.1. Cost of distribution of tangible personal property.
26 Except as otherwise provided in the will, if any, the
27 personal representative shall pay as an expense of
28 administration the reasonable expenses of storage, insurance,
29 packing and delivery of tangible personal property to a
30 beneficiary.
20050S0660B1969 - 4 -
1 Section 3. Sections 3543, 3702(h), 6101, 6102, 6104(d), 6106
2 and 6107 of Title 20 are amended to read:
3 § 3543. [Interest or income] Income on distributive shares.
4 (a) Pecuniary legacy.--A pecuniary legacy bequeathed in
5 trust shall [bear interest] be entitled to income at the rate of
6 5% per annum from the death of the decedent until the payment of
7 the legacy, and when not in trust [shall bear interest at the
8 rate of 5% per annum] from one year after the death of the
9 decedent until the payment of the legacy.
10 (b) Specific legacy or devise.--A specific legatee or
11 devisee shall be entitled to the net income from property given
12 to him accrued from the date of the death of the decedent.
13 (c) Demonstrative legacy.--A demonstrative legacy shall
14 [bear interest] be entitled to income from the death of the
15 decedent until the payment of the legacy at the rate earned by
16 the property out of which it is primarily payable, and to the
17 extent that it is not paid from that source, [shall bear
18 interest] at the rate of 5% per annum from one year after the
19 death of the decedent until the payment of the legacy.
20 (d) Residuary legacy or devise.--All income from real and
21 personal estate earned during the period of administration and
22 not payable to others pursuant to the governing instrument or
23 this section shall be distributed pro rata among the income
24 beneficiaries of any trust created out of the residuary estate
25 and the other persons entitled to the residuary estate.
26 (e) Future date.--A legacy payable at a future date, unless
27 earlier set aside as a separate trust, shall not begin to bear
28 [interest or] income until three months after the date fixed for
29 payment or delivery.
30 (f) Relationship.--[Interest or income] Income shall be paid
20050S0660B1969 - 5 -
1 on distributive shares with no distinction because of the
2 relationship of the distributee to the decedent.
3 (g) Testamentary provisions.--All rules set forth in this
4 section are subject to the provisions of the decedent's will.
5 § 3702. Equitable apportionment of Federal estate tax.
6 * * *
7 (h) Interest and penalties.--Interest and penalties shall be
8 apportioned in the same manner as the principal amount of the
9 Federal estate tax unless the court finds it inequitable to do
10 so by reason of special circumstances in which case the court
11 may direct a different apportionment of interest and penalties.
12 To the extent the interest or penalties are apportioned to or
13 are payable out of a residuary estate or a trust, they shall be
14 paid from income or principal in the same manner as the Federal
15 estate tax, subject to a fiduciary's power to adjust under
16 Chapter 81 (relating to principal and income).
17 * * *
18 § 6101. Definitions.
19 The following words and phrases, when used in this chapter,
20 unless the context clearly indicates otherwise, shall have the
21 meanings ascribed to them in this section:
22 ["Charity" or "charitable purposes." Includes but is not
23 limited to the relief of poverty, the advancement of education,
24 the advancement of religion, the promotion of health,
25 governmental or municipal purposes, and other purposes the
26 accomplishment of which is beneficial to the community.]
27 "Conveyance." An act by which it is intended to create an
28 interest in real or personal property whether the act is
29 intended to have inter vivos or testamentary operation. It shall
30 include an act by which a power of appointment whenever given is
20050S0660B1969 - 6 -
1 exercised.
2 [§ 6102. Termination of trusts.
3 (a) Failure of original purpose.--The court having
4 jurisdiction of a trust heretofore or hereafter created,
5 regardless of any spendthrift or similar provision therein, in
6 its discretion may terminate such trust in whole or in part, or
7 make an allowance from principal to one or more beneficiaries
8 provided the court after hearing is satisfied that the original
9 purpose of the conveyor cannot be carried out or is impractical
10 of fulfillment and that the termination, partial termination, or
11 allowance more nearly approximates the intention of the
12 conveyor, and notice is given to all parties in interest or to
13 their duly appointed fiduciaries.
14 (b) Distribution of terminated trust.--Whenever the court
15 shall decree termination or partial termination of a trust under
16 the provisions of this section, it shall thereupon order such
17 distribution of the principal and undistributed income as it
18 deems proper and as nearly as possible in conformity with the
19 conveyor's intention.
20 (c) Other powers.--Nothing in this section shall limit any
21 power of the court to terminate or reform a trust under existing
22 law.]
23 § 6104. Rule against perpetuities.
24 * * *
25 (d) Applicability.--The provisions of this section and of
26 section 6105 (relating to rule against perpetuities; disposition
27 when invalidity occurs) shall apply to all interests [heretofore
28 or hereafter] created before January 1, 2007.
29 § 6106. Income accumulations; when valid.
30 (a) General.--[No] Except as set forth in section 6107.1
20050S0660B1969 - 7 -
1 (relating to applicability of rule against perpetuities), no
2 direction or authorization to accumulated income shall be void,
3 except as herein provided.
4 (b) Void accumulations; exceptions.--[Upon] Except as set
5 forth in section 6107.1, upon the expiration of the period
6 allowed by the common law rule against perpetuities as measured
7 by actual rather than possible events, any direction or
8 authorization to accumulate income shall be void. This
9 subsection shall not apply to:
10 (1) Directions or authorizations to accumulate income in
11 a trust for any charitable purpose or purposes.
12 (2) Directions or authorizations to accumulate income in
13 a bona fide trust inter vivos primarily for the benefit of
14 business employees, their families or appointees, under a
15 stock bonus, pension, disability or death benefit, profit-
16 sharing or other employee-benefit plan.
17 (c) Time for beginning period.--[The] Except as set forth in
18 section 6107.1, the period allowed by the common law rule
19 against perpetuities under subsection (b) of this section shall
20 be measured from the expiration of any time during which one
21 person while living has the unrestricted power to transfer to
22 himself the entire legal and beneficial interest in the
23 property.
24 § 6107. Income accumulations; disposition when invalidity
25 occurs.
26 [Income] Except as set forth in section 6107.1 (relating to
27 applicability of rule against perpetuities), income subject to a
28 void direction or authorization to accumulate shall be
29 distributed to the person or proportionately to the persons in
30 whom the right to such income has vested by the terms of the
20050S0660B1969 - 8 -
1 instrument or by operation of law.
2 Section 3.1. Title 20 is amended by adding a section to
3 read:
4 § 6107.1. Applicability of rule against perpetuities.
5 (a) Traditional rule.--Sections 6104 (relating to rule
6 against perpetuities), 6105 (relating to rule against
7 perpetuities; disposition when invalidity occurs), 6106
8 (relating to income accumulations; when valid) and 6107
9 (relating to income accumulations; disposition when invalidity
10 occurs):
11 (1) shall apply to every interest created before January
12 1, 2007; but
13 (2) shall not apply to any interest created after
14 December 31, 2006.
15 (b) Modern rule.--All of the following apply to every
16 interest created after December 31, 2006:
17 (1) No interest shall be void as a perpetuity.
18 (2) No direction or authorization to accumulated income
19 shall be void as a perpetuity.
20 Section 3.2. Sections 6110, 6112 and 6114 of Title 20 are
21 amended to read:
22 [§ 6110. Administration of charitable interests.
23 (a) General rule.--Except as otherwise provided by the
24 conveyor, if the charitable purpose for which an interest shall
25 be conveyed outright or in a testamentary or inter vivos trust
26 shall be or become indefinite or impossible or impractical of
27 fulfillment, or if it shall not have been carried out for want
28 of a trustee or because of the failure of a trustee to designate
29 such purpose, the court may, on application of the trustee or of
30 any interested person or of the Attorney General, after proof of
20050S0660B1969 - 9 -
1 notice to the Attorney General when he is not the petitioner,
2 order an administration or distribution of the interest for a
3 charitable purpose in a manner as nearly as possible to fulfill
4 the intention of the conveyor, whether his charitable intent be
5 general or specific.
6 (b) Administrative termination of small charitable trusts.--
7 A trust held solely for charitable purposes with assets not
8 exceeding $10,000, whether heretofore or hereafter created, may
9 be terminated by the trustee at its inception or at any time
10 thereafter with the consent of the Attorney General and all
11 charitable organizations which are designated by name in the
12 conveyance as beneficiaries. Upon such termination the assets,
13 subject to the approval of the Attorney General, shall be
14 delivered to the organizations, if any, designated in the trust
15 instrument or, if none, to organizations selected by the
16 trustee, in either case to be held and applied for such general
17 or specific charitable purposes and on such terms as will, in
18 the trustee's discretion, fulfill as nearly as possible the
19 conveyor's intention.
20 (c) Judicial termination of charitable trusts.--If the
21 separate existence of a trust solely for charitable purposes,
22 whether heretofore or hereafter created, results or will result
23 in administrative expense or other burdens unreasonably out of
24 proportion to the charitable benefits, the court may, upon
25 application of the trustee or any interested person and after
26 notice to the Attorney General, terminate the trust, either at
27 its inception or at any time thereafter, and award the assets
28 outright, free of the trust, to the charitable organizations, if
29 any, designated in the conveyance or, if none, to charitable
30 organizations selected by the court, in either case for such
20050S0660B1969 - 10 -
1 purposes and on such terms as the court may direct to fulfill as
2 nearly as possible the conveyor'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 § 6112. Spendthrift trusts.
7 Income of a trust subject to spendthrift or similar
8 provisions shall nevertheless be liable for the support of
9 anyone whom the income beneficiary shall be under a legal duty
10 to support.]
11 § 6114. Rules of interpretation.
12 [In] (a) General rule.--Except as provided in subsection
13 (b), in the absence of a contrary intent appearing therein,
14 conveyances shall be construed, as to real and personal estate,
15 in accordance with the following rules:
16 (1) Meaning of "heirs" and "next of kin," etc.; time of
17 ascertaining class.--A conveyance of real or personal
18 property, whether directly or in trust, to the conveyor's or
19 another designated person's "heirs" or "next of kin" or
20 "relatives" or "family" or to "the persons thereunto entitled
21 under the intestate laws," or to persons described by words
22 of similar import, shall mean those persons, including the
23 spouse, who would take under the intestate laws if such
24 conveyor or other designated person were to die intestate at
25 the time when such class is to be ascertained, a resident of
26 the Commonwealth, and owning the property so conveyed:
27 Provided, That the share of a spouse other than the spouse of
28 the conveyor, shall not include the allowance under the
29 intestate laws. The time when such class is to be ascertained
30 shall be when the conveyance to the class is to take effect
20050S0660B1969 - 11 -
1 in enjoyment.
2 (2) Time for ascertaining class.--In construing a
3 conveyance to a class other than a class described in
4 paragraph (1) of this section, the class shall be ascertained
5 at the time the conveyance is to take effect in enjoyment,
6 except that the issue then living of any member of the class
7 who is then dead shall take per stirpes the share which their
8 deceased ancestor would have taken if he had then been
9 living.
10 (3) Meaning of "die without issue" and similar
11 phrases.--In any conveyance of real or personal estate, the
12 words "die without issue," "die without leaving issue," "have
13 no issue," or other words importing either a want or failure
14 of issue of any person in his lifetime or at the time of his
15 death, or an indefinite failure of his issue, shall be
16 construed to mean a want or failure of issue in his lifetime
17 or at his death, and not an indefinite failure of his issue.
18 (4) Adopted children.--In construing a conveyance to a
19 person or persons described by relationship to the conveyor
20 or to another, any adopted person shall be considered the
21 child of his adopting parent or parents, except that, in
22 construing the conveyance of a conveyor who is not the
23 adopting parent, an adopted person shall not be considered
24 the child of his adopting parent or parents unless the
25 adoption occurred during the adopted person's minority or
26 reflected an earlier parent-child relationship that existed
27 during the child's minority. An adopted person who is
28 considered the child of his adopting parent or parents under
29 this paragraph shall not be considered as continuing to be
30 the child of his natural parents except in construing the
20050S0660B1969 - 12 -
1 conveyance of a natural kin, other than the natural parent,
2 who has maintained a family relationship with the adopted
3 person. If a natural parent shall have married the adopting
4 parent, the adopted person shall also be considered the child
5 of such natural parent.
6 (5) Persons born out of wedlock.--In construing a
7 conveyance to a person or persons described by relationship
8 to the conveyor or to another, a person born out of wedlock
9 shall be considered the child of the natural mother and also
10 of the natural father if the paternity of the natural father
11 has been determined according to the provisions of section
12 2107 (relating to persons born out of wedlock).
13 (6) Inheritance tax.--The inheritance tax imposed by the
14 Inheritance and Estate Tax Act of 1961 upon the conveyance of
15 any estate, income or interest, for a term of years, for
16 life, or for other limited period, shall be paid out of the
17 principal of the property by which the estate, income or
18 interest is supported.
19 (7) Employee benefits.--Benefits received by a trust
20 under a Federally qualified profit sharing, pension or stock
21 bonus plan shall not be available for the payment of
22 obligations of the decedent or of his estate.
23 (8) Corporate fiduciaries.--Provisions authorizing or
24 restricting investment in the securities or common trust
25 funds of a corporate fiduciary or the exercise of voting
26 rights in its securities shall also apply to the securities
27 or common trust funds of any corporation which is an
28 affiliate of the corporate fiduciary within the meaning of
29 section 1504 of the Internal Revenue Code of 1986 (Public Law
30 99-514, 26 U.S.C. § 1504).
20050S0660B1969 - 13 -
1 (b) Exception.--This section does not apply to trusts under
2 Chapter 77 (relating to trusts).
3 Section 4. Chapter 71 heading, Subchapter A heading,
4 sections 7101, 7103, 7104 and 7105, Subchapter B heading,
5 sections 7111 and 7112, Subchapter C heading, section 7121,
6 Subchapter D heading, sections 7131, 7132, 7133, 7134, 7135 and
7 7136, Subchapter E heading, sections 7141, 7142, 7143, 7144 and
8 7145, Subchapter F heading, sections 7181, 7182, 7183, 7184,
9 7185, 7186, 7187 and 7188, Subchapter G heading, sections 7191
10 and 7192 of Title 20 are amended to read:
11 [CHAPTER 71
12 TRUST ESTATES
13 * * *
14 SUBCHAPTER A
15 APPOINTMENT OF TRUSTEES
16 * * *
17 § 7101. To fill vacancy.
18 The court, after such notice to parties in interest as it
19 shall direct, may appoint a trustee to fill a vacancy in the
20 office of trustee, subject to the provisions, if any, of the
21 trust instrument.
22 § 7103. Resident co-trustee.
23 When no trustee shall be a resident of the Commonwealth, the
24 court, after such notice as it shall direct, may appoint one or
25 more additional trustees resident within the Commonwealth to
26 serve with the nonresident trustee or trustees.
27 § 7104. Power of trustee to resign.
28 (a) Court approval.--Any trustee may resign with court
29 approval.
30 (b) Without court approval if authorized by governing
20050S0660B1969 - 14 -
1 instrument.--Any trustee may resign without court approval if
2 authorized to resign by the governing instrument.
3 (c) When individual trustee may resign without court
4 approval and without authorization in governing instrument.--
5 Unless expressly provided to the contrary in the governing
6 instrument, an individual trustee may resign without court
7 approval and without authorization in the governing instrument
8 if:
9 (1) consented to in writing by all co-trustees, if there
10 are one or more co-trustees; and
11 (2) consented to in writing by all the sui juris
12 beneficiaries currently eligible to receive income and by all
13 the sui juris beneficiaries who would receive, if no powers
14 of appointment were exercised, a distribution of principal if
15 the trust were to terminate immediately prior to the
16 resignation, provided that no such resignation shall be
17 effective unless there is at least one such income
18 beneficiary and at least one such remainderman.
19 This subsection shall not authorize the sole trustee of a trust
20 to resign unless the governing instrument names a successor
21 trustee or provides a method for appointing a successor trustee,
22 and in either case the resignation shall not be effective until
23 the successor trustee accepts in writing his appointment.
24 (d) Liability.--The resignation of a trustee shall not by
25 itself relieve the resigning trustee of liability in connection
26 with the administration of the trust.
27 (e) Definition.--As used in this section, the term "sui
28 juris beneficiary" includes a guardian for an incapacitated
29 beneficiary, an agent acting under a durable power of attorney
30 for an incompetent beneficiary and a court-appointed guardian of
20050S0660B1969 - 15 -
1 a minor's estate or, if none, the minor's parents.
2 § 7105. Filing resignations and appointments.
3 A resignation of a trustee, an appointment of a trustee and
4 an acceptance of an appointment of a trustee may be filed with
5 the clerk of the orphans' court division having jurisdiction
6 over the trust.
7 SUBCHAPTER B
8 BOND OF TRUSTEES
9 * * *
10 § 7111. Necessity, form and amount.
11 (a) When required.--Except as hereinafter provided, the
12 court, in its discretion, may require any trustee, whether or
13 not a resident of the Commonwealth, to execute and file a bond
14 which shall be in the name of the Commonwealth, with sufficient
15 surety, in such amount as the court considers necessary having
16 regard to the value of the personal estate in the control of the
17 trustee.
18 (b) When not required.--
19 (1) When named in or provided for in trust instrument.--
20 No bond shall be required of a trustee, whether or not a
21 resident of the Commonwealth, who is named in or whose
22 appointment is to be made in a manner specified by the trust
23 instrument, unless such instrument requires a bond or the
24 court, for cause shown, deems it advisable.
25 (2) Corporate trustee.--No bond shall be required of a
26 bank and trust company or trust company incorporated in the
27 Commonwealth, or of a national bank having its principal
28 office in the Commonwealth, unless the court, for cause
29 shown, deems it advisable.
30 (c) Condition.--
20050S0660B1969 - 16 -
1 (1) When one trustee.--The condition of this obligation
2 is, that if the said trustee shall well and truly administer
3 the trust according to law, this obligation shall be void;
4 but otherwise, it shall remain in force.
5 (2) When two or more trustees.--The condition of this
6 obligation is, that if the said trustees or any of them shall
7 well and truly administer the trust according to law, this
8 obligation shall be void as to the trustee or trustees who
9 shall so administer the trust; but otherwise, it shall remain
10 in force.
11 § 7112. Requiring or changing amount of bond.
12 The court, for cause shown, and after such notice, if any, as
13 it shall direct, may require a surety bond, or increase or
14 decrease the amount of the existing bond, or require more or
15 less security therefor.
16 SUBCHAPTER C
17 REMOVAL AND DISCHARGE
18 * * *
19 § 7121. Grounds and procedure.
20 The grounds and the procedure for the removal or discharge of
21 a trustee and his surety and the effect of such removal or
22 discharge shall be the same as are set forth in the following
23 provisions of this title relating to the removal and discharge
24 of a personal representative and his surety:
25 Section 3182 (relating to grounds for removal).
26 Section 3183 (relating to procedure for and effect of
27 removal).
28 Section 3184 (relating to discharge of personal
29 representative and surety).
30 SUBCHAPTER D
20050S0660B1969 - 17 -
1 POWERS, DUTIES AND LIABILITIES
2 * * *
3 § 7131. Possession of real and personal property.
4 Except as otherwise provided in the trust instrument, the
5 trustee, until it is distributed or sold, shall have the right
6 to and shall take possession of, maintain and administer each
7 real and personal asset of the trust, collect the rents and
8 income from it, and make all reasonable expenditures necessary
9 to preserve it. He shall also have the right to maintain any
10 action with respect to real or personal property of the trust.
11 § 7132. Abandonment of property.
12 When any property is so burdensome or is so encumbered or is
13 in such condition that it is of no value to the trust, the
14 trustee may abandon it. When such property cannot be abandoned
15 without transfer of title to another or without a formal
16 renunciation, the court may authorize the trustee to transfer or
17 renounce it without consideration if it shall find that this
18 will be for the best interests of the trust.
19 § 7133. Powers, duties and liabilities identical with personal
20 representatives.
21 The provisions concerning the powers, duties and liabilities
22 of a trustee shall be the same as those set forth in the
23 following provisions of this title for the administration of a
24 decedent's or a minor's estate:
25 Section 3313 (relating to liability insurance).
26 Section 3314 (relating to continuation of business).
27 Section 3315 (relating to incorporation of estate's
28 business).
29 Section 3317 (relating to claims against co-fiduciary).
30 Section 3318 (relating to revival of judgments against
20050S0660B1969 - 18 -
1 personal representative).
2 Section 3319 (relating to power of attorney; delegation
3 of power over subscription rights and fractional shares;
4 authorized delegations).
5 Section 3320 (relating to voting stock by proxy).
6 Section 3321 (relating to nominee registration; corporate
7 fiduciary as agent; deposit of securities in a clearing
8 corporation; book-entry securities).
9 Section 3322 (relating to acceptance of deed in lieu of
10 foreclosure).
11 Section 3323 (relating to compromise of controversies).
12 Section 3324 (relating to death or incapacity of
13 fiduciary).
14 Section 3327 (relating to surviving or remaining personal
15 representatives).
16 Section 3328 (relating to disagreement of personal
17 representatives).
18 Section 3331 (relating to liability of personal
19 representative on contracts).
20 Section 3332 (relating to inherent powers and duties).
21 Section 3353 (relating to order of court).
22 Section 3354 (relating to power given in governing
23 instrument).
24 Section 3355 (relating to restraint of sale).
25 Section 3356 (relating to purchase by personal
26 representative).
27 Section 3358 (relating to collateral attack).
28 Section 3359 (relating to record of proceedings; county
29 where real estate lies).
30 Section 3360 (relating to contracts, inadequacy of
20050S0660B1969 - 19 -
1 consideration or better offer; brokers' commissions).
2 Section 5147 (relating to proceedings against guardian).
3 § 7134. Investments.
4 Subject only to the provisions of a governing instrument, if
5 any, a trustee may accept, hold, invest in and retain
6 investments as provided by Chapter 72 (relating to prudent
7 investor rule).
8 § 7135. Substituted or succeeding trustee.
9 A substituted or succeeding trustee, except as otherwise
10 provided by the trust instrument, shall have all the powers,
11 duties and liabilities of the original trustee. He shall have
12 the power to recover the assets of the trust from his
13 predecessor in administration or from the fiduciary of such
14 predecessor and, except as otherwise provided by the governing
15 instrument, shall stand in the predecessor's stead for all
16 purposes, except that he shall not be personally liable for the
17 acts of his predecessor.
18 § 7136. Effect of removal, or of probate of later will or
19 codicil.
20 No act of administration performed by a testamentary trustee
21 in good faith shall be impeached by the subsequent revocation of
22 the probate of the will from which he derives his authority, or
23 by the subsequent probate of a later will or of a codicil, or by
24 the subsequent dismissal of the trustee: Provided, That
25 regardless of the good or bad faith of the testamentary trustee,
26 no person who deals in good faith with a testamentary trustee
27 shall be prejudiced by the subsequent occurrence of any of these
28 contingencies.
29 SUBCHAPTER E
30 SALES, PLEDGES, MORTGAGES, LEASES, OPTIONS
20050S0660B1969 - 20 -
1 AND EXCHANGES
2 * * *
3 § 7141. Power to sell.
4 Except as otherwise provided by the trust instrument, the
5 trustee, for any purpose of administration or distribution, may
6 sell, at public or private sale, any real or personal property
7 of the trust. When the trustee has been required to give bond,
8 no proceeds of real estate shall be paid to him until the court
9 has made an order excusing him from entering additional security
10 or requiring additional security, and in the latter event, only
11 after he has entered the additional security.
12 § 7142. Power to lease.
13 Except as otherwise provided by the trust instrument, the
14 trustee may lease any real or personal property of the trust for
15 a term not exceeding five years after its execution, unless a
16 longer term is approved by the court.
17 § 7143. Title of purchaser.
18 If the trustee has given such bond, if any, as shall be
19 required in accordance with this title, any sale, pledge,
20 mortgage, or exchange by a trustee, whether pursuant to a decree
21 or to the exercise of a power conferred by the trust instrument
22 or of a power under this title, shall pass the full title of the
23 trust therein, unless otherwise specified. Persons dealing with
24 the trustee shall have no obligation to see to the proper
25 application of the cash or other assets given in exchange for
26 the property of the trust. Any sale or exchange by a trustee
27 pursuant to a decree under section 3353 (relating to order of
28 court) shall have the effect of a judicial sale as to the
29 discharge of liens, but the court may decree a sale or exchange
30 freed and discharged from the lien of any mortgage otherwise
20050S0660B1969 - 21 -
1 preserved from discharge by existing law, if the holder of such
2 mortgage shall consent by writing filed in the proceeding. No
3 such sale, mortgage, exchange, or conveyance shall be prejudiced
4 by the subsequent dismissal of the trustee nor shall any such
5 sale, mortgage, exchange, or conveyance by a testamentary
6 trustee be prejudiced by the terms of any will or codicil
7 thereafter probated, if the person dealing with the trustee did
8 so in good faith.
9 § 7144. Reports for school district trustees.
10 (a) Scope.--This section applies if a school district is a
11 trustee of land in accordance with all of the following:
12 (1) The land is held for the benefit of the public.
13 (2) The land is not used directly for school purposes.
14 (b) Requirement.--
15 (1) By January 30, the school district shall prepare a
16 report for the prior year concerning the trust.
17 (2) The report shall detail all of the following:
18 (i) Revenues generated.
19 (ii) Expenses incurred.
20 (iii) Balance of funds held by the school district
21 as trustee.
22 (iv) A statement regarding the activities taken by
23 the trustee during the prior year to advance the purposes
24 of the trust.
25 (3) The report must be certified as correct by the
26 district superintendent.
27 (4) The report shall be made public as follows:
28 (i) The report shall be published in 14-point type
29 in a newspaper of general circulation in each county in
30 which the land is located.
20050S0660B1969 - 22 -
1 (ii) The report shall be available during business
2 hours for inspection and copying at the office of the
3 district superintendent. A reasonable fee may be charged
4 for copying.
5 § 7145. Jurisdiction.
6 Notwithstanding 42 Pa.C.S. § 931 (relating to original
7 jurisdiction and venue), jurisdiction over an action involving
8 land referred to in section 7144 (relating to reports for school
9 district trustees) shall be vested in the court of common pleas
10 in the judicial district where:
11 (1) all of the land is located; or
12 (2) more than 50% of the land is located.
13 SUBCHAPTER F
14 ACCOUNTS, AUDITS, REVIEWS AND DISTRIBUTION
15 * * *
16 § 7181. When account filed.
17 A trustee shall file an account of his administration
18 whenever directed to do so by the court and may file an account
19 at any other time.
20 § 7182. Where accounts filed.
21 All accounts of trustees shall be filed in the office of the
22 clerk.
23 § 7183. Notice, audits, reviews, and distribution.
24 The provisions concerning accounts, audits, reviews,
25 distributions and rights of distributees in trust estates shall
26 be the same as those set forth in the following provisions of
27 this title for the administration of a decedent's estate:
28 Section 3503 (relating to notice to parties in interest).
29 Section 3504 (relating to representation of parties in
30 interest).
20050S0660B1969 - 23 -
1 Section 3511 (relating to audits in counties having
2 separate orphans' court division).
3 Section 3512 (relating to audits in counties having no
4 separate orphans' court division).
5 Section 3513 (relating to statement of proposed
6 distribution).
7 Section 3514 (relating to confirmation of account and
8 approval of proposed distribution).
9 Section 3521 (relating to rehearing; relief granted).
10 Section 3532(c) (relating to at risk of personal
11 representative).
12 Section 3533 (relating to award upon final confirmation
13 of account).
14 Section 3534 (relating to distribution in kind).
15 Section 3536 (relating to recording and registering
16 decrees awarding real estate).
17 Section 3538 (relating to distributions involving persons
18 born out of wedlock).
19 Section 3539 (relating to change in law after pattern of
20 distribution established).
21 Section 3540 (relating to absentee and additional
22 distributees).
23 Section 3541 (relating to order of abatement).
24 Section 3544 (relating to liability of personal
25 representative for interest).
26 Section 3545 (relating to transcripts of balances due by
27 personal representative).
28 § 7184. Disposition of income.
29 Except as otherwise provided by the trust instrument, the
30 trustee with the approval of the court, may pay income
20050S0660B1969 - 24 -
1 distributable to a minor or incompetent beneficiary for whose
2 estate no guardian has been appointed directly to the minor or
3 incompetent, or expend and apply it for his maintenance or
4 education.
5 § 7185. Compensation.
6 (a) When allowed.--The court shall allow such compensation
7 to the trustee as shall in the circumstances be reasonable and
8 just, and may take into account the market value of the trust at
9 the time of the allowance, and calculate such compensation on a
10 graduated percentage.
11 (b) Allowed out of principal or income.--The fact that a
12 fiduciary's service has not ended or the fact that the trust has
13 not ended or the fact that the trust is perpetual shall not be a
14 bar to the fiduciary's receiving compensation for his services
15 out of the principal of the trust. Whenever it shall appear
16 either during the continuance of a trust or at its end, that a
17 fiduciary has rendered services for which he has not been fully
18 compensated, the court having jurisdiction over his accounts,
19 shall allow him such original or additional compensation out of
20 the trust income or the trust principal or both, as may be
21 necessary to compensate him for the services theretofore
22 rendered by him. The provisions of this section shall apply to
23 ordinary and extraordinary services alike.
24 (c) Compensation prescribed by will or other instrument.--
25 Where the compensation of a fiduciary is expressly prescribed
26 either by provisions of a will or deed of trust or other
27 instrument under which he is acting or by provisions of an
28 agreement between him and the creator of a trust, nothing in
29 this section shall change in any way the rights of any party in
30 interest or of the fiduciary.
20050S0660B1969 - 25 -
1 (d) Cemetery lots.--The provisions of this section shall not
2 apply to trusts created by cemetery lot owners as endowments for
3 the endowed care and maintenance of burial or cemetery lots,
4 where the corpus or principal sum involved is or does not exceed
5 $5,000, in order that the corpus or principal sum for such
6 endowments should remain undiminished.
7 § 7186. Failure to present claim at audit.
8 (a) General rule.--Any person who at the audit of a
9 trustee's account has a claim which arose out of the
10 administration of trust property, or arises out of the
11 distribution of such property upon any interim or final
12 accounting of the trust, and which is not reported to the court
13 as an admitted claim, and who shall fail to present his claim at
14 the call for audit or confirmation, shall be forever barred,
15 against:
16 (1) any trust property distributed pursuant to such
17 audit or confirmation;
18 (2) any distributee of trust property distributed
19 pursuant to such audit or confirmation; and
20 (3) except as otherwise provided in section 3521
21 (relating to rehearing; relief granted), any trust property
22 awarded back upon further trust pursuant to such audit or
23 confirmation.
24 (b) Liens and charges unimpaired.--Nothing in this section
25 shall be construed as impairing any lien or charge on real or
26 personal estate of the trust existing at the time of the audit.
27 § 7187. Interest or income on distributive shares.
28 Except as otherwise provided by the trust instrument or by
29 the provisions of section 3543 (relating to interest or income
30 on distributive shares):
20050S0660B1969 - 26 -
1 (1) Pecuniary gift.--When a sum of money is directed to
2 be set aside at a specified time as a separate trust, it
3 shall bear interest at the rate of 5% per annum from the date
4 it was to be set aside until it is set aside. When a sum of
5 money is directed to be paid outright, it shall bear interest
6 at the rate of 5% per annum from three months after it became
7 payable until it is paid.
8 (2) Specific gift.--A donee of a gift of specific real
9 or personal property directed to be distributed from a trust
10 shall be entitled to the net income from property given to
11 him accrued from the date it became distributable to him.
12 (3) Residuary gift.--All income from real and personal
13 property earned during the administration of a trust and not
14 payable to others shall be distributed pro rata among the
15 income beneficiaries of any continuing trust of a residuary
16 share and other persons entitled to residuary shares of the
17 trust.
18 § 7188. Annexation of account of distributed estate or trust.
19 A trustee who has received property from a personal
20 representative or from another trustee in distribution of an
21 estate or another trust, may annex a copy of an account of the
22 administration of such estate or other trust to an account filed
23 by the trustee covering the administration of the trust under
24 his management. If notice of the annexation of the account of
25 the estate or other trust is given to the persons required to be
26 notified of the filing of the trustee's account of the principal
27 trust, confirmation of the principal account shall relieve both
28 the trustee of the principal trust and the personal
29 representative or trustee of the distributed estate or other
30 trust of all liability to beneficiaries of the principal trust
20050S0660B1969 - 27 -
1 for transactions shown in the account so annexed to the same
2 extent as if the annexed account had been separately filed and
3 confirmed. When the fund covered by the annexed account has
4 itself received property from another source under circumstances
5 that would have permitted annexation of an account under this
6 section or under section 3501.2 (relating to annexation of
7 account of terminated trust, guardianship or agency), accounts
8 for both funds may be annexed.
9 SUBCHAPTER G
10 SEPARATION AND COMBINATION OF TRUSTS
11 * * *
12 § 7191. Separate trusts.
13 (a) Without court approval.--A trustee may, without court
14 approval, divide a trust into separate trusts, allocating to
15 each separate trust either a fractional share of each asset and
16 each liability held by the original trust or assets having an
17 appropriate aggregate fair market value and fairly representing
18 the appreciation or depreciation in the assets of the original
19 trust as a whole. If the division reflects disclaimers or
20 different tax elections, the division shall relate back to the
21 date to which the disclaimer or tax election relates.
22 (b) With court approval.--The court, for cause shown, may
23 authorize the division of a trust into two or more separate
24 trusts upon such terms and conditions and with such notice as
25 the court shall direct.
26 (c) Separate fund.--A trustee may, without court approval,
27 set aside property in a separate fund prior to actual
28 distribution, after which income earned on the separate fund and
29 appreciation or depreciation of the property set-aside shall
30 belong to the separate fund.
20050S0660B1969 - 28 -
1 § 7192. Combination of trusts.
2 The court, for cause shown, may authorize the combination of
3 separate trusts with substantially similar provisions upon such
4 terms and conditions and with such notice as the court shall
5 direct notwithstanding that the trusts may have been created by
6 separate instruments and by different persons. If necessary to
7 protect possibly different future interests, the assets shall be
8 valued at the time of any such combination and a record made of
9 the proportionate interest of each separate trust in the
10 combined fund.]
11 Section 5. The definition of "mutual fund" in section 7201
12 of Title 20 is amended to read:
13 § 7201. Definitions.
14 The following words and phrases when used in this chapter
15 shall have the meanings given to them in this section unless the
16 context clearly indicates otherwise:
17 * * *
18 "Mutual fund." The securities of an [open-end or closed-end
19 management] investment company [or investment trust] registered
20 under the Investment Company Act of 1940 (54 Stat. 789, 15
21 U.S.C. § 80a-1 et seq.).
22 * * *
23 Section 6. Sections 7314.1 and 7503(b) of Title 20 are
24 amended to read:
25 § 7314.1. Mutual funds.
26 Notwithstanding that a bank or trust company or an affiliate
27 provides services to the investment company or investment trust,
28 including that of an investment advisor, custodian, transfer
29 agent, registrar, sponsor, distributor or manager, and receives
30 reasonable compensation for those services and notwithstanding
20050S0660B1969 - 29 -
1 any other provision of law, a bank or trust company acting as a
2 fiduciary, agent or otherwise may invest and reinvest in the
3 securities of an [open-end or closed-end management] investment
4 company [or investment trust] registered under the Investment
5 Company Act of 1940 (54 Stat. 789, 15 U.S.C. § 80a-1 et seq.) if
6 the portfolio of the investment company or investment trust
7 consists substantially of investments not prohibited by the
8 governing instrument. With respect to any funds invested, the
9 basis upon which compensation is calculated, expressed as a
10 percentage of asset value or otherwise, shall be disclosed by
11 prospectus, account statement or otherwise to all persons to
12 whom statements of the account are rendered.
13 § 7503. Application of chapter.
14 * * *
15 (b) Exclusion.--This chapter shall not apply to:
16 (1) Any trust during the time that the trust is
17 revocable or amendable by its settlor.
18 (2) A spouse of a decedent or settlor where the spouse
19 is the trustee of a testamentary or inter vivos trust for
20 which a marital deduction has been allowed.
21 [(3) A trustee who possesses in his individual capacity
22 an unlimited right to withdraw the entire principal of the
23 trust or has a general testamentary power of appointment over
24 the entire principal of the trust.]
25 (4) A trust under a governing instrument that by
26 specific reference expressly rejects the application of this
27 chapter.
28 [(5) A trust created under governing instrument executed
29 on or before March 21, 1999, if no part of the principal of
30 the trust would be included in the gross estate of the
20050S0660B1969 - 30 -
1 trustee for Federal estate tax purposes if the trustee had
2 died on March 21, 1999, without having exercised the power
3 under the governing instrument to make discretionary
4 distributions of principal or income to or for the benefit of
5 the trustee, the trustee's estate or the creditors of
6 either.]
7 Section 7. Section 7504 of Title 20 is amended by adding a
8 subsection to read:
9 § 7504. Certain trustee powers not exercisable.
10 * * *
11 (c) Exceptions.--This section shall not apply to:
12 (1) A trustee who possesses in his individual capacity
13 an unlimited right to withdraw the entire principal of the
14 trust or has a general testamentary power of appointment over
15 the entire principal of the trust.
16 (2) A trust created under a governing instrument
17 executed on or before March 21, 1999, if no part of the
18 principal of the trust would have been included in the gross
19 estate of the trustee for Federal estate tax purposes if the
20 trustee had died on March 21, 1999, without having exercised
21 the power under the governing instrument to make
22 discretionary distributions of principal or income to or for
23 the benefit of the trustee, the trustee's estate or the
24 creditors of either.
25 Section 8. Section 7506 of Title 20 is amended to read:
26 § 7506. Certain powers of beneficiaries not exercisable.
27 (a) General rule.--No beneficiary of a trust in an
28 individual, trustee or other capacity may appoint himself or
29 herself as trustee or remove a trustee and appoint in place of
30 the trustee so removed a trustee who is related or subordinate
20050S0660B1969 - 31 -
1 to the beneficiary within the meaning of section 672(c) of the
2 Internal Revenue Code of 1986 (Public Law 99-514, 26 U.S.C. §
3 672(c) [(relating to definitions and rules)]) in each case
4 unless:
5 (1) the trustee's discretionary power to make
6 distributions to or for the beneficiary is limited by an
7 ascertainable standard relating to the beneficiary's health,
8 education, support or maintenance within the meaning of
9 sections 2041 and 2514 of the Internal Revenue Code of 1986
10 (26 U.S.C. §§ 2041 [(relating to powers of appointment)] and
11 2514 [(relating to powers of appointment]);
12 (2) the trustee's discretionary power may not be
13 exercised to satisfy any of the beneficiary's legal
14 obligations for support or other purposes; and
15 (3) the trustee's discretionary power may not be
16 exercised to grant to the beneficiary a general power to
17 appoint property of the trust to the beneficiary, the
18 beneficiary's estate or the creditors [thereof] of either
19 within the meaning of section 2041 of the Internal Revenue
20 Code of 1986 (26 U.S.C. § 2041).
21 (b) [Exception] Exceptions.--This section shall not apply:
22 (1) if the appointment of the trustee by the beneficiary
23 may be made only in conjunction with another person having a
24 substantial interest in the property of the trust subject to
25 the power which is adverse to the exercise of the power in
26 favor of the beneficiary within the meaning of section
27 2041(b)(1)(C)(ii) of the Internal Revenue Code of 1986 (26
28 U.S.C. § 2041(b)(1)(C)(ii)) or the appointment is in
29 conformity with a procedure governing appointments approved
30 by the court before December 21, 1998[.];
20050S0660B1969 - 32 -
1 (2) to any beneficiary who possesses in an individual
2 capacity an unlimited right to withdraw the entire principal
3 of the trust or has a general testamentary power of
4 appointment over the entire principal of the trust; or
5 (3) to a trust created under a governing instrument
6 executed on or before March 21, 1999, if no part of the
7 principal of the trust would have been included in the gross
8 estate of the beneficiary for Federal estate tax purposes if
9 the beneficiary had died on March 21, 1999.
10 Section 9. Title 20 is amended by adding a chapter to read:
11 CHAPTER 77
12 TRUSTS
13 Subchapter
14 A. General Provisions
15 B. Judicial Proceedings
16 C. Representation
17 D. Creation, Validity, Modification and Termination of Trust
18 E. Creditor's Claims; Spendthrift and Discretionary Trusts
19 F. Revocable Trusts
20 G. Office of Trustee
21 H. Duties and Powers of Trustee
22 I. Liability of Trustees and Rights of Persons Dealing with
23 Trustees
24 J. Miscellaneous Provisions
25 SUBCHAPTER A
26 GENERAL PROVISIONS
27 Sec.
28 7701. Short title - UTC 101.
29 7702. Scope - UTC 102.
30 7703. Definitions - UTC 103.
20050S0660B1969 - 33 -
1 7704. Knowledge - UTC 104.
2 7705. Trust instrument controls; mandatory rules - UTC 105.
3 7706. Common law of trusts; principles of equity - UTC 106.
4 7707. Governing law - UTC 107.
5 7708. Situs of trust.
6 7709. Methods and waiver of notice - UTC 109.
7 7710. Notice; others treated as beneficiaries - UTC 110.
8 7710.1. Nonjudicial settlement agreements - UTC 111.
9 7710.2. Rules of construction - UTC 112.
10 § 7701. Short title - UTC 101.
11 Subchapters A (relating to general provisions) through I
12 (relating to liability of trustees and rights of persons dealing
13 with trustees) shall be known and may be cited as the Uniform
14 Trust Act.
15 § 7702. Scope - UTC 102.
16 This chapter applies to express trusts, charitable and
17 noncharitable, and trusts created pursuant to a statute,
18 judgment or decree that requires the trust to be administered in
19 the manner of an express trust.
20 § 7703. Definitions - UTC 103.
21 The following words and phrases when used in this chapter
22 shall have the meanings given to them in this section unless the
23 context clearly indicates otherwise:
24 "Action." With respect to an act of a trustee, includes a
25 failure to act.
26 "Beneficiary." A person that:
27 (1) has a present or future beneficial interest in a
28 trust, vested or contingent; or
29 (2) in a capacity other than that of trustee or
30 protector, holds a power of appointment over trust property.
20050S0660B1969 - 34 -
1 "Charitable trust." A trust, or portion of a trust, created
2 for a charitable purpose described in section 7735(a) (relating
3 to charitable purposes; enforcement - UTC 405).
4 "Current beneficiary." A person 18 years of age or older to
5 or for whom income or principal of a trust must be distributed
6 currently or a person 25 years of age or older to or for whom
7 income or principal of a trust may, in the trustee's discretion,
8 be distributed currently.
9 "Guardian." A person other than a guardian ad litem who is
10 appointed by the court to make decisions regarding the property
11 of an individual.
12 "Interests of the beneficiaries." The beneficial interests
13 provided in the trust instrument.
14 "Jurisdiction." With reference to a geographic area, a
15 country, state or county.
16 "Power of withdrawal." The unrestricted power of a
17 beneficiary, acting as a beneficiary and not as a trustee, to
18 transfer to himself or herself the entire legal and beneficial
19 interest in all or a portion of trust property. However, a power
20 to withdraw the greater of the amount specified in section
21 2041(b)(2), 2503(b) or 2514(e) of the Internal Revenue Code of
22 1986 (Public Law 99-514, 26 U.S.C. § 2041(b)(2), 2503(b) or
23 2514(e)), or any lesser amount determined by reference to one or
24 more of these provisions, may not be treated as a power of
25 withdrawal.
26 "Property." Anything that may be the subject of ownership,
27 whether real or personal, legal or equitable, or any interest
28 therein.
29 "Qualified beneficiary." Assuming nonexercise of all
30 testamentary powers of appointment, a beneficiary who on the
20050S0660B1969 - 35 -
1 date the beneficiary's qualification is determined:
2 (1) is a distributee or permissible distributee of trust
3 income or principal;
4 (2) would be a distributee or permissible distributee of
5 trust income or principal if the interests of the
6 distributees described in paragraph (1) terminated on that
7 date; or
8 (3) would be a distributee or permissible distributee of
9 trust income or principal if the trust terminated on that
10 date.
11 "Revocable trust." A trust is revocable to the extent the
12 settlor, immediately before the time as of which the
13 determination is made, had the power, acting without the consent
14 of the trustee or any person holding an interest adverse to
15 revocation, to prevent the transfer of the trust property at the
16 settlor's death by revocation or amendment of or withdrawal of
17 property from the trust.
18 "Settlor." A person, including a testator, who creates or
19 contributes property to a trust. If more than one person creates
20 or contributes property to a trust, each person is a settlor of
21 the portion of the trust property attributable to that person's
22 contribution except to the extent another person has the power
23 to revoke or withdraw that portion.
24 "Spendthrift provision." A provision in a trust instrument
25 that restrains both voluntary and involuntary transfer of a
26 beneficiary's interest.
27 "Trust instrument." A will or other written instrument
28 executed by the settlor that contains trust provisions,
29 including any amendments thereto.
30 "Trustee." Includes an original, additional and successor
20050S0660B1969 - 36 -
1 trustee and a cotrustee.
2 § 7704. Knowledge - UTC 104.
3 (a) When person has knowledge.--For the purposes of this
4 chapter and subject to subsection (b), a person has knowledge of
5 a fact involving a trust if the person has:
6 (1) actual knowledge of it;
7 (2) received a notice or notification of it; or
8 (3) reason to know it from all the facts and
9 circumstances known to the person at the time in question.
10 (b) Employees.--For the purposes of this chapter, an
11 organization that conducts activities through employees has
12 notice or knowledge of a fact involving a trust only from the
13 time the information was received by an employee having
14 responsibility to act for the trust, or would have been brought
15 to the employee's attention if the organization had exercised
16 reasonable diligence. An organization exercises reasonable
17 diligence if it maintains reasonable routines for communicating
18 significant information to the employee having responsibility to
19 act for the trust and there is reasonable compliance with the
20 routines. Reasonable diligence does not require an employee of
21 the organization to communicate information unless the
22 communication is part of the individual's regular duties or the
23 individual knows a matter involving the trust would be
24 materially affected by the information.
25 § 7705. Trust instrument controls; mandatory rules - UTC 105.
26 (a) Trust instrument controls.--Except as provided in
27 subsection (b), the provisions of a trust instrument prevail
28 over any contrary provisions of this chapter.
29 (b) Mandatory rules.--Notwithstanding a contrary provision
30 in the trust instrument, the following rules apply:
20050S0660B1969 - 37 -
1 (1) The requirements for creating a trust set forth in
2 section 7732 (relating to requirements for creation - UTC
3 402).
4 (2) The duty of a trustee to act in good faith and in
5 accordance with the purposes of the trust as set forth in
6 section 7771 (relating to duty to administer trust - UTC
7 801).
8 (3) The requirement in section 7734 (relating to trust
9 purposes - UTC 404) that a trust's purpose be lawful and not
10 contrary to public policy.
11 (4) The power of the court to modify or terminate a
12 trust under sections 7740 (relating to termination of trusts;
13 proceedings for termination or modification of trusts - UTC
14 410) through 7740.6 (relating to modification to achieve
15 settlor's tax objectives - UTC 416).
16 (5) The effect of a spendthrift provision and the rights
17 of certain creditors and assignees to reach a trust as
18 provided in Subchapter E (relating to creditor's claims;
19 spendthrift and discretionary trusts).
20 (6) The power of the court under section 7762 (relating
21 to trustee's bond - UTC 702).
22 (7) The power of the court under section 7768(b)
23 (relating to compensation of trustee - UTC 708) to adjust a
24 trustee's compensation specified in the trust instrument.
25 (8) The duty of a trustee under section 7780.3 (relating
26 to duty to inform and report).
27 (9) (Reserved).
28 (10) The effect of an exculpatory term under section
29 7788 (relating to exculpation of trustee - UTC 1008).
30 (11) The rights under sections 7790 (relating to
20050S0660B1969 - 38 -
1 limitation on personal liability of trustee - UTC 1010)
2 through 7790.3 (relating to certification of trust - UTC
3 1013) of a person other than a trustee or beneficiary.
4 (12) Periods of limitation for commencing a judicial
5 proceeding.
6 (13) The power of the court to take action and exercise
7 jurisdiction as may be necessary in the interests of justice.
8 (14) The subject matter jurisdiction of the court
9 described in Chapter 7 (relating to orphans' court divisions)
10 and venue for commencing a proceeding as provided in section
11 7714 (relating to venue - UTC 204).
12 § 7706. Common law of trusts; principles of equity - UTC 106.
13 The common law of trusts and principles of equity supplement
14 this chapter, except to the extent modified by this chapter or
15 another statute of this Commonwealth.
16 § 7707. Governing law - UTC 107.
17 The meaning and effect of the provisions of a trust
18 instrument shall be determined by:
19 (1) the law of the jurisdiction designated in the trust
20 instrument, but the mandatory rules of section 7705(b)
21 (relating to trust instrument controls; mandatory rules - UTC
22 105) shall govern if different from the law of the
23 jurisdiction designated in the trust instrument; or
24 (2) in the absence of an effective designation in the
25 trust instrument, the law of the jurisdiction in which the
26 settlor is domiciled when the trust becomes irrevocable.
27 § 7708. Situs of trust.
28 (a) Specified in trust instrument.--Without precluding other
29 means for establishing a sufficient connection with the
30 designated jurisdiction, provisions of a trust instrument
20050S0660B1969 - 39 -
1 designating the situs of the trust are valid and controlling if:
2 (1) a trustee's principal place of business is located
3 in or a trustee is a resident of the designated jurisdiction;
4 (2) all or part of the trust administration occurs in
5 the designated jurisdiction; or
6 (3) one or more of the beneficiaries resides in the
7 designated jurisdiction.
8 (b) Unspecified in trust instrument.--If the trust
9 instrument does not specify a situs:
10 (1) The situs of a testamentary trust shall be:
11 (i) in the county where letters were granted to the
12 personal representative;
13 (ii) if letters under subparagraph (i) have not been
14 granted, in a county where the letters might have been
15 granted; or
16 (iii) if letters under subparagraph (i) have not
17 been granted and are not subject to being granted, in a
18 county in which any trustee resides or has a place of
19 business.
20 (2) The situs of an inter vivos trust whose settlor is
21 domiciled in this Commonwealth when the trust becomes
22 irrevocable or, in the case of a revocable trust, when the
23 first application is made to a court concerning the trust
24 shall be:
25 (i) during the settlor's lifetime, either in the
26 county of the settlor's principal residence or in the
27 county in which any of the trustees resides or has a
28 place of business; and
29 (ii) after the settlor's death:
30 (A) in the county in which letters have been
20050S0660B1969 - 40 -
1 granted to the settlor's personal representative;
2 (B) in a county in which letters might have been
3 granted;
4 (C) in a county which is the principal place of
5 the trust's administration; or
6 (D) in a county in which any trustee resides or
7 has a place of business.
8 (3) The situs of an inter vivos trust, whose settlor
9 either is living and not domiciled in this Commonwealth at
10 the time when the first application is made to a court
11 concerning the trust or was not domiciled in this
12 Commonwealth at the settlor's death after which the first
13 application to a court concerning the trust is made
14 thereafter, shall be in a county where:
15 (i) a trustee's principal place of business is
16 located or a trustee is a resident;
17 (ii) all or part of the trust administration occurs;
18 or
19 (iii) one or more of the beneficiaries reside.
20 (c) Transfer.--By complying with subsections (d) and (e),
21 the trustee may transfer the trust's situs to another
22 jurisdiction if either immediately before or immediately after
23 the proposed transfer:
24 (1) a trustee's principal place of business is located
25 in or a trustee is a resident of the proposed jurisdiction;
26 (2) all or part of the trust administration occurs in
27 the proposed jurisdiction; or
28 (3) one or more of the beneficiaries reside in the
29 proposed jurisdiction.
30 (d) Notice of transfer.--The trustee shall notify the
20050S0660B1969 - 41 -
1 qualified beneficiaries of a proposed transfer of a trust's
2 situs at least 60 days before the date as of which the trustee
3 intends to change the situs. The notice of proposed transfer
4 must include the following:
5 (1) The name of the jurisdiction to which the situs is
6 to be transferred.
7 (2) The address and telephone number at the new location
8 at which the trustee can be contacted.
9 (3) The reasons for the proposed transfer.
10 (4) The date on which the proposed transfer is
11 anticipated to occur.
12 (5) A statement that if the situs is changed as the
13 trustee proposes, venue will thereafter be in the county of
14 the new situs consistent with section 7714 (relating to venue
15 - UTC 204).
16 (6) The name and address of the court before which
17 judicial actions involving the trust will be heard after the
18 situs is changed as the trustee proposes.
19 (7) A statement that the change in situs will occur only
20 if all qualified beneficiaries of the trust consent in
21 writing to the change.
22 (e) Consent to transfer.--A trustee may transfer a trust's
23 situs under this section without court approval if all the
24 qualified beneficiaries of the trust consent in writing to the
25 change.
26 (f) Successor trustee.--In connection with a transfer of the
27 trust's situs, the trustee may transfer some or all of the trust
28 property to a successor trustee designated in the trust
29 instrument or appointed pursuant to section 7764 (relating to
30 vacancy in trusteeship; appointment of successor - UTC 704).
20050S0660B1969 - 42 -
1 (g) Court-directed change in situs.--A court having
2 jurisdiction of a testamentary or inter vivos trust, on
3 application of a trustee or any party in interest, after notice
4 as the court shall direct and aided if necessary by the report
5 of a master, and after accounting as the court shall require,
6 may direct, notwithstanding any other provision of this chapter,
7 that the situs of the trust shall be changed to any other place
8 within or without this Commonwealth if the court shall find the
9 change necessary or desirable for the proper administration of
10 the trust.
11 (h) Claims not discharged.--A change in situs under this
12 section does not discharge any claim against the trustee.
13 § 7709. Methods and waiver of notice - UTC 109.
14 (a) Notice generally.--Notice to a person under this chapter
15 or the sending of a document to a person under this chapter must
16 be accomplished in a manner reasonably suitable under the
17 circumstances and likely to result in receipt of the notice or
18 document. Permissible methods of notice or for sending a
19 document include first-class mail, personal delivery, delivery
20 to the person's last known place of residence or place of
21 business and a properly directed electronic message.
22 (b) Unknown identity or location.--Notice otherwise required
23 under this chapter or a document otherwise required to be sent
24 under this chapter need not be provided to a person whose
25 identity or location is unknown to and not reasonably
26 ascertainable by the trustee, but the trustee shall create and
27 maintain indefinitely a written record of the steps the trustee
28 took to identify or locate the person.
29 (c) Waiver.--Notice under this chapter or the sending of a
30 document under this chapter may be waived in writing by the
20050S0660B1969 - 43 -
1 person to be notified or sent the document.
2 (d) Notice of judicial proceeding.--Notice of a judicial
3 proceeding must be given as provided in the applicable rules of
4 court.
5 § 7710. Notice; others treated as beneficiaries - UTC 110.
6 (a) Notice.--Whenever notice to qualified or current
7 beneficiaries of a trust is required under this chapter, the
8 trustee must also give notice to any other beneficiary who has
9 sent the trustee a written request for notice.
10 (b) Enforcement by charitable organization expressly named
11 in instrument.--A charitable organization expressly named in the
12 trust instrument to receive distributions from the trust has the
13 rights of a beneficiary under this chapter.
14 (c) Enforcement by others.--A person appointed to enforce a
15 trust created for the care of an animal or another noncharitable
16 purpose as provided in section 7738 (relating to trust for care
17 of animal - UTC 408) or 7739 (relating to noncharitable trust
18 without ascertainable beneficiary - UTC 409) has the rights of a
19 beneficiary under this chapter.
20 (d) Office of Attorney General.--The Office of Attorney
21 General has the rights of a charitable organization expressly
22 named in the trust instrument to receive distributions from a
23 trust having its situs in this Commonwealth AND THE RIGHT TO <--
24 NOTICE OF ANY PROCEEDING OR NONJUDICIAL SETTLEMENT AGREEMENT IN
25 WHICH THERE IS A CHARITABLE INTEREST OR PURPOSE.
26 § 7710.1. Nonjudicial settlement agreements - UTC 111.
27 (a) (Reserved).
28 (b) General rule.--Except as otherwise provided in
29 subsection (c), all beneficiaries and trustees of a trust may
30 enter into a binding nonjudicial settlement agreement with
20050S0660B1969 - 44 -
1 respect to any matter involving the trust. The rules of
2 Subchapter C (relating to representation) shall apply to a
3 settlement agreement under this section.
4 (c) Exception.--A nonjudicial settlement agreement is valid
5 only to the extent it does not violate a material purpose of the
6 trust and includes terms and conditions that could be properly
7 approved by the court under this chapter or other applicable
8 law.
9 (d) Matters that may be resolved.--Matters that may be
10 resolved by a nonjudicial settlement agreement include the
11 following:
12 (1) The interpretation or construction of the provisions
13 of a trust instrument.
14 (2) The approval of a trustee's report or accounting or
15 waiver of the preparation of a trustee's report or
16 accounting.
17 (3) Direction to a trustee to perform or refrain from
18 performing a particular act.
19 (4) The resignation or appointment of a trustee and the
20 determination of a trustee's compensation.
21 (5) Transfer of a trust's situs.
22 (6) Liability or release from liability of a trustee for
23 an action relating to the trust.
24 (7) The grant to a trustee of any necessary or desirable
25 power.
26 (8) The exercise or nonexercise of any power by a
27 trustee.
28 (9) Questions relating to the property or an interest in
29 property held as part of a trust.
30 (10) An action or proposed action by or against a trust
20050S0660B1969 - 45 -
1 or trustee.
2 (11) The modification or termination of a trust.
3 (12) An investment decision, policy, plan or program of
4 a trustee.
5 (13) Any other matter concerning the administration of a
6 trust.
7 (e) Request of court.--Any beneficiary or trustee of a trust
8 may request the court to approve a nonjudicial settlement
9 agreement to determine whether the representation as provided in
10 Subchapter C was adequate or whether the agreement contains
11 terms and conditions the court could have properly approved.
12 § 7710.2. Rules of construction - UTC 112.
13 The rules of construction that apply in this Commonwealth to
14 the provisions of testamentary trusts also apply as appropriate
15 to the provisions of inter vivos trusts.
16 SUBCHAPTER B
17 JUDICIAL PROCEEDINGS
18 Sec.
19 7711. Role of court in administration of trust - UTC 201.
20 7712. Jurisdiction over trustee and beneficiary - UTC 202.
21 7713. (Reserved).
22 7714. Venue - UTC 204.
23 § 7711. Role of court in administration of trust - UTC 201.
24 (a) Judicial intervention.--The court may intervene in the
25 administration of a trust to the extent its jurisdiction is
26 invoked by an interested person or as provided by law.
27 (b) Judicial supervision.--A trust is not subject to
28 continuing judicial supervision unless ordered by the court.
29 (c) Scope of proceeding.--A judicial proceeding involving a
30 trust may relate to any matter involving the trust's
20050S0660B1969 - 46 -
1 administration, including a request for declaratory judgment.
2 § 7712. Jurisdiction over trustee and beneficiary - UTC 202.
3 (a) Personal jurisdiction over trustee.--By accepting the
4 trusteeship of a trust having its situs in this Commonwealth or
5 by moving the situs to this Commonwealth, the trustee submits
6 personally to the jurisdiction of the courts of this
7 Commonwealth regarding any matter involving the trust.
8 (b) Personal jurisdiction over beneficiary.--With respect to
9 their interests in the trust, the beneficiaries of a trust
10 having its situs in this Commonwealth are subject to the
11 jurisdiction of the courts of this Commonwealth regarding any
12 matter involving the trust. By not releasing or disclaiming the
13 beneficiary's beneficial interest in the trust, a beneficiary of
14 a trust having its situs in this Commonwealth submits personally
15 to the jurisdiction of the courts of this Commonwealth regarding
16 any matter involving the trust.
17 (c) Additional jurisdictional methods.--This section does
18 not preclude other methods of obtaining jurisdiction over a
19 trustee, beneficiary or other person receiving property from the
20 trust.
21 § 7713. (Reserved).
22 § 7714. Venue - UTC 204.
23 (a) General rule.--Except as otherwise provided in
24 subsection (b), venue for a judicial proceeding involving a
25 trust is in the county of this Commonwealth in which the trust's
26 situs is located and, if the trust is created by will and the
27 estate is not yet closed, in the county in which the decedent's
28 estate is being administered.
29 (b) Exceptions.--
30 (1) If a trust has no trustee, venue for a judicial
20050S0660B1969 - 47 -
1 proceeding for the appointment of a trustee is in:
2 (i) any county in which a beneficiary resides;
3 (ii) any county in which trust property is located;
4 or
5 (iii) if the trust is created by will, the county in
6 which the decedent's estate was or is being administered.
7 (2) The venue of proceedings that are pending on the
8 effective date of this section shall not be disturbed.
9 SUBCHAPTER C
10 REPRESENTATION
11 Sec.
12 7721. Scope; definition of trust matter.
13 7722. Representation of parties in interest in general.
14 7723. Representatives and persons represented.
15 7724. Appointment of representative.
16 7725. Notice of representation.
17 7726. Representation ineffective if person objects.
18 § 7721. Scope; definition of trust matter.
19 (a) Scope.--This subchapter shall apply to this entire
20 chapter unless the context clearly specifies the contrary.
21 (b) Definition.--As used in this subchapter, the term "trust
22 matter" includes a judicial proceeding and a nonjudicial
23 settlement, agreement or act pertaining to any matter listed in
24 section 7710.1(d) (relating to nonjudicial settlement agreements
25 - UTC 111).
26 § 7722. Representation of parties in interest in general.
27 (a) Judicial proceeding.--In a judicial proceeding involving
28 a trust matter, an order or decree of the court that binds the
29 representative or representatives is binding upon a person,
30 class of persons or both represented in accordance with section
20050S0660B1969 - 48 -
1 7723 (relating to representatives and persons represented) if
2 the trustee notifies the representatives in writing whom they
3 represent, they do not decline the representation as provided in
4 section 7725 (relating to notice of representation) and they act
5 in good faith.
6 (b) Nonjudicial resolution.--In a nonjudicial resolution of
7 a trust matter, notice to, the consent or approval of or the
8 waiver or release by the representative or representatives is
9 binding upon a person, class of persons or both represented in
10 accordance with section 7723 if the trustee notifies the
11 representatives in writing whom they represent, they do not
12 decline the representation as provided in section 7725 and they
13 act in good faith.
14 (c) Permissible consideration.--In making decisions, a
15 representative may consider general benefit accruing to the
16 living members of the family of the person represented.
17 § 7723. Representatives and persons represented.
18 The following rules except as set forth in paragraph (7)
19 apply to the extent there is no conflict of interest with
20 respect to the matter at issue between the representative and
21 the person or persons represented that might affect the
22 impartiality of the representative and, if two or more persons
23 are being represented, to the extent there is no conflict of
24 interest with respect to the matter at issue between or among
25 the persons represented that might affect the impartiality of
26 the representative:
27 (1) A plenary guardian represents the person whose
28 estate the guardian supervises, and a limited guardian
29 represents the person whose estate the guardian supervises
30 within the scope of authority prescribed by the court order
20050S0660B1969 - 49 -
1 that defines the guardian's authority.
2 (2) An agent under a general power of attorney
3 represents the agent's principal, and an agent under a
4 limited power of attorney represents the principal within the
5 scope of the agent's authority under the power of attorney.
6 (3) Where property or an interest in property is vested
7 in a class of persons, the living sui juris class members
8 represent the class members who are minors, unborn, unknown
9 or unascertained.
10 (4) Where property or an interest in property will pass
11 to a class of persons upon the occurrence of a future event,
12 the living sui juris class members represent the class
13 members who are minors, unborn, unknown or unascertained. The
14 class members entitled to represent other class members or
15 potential class members are the persons who would take the
16 property or interest in property if the future event had
17 occurred immediately before the commencement of the judicial
18 proceeding relating to the property or interest in property
19 or immediately before the effective date of the nonjudicial
20 resolution of the matter.
21 (5) Where property or an interest in property will pass
22 to a person, class of persons or both upon the occurrence of
23 a future event, but the property or interest in property will
24 pass to another person, class of persons or both upon the
25 occurrence of an additional future event, the person, class
26 of persons or both who would take upon the occurrence of the
27 first event represents the person, class of persons or both
28 who would take upon the occurrence of the additional event,
29 provided their interests are identical or substantially
30 similar for purposes of the particular trust matter. If a
20050S0660B1969 - 50 -
1 class of persons would take upon the occurrence of the first
2 event, paragraph (4) applies to representation between or
3 among the class.
4 (6) A person represents all minors or unborn individuals
5 and persons whose identity or location is unknown and not
6 reasonably ascertainable, to the extent such persons are not
7 otherwise represented, if the interests of the person and the
8 person represented are substantially identical with respect
9 to the particular question or dispute involved.
10 (7) Whether or not there is a conflict of interest
11 described in this section, the sole holder or all coholders
12 of a presently exercisable or testamentary power of
13 appointment represent all potential appointees and all takers
14 in default of exercise of the power of appointment if the
15 holder may appoint to:
16 (i) the holder's estate, the holder's creditors or
17 the creditors of the holder's estate; or
18 (ii) anyone other than the holder's estate, the
19 holder's creditors and the creditors of the holder's
20 estate.
21 (8) The sole holder or all coholders of a presently
22 exercisable or testamentary power of appointment not
23 described in paragraph (7) represent all potential appointees
24 and all takers in default of exercise of the power who are
25 also potential appointees.
26 (9) Except as provided in paragraph (1), a person
27 represents the person's minor and unborn descendants.
28 § 7724. Appointment of representative.
29 Notwithstanding any other provision of this subchapter, if in
30 any judicial proceeding involving a trust matter the court
20050S0660B1969 - 51 -
1 determines that the representation provided by section 7723
2 (relating to representatives and persons represented) is or
3 might be inadequate, the court may appoint a guardian ad litem
4 or trustee ad litem to represent the inadequately represented
5 person, class of persons or both.
6 § 7725. Notice of representation.
7 A person representing another must be given written notice by
8 the trustee that the person is representing the other person.
9 The person to whom the notice is given may decline the
10 representation by a writing that is given to the trustee no
11 later than 60 days after receipt of the trustee's notice.
12 § 7726. Representation ineffective if person objects.
13 Notwithstanding the provisions of this subchapter, a person
14 may not represent another who is sui juris and files a written
15 objection to representation with the trustee.
16 SUBCHAPTER D
17 CREATION, VALIDITY, MODIFICATION
18 AND TERMINATION OF TRUST
19 Sec.
20 7731. Creation of trust - UTC 401.
21 7732. Requirements for creation - UTC 402.
22 7733. Written trusts created in other jurisdictions - UTC
23 403.
24 7734. Trust purposes - UTC 404.
25 7735. Charitable purposes; enforcement - UTC 405.
26 7736. Creation of trust induced by fraud, duress or undue
27 influence - UTC 406.
28 7737. Oral trusts unenforceable.
29 7738. Trust for care of animal - UTC 408.
30 7739. Noncharitable trust without ascertainable beneficiary -
20050S0660B1969 - 52 -
1 UTC 409.
2 7740. Termination of trusts; proceedings for termination or
3 modification of trusts - UTC 410.
4 7740.1. Modification or termination of noncharitable
5 irrevocable trust by consent - UTC 411.
6 7740.2. Modification or termination of noncharitable
7 irrevocable trust by court - UTC 412.
8 7740.3. Charitable trusts - UTC 413.
9 7740.4. Modification or termination of noncharitable trust -
10 UTC 414.
11 7740.5. Reformation to correct mistakes - UTC 415.
12 7740.6. Modification to achieve settlor's tax objectives - UTC
13 416.
14 7740.7. Division of trusts.
15 7740.8. Combination of trusts.
16 § 7731. Creation of trust - UTC 401.
17 A trust may be created by:
18 (1) transfer of property under a written instrument to
19 another person as trustee during the settlor's lifetime or by
20 will or other written disposition taking effect upon the
21 settlor's death;
22 (2) written declaration, signed by or on behalf and at
23 the direction of the owner of property as required by section
24 7732 (relating to requirements for creation - UTC 402), that
25 the owner holds identifiable property as trustee; or
26 (3) written exercise of a power of appointment in favor
27 of a trustee.
28 § 7732. Requirements for creation - UTC 402.
29 (a) Requirements.--A trust is created only if:
30 (1) the settlor has capacity to create a trust;
20050S0660B1969 - 53 -
1 (2) the settlor signs a writing that indicates an
2 intention to create the trust and contains provisions of the
3 trust;
4 (3) the trust has a definite beneficiary or is:
5 (i) a charitable trust;
6 (ii) a trust for the care of an animal, as provided
7 in section 7738 (relating to trust for care of animal -
8 UTC 408); or
9 (iii) a trust for a noncharitable purpose, as
10 provided in section 7739 (relating to noncharitable trust
11 without ascertainable beneficiary - UTC 409);
12 (4) the trustee has duties to perform; and
13 (5) the same person is not the sole trustee and sole
14 beneficiary of the trust.
15 (b) (Reserved).
16 (b.1) Signature by mark or another.--A trust instrument
17 other than a will may be signed by mark or by a person other
18 than the settlor on behalf of and at the direction of the
19 settlor in the same manner as a power of attorney under Chapter
20 56 (relating to powers of attorney).
21 (c) Power to select beneficiary from indefinite class.--A
22 power in a trustee to select a beneficiary from an indefinite
23 class is valid. If the power WITH RESPECT TO A NONCHARITABLE <--
24 TRUST is not exercised within a reasonable time, the power fails
25 and the property subject to the power passes to the persons who
26 would have taken the property had the power not been conferred.
27 (d) Definition.--As used in this section, the term "definite
28 beneficiary" means a beneficiary that can be ascertained now or
29 in the future, subject to any applicable rule against
30 perpetuities.
20050S0660B1969 - 54 -
1 § 7733. Written trusts created in other jurisdictions - UTC
2 403.
3 A written trust not created by will is validly created if its
4 creation complies with the law of the jurisdiction in which the
5 trust instrument was executed or the law of the jurisdiction in
6 which, at the time of creation:
7 (1) the settlor was domiciled, had a residence or was a
8 national;
9 (2) a trustee was domiciled or had a place of business;
10 or
11 (3) any trust property was located.
12 § 7734. Trust purposes - UTC 404.
13 A trust may be created only to the extent its purposes are
14 lawful and not contrary to public policy.
15 § 7735. Charitable purposes; enforcement - UTC 405.
16 (a) Purposes.--A charitable trust may be created for the
17 relief of poverty, the advancement of education or religion, the
18 promotion of health, governmental or municipal purposes, or
19 other purposes the achievement of which is beneficial to the
20 community.
21 (b) Selection by court.--If the provisions of a charitable
22 trust instrument do not indicate or authorize the trustee to
23 select a particular charitable purpose or beneficiary, the court
24 may select one or more charitable purposes or beneficiaries. The
25 selection must be consistent with the settlor's intention to the
26 extent it can be ascertained.
27 (c) Proceeding to enforce trust.--A proceeding to enforce a
28 charitable trust may be brought by the settlor during the
29 settlor's lifetime or at any time by the Attorney General, a
30 charitable organization expressly named in the trust instrument
20050S0660B1969 - 55 -
1 to receive distributions from the trust or any other person who
2 has standing to do so.
3 § 7736. Creation of trust induced by fraud, duress or undue
4 influence - UTC 406.
5 A trust or an amendment to a trust is voidable to the extent
6 its creation was induced by fraud, duress or undue influence.
7 § 7737. Oral trusts unenforceable.
8 Oral trusts are unenforceable in this Commonwealth.
9 § 7738. Trust for care of animal - UTC 408.
10 (a) Creation and termination.--A trust may be created to
11 provide for the care of an animal alive during the settlor's
12 lifetime. The trust terminates upon the death of the animal or,
13 if the trust was created to provide for the care of more than
14 one animal alive during the settlor's lifetime, upon the death
15 of the last surviving animal.
16 (b) Enforcement.--A trust authorized by this section may be
17 enforced by a person appointed in the trust instrument or, if no
18 person is so appointed, by a person appointed by the court. A
19 person having an interest in the welfare of the animal may
20 request the court to appoint a person to enforce the trust or to
21 remove a person appointed.
22 (c) Limitation.--Property of a trust authorized by this
23 section may be applied only to its intended use, except to the
24 extent the court determines that the value of the trust property
25 exceeds the amount required for the intended use. Except as
26 otherwise provided in the trust instrument, property not
27 required for the intended use must be distributed to the settlor
28 if then living, otherwise to the settlor's successors in
29 interest.
30 § 7739. Noncharitable trust without ascertainable beneficiary -
20050S0660B1969 - 56 -
1 UTC 409.
2 Except as otherwise provided in section 7738 (relating to
3 trust for care of animal - UTC 408) or by another statute:
4 (1) A trust may be created for a noncharitable purpose
5 without a definite or definitely ascertainable beneficiary or
6 for a noncharitable but otherwise valid purpose to be
7 selected by the trustee. The trust may not be enforced for
8 more than 21 years.
9 (2) A trust authorized by this section may be enforced
10 by a person appointed in the trust instrument or, if no
11 person is so appointed, by a person appointed by the court.
12 (3) Property of a trust authorized by this section may
13 be applied only to its intended use, except to the extent the
14 court determines that the value of the trust property exceeds
15 the amount required for the intended use. Except as otherwise
16 provided in the trust instrument, property not required for
17 the intended use must be distributed to the settlor if then
18 living, otherwise to the settlor's successors in interest.
19 § 7740. Termination of trusts; proceedings for termination or
20 modification of trusts - UTC 410.
21 (a) Termination.--A trust terminates to the extent it is
22 revoked or expires pursuant to its terms, no purpose of the
23 trust remains to be achieved or the purposes of the trust have
24 become unlawful or contrary to public policy. In addition, a
25 trust may be terminated by the methods prescribed by sections
26 7740.1 (relating to modification or termination of noncharitable
27 irrevocable trust by consent - UTC 411) through 7740.4 (relating
28 to modification or termination of noncharitable trust - UTC
29 414).
30 (b) Proceedings for termination or modification.--The
20050S0660B1969 - 57 -
1 settlor, the trustee or a beneficiary may commence a proceeding
2 to approve or disapprove a proposed modification or termination
3 under sections 7740.1 through 7740.6 (relating to modification
4 to achieve settlor's tax objectives - UTC 416), the division of
5 a trust under section 7740.7 (relating to division of trusts) or
6 the combination of trusts under section 7740.8 (relating to
7 combination of trusts). The settlor of a charitable trust may
8 commence a proceeding to modify the trust under section 7740.3
9 (relating to charitable trusts - UTC 413).
10 § 7740.1. Modification or termination of noncharitable
11 irrevocable trust by consent - UTC 411.
12 (a) Consent by settlor and beneficiaries.--A noncharitable
13 irrevocable trust may be modified or terminated upon consent of
14 the settlor and all beneficiaries even if the modification or
15 termination is inconsistent with a material purpose of the
16 trust. A settlor's power to consent to a trust's modification or
17 termination may be exercised by a guardian, an agent under the
18 settlor's general power of attorney or an agent under the
19 settlor's limited power of attorney that specifically authorizes
20 that action. Notwithstanding Subchapter C (relating to
21 representation), the settlor may not represent a beneficiary in
22 the modification or termination of a trust under this
23 subsection.
24 (b) Consent by beneficiaries with court approval.--A
25 noncharitable irrevocable trust may be modified upon the consent
26 of all the beneficiaries only if the court concludes that the
27 modification is not inconsistent with a material purpose of the
28 trust. A noncharitable irrevocable trust may be terminated upon
29 consent of all the beneficiaries only if the court concludes
30 that continuance of the trust is not necessary to achieve any
20050S0660B1969 - 58 -
1 material purpose of the trust.
2 (b.1) Spendthrift provision.--A spendthrift provision in a
3 trust instrument is presumed to constitute a material purpose of
4 the trust.
5 (c) Distribution upon termination.--Upon termination of a
6 trust under subsection (a) or (b), the trustee shall distribute
7 the trust property as agreed by the beneficiaries.
8 (d) Consent by some beneficiaries with court approval.--If
9 not all the beneficiaries consent to a proposed modification or
10 termination of the trust under subsection (a) or (b), the
11 modification or termination may be approved by the court only if
12 the court is satisfied that:
13 (1) if all the beneficiaries had consented, the trust
14 could have been modified or terminated under this section;
15 and
16 (2) the interests of a beneficiary who does not consent
17 will be adequately protected.
18 § 7740.2. Modification or termination of noncharitable
19 irrevocable trust by court - UTC 412.
20 (a) Unanticipated circumstances.--The court may modify the
21 administrative or dispositive provisions of a noncharitable
22 irrevocable trust, make an allowance from the principal of the
23 trust or terminate the trust if, because of circumstances that
24 apparently were not anticipated by the settlor, modification,
25 allowance or termination will further the purposes of the trust.
26 To the extent practicable, the modification or allowance shall
27 approximate the settlor's probable intention.
28 (b) Inability to administer effectively.--The court may
29 modify the administrative provisions of a noncharitable
30 irrevocable trust if adherence to the existing provisions would
20050S0660B1969 - 59 -
1 be impracticable or wasteful or impair the trust's
2 administration.
3 (c) Distribution of property.--Upon termination of a trust
4 under this section, the trustee shall distribute the trust
5 property in a manner consistent with the purposes of the trust.
6 § 7740.3. Charitable trusts - UTC 413.
7 (a) General rule.--Except as otherwise provided in
8 subsection (b), if a particular charitable purpose becomes
9 unlawful, impracticable or wasteful:
10 (1) the trust does not fail, in whole or in part;
11 (2) the trust property does not revert to the settlor or
12 the settlor's successors in interest; and
13 (3) the court shall apply cy pres to fulfill as nearly
14 as possible the settlor's charitable intention, whether it be
15 general or specific.
16 (b) Exception.--A provision in the terms of a charitable
17 trust that would result in distribution of the trust property to
18 a noncharitable beneficiary prevails over the power of the court
19 under subsection (a) to apply cy pres.
20 (c) Administrative deviation.--A court may modify an
21 administrative provision of a charitable trust only to the <--
22 extent necessary to preserve the trust.
23 (d) Administrative termination of small charitable trusts.--
24 A trust solely for charitable purposes having assets of less
25 than $100,000 may be terminated at its inception or at any time
26 thereafter by the trustee with the consent of the Attorney
27 General and all charitable organizations that are designated as
28 beneficiaries by name in the trust instrument. Upon termination,
29 the assets, subject to the approval of the Attorney General,
30 shall be delivered to the organizations, if any, designated in
20050S0660B1969 - 60 -
1 the trust instrument or, if none, to organizations selected by
2 the trustee, in either case to be held and applied for the
3 general or specific charitable purposes and on the terms that
4 will, in the trustee's discretion, fulfill as nearly as possible
5 the settlor's intention.
6 (e) Judicial termination of charitable trusts.--If the
7 separate existence of a trust, whenever created, solely for
8 charitable purposes results or will result in administrative
9 expense or other burdens unreasonably out of proportion to the
10 charitable benefits, the court may, upon application of the
11 trustee or any interested person and after notice to the
12 Attorney General, terminate the trust, either at its inception
13 or at any time thereafter, and award the assets outright, free
14 of the trust, to the charitable organizations, if any,
15 designated in the trust instrument or, if none, to charitable
16 organizations selected by the court, in either case for the
17 purposes and on the terms that the court may direct to fulfill
18 as nearly as possible the settlor's intentions other than any
19 intent to continue the trust, if the court is satisfied that the
20 charitable organizations will properly use or administer the
21 assets.
22 § 7740.4. Modification or termination of noncharitable trust -
23 UTC 414.
24 (a) Trustee's authority.--A trustee of a noncharitable trust
25 may terminate the trust if the trustee concludes that the value
26 of the trust property is insufficient to justify the cost of
27 administration, the trustee has given written notice to the
28 qualified beneficiaries at least 60 days before the proposed
29 termination and no qualified beneficiary provides the trustee
30 with a written objection to the proposed termination on or
20050S0660B1969 - 61 -
1 before the date specified in the notice.
2 (b) Court authority.--The court may modify or terminate a
3 noncharitable trust, or remove the trustee and appoint a
4 different trustee, if it determines that the value of the trust
5 property is insufficient to justify the cost of administration.
6 (c) Distribution of trust property.--Upon termination of a
7 trust under this section, the trustee shall distribute the trust
8 property in a manner consistent with the purposes of the trust.
9 § 7740.5. Reformation to correct mistakes - UTC 415.
10 The court may reform a trust instrument, even if unambiguous,
11 to conform to the settlor's probable intention if it is proved
12 by clear and convincing evidence that the settlor's intent as
13 expressed in the trust instrument was affected by a mistake of
14 fact or law, whether in expression or inducement. The court may
15 provide that the modification have retroactive effect.
16 § 7740.6. Modification to achieve settlor's tax objectives -
17 UTC 416.
18 The court may modify a trust instrument in a manner that is
19 not contrary to the settlor's probable intention in order to
20 achieve the settlor's tax objectives. The court may provide that
21 the modification have retroactive effect.
22 § 7740.7. Division of trusts.
23 (a) Without court approval.--A trustee may, without court
24 approval, divide a trust into separate trusts, allocating to
25 each separate trust either a fractional share of each asset and
26 each liability held by the original trust or assets having an
27 appropriate aggregate fair market value and fairly representing
28 the appreciation or depreciation in the assets of the original
29 trust as a whole. The beneficiaries of the separate trusts may
30 be different so long as their rights are not impaired. If the
20050S0660B1969 - 62 -
1 division reflects disclaimers or different tax elections, the
2 division shall relate back to the date to which the disclaimer
3 or tax election relates.
4 (b) With court approval.--The court, for cause shown, may
5 authorize the division of a trust into two separate trusts upon
6 such terms and conditions and with notice as the court shall
7 direct.
8 (c) Separate fund.--A trustee may, without court approval,
9 set aside property in a separate fund prior to actual
10 distribution, after which income earned on the separate fund and
11 appreciation or depreciation of the fund set-aside shall belong
12 to the separate fund.
13 § 7740.8. Combination of trusts.
14 (a) With court approval.--The court, for cause shown, may
15 authorize the combination of separate trusts with substantially
16 similar provisions upon terms and conditions and with notice as
17 the court shall direct notwithstanding that the trusts may have
18 been created by separate instruments and by different persons.
19 If necessary to protect possibly different future interests, the
20 assets shall be valued at the time of the combination and a
21 record made of the proportionate interest of each separate trust
22 in the combined fund.
23 (b) Without court approval.--A trustee may, without court
24 approval, combine trusts that were created under the same or
25 different instruments if the trusts have identical provisions,
26 tax attributes and trustees.
27 SUBCHAPTER E
28 CREDITOR'S CLAIMS; SPENDTHRIFT AND
29 DISCRETIONARY TRUSTS
30 Sec.
20050S0660B1969 - 63 -
1 7741. Rights of beneficiary's creditor or assignee - UTC 501.
2 7742. Spendthrift provision - UTC 502.
3 7743. Exceptions to spendthrift provision - UTC 503.
4 7744. Discretionary trusts; effect of standard - UTC 504.
5 7745. Creditor's claim against settlor - UTC 505(a).
6 7746. Overdue distribution - UTC 506.
7 7747. Personal obligations of trustee - UTC 507.
8 7748. Property subject to power of withdrawal - UTC 505(b).
9 § 7741. Rights of beneficiary's creditor or assignee - UTC 501.
10 A judgment creditor or assignee of the beneficiary may reach
11 the beneficiary's interest by attachment of present or future
12 distributions to or for the benefit of the beneficiary or other
13 means to the extent the beneficiary's interest is not subject to
14 a spendthrift provision.
15 § 7742. Spendthrift provision - UTC 502.
16 (a) Validity.--A spendthrift provision is valid only if it
17 restrains both voluntary and involuntary transfer of a
18 beneficiary's interest.
19 (b) Creation.--A trust instrument providing that the
20 interest of a beneficiary is held subject to a "spendthrift
21 trust," or words of similar import, is sufficient to restrain
22 both voluntary and involuntary transfer of the beneficiary's
23 interest.
24 (c) Effect.--A beneficiary may not transfer an interest in a
25 trust in violation of a valid spendthrift provision. Except as
26 otherwise provided in this subchapter, a creditor or assignee of
27 the beneficiary of a spendthrift trust may not reach the
28 interest or a distribution by the trustee before its receipt by
29 the beneficiary.
30 § 7743. Exceptions to spendthrift provision - UTC 503.
20050S0660B1969 - 64 -
1 (a) (Reserved).
2 (b) Who may override.--A spendthrift provision is
3 unenforceable against:
4 (1) a beneficiary's child who has a judgment or court
5 order against the beneficiary for support or maintenance, to
6 the extent of the beneficiary's interests in the income and
7 principal of the trust;
8 (2) any other person who has a judgment or court order
9 against the beneficiary for support or maintenance, to the
10 extent of the beneficiary's interest in the trust's income;
11 (3) a judgment creditor who has provided services for
12 the protection of the beneficiary's interest in the trust;
13 and
14 (4) a claim of the United States or the Commonwealth to
15 the extent Federal law or a statute of this Commonwealth
16 provides.
17 (c) Remedy if unenforceable.--A claimant against whom a
18 spendthrift provision cannot be enforced may obtain from a court
19 an order attaching present or future distributions to or for the
20 benefit of the beneficiary. The court may limit the award to
21 such relief as is appropriate under the circumstances.
22 (d) Definition.--As used in this section, the term "child"
23 includes any person for whom an order or judgment for child
24 support has been entered in this Commonwealth or another state.
25 § 7744. Discretionary trusts; effect of standard - UTC 504.
26 (a) (Reserved).
27 (b) Distribution not compelled.--Except as otherwise
28 provided in subsection (c), whether or not a trust contains a
29 spendthrift provision, a creditor of a beneficiary may not
30 compel a distribution that is subject to the trustee's
20050S0660B1969 - 65 -
1 discretion, even if:
2 (1) the discretion is expressed in the form of a
3 standard of distribution;
4 (2) the trustee has abused the discretion; or
5 (3) the beneficiary is the trustee or a cotrustee of the
6 trust.
7 (c) Exception.--To the extent a trustee has not complied
8 with a standard of distribution or has abused a discretion:
9 (1) a distribution from the trust's income, principal or
10 both may be ordered by the court to satisfy a judgment or
11 court order against the beneficiary for support or
12 maintenance of the beneficiary's child to the extent of the
13 beneficiary's interests in the trust's income, principal or
14 both, and the court shall direct the trustee to pay the child
15 from the trust an amount as is equitable under the
16 circumstances, but not more than the amount the trustee would
17 have been required to distribute to or for the benefit of the
18 beneficiary had the trustee complied with the standard or not
19 abused the discretion; and
20 (2) a distribution from trust income may be ordered by
21 the court to satisfy a judgment or court order against the
22 beneficiary for support or maintenance of any person other
23 than the beneficiary's child to the extent of the
24 beneficiary's interest in the income of the trust, and the
25 court shall direct the trustee to pay the person an amount
26 from the income of the trust as is equitable under the
27 circumstances, but not more than the amount of income the
28 trustee would have been required to distribute to or for the
29 benefit of the beneficiary had the trustee complied with the
30 standard or not abused the discretion.
20050S0660B1969 - 66 -
1 (d) Proceeding against trustee.--This section does not limit
2 the right of a beneficiary to maintain a judicial proceeding
3 against a trustee for an abuse of discretion or failure to
4 comply with a standard for distribution.
5 (e) (Reserved).
6 (f) 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 § 7745. Creditor's claim against settlor - UTC 505(a).
10 Whether or not a trust instrument contains a spendthrift
11 provision and notwithstanding section 7744 (relating to
12 discretionary trusts; effect of standard - UTC 504):
13 (1) During the lifetime of the settlor, the property of
14 a revocable trust is subject to claims of the settlor's
15 creditors.
16 (2) A judgment creditor or assignee of the settlor of an
17 irrevocable trust may reach the maximum amount that can be
18 distributed to or for the settlor's benefit. If a trust has
19 more than one settlor, the creditor or assignee of a
20 particular settlor may reach the portion of the trust
21 attributable to that settlor's contribution.
22 (3) After the death of the settlor and subject to the
23 settlor's right to direct the source from which liabilities
24 will be paid, the property of a revocable trust is subject to
25 claims of the settlor's creditors, costs of administration of
26 the settlor's estate, the expenses of the settlor's funeral
27 and disposal of remains and the family exemption to the
28 extent the settlor's probate estate is inadequate to satisfy
29 those claims, costs, expenses and exemption and no other
30 statute specifically exempts the property from those claims.
20050S0660B1969 - 67 -
1 § 7746. Overdue distribution - UTC 506.
2 (a) Distribution not made within reasonable time.--Whether
3 or not the interest of the beneficiary in the trust is subject
4 to a spendthrift provision, a creditor or assignee of a
5 beneficiary may reach a mandatory distribution of income or
6 principal, including a distribution upon termination of the
7 trust, if the trustee has not made the distribution to the
8 beneficiary within a reasonable time after the mandated
9 distribution date.
10 (b) Definition.--As used in this section, the term
11 "mandatory distribution" means a distribution of income or
12 principal that the trustee is required by the trust instrument
13 to make to a beneficiary, including a distribution upon the
14 termination of the trust. The term excludes a distribution that
15 is subject to the exercise of the trustee's discretion
16 regardless of whether the trust instrument includes a support or
17 other standard to guide the trustee in making distribution
18 decisions or provides that the trustee "may" or "shall" make
19 discretionary distributions, including distributions pursuant to
20 a support or other standard.
21 § 7747. Personal obligations of trustee - UTC 507.
22 Trust property is not subject to personal obligations of the
23 trustee, even if the trustee becomes insolvent or bankrupt.
24 § 7748. Property subject to power of withdrawal - UTC 505(b).
25 Trust property that is subject to a power of withdrawal,
26 during the period the power may be exercised and after its
27 lapse, release or waiver, may be reached by a creditor or an
28 assignee of the holder of the power whether or not the interest
29 of the holder in the trust is subject to a spendthrift
30 provision.
20050S0660B1969 - 68 -
1 SUBCHAPTER F
2 REVOCABLE TRUSTS
3 Sec.
4 7751. Capacity of settlor of revocable trust - UTC 601.
5 7752. Revocation or amendment of revocable trust - UTC 602.
6 7753. Trustee's duties; powers of withdrawal - UTC 603.
7 7754. Actions contesting validity of revocable trust.
8 7755. Claims and distribution after settlor's death.
9 § 7751. Capacity of settlor of revocable trust - UTC 601.
10 The capacity required to create, amend, revoke or add
11 property to a revocable trust or to direct the actions of the
12 trustee of a revocable trust is the same as that required to
13 make a will.
14 § 7752. Revocation or amendment of revocable trust - UTC 602.
15 (a) Power to revoke or amend.--The settlor may revoke or
16 amend a trust unless the trust instrument expressly provides
17 that the trust is irrevocable.
18 (b) More than one settlor.--If a revocable trust is created
19 or funded by more than one settlor:
20 (1) to the extent the trust consists of community
21 property, either spouse alone who notifies the other spouse
22 may revoke the trust, but the trust may be amended only by
23 joint action of both spouses;
24 (2) to the extent the trust consists of property other
25 than community property, each settlor may revoke or amend the
26 trust with respect to the portion of the trust property
27 attributable to that settlor's contribution upon notice to
28 each other settlor; and
29 (3) upon the revocation or amendment of the trust by
30 fewer than all the settlors, the trustee shall promptly
20050S0660B1969 - 69 -
1 notify the other settlors of the revocation or amendment.
2 (c) How to revoke or amend.--The settlor may revoke or amend
3 a revocable trust only:
4 (1) by substantial compliance with a method provided in
5 the trust instrument; or
6 (2) if the trust instrument does not provide a method or
7 the method provided in the trust instrument is not expressly
8 made exclusive, by a later writing, other than a will or
9 codicil, that is signed by the settlor and expressly refers
10 to the trust or specifically conveys property that would
11 otherwise have passed according to the trust instrument.
12 (d) Delivery of property.--Upon revocation of a revocable
13 trust, the trustee shall deliver the trust property as the
14 settlor directs.
15 (e) Agent.--A settlor's powers with respect to revocation or
16 amendment of the nondispositive provisions of or withdrawal of
17 property from a trust may be exercised by an agent under a power
18 of attorney only to the extent expressly authorized by the trust
19 instrument or the power. The agent under a power of attorney
20 that expressly authorizes the agent to do so may amend the
21 dispositive provisions of a revocable trust as the court may
22 direct.
23 (f) Guardian.--A guardian of the settlor's estate may
24 exercise the settlor's powers with respect to revocation or
25 amendment of or withdrawal of property from a revocable trust as
26 the court may direct.
27 (g) Liability.--A trustee who does not know that a trust has
28 been revoked or amended is not liable to the settlor, the
29 settlor's successors in interest or the beneficiaries for
30 distributions made and other actions taken on the assumption
20050S0660B1969 - 70 -
1 that the trust had not been amended or revoked.
2 § 7753. Trustee's duties; powers of withdrawal - UTC 603.
3 (a) Power of settlor.--Regardless of the legal capacity of
4 the settlor, the rights of the beneficiaries are subject to the
5 control of, and the duties of the trustee are owed exclusively
6 to, the settlor while a trust is revocable.
7 (b) Holder of power of withdrawal.--The holder of a power of
8 withdrawal has the rights of a settlor of a revocable trust
9 under this section to the extent of the property subject to the
10 power during the period the power may be exercised.
11 § 7754. Actions contesting validity of revocable trust.
12 (a) How action may be commenced.--A person having standing
13 to do so may contest the validity of a revocable trust by filing
14 a petition with the court.
15 (b) Time limit.--The petition described in subsection (a)
16 must be filed no later than one year after the date on which the
17 trustee gave the notice required by section 7780.3(c) (relating
18 to duty to inform and report). The court, upon petition of a
19 party in interest and with such notice as the court may direct,
20 may limit the time by which a petition under this section must
21 be filed to six months after the date on which the trustee gave
22 the notice required by section 7780.3(c).
23 (c) Grounds for contest.--The grounds for contesting the
24 validity of a revocable trust shall be the same as those for
25 contesting the validity of a will.
26 § 7755. Claims and distribution after settlor's death.
27 (a) Creditors' rights.--Creditors of the settlor of a
28 revocable trust shall have the same rights against the trust
29 assets determined immediately before the settlor's death as they
30 have against the settlor's estate, but the assets of the
20050S0660B1969 - 71 -
1 settlor's estate shall be applied first toward satisfaction of
2 the creditors' claims. This subsection shall not expose to
3 creditors' claims trust assets for which other provisions of
4 substantive law provide exemption from the claims of the
5 settlor's creditors.
6 (b) Enforcement of claim against revocable trust.--A
7 creditor may make a claim against a revocable trust by notifying
8 the settlor's personal representative as provided in section
9 3384 (relating to notice of claim) or, if no personal
10 representative has been appointed, by notifying the trustee
11 according to the methods set forth in section 3384. A personal
12 representative who receives notice shall within 20 days notify
13 the trustee in writing and upon doing so shall have no liability
14 under this section to the creditor.
15 (c) No personal representative.--If no personal
16 representative is appointed within 90 days after the settlor's
17 death, the trustee shall advertise the trust's existence and the
18 name and address of the trustee in the manner set forth in
19 section 3162 (relating to advertisement of grant of letters).
20 (d) Liability of personal representative.--A personal
21 representative who has received the notice required by section
22 7780.3(c) (relating to duty to inform and report) and does not
23 notify the trustee of a revocable trust of a creditor's claim
24 known to the personal representative within one year after the
25 first complete advertisement of the grant of letters to the
26 personal representative shall be liable to the creditor to the
27 extent the creditor's interest is prejudiced thereby. A personal
28 representative shall have no liability under this section to a
29 creditor whose claim is not known to the personal representative
30 within one year after the first complete advertisement of the
20050S0660B1969 - 72 -
1 grant of letters to the personal representative. The provisions
2 of this section shall not affect the liability of the settlor's
3 personal representative under other provisions of law.
4 (e) Liability to any creditor.--At the trustee's own risk
5 and without the filing, audit or confirmation of the trustee's
6 account, a trustee of a revocable trust who has either given the
7 settlor's personal representative the notice required by section
8 7780.3(c) or given the notice required by subsection (c) may
9 distribute real or personal property of the revocable trust.
10 That distribution shall be without liability to any creditor of
11 the settlor unless the claim of that creditor is known to the
12 trustee within 13 months after the first complete advertisement
13 of the grant of letters to the personal representative or, if no
14 personal representative has been appointed, within one year
15 after the first complete advertisement under subsection (c).
16 (f) Rights of creditors against distributed property.--
17 (1) No creditor shall have any claim against personal
18 property distributed by the trustee of a revocable trust at
19 the trustee's own risk under subsection (e) unless the claim
20 of the creditor is known to the trustee within 13 months
21 after the first complete advertisement of the grant of
22 letters to the personal representative or, if no personal
23 representative has been appointed, within one year after the
24 first complete advertisement of the trust under subsection
25 (c).
26 (2) No creditor shall have any claim against real
27 property distributed by the trustee of a revocable trust at
28 the trustee's own risk under subsection (e) unless the
29 creditor, within one year after the settlor's death, files a
30 written notice of claim with the clerk. The claim against
20050S0660B1969 - 73 -
1 real property shall expire at the end of five years after the
2 settlor's death unless within that time the trustee files an
3 account or the creditor files a petition to compel an
4 accounting.
5 (g) Judicial principles.--In any proceeding by a creditor
6 against a trustee or beneficiary of a revocable trust, the court
7 shall apply principles analogous to:
8 (1) section 3387 (relating to claims not due; certain to
9 become due);
10 (2) section 3388 (relating to claims not certain to
11 become due);
12 (3) section 3392 (relating to classification and order
13 of payment); and
14 (4) section 3393 (relating to notice to Commonwealth and
15 political subdivisions).
16 SUBCHAPTER G
17 OFFICE OF TRUSTEE
18 Sec.
19 7761. Accepting or declining trusteeship - UTC 701.
20 7762. Trustee's bond - UTC 702.
21 7763. Cotrustees - UTC 703.
22 7764. Vacancy in trusteeship; appointment of successor - UTC
23 704.
24 7765. Resignation of trustee; filing resignation.
25 7766. Removal of trustee - UTC 706.
26 7767. Delivery of property by former trustee - UTC 707.
27 7768. Compensation of trustee - UTC 708.
28 7769. Reimbursement of expenses - UTC 709.
29 7770. Liability of successor trustee.
30 § 7761. Accepting or declining trusteeship - UTC 701.
20050S0660B1969 - 74 -
1 (a) Accepting trusteeship.--Except as otherwise provided in
2 subsection (c), a person designated as trustee accepts the
3 trusteeship:
4 (1) by substantially complying with a method of
5 acceptance provided in the trust instrument; or
6 (2) if the trust instrument does not provide a method or
7 the method provided in the trust instrument is not expressly
8 made exclusive, by accepting delivery of the trust property,
9 exercising powers or performing duties as trustee or by
10 otherwise indicating acceptance of the trusteeship.
11 (b) Rejecting trusteeship.--A person designated as trustee
12 who has not yet accepted the trusteeship may reject the
13 trusteeship. A designated trustee who does not accept the
14 trusteeship within a reasonable time after knowing of the
15 designation is deemed to have rejected the trusteeship.
16 (c) Actions not constituting acceptance of trusteeship.--A
17 person designated as trustee, without accepting the trusteeship,
18 may:
19 (1) act to preserve the trust property if, within a
20 reasonable time after acting, the person sends a written
21 rejection of the trusteeship to the settlor or, if the
22 settlor is dead or lacks capacity, to a qualified
23 beneficiary; and
24 (2) inspect or investigate trust property to determine
25 potential liability under environmental or other law or for
26 any other purpose.
27 § 7762. Trustee's bond - UTC 702.
28 (a) When required.--A trustee shall give bond to secure
29 performance of the trustee's duties only if the court finds that
30 a bond is needed to protect the interests of the beneficiaries
20050S0660B1969 - 75 -
1 or is required by the provisions of the trust instrument and the
2 court has not dispensed with the requirement.
3 (b) Judicial authority.--The court may specify the amount of
4 a bond, its liabilities and whether sureties are necessary. The
5 court may modify or terminate a bond at any time.
6 (c) Institutional trustees.--An institution qualified to do
7 trust business in this Commonwealth need not give bond even if
8 required by the trust instrument.
9 § 7763. Cotrustees - UTC 703.
10 (a) Majority decision.--Cotrustees who do not reach a
11 unanimous decision may act by majority decision.
12 (a.1) When no majority.--When a dispute arises among
13 trustees as to the exercise or nonexercise of any of their
14 powers and there is no agreement by a majority of them, unless
15 otherwise provided by the trust instrument, the court in its
16 discretion, upon petition filed by any of the trustees or any
17 party in interest, aided if necessary by the report of a master,
18 may direct the exercise or nonexercise of the power as it deems
19 necessary for the best interest of the trust.
20 (b) Vacancy.--If a vacancy occurs in a cotrusteeship, the
21 remaining cotrustees may act for the trust.
22 (c) Performance.--A cotrustee shall participate in the
23 performance of a trustee's function unless the cotrustee is
24 unavailable to perform the function because of absence, illness,
25 disqualification under the law or other reason or the cotrustee
26 has properly delegated the performance of the function to
27 another trustee.
28 (d) Unavailability.--If a cotrustee is unavailable to
29 perform duties and prompt action is necessary to achieve the
30 purposes of the trust or to avoid injury or loss to the trust
20050S0660B1969 - 76 -
1 property, the remaining cotrustee or a majority of the remaining
2 cotrustees may act for the trust.
3 (e) (Reserved).
4 (f) Liability.--Except as otherwise provided in subsection
5 (g), a trustee who does not join in an action of another trustee
6 is not liable for the action.
7 (g) Reasonable care.--Each trustee shall exercise reasonable
8 care to:
9 (1) prevent a cotrustee from committing a breach of
10 trust involving fraud or self-dealing; and
11 (2) compel a cotrustee to redress a breach of trust
12 involving fraud or self-dealing.
13 (h) Dissenting trustee.--A dissenting trustee shall join the
14 majority to carry out a majority decision requiring affirmative
15 action and may be ordered to do so by the court. A dissenting
16 trustee who joins in an action at the direction of the majority
17 of the trustees and who notified any cotrustee of the dissent at
18 or before the time of the action is not liable for the action
19 unless the action is a breach of trust involving fraud or self-
20 dealing.
21 § 7764. Vacancy in trusteeship; appointment of successor - UTC
22 704.
23 (a) When vacancy occurs.--A vacancy in a trusteeship occurs
24 if:
25 (1) a person designated as trustee rejects the
26 trusteeship;
27 (2) a person designated as trustee cannot be identified
28 or does not exist;
29 (3) a trustee resigns;
30 (4) a trustee is disqualified or removed;
20050S0660B1969 - 77 -
1 (5) a trustee dies; or
2 (6) a trustee is determined by the court to be
3 incapacitated pursuant to section 5511 (relating to petition
4 and hearing; independent evaluation).
5 (b) Filling of vacancy.--A vacancy in a trusteeship need not
6 be filled if one or more cotrustees remain in office and the
7 trust instrument does not require that it be filled. A vacancy
8 shall be filled if the trust has no remaining trustee.
9 (c) Filling vacancy for noncharitable trust.--A vacancy in a
10 trusteeship of a noncharitable trust that is required to be
11 filled shall be filled in the following order of priority:
12 (1) by a person designated in or pursuant to the
13 provisions of the trust instrument to act as successor
14 trustee;
15 (2) by a person appointed by unanimous written agreement
16 of the qualified beneficiaries; or
17 (3) by a person appointed by the court.
18 (d) Filling vacancy for charitable trust.--A vacancy in a
19 trusteeship of a charitable trust that is required to be filled
20 shall be filled in the following order of priority:
21 (1) by a person designated in or under the provisions of
22 the trust instrument to act as successor trustee;
23 (2) by a person selected by unanimous written agreement
24 of the qualified beneficiaries if the Office of Attorney
25 General concurs in the selection; or
26 (3) by a person appointed by the court.
27 (e) Appointment by court.--Whether or not a vacancy in a
28 trusteeship exists or is required to be filled, the court may
29 appoint an additional trustee or special fiduciary if the court
30 considers the appointment desirable for the administration of
20050S0660B1969 - 78 -
1 the trust.
2 (f) Filing appointment.--An appointment of a trustee and an
3 acceptance of an appointment of a trustee may be filed with the
4 clerk of court having jurisdiction over the trust.
5 § 7765. Resignation of trustee; filing resignation.
6 (a) Court approval.--A trustee may resign with court
7 approval.
8 (b) Without court approval if authorized by trust
9 instrument.--A trustee may resign without court approval if
10 authorized to resign by the trust instrument.
11 (c) Without court approval and without authorization in
12 trust instrument.--
13 (1) Unless expressly provided to the contrary in the
14 trust instrument, an individual trustee may resign without
15 court approval and without authorization in the trust
16 instrument if:
17 (i) there is at least one cotrustee and all
18 cotrustees consent in writing to the resignation; and
19 (ii) all the qualified beneficiaries consent in
20 writing to the resignation.
21 (2) This subsection shall not authorize the sole trustee
22 of a trust to resign unless the trust instrument names a
23 successor trustee or provides a method for appointing a
24 successor trustee, and in either case the resignation shall
25 not be effective until the successor trustee accepts the
26 appointment in writing.
27 (d) Liability.--The resignation of a trustee shall not by
28 itself relieve the resigning trustee of liability in connection
29 with the administration of the trust.
30 (e) Filing resignation.--A resignation of a trustee may be
20050S0660B1969 - 79 -
1 filed with the clerk of the court having jurisdiction over the
2 trust.
3 § 7766. Removal of trustee - UTC 706.
4 (a) Request to remove trustee; court authority.--The
5 settlor, a cotrustee or a beneficiary may request the court to
6 remove a trustee or a trustee may be removed by the court on its
7 own initiative.
8 (b) When court may remove trustee.--The court may remove a
9 trustee if it finds that removal of the trustee best serves the
10 interests of the beneficiaries of the trust and is not
11 inconsistent with a material purpose of the trust, a suitable
12 cotrustee or successor trustee is available and:
13 (1) the trustee has committed a serious breach of trust;
14 (2) lack of cooperation among cotrustees substantially
15 impairs the administration of the trust;
16 (3) the trustee has not effectively administered the
17 trust because of the trustee's unfitness, unwillingness or
18 persistent failures; or
19 (4) there has been a substantial change of
20 circumstances.
21 (c) Court remedies.--Pending a final decision on a request
22 to remove a trustee, or in lieu of or in addition to removing a
23 trustee, the court may order appropriate relief under section
24 7781(b) (relating to remedies for breach of trust - UTC 1001) as
25 may be necessary to protect the trust property or the interests
26 of the beneficiaries.
27 (d) Procedure.--The procedure for removal and discharge of a
28 trustee and the effect of removal and discharge shall be the
29 same as that set forth in sections 3183 (relating to procedure
30 for and effect of removal) and 3184 (relating to discharge of
20050S0660B1969 - 80 -
1 personal representative and surety).
2 § 7767. Delivery of property by former trustee - UTC 707.
3 (a) Duties and powers of trustee.--Unless a cotrustee
4 remains in office or the court otherwise orders, a trustee who
5 has resigned or been removed has the duties of a trustee and the
6 powers necessary to protect the trust property until the trust
7 property is delivered to a successor trustee or other person
8 entitled to it.
9 (b) Delivery of trust property.--A trustee who has resigned
10 or been removed shall proceed expeditiously to deliver the trust
11 property within the trustee's possession to the cotrustee,
12 successor trustee or other person entitled to it.
13 § 7768. Compensation of trustee - UTC 708.
14 (a) If unspecified.--If neither the trust instrument nor a
15 separate written agreement signed by the settlor or anyone who
16 is authorized by the trust instrument to do so specifies the
17 trustee's compensation, the trustee is entitled to compensation
18 that is reasonable under the circumstances. Neither a
19 compensation provision in a trust instrument nor a fee agreement
20 governs compensation payable from trust principal unless it
21 explicitly so provides.
22 (b) If specified; adjustment.--If a trust instrument or
23 written fee agreement signed by the settlor or anyone who is
24 authorized by the trust instrument to do so specifies a
25 trustee's compensation, the trustee is entitled to the specified
26 compensation. The court may allow reasonable compensation that
27 is more or less than that specified if:
28 (1) the duties of the trustee have become substantially
29 different from those contemplated when the trust was created
30 or when the fee agreement was executed;
20050S0660B1969 - 81 -
1 (2) the compensation specified in the trust instrument
2 or fee agreement would be unreasonable; or
3 (3) the trustee performed extraordinary services, and
4 the trust instrument or fee agreement does not specify the
5 trustee's compensation for those services.
6 (c) Entitlement not barred.--None of the following shall bar
7 a trustee's entitlement to compensation from the income or
8 principal of the trust:
9 (1) The trust is perpetual or for any other reason has
10 not yet terminated.
11 (2) The trustee's term of office has not yet ended.
12 (3) The trustee of a testamentary trust also acted as a
13 personal representative of the settlor and was or might have
14 been compensated for services as a personal representative
15 from the principal of the settlor's estate.
16 (d) Court authority.--In determining reasonable
17 compensation, the court may consider, among other facts, the
18 market value of the trust and may determine compensation as a
19 fixed or graduated percentage of the trust's market value. The
20 court may allow compensation from principal, income or both and
21 determine the frequency with which compensation may be
22 collected. Compensation at levels that arise in a competitive
23 market shall be presumed to be reasonable in the absence of
24 compelling evidence to the contrary.
25 (e) Cemetery lots.--The authority in this section to pay
26 compensation from trust principal shall not apply to trusts
27 created by cemetery lot owners as endowments for the endowed
28 care and maintenance of burial or cemetery lots if the principal
29 sum involved is less than $20,000. Compensation shall be paid
30 exclusively from the income of such trusts.
20050S0660B1969 - 82 -
1 § 7769. Reimbursement of expenses - UTC 709.
2 (a) Reimbursement from trust property.--A trustee is
3 entitled to be reimbursed out of the trust property, with
4 interest as appropriate, for:
5 (1) expenses that were properly incurred in the
6 administration of the trust; and
7 (2) to the extent necessary to prevent unjust enrichment
8 of the trust, expenses that were not properly incurred in the
9 administration of the trust.
10 (b) Advance.--An advance by the trustee of money for the
11 protection of the trust gives rise to a lien against trust
12 property to secure reimbursement with reasonable interest.
13 § 7770. Liability of successor trustee.
14 A successor trustee shall not be personally liable for the
15 acts or omissions of the trustee's predecessor and shall have no
16 duty to investigate the acts or omissions of the predecessor.
17 SUBCHAPTER H
18 DUTIES AND POWERS OF TRUSTEE
19 Sec.
20 7771. Duty to administer trust - UTC 801.
21 7772. Duty of loyalty - UTC 802.
22 7773. Impartiality - UTC 803.
23 7774. Prudent administration - UTC 804.
24 7775. Costs of administration - UTC 805.
25 7776. Trustee's skills - UTC 806.
26 7777. Delegation by trustee.
27 7778. Powers to direct - UTC 808.
28 7779. Control and protection of trust property - UTC 809.
29 7780. Recordkeeping and identification of trust property -
30 UTC 810.
20050S0660B1969 - 83 -
1 7780.1. Enforcement and defense of claims - UTC 811.
2 7780.2. (Reserved).
3 7780.3. Duty to inform and report.
4 7780.4. Discretionary powers.
5 7780.5. Powers of trustees - UTC 815.
6 7780.6. Illustrative powers of trustee.
7 7780.7. Distribution upon termination.
8 § 7771. Duty to administer trust - UTC 801.
9 Upon acceptance of a trusteeship, the trustee shall
10 administer the trust in good faith, in accordance with its
11 provisions and purposes and the interests of the beneficiaries
12 and in accordance with applicable law.
13 § 7772. Duty of loyalty - UTC 802.
14 (a) Duty of trustee.--A trustee shall administer the trust
15 solely in the interests of the beneficiaries.
16 (b) Effect of conflict of interest.--Subject to the rights
17 of persons dealing with or assisting the trustee as provided in
18 section 7790.2 (relating to protection of person dealing with
19 trustee - UTC 1012), a sale, purchase, exchange, encumbrance or
20 other disposition of property between a trust and either the
21 trustee in the trustee's individual capacity or one of the
22 persons identified in subsection (c) is voidable by a court upon
23 application by a beneficiary affected by the transaction unless:
24 (1) the transaction was authorized by the trust
25 instrument;
26 (2) the transaction was approved by the court;
27 (3) the beneficiary did not commence a judicial
28 proceeding within the time allowed by section 7785 (relating
29 to limitation of action against trustee);
30 (4) the beneficiary consented to the trustee's conduct,
20050S0660B1969 - 84 -
1 ratified the transaction or released the trustee in
2 compliance with section 7789 (relating to beneficiary's
3 consent, release or ratification - UTC 1009); or
4 (5) the transaction involves a contract entered into or
5 claim acquired by the trustee before the person became or
6 contemplated becoming a trustee.
7 (c) What constitutes conflict of interest.--A sale,
8 purchase, exchange, encumbrance or other disposition of property
9 is presumed to be affected by a conflict between personal and
10 fiduciary interests if it is entered into by the trustee with:
11 (1) the trustee's spouse;
12 (2) the trustee's parent or a spouse of the parent;
13 (3) a descendant of the trustee's parent or a spouse of
14 the descendant;
15 (4) an agent of the trustee unless the trustee is a
16 corporation and the agent is an affiliate of the corporation
17 or the transaction is authorized by section 7209 (relating to
18 mutual funds);
19 (5) a corporation or other person or enterprise in which
20 the trustee or a person that owns a significant interest in
21 the trustee has an interest that might affect the trustee's
22 judgment, but this paragraph does not apply to an affiliate
23 of a corporate trustee or to a transaction authorized by
24 section 7209; or
25 (6) the trustee personally.
26 (d) Transactions between trustee and beneficiary.--A
27 transaction between a trustee and a beneficiary that does not
28 concern trust property but that occurs during the existence of
29 the trust or while the trustee retains significant influence
30 over the beneficiary and from which the trustee obtains an
20050S0660B1969 - 85 -
1 advantage is voidable by a court upon application by the
2 beneficiary unless the trustee establishes that the transaction
3 was fair to the beneficiary.
4 (e) Conflict regarding trust opportunity.--A transaction not
5 concerning trust property in which the trustee engages in the
6 trustee's individual capacity involves a conflict between
7 personal and fiduciary interests if the transaction concerns an
8 opportunity properly belonging to the trust.
9 (f) (Reserved).
10 (g) Business enterprises.--In voting shares of stock or in
11 exercising powers of control over similar interests in other
12 forms of business enterprise, the trustee shall act in the best
13 interests of the beneficiaries. If the trust is the sole owner
14 of a corporation or other form of enterprise, the trustee shall
15 elect or appoint directors or other managers who will manage the
16 corporation or business enterprise in the best interests of the
17 beneficiaries.
18 (h) Permissible transactions.--This section does not
19 preclude the following transactions if fair to the
20 beneficiaries:
21 (1) an agreement between a trustee and a beneficiary
22 relating to the appointment or compensation of the trustee;
23 (2) payment of reasonable compensation to the trustee
24 and payment of reasonable compensation to affiliates of a
25 corporate trustee if the compensation is disclosed to the
26 current beneficiaries;
27 (3) a transaction between a trust and another trust,
28 decedent's estate or guardianship, of which the trustee is a
29 fiduciary or in which a beneficiary has an interest;
30 (4) a deposit of trust money in a regulated financial-
20050S0660B1969 - 86 -
1 service institution operated by the trustee;
2 (5) an advance by the trustee of money for the
3 protection of the trust; or
4 (6) a transaction authorized by section 7209.
5 (i) (Reserved).
6 § 7773. Impartiality - UTC 803.
7 If a trust has two or more beneficiaries, the trustee shall
8 act impartially in investing, managing and distributing the
9 trust property, giving due regard to the beneficiaries'
10 respective interests in light of the purposes of the trust. The
11 duty to act impartially does not mean that the trustee must
12 treat the beneficiaries equally. Rather, the trustee must treat
13 the beneficiaries equitably in light of the purposes of the
14 trust.
15 § 7774. Prudent administration - UTC 804.
16 A trustee shall administer the trust as a prudent person
17 would, by considering the purposes, provisions, distributional
18 requirements and other circumstances of the trust and by
19 exercising reasonable care, skill and caution.
20 § 7775. Costs of administration - UTC 805.
21 In administering a trust, the trustee may incur only costs
22 that are reasonable in relation to the trust property, the
23 purposes of the trust and the skills of the trustee.
24 § 7776. Trustee's skills - UTC 806.
25 A trustee who has special skills or expertise relevant to a
26 trust or who is named trustee in reliance upon the trustee's
27 representation that the trustee has special skills or expertise
28 relevant to a trust shall use those special skills or expertise
29 in the administration of the trust.
30 § 7777. Delegation by trustee.
20050S0660B1969 - 87 -
1 (a) Standards for delegation.--A trustee may delegate duties
2 and powers that a prudent trustee of comparable skills might
3 delegate under the circumstances. The trustee shall exercise
4 reasonable care, skill and caution in:
5 (1) selecting an agent;
6 (2) establishing the scope and specific terms of the
7 delegation, consistent with the purposes and provisions of
8 the trust; and
9 (3) reviewing periodically the agent's actions in order
10 to monitor the agent's performance and compliance with the
11 scope and specific terms of the delegation.
12 (b) Agent's duty.--The agent shall comply with the scope and
13 terms of the delegation and shall exercise the delegated duties
14 and powers with reasonable care, skill and caution and shall be
15 liable to the trust for failure to do so. An agent who
16 represents having special skills or expertise shall use those
17 special skills or that expertise.
18 (c) Liability.--A trustee who complies with subsection (a)
19 is not liable to the beneficiaries or to the trust for an action
20 of the agent to whom the function was delegated.
21 (d) Jurisdiction.--An agent who accepts the delegation of
22 duties or powers from a trustee who is subject to the
23 jurisdiction of a court of this Commonwealth shall be deemed to
24 have submitted to the jurisdiction of that court even if the
25 terms of the delegation provide for a different jurisdiction or
26 venue.
27 (e) When one trustee may delegate to another.--A trustee may
28 delegate duties and powers to another trustee if the delegating
29 trustee reasonably believes that the other trustee has greater
30 skills than the delegating trustee with respect to those duties
20050S0660B1969 - 88 -
1 and powers and the other trustee accepts the delegation. The
2 delegating trustee shall not be responsible for the decisions,
3 actions or inactions of the trustee to whom those duties and
4 powers have been delegated if the delegating trustee has
5 exercised reasonable care, skill and caution in establishing the
6 scope and specific terms of the delegation and in reviewing
7 periodically the performance of the trustee to whom the duties
8 and powers have been delegated and that trustee's compliance
9 with the scope and specific terms of the delegation.
10 § 7778. Powers to direct - UTC 808.
11 (a) Direction of settlor.--While a trust is revocable, the
12 trustee may follow a written direction of the settlor that is
13 contrary to the trust instrument.
14 (b) Compliance with power.--If a trust instrument confers
15 upon a person other than the settlor of a revocable trust power
16 to direct certain actions of the trustee, the trustee shall act
17 in accordance with a written exercise of the power unless the
18 attempted exercise is manifestly contrary to the trust
19 instrument or the trustee knows the attempted exercise would
20 constitute a serious breach of a fiduciary duty that the person
21 holding the power owes to the beneficiaries of the trust.
22 (c) Modification or termination of trust.--A trust
23 instrument may confer upon a trustee or other person a power to
24 modify or terminate the trust.
25 (d) Fiduciary relationship.--A person other than a
26 beneficiary who holds a power to direct certain actions of a
27 trustee is presumptively a fiduciary who, as such, is required
28 to act in good faith with regard to the purposes of the trust
29 and the interests of the beneficiaries. The holder of a power to
30 direct is liable for any loss that results from breach of the
20050S0660B1969 - 89 -
1 holder's fiduciary duty.
2 § 7779. Control and protection of trust property - UTC 809.
3 A trustee shall take reasonable steps to take control of and
4 protect the trust property.
5 § 7780. Recordkeeping and identification of trust property -
6 UTC 810.
7 (a) Records.--A trustee shall keep adequate records of the
8 administration of the trust.
9 (b) Commingling trust property prohibited.--A trustee shall
10 keep trust property separate from the trustee's own property.
11 (c) Designating trust property.--Except as otherwise
12 provided in subsection (d) and section 3321 (relating to nominee
13 registration; corporate fiduciary as agent; deposit of
14 securities in a clearing corporation; book-entry securities), a
15 trustee shall cause the trust property to be designated so that
16 the interest of the trust, to the extent feasible, appears in
17 records maintained by a party other than a trustee or
18 beneficiary.
19 (d) Investing property of separate trusts.--If the trustee
20 maintains records clearly indicating the respective interests, a
21 trustee may invest as a whole the property of two or more
22 separate trusts.
23 § 7780.1. Enforcement and defense of claims - UTC 811.
24 Except as provided in section 7770 (relating to liability of
25 successor trustee), a trustee shall take reasonable steps to
26 enforce claims of the trust and to defend claims against the
27 trust. When one of several trustees is individually liable to
28 the trust, the other trustee or trustees shall take any legal
29 action against that trustee necessary to protect the trust.
30 § 7780.2. (Reserved).
20050S0660B1969 - 90 -
1 § 7780.3. Duty to inform and report.
2 (a) Duty to respond to requests.--A trustee shall promptly
3 respond to a beneficiary's reasonable request for information
4 related to the trust's administration.
5 (b) Notice after settlor of revocable trust has been
6 adjudicated incapacitated.--No later than 30 days after the date
7 on which the trustee of a revocable trust learns that the
8 settlor has been adjudicated incapacitated, the trustee shall
9 send the notice described in subsection (i) to the settlor's
10 guardian.
11 (c) Notice after settlor of revocable trust has died.--No
12 later than 30 days after the date on which the trustee of a
13 revocable trust learns that the settlor has died, the trustee
14 shall send the notice described in subsection (i) to:
15 (1) the settlor's personal representative;
16 (2) the settlor's spouse or, if the settlor's spouse is
17 incapacitated, the spouse's guardian;
18 (3) each of the settlor's children who is sui juris and
19 the guardian, if any, of each child who is not sui juris; and
20 (4) the trust's current beneficiaries.
21 (d) Notice after settlor of irrevocable trust has been
22 adjudicated incapacitated.--No later than 30 days after the date
23 on which the trustee of an irrevocable trust learns that the
24 settlor has been adjudicated incapacitated, the trustee shall
25 send the notice described in subsection (i) to the trust's
26 current beneficiaries. A revocable trust shall not be deemed
27 irrevocable for the purposes of this subsection merely because
28 the settlor has been adjudicated incapacitated.
29 (e) Notice after settlor of irrevocable trust has died.--No
30 later than 30 days after the date on which the trustee of an
20050S0660B1969 - 91 -
1 irrevocable trust learns that the settlor has died, the trustee
2 shall send the notice described in subsection (i) to the trust's
3 current beneficiaries unless the settlor had been adjudicated
4 incapacitated and the trustee sent notices to the current
5 beneficiaries as required by subsection (d).
6 (f) Notice to current beneficiaries.--No later than 30 days
7 after the date on which the trustee of an irrevocable trust
8 learns that a person who did not previously receive the notice
9 described in subsection (i) is a current beneficiary of the
10 trust, the trustee shall send the notice described in subsection
11 (i) to the current beneficiary if, at that time, the trustee
12 knows that the settlor is then deceased or has been adjudicated
13 incapacitated.
14 (g) Change in trusteeship.--Apart from the other
15 requirements of this section, the trustee shall send the notice
16 described in subsection (i) to the current beneficiaries each
17 time there is a change in trusteeship.
18 (h) Trustee's notice to any beneficiary at any time.--Apart
19 from the requirements of this section, the trustee may send the
20 notice described in subsection (i) to any beneficiary of the
21 trust at any time.
22 (i) Contents of notice.--Any notice under this section shall
23 be written and convey the following information:
24 (1) The fact of the trust's existence.
25 (2) The identity of the settlor.
26 (3) The trustee's name, address and telephone number.
27 (4) The recipient's right to receive a copy of the trust
28 instrument.
29 (5) The recipient's right to receive, at least annually,
30 a written report of the trust's assets and their market
20050S0660B1969 - 92 -
1 values if feasible, the trust's liabilities and the trust's
2 receipts and disbursements since the date of the last such
3 report.
4 (j) Waiver.--Any beneficiary may waive in writing the right
5 to receive the notice described in subsection (i) and thereafter
6 may rescind in writing that waiver.
7 (k) Notice to settlor's appointee.--The settlor of a trust
8 may in the trust instrument appoint one or more persons or a
9 succession of persons to receive, on behalf of one or more named
10 current beneficiaries of the trust, the notices required by this
11 section. The trustee giving the notice required by this section
12 to that appointee satisfies the trustee's duty to give to the
13 named current beneficiary the notice required by this section
14 if:
15 (1) the trustee notifies the appointee that the notice
16 is being given to the appointee as representing the named
17 current beneficiary; and
18 (2) the appointee does not decline to receive the notice
19 in a writing that is given to the trustee no later than 60
20 days after receipt of the trustee's notice.
21 (l) Applicability.--
22 (1) If the death or adjudication of incapacity described
23 in subsection (b), (c), (d) or (e) occurs on or after (in
24 preparing this act for printing in the Laws of Pennsylvania
25 and the Pennsylvania Consolidated Statutes, the Legislative
26 Reference Bureau shall insert here, in lieu of this
27 statement, the effective date of this section), the time
28 limit for notice set forth in that subsection shall apply.
29 (2) If the death or adjudication of incapacity described
30 in subsection (b), (c), (d) or (e) has occurred before (in
20050S0660B1969 - 93 -
1 preparing this act for printing in the Laws of Pennsylvania
2 and the Pennsylvania Consolidated Statutes, the Legislative
3 Reference Bureau shall insert here, in lieu of this
4 statement, the effective date of this section), the time
5 limit for notice set forth in that subsection shall be (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 date that is two years after the effective
10 date of this section).
11 (3) The notice under subsection (f) shall not be
12 required to be completed until two years after (in preparing
13 this act for printing in the Laws of Pennsylvania and the
14 Pennsylvania Consolidated Statutes, the Legislative Reference
15 Bureau shall insert here, in lieu of this statement, the
16 effective date of this section).
17 § 7780.4. Discretionary powers.
18 The trustee shall exercise a discretionary power in good
19 faith and in accordance with the provisions and purposes of the
20 trust and the interests of the beneficiaries, notwithstanding
21 the breadth of discretion granted to a trustee in the trust
22 instrument, including the use of such terms as "absolute,"
23 "sole" or "uncontrolled."
24 § 7780.5. Powers of trustees - UTC 815.
25 (a) Exercise of power.--Except as otherwise provided in the
26 trust instrument or in other provisions of this title, a trustee
27 has all the powers over the trust property that an unmarried
28 competent owner has over individually owned property and may
29 exercise those powers without court approval from the time of
30 creation of the trust until final distribution of the assets of
20050S0660B1969 - 94 -
1 the trust.
2 (b) (Reserved).
3 § 7780.6. Illustrative powers of trustee.
4 (a) Listing.--The powers which a trustee may exercise
5 pursuant to section 7780.5 (relating to powers of trustees - UTC
6 815) include the following powers:
7 (1) To accept, hold, invest in and retain investments as
8 provided in Chapter 72 (relating to prudent investor rule).
9 (2) To pay or contest a claim; settle a claim by or
10 against the trust by compromise, arbitration or otherwise;
11 and release, in whole or in part, any claim belonging to the
12 trust.
13 (3) To resolve a dispute regarding the interpretation of
14 the trust or the administration of the trust by mediation,
15 arbitration or other alternative dispute resolution
16 procedures.
17 (4) To prosecute or defend actions, claims or
18 proceedings for the protection of trust assets and of the
19 trustee in the performance of the trustee's duties.
20 (5) To abandon or decline to administer any property
21 which is of little or no value, transfer title to abandoned
22 property and decline to accept title to and administer
23 property which has or may have environmental or other
24 liability attached to it.
25 (6) To insure the assets of the trust against damage or
26 loss and, at the expense of the trust, protect the trustee,
27 the trustee's agents and the beneficiaries from liability to
28 third persons arising from the administration of the trust.
29 (7) To advance money for the protection of the trust and
30 for all expenses, losses and liability sustained in the
20050S0660B1969 - 95 -
1 administration of the trust or because of the holding or
2 ownership of any trust assets. The trustee has a lien on the
3 trust assets as against the beneficiary for an advance under
4 this paragraph, including interest on the advance.
5 (8) To pay taxes, assessments, compensation of the
6 trustee and employees and agents of the trustee and other
7 expenses incurred in the administration of the trust.
8 (9) To receive additions to the assets of the trust.
9 (10) To sell or exchange any real or personal property
10 at public or private sale, without obligation to repudiate an
11 otherwise binding agreement in favor of better offers. If the
12 trustee has been required to give bond, no proceeds of the
13 sale of real estate, including proceeds arising by the reason
14 of involuntary conversion, shall be paid to the trustee
15 until:
16 (i) the court has made an order excusing the trustee
17 from entering additional security; or
18 (ii) the court has made an order requiring
19 additional security and the trustee has entered the
20 additional security.
21 (11) To enter for any purpose into a lease as lessor or
22 lessee with or without option to purchase or renew for a term
23 within or extending beyond the term of the trust.
24 (12) To grant options for sales or leases of a trust
25 asset and acquire options for the acquisition of assets,
26 including options exercisable after the trust terminates.
27 (13) To join in any reorganization, consolidation,
28 merger, dissolution, liquidation, voting-trust plan or other
29 concerted action of security holders and to delegate
30 discretionary duties with respect thereto.
20050S0660B1969 - 96 -
1 (14) To vote a security, in person or by general or
2 limited proxy, with or without power of substitution.
3 (15) To borrow funds and mortgage or pledge trust assets
4 as security for repayment of the funds borrowed, including
5 repayments after the trust terminates.
6 (16) To make loans to and buy property from the personal
7 representatives of the settlor and the settlor's spouse.
8 Loans under this paragraph shall be adequately secured, and
9 the purchases under this paragraph shall be for fair market
10 value.
11 (17) To partition, subdivide, repair, improve or develop
12 real estate; enter into agreements concerning the partition,
13 subdivision, repair, improvement, development, zoning or
14 management of real estate; impose or extinguish restrictions
15 on real estate; dedicate land and easements to public use;
16 adjust boundaries; and do anything else regarding real estate
17 which is commercially reasonable or customary under the
18 circumstances.
19 (18) With respect to possible liability for violation of
20 environmental law:
21 (i) to inspect or investigate property the trustee
22 holds or has been asked to hold or property owned or
23 operated by an organization in which the trustee holds or
24 has been asked to hold an interest, for the purpose of
25 determining the application of environmental law with
26 respect to the property;
27 (ii) to take action to prevent, abate or otherwise
28 remedy any actual or potential violation of environmental
29 law affecting property held directly or indirectly by the
30 trustee, whether taken before or after the assertion of a
20050S0660B1969 - 97 -
1 claim or the initiation of governmental enforcement;
2 (iii) to decline to accept property into trust or
3 disclaim a power with respect to property that is or may
4 be burdened with liability for violation of environmental
5 law;
6 (iv) to compromise claims against the trust which
7 may be asserted for an alleged violation of environmental
8 law; and
9 (v) to pay the expense of inspection, review,
10 abatement or remedial action to comply with environmental
11 law.
12 (19) To operate, repair, maintain, equip and improve any
13 farm or farm operation; to purchase and sell livestock,
14 crops, feed and other property that is normally perishable;
15 and to purchase, use and dispose of farm equipment and employ
16 one or more farm managers and others in connection with farm
17 equipment and pay them reasonable compensation.
18 (20) To make ordinary or extraordinary repairs or
19 alterations in buildings or other structures; demolish
20 improvements; and raze existing or erect new party walls or
21 buildings.
22 (21) To enter into a lease or arrangements for
23 exploration and removal of minerals or other natural
24 resources or enter into a pooling or unitization agreement.
25 (22) To exercise all rights and incidents of ownership
26 of life insurance policies held by the trust, including
27 borrowing on policies, entering into and terminating split-
28 dollar plans, exercising conversion privileges and rights to
29 acquire additional insurance and selecting settlement
30 options.
20050S0660B1969 - 98 -
1 (23) To employ a custodian; hold property unregistered
2 or in the name of a nominee, including the nominee of any
3 institution employed as custodian, without disclosing the
4 fiduciary relationship and without retaining possession and
5 control of securities or other property so held or
6 registered; and pay reasonable compensation to the custodian.
7 (24) To apply funds distributable to a beneficiary who
8 is, in the trustee's opinion, disabled by illness or other
9 cause and unable properly to manage the funds directly for
10 the beneficiary's benefit or to pay such funds for
11 expenditure on the beneficiary's behalf to:
12 (i) the beneficiary;
13 (ii) a guardian of the beneficiary's estate;
14 (iii) an agent acting under a general power of
15 attorney for the beneficiary; or
16 (iv) if there is no agent or guardian, a relative or
17 other person having legal or physical custody or care of
18 the beneficiary.
19 (25) To pay funds distributable to a minor beneficiary
20 to the minor or to a guardian of the minor's estate or to
21 apply the funds directly for the minor's benefit.
22 (26) To do any of the following:
23 (i) Pay any funds distributable to a beneficiary who
24 is not 21 years of age or older to:
25 (A) the beneficiary;
26 (B) an existing custodian for the beneficiary
27 under Chapter 53 (relating to Pennsylvania Uniform
28 Transfers to Minors Act) or under any other state's
29 version of the Uniform Transfers to Minors Act;
30 (C) an existing custodian for the beneficiary
20050S0660B1969 - 99 -
1 under the former Pennsylvania Uniform Gifts to Minors
2 Act or under any other state's version of the Uniform
3 Gifts to Minors Act; or
4 (D) a custodian for the beneficiary appointed by
5 the trustee under Chapter 53.
6 (ii) Apply the funds for the beneficiary.
7 (27) To pay calls, assessments and other sums chargeable
8 or accruing against or on account of securities.
9 (28) To sell or exercise stock subscription or
10 conversion rights.
11 (29) To continue or participate in the operation of any
12 business or other enterprise and to effect incorporation,
13 merger, consolidation, dissolution or other change in the
14 form of the organization of the business or enterprise.
15 (30) To select a mode of payment under a qualified
16 employee benefit plan or a retirement plan payable to the
17 trustee and exercise rights under the plan.
18 (31) To distribute in cash or in kind or partly in each
19 and allocate particular assets in proportionate or
20 disproportionate shares.
21 (32) To appoint a trustee to act in another jurisdiction
22 with respect to trust property located in the other
23 jurisdiction, confer upon the appointed trustee all the
24 powers and duties of the appointing trustee, require that the
25 appointed trustee furnish security and remove the appointed
26 trustee.
27 (33) To execute and deliver instruments which will
28 accomplish or facilitate the exercise of the trustee's
29 powers.
30 (b) Effect.--The trustee shall have no further
20050S0660B1969 - 100 -
1 responsibility or liability for funds upon any of the following:
2 (1) Payment under subsection (a)(24).
3 (2) Payment under subsection (a)(25).
4 (3) Payment or application under subsection (a)(26).
5 § 7780.7. Distribution upon termination.
6 Upon the occurrence of an event terminating or partially
7 terminating a trust, the trustee shall proceed to distribute the
8 trust property within a reasonable time to the persons entitled
9 to it, subject to the right of the trustee to retain a
10 reasonable reserve for the payment of debts, expenses and taxes.
11 SUBCHAPTER I
12 LIABILITY OF TRUSTEES AND RIGHTS
13 OF PERSONS DEALING WITH TRUSTEES
14 Sec.
15 7781. Remedies for breach of trust - UTC 1001.
16 7782. Damages for breach of trust - UTC 1002.
17 7783. Damages in absence of breach - UTC 1003.
18 7784. (Reserved).
19 7785. Limitation of action against trustee.
20 7786. Reliance on trust instrument - UTC 1006.
21 7787. Event affecting administration or distribution - UTC
22 1007.
23 7788. Exculpation of trustee - UTC 1008.
24 7789. Beneficiary's consent, release or ratification - UTC
25 1009.
26 7790. Limitation on personal liability of trustee - UTC 1010.
27 7790.1. Interest as general partner - UTC 1011.
28 7790.2. Protection of person dealing with trustee - UTC 1012.
29 7790.3. Certification of trust - UTC 1013.
30 § 7781. Remedies for breach of trust - UTC 1001.
20050S0660B1969 - 101 -
1 (a) What constitutes breach of trust.--A violation by a
2 trustee of a duty the trustee owes to a beneficiary is a breach
3 of trust.
4 (b) Remedies.--To remedy a breach of trust that has occurred
5 or may occur, the court may order any appropriate relief,
6 including the following:
7 (1) Compelling the trustee to perform the trustee's
8 duties.
9 (2) Enjoining the trustee from committing a breach of
10 trust.
11 (3) Compelling the trustee to redress a breach of trust
12 by paying money, restoring property or other means.
13 (4) Ordering a trustee to file an account.
14 (5) Taking any action authorized by Chapter 43 (relating
15 to temporary fiduciaries).
16 (6) (Reserved).
17 (7) Removing the trustee as provided in section 7766
18 (relating to removal of trustee - UTC 706).
19 (8) Reducing or denying compensation to the trustee.
20 (9) Subject to section 7790.2 (relating to protection of
21 person dealing with trustee - UTC 1012):
22 (i) voiding an act of the trustee;
23 (ii) imposing a lien or a constructive trust on
24 trust property; or
25 (iii) tracing trust property wrongfully disposed of
26 and recovering the property or its proceeds.
27 (10) (Reserved).
28 § 7782. Damages for breach of trust - UTC 1002.
29 (a) Liability for breach of trust.--A trustee who commits a
30 breach of trust is liable to the beneficiaries affected.
20050S0660B1969 - 102 -
1 (b) Contribution.--
2 (1) Except as otherwise provided in this subsection, if
3 more than one trustee is liable to the beneficiaries for a
4 breach of trust, a trustee is entitled to contribution from
5 the other trustee or trustees.
6 (2) A trustee is not entitled to contribution if the
7 trustee:
8 (i) was substantially more at fault than another
9 trustee; or
10 (ii) committed the breach of trust in bad faith or
11 with reckless indifference to the purposes of the trust
12 or the interests of the beneficiaries.
13 (3) A trustee who received a benefit from the breach of
14 trust is not entitled to contribution from another trustee to
15 the extent of the benefit received.
16 § 7783. Damages in absence of breach - UTC 1003.
17 (a) Profit.--A trustee is accountable to an affected
18 beneficiary for any profit, excluding reasonable compensation,
19 made by the trustee arising from the administration of the
20 trust, even absent a breach of trust.
21 (b) Loss or depreciation.--Absent a breach of trust, a
22 trustee is not liable to a beneficiary for a loss or
23 depreciation in the value of trust property or for not having
24 made a profit.
25 § 7784. (Reserved).
26 § 7785. Limitation of action against trustee.
27 (a) Imposed by trustee's written reports.--
28 (1) A beneficiary may not challenge a transaction or
29 assert a claim against a trustee for breach of trust on the
30 basis of a transaction if:
20050S0660B1969 - 103 -
1 (i) the trustee provided the beneficiary with a
2 written report of the trust's assets and their market
3 values if feasible, the trust's liabilities and the
4 trust's receipts and disbursements for the year in which
5 the transaction occurred and for each of the four
6 subsequent calendar years;
7 (ii) the transaction was disclosed in the first of
8 the five reports to which subparagraph (i) refers;
9 (iii) the beneficiary did not notify the trustee in
10 writing within six months after receiving the fifth
11 annual report that the beneficiary objects to the
12 transaction and provide the basis in writing for that
13 objection; and
14 (iv) all reports were accompanied by a conspicuous
15 written statement describing the effect of this
16 paragraph.
17 (2) A claim not barred by paragraph (1) may nevertheless
18 be barred by subsection (b).
19 (b) Five-year absolute bar.--If not previously barred by
20 subsection (a) or section 7798 (relating to failure to present
21 claim at audit):
22 (1) Except as provided in paragraph (2) or (3), a claim
23 by a beneficiary against a trustee, including a claim
24 preserved by the beneficiary notifying the trustee in the
25 manner described in subsection (a), shall be barred five
26 years after the first to occur of the following events:
27 (i) the date after the removal, resignation or death
28 of the trustee on which the beneficiary was given the
29 notice required by section 7780.3(g) (relating to duty to
30 inform and report);
20050S0660B1969 - 104 -
1 (ii) the termination of the beneficiary's interest
2 in the trust; or
3 (iii) the termination of the trust.
4 (2) Except as set forth in paragraph (3), if the first
5 to occur of the events set forth in paragraph (1) occurred
6 before (in preparing this act for printing in the Laws of
7 Pennsylvania and the Pennsylvania Consolidated Statutes, the
8 Legislative Reference Bureau shall insert here, in lieu of
9 this statement, the effective date of this section), a claim
10 described in paragraph (1) shall be barred five years after
11 (in preparing this act for printing in the Laws of
12 Pennsylvania and the Pennsylvania Consolidated Statutes, the
13 Legislative Reference Bureau shall insert here, in lieu of
14 this statement, the effective date of this section).
15 (3) A claim described in paragraph (1) is not barred if,
16 prior to the respective date set forth in either paragraph
17 (1) or (2), the trustee has filed an account with the court
18 or the beneficiary has petitioned the court to compel the
19 trustee to file an account.
20 § 7786. Reliance on trust instrument - UTC 1006.
21 A trustee who acts in reasonable reliance on the express
22 provisions of the trust instrument is not liable to a
23 beneficiary for a breach of trust to the extent the breach
24 resulted from the reliance.
25 § 7787. Event affecting administration or distribution - UTC
26 1007.
27 If the happening of an event, including marriage, divorce,
28 performance of educational requirements, attaining a specific
29 age or death, affects the administration or distribution of a
30 trust, a trustee who has exercised reasonable care to ascertain
20050S0660B1969 - 105 -
1 the happening of the event is not liable for a loss resulting
2 from the trustee's lack of knowledge.
3 § 7788. Exculpation of trustee - UTC 1008.
4 (a) When exculpatory provision unenforceable.--A provision
5 of a trust instrument relieving a trustee of liability for
6 breach of trust is unenforceable to the extent that it:
7 (1) relieves the trustee of liability for breach of
8 trust committed in bad faith or with reckless indifference to
9 the purposes of the trust or the interests of the
10 beneficiaries; or
11 (2) was inserted as the result of an abuse by the
12 trustee of a fiduciary or confidential relationship to the
13 settlor.
14 (b) Exculpatory provision by trustee.--An exculpatory term
15 drafted or caused to be drafted by the trustee is invalid as an
16 abuse of a fiduciary or confidential relationship unless the
17 trustee proves that the exculpatory term is fair under the
18 circumstances and that its existence and contents were
19 adequately communicated to the settlor.
20 § 7789. Beneficiary's consent, release or ratification - UTC
21 1009.
22 A trustee is not liable to a beneficiary for breach of trust
23 if the beneficiary consented to the conduct constituting the
24 breach, released the trustee from liability for the breach or
25 ratified the transaction constituting the breach, unless the
26 consent, release or ratification of the beneficiary was induced
27 by improper conduct of the trustee.
28 § 7790. Limitation on personal liability of trustee - UTC 1010.
29 (a) When trustee not personally liable.--Except as otherwise
30 provided in the contract, a trustee is not personally liable on
20050S0660B1969 - 106 -
1 a contract properly entered into in the trustee's fiduciary
2 capacity in the course of administering the trust if the trustee
3 in the contract disclosed the fiduciary capacity.
4 (b) When trustee personally liable.--A trustee is personally
5 liable for torts committed in the course of administering a
6 trust or for obligations arising from ownership or control of
7 trust property, including liability for violation of
8 environmental law, only if the trustee is personally at fault.
9 (c) Assertion of claim.--A claim based on a contract entered
10 into by a trustee in the trustee's fiduciary capacity on an
11 obligation arising from ownership or control of trust property
12 or on a tort committed in the course of administering a trust
13 may be asserted in a judicial proceeding against the trustee in
14 the trustee's fiduciary capacity, whether or not the trustee is
15 personally liable for the claim.
16 § 7790.1. Interest as general partner - UTC 1011.
17 (a) Contractual liability.--Except as otherwise provided in
18 subsection (c) or unless personal liability is imposed in the
19 contract, a trustee who holds an interest as a general partner
20 in a general or limited partnership is not personally liable on
21 a contract entered into by the partnership after the trust's
22 acquisition of the interest if the fiduciary capacity was
23 disclosed in the contract or in a statement previously filed
24 pursuant to 15 Pa.C.S. Ch. 83 (relating to general partnerships)
25 or 85 (relating to limited partnerships).
26 (b) Tortious liability.--Except as otherwise provided in
27 subsection (c), a trustee who holds an interest as a general
28 partner is not personally liable for torts committed by the
29 partnership or for obligations arising from ownership or control
30 of the interest unless the trustee is personally at fault.
20050S0660B1969 - 107 -
1 (c) When immunity inapplicable.--The immunity provided by
2 this section does not apply if an interest in the partnership is
3 held by:
4 (1) the trustee in a capacity other than that of
5 trustee;
6 (2) the trustee's spouse; or
7 (3) the trustee's descendant, sibling or parent or the
8 spouse of a descendant, sibling or parent.
9 (d) Personal liability of settlor.--If the trustee of a
10 revocable trust holds an interest as a general partner, the
11 settlor is personally liable for contracts and other obligations
12 of the partnership as if the settlor were a general partner.
13 § 7790.2. Protection of person dealing with trustee - UTC 1012.
14 (a) (Reserved).
15 (a.1) Protection from liability.--Unless a person assisting
16 or dealing with a trustee has actual knowledge that the trustee
17 is committing a breach of trust or has knowledge of such facts
18 that the trustee's conduct amounts to bad faith, the person:
19 (1) may assume without inquiry the existence of trust
20 powers and their proper exercise by the trustee;
21 (2) is not bound to inquire whether the trustee has
22 power to act or is properly exercising the power; and
23 (3) is fully protected in dealing with the trustee as if
24 the trustee possessed and properly exercised the powers the
25 trustee purports to exercise.
26 (b) No requirement to inquire.--A person other than a
27 beneficiary who in good faith deals with a trustee is not
28 required to inquire into the extent of the trustee's powers or
29 the propriety of their exercise.
30 (c) (Reserved).
20050S0660B1969 - 108 -
1 (c.1) Ultra vires.--A trustee's act may not be set aside or
2 not specifically enforced because the trustee's act was not
3 authorized by section 7780.5 (relating to powers of trustees -
4 UTC 815) or 7780.6 (relating to illustrative powers of trustee)
5 or because the trustee's act was authorized but the authority
6 was improperly exercised. A court's power to set aside a
7 transaction for fraud, accident, mistake or self-dealing is
8 unaffected by this subsection.
9 (d) Former trustee.--A person other than a beneficiary who
10 in good faith assists a former trustee, or who in good faith and
11 for value deals with a former trustee, without knowledge that
12 the trusteeship has terminated is protected from liability as if
13 the former trustee were still a trustee.
14 (e) Effect of other laws.--Comparable protective provisions
15 of other laws relating to commercial transactions or transfer of
16 securities by fiduciaries prevail over the protection provided
17 by this section.
18 § 7790.3. Certification of trust - UTC 1013.
19 (a) Contents of certification.--Instead of furnishing a copy
20 of the trust instrument to a person other than a beneficiary,
21 the trustee may furnish to the person a certification of trust
22 containing the following information:
23 (1) The trust's existence and the date the trust
24 instrument was executed.
25 (2) The identity of the settlor.
26 (3) The identity and address of the currently acting
27 trustee.
28 (4) The powers of the trustee.
29 (5) The revocability or irrevocability of the trust and
30 the identity of any person holding a power to revoke the
20050S0660B1969 - 109 -
1 trust.
2 (6) The authority of cotrustees to sign or otherwise
3 authenticate and whether all or less than all are required in
4 order to exercise powers of the trustee.
5 (7) The trust's taxpayer identification number.
6 (8) The manner of taking title to trust property.
7 (b) Authentication.--A certification of trust may be signed
8 or otherwise authenticated by any trustee.
9 (c) Assurance of representations.--A certification of trust
10 must state that the trust has not been revoked, modified or
11 amended in a manner that would cause the representations
12 contained in the certification of trust to be incorrect.
13 (d) Dispositive trust provisions.--A certification of trust
14 need not contain the dispositive provisions of the trust
15 instrument.
16 (e) Provisions to be made available upon request.--A
17 recipient of a certification of trust may require the trustee to
18 furnish copies of those excerpts from the original trust
19 instrument and later amendments which designate the trustee and
20 confer upon the trustee the power to act in the pending
21 transaction.
22 (f) Reliance on certification.--A person who acts in
23 reliance upon a certification of trust without knowledge that
24 the representations contained in the certification are incorrect
25 is not liable to any person for so acting and may assume without
26 inquiry the existence of the facts contained in the
27 certification. Knowledge of the provisions of the trust
28 instrument may not be inferred solely from the fact that a copy
29 of all or part of the trust instrument is held by the person
30 relying upon the certification.
20050S0660B1969 - 110 -
1 (g) Enforcement.--A person who in good faith enters into a
2 transaction in reliance upon a certification of trust may
3 enforce the transaction against the trust property as if the
4 representations contained in the certification were correct.
5 (h) Liability.--A person making a demand for the trust
6 instrument in addition to a certification of trust or excerpts
7 is liable for damages if the court determines that the person
8 did not act in good faith in demanding the trust instrument.
9 (i) Applicability.--This section does not limit the right of
10 a person to obtain a copy of the trust instrument in a judicial
11 proceeding concerning the trust.
12 SUBCHAPTER J
13 MISCELLANEOUS PROVISIONS
14 Sec.
15 7791. Abandonment of property.
16 7792. Powers, duties and liabilities identical with personal
17 representatives.
18 7793. Effect of removal, or of probate of later will or
19 codicil.
20 7794. Title of purchaser.
21 7795. Reports for school district trustees.
22 7796. Jurisdiction.
23 7797. Filing accounts.
24 7798. Failure to present claim at audit.
25 7799. Income on distributive shares.
26 7799.1. Annexation of account of distributed estate or
27 trust.
28 7799.2. Accounts, audits and distributions.
29 7799.3. Pooled trusts for persons with disabilities.
30 § 7791. Abandonment of property.
20050S0660B1969 - 111 -
1 If any property is so burdensome or is so encumbered or is in
2 such condition that it is of no value to the trust, the trustee
3 may abandon it. If property without value cannot be abandoned
4 without transfer of title to another or without a formal
5 renunciation, the court may authorize the trustee to transfer or
6 renounce it without consideration if it finds that this will be
7 for the best interests of the trust.
8 § 7792. Powers, duties and liabilities identical with personal
9 representatives.
10 The provisions concerning the powers, duties and liabilities
11 of a trustee shall be the same as those set forth in the
12 following provisions of this title for the administration of a
13 decedent's or a minor's estate:
14 Section 3184 (relating to discharge of personal
15 representative and surety).
16 Section 3321(d) and (e) (relating to nominee
17 registration; corporate fiduciary as agent; deposit of
18 securities in a clearing corporation; book-entry securities).
19 Section 3323 (relating to compromise of controversies).
20 Section 3324 (relating to death or incapacity of
21 fiduciary).
22 Section 3332 (relating to inherent powers and duties).
23 Section 3353 (relating to order of court).
24 Section 3354 (relating to power given in governing
25 instrument).
26 Section 3355 (relating to restraint of sale).
27 Section 3356 (relating to purchase by personal
28 representative).
29 Section 3358 (relating to collateral attack).
30 Section 3359 (relating to record of proceedings; county
20050S0660B1969 - 112 -
1 where real estate lies).
2 § 7793. Effect of removal, or of probate of later will or
3 codicil.
4 (a) No impeachment.--No act of administration performed by a
5 testamentary trustee in good faith shall be impeached by the
6 subsequent:
7 (1) revocation of the probate of the will from which the
8 trustee derives authority;
9 (2) probate of a later will or of a codicil; or
10 (3) dismissal of the trustee.
11 (b) Good faith dealings.--Regardless of the good or bad
12 faith of the testamentary trustee, no person who deals in good
13 faith with a testamentary trustee shall be prejudiced by the
14 occurrence of any of the contingencies set forth in subsection
15 (a).
16 § 7794. Title of purchaser.
17 If the trustee has given a bond as required in accordance
18 with this title, any sale, pledge, mortgage or exchange by a
19 trustee, whether pursuant to a decree or to the exercise of a
20 power conferred by the trust instrument or of a power under this
21 title, shall pass the full title of the trust in the property,
22 unless otherwise specified. Persons dealing with the trustee
23 shall have no obligation to see to the proper application of the
24 cash or other assets given in exchange for the property of the
25 trust. A sale or exchange by a trustee pursuant to a decree
26 under section 3353 (relating to order of court) shall have the
27 effect of a judicial sale as to the discharge of liens, but the
28 court may decree a sale or exchange freed and discharged from
29 the lien of any mortgage otherwise preserved from discharge by
30 existing law if the holder of the mortgage consents by writing
20050S0660B1969 - 113 -
1 filed in the proceeding. No sale, mortgage, exchange or
2 conveyance shall be prejudiced by the subsequent dismissal of
3 the trustee. No sale, mortgage, exchange or conveyance by a
4 testamentary trustee shall be prejudiced by the terms of a will
5 or codicil thereafter probated if the person dealing with the
6 trustee did so in good faith.
7 § 7795. Reports for school district trustees.
8 (a) Scope.--This section applies if a school district is a
9 trustee of land in accordance with all of the following:
10 (1) The land is held for the benefit of the public.
11 (2) The land is not used directly for school purposes.
12 (b) Requirement.--
13 (1) By January 30, the school district shall prepare a
14 report for the prior year concerning the trust.
15 (2) The report shall detail all of the following:
16 (i) Revenues generated.
17 (ii) Expenses incurred.
18 (iii) Balance of funds held by the school district
19 as trustee.
20 (iv) A statement regarding the activities taken by
21 the trustee during the prior year to advance the purposes
22 of the trust.
23 (3) The report must be certified as correct by the
24 district superintendent.
25 (4) The report shall be made public as follows:
26 (i) The report shall be published in 14-point type
27 in a newspaper of general circulation in each county in
28 which the land is located.
29 (ii) The report shall be available during business
30 hours for inspection and copying at the office of the
20050S0660B1969 - 114 -
1 district superintendent. A reasonable fee may be charged
2 for copying.
3 § 7796. Jurisdiction.
4 Notwithstanding 42 Pa.C.S. § 931 (relating to original
5 jurisdiction and venue), jurisdiction over an action involving
6 land referred to in section 7795 (relating to reports for school
7 district trustees) shall be vested in the court of common pleas
8 in the judicial district where:
9 (1) all of the land is located; or
10 (2) more than 50% of the land is located.
11 § 7797. Filing accounts.
12 (a) When to file.--A trustee shall file an account of his
13 administration whenever directed to do so by the court and may
14 file an account at any other time.
15 (b) Where to file.--All accounts of trustees shall be filed
16 in the office of the clerk.
17 § 7798. Failure to present claim at audit.
18 (a) Applicability.--This section applies to a person that,
19 at the audit of a trustee's account, has a claim that:
20 (1) arose out of the administration of trust property or
21 arises out of the distribution of trust property upon any
22 interim or final accounting of the trust; and
23 (2) is not reported to the court as an admitted claim.
24 (b) Bar.--A person that fails, at the call for audit or
25 confirmation, to present a claim under subsection (a) shall be
26 forever barred from making a claim against:
27 (1) trust property distributed pursuant to the audit or
28 confirmation;
29 (2) a distributee of trust property distributed pursuant
30 to the audit or confirmation; and
20050S0660B1969 - 115 -
1 (3) except as otherwise provided in section 3521
2 (relating to rehearing; relief granted), trust property
3 awarded back upon further trust pursuant to the audit or
4 confirmation.
5 (c) Liens and charges unimpaired.--Nothing in this section
6 shall be construed as impairing any lien or charge on real or
7 personal estate of the trust existing at the time of the audit.
8 § 7799. Income on distributive shares.
9 Except as otherwise provided by the trust instrument or by
10 the provisions of section 3543 (relating to income on
11 distributive shares):
12 (1) If a sum of money is directed to be set aside at a
13 specified time as a separate trust, it shall be entitled to
14 income at the annual rate of 5% from the date it was to be
15 set aside until it is set aside. If a sum of money is
16 directed to be paid outright, it shall be entitled to income
17 at the annual rate of 5% from three months after it became
18 payable until it is paid.
19 (2) A donee of a gift of specific real or personal
20 property directed to be distributed from a trust shall be
21 entitled to the net income from property given to the donee
22 accrued from the date it became distributable.
23 (3) All income from real and personal property earned
24 during the administration of a trust and not payable to
25 others pursuant to the governing instrument or the provisions
26 of this section shall be distributed pro rata among the
27 income beneficiaries of a continuing trust and other persons
28 entitled to residuary shares of the trust.
29 § 7799.1. Annexation of account of distributed estate or trust.
30 A trustee who has received property from a personal
20050S0660B1969 - 116 -
1 representative or from another trustee in distribution of an
2 estate or another trust may annex a copy of an account of the
3 administration of the estate or other trust to an account filed
4 by the trustee covering the administration of the trust under
5 the trustee's management. If notice of the annexation of the
6 account of the estate or other trust is given to the persons
7 required to be notified of the filing of the trustee's account
8 of the principal trust, confirmation of the principal account
9 shall relieve both the trustee of the principal trust and the
10 personal representative or trustee of the distributed estate or
11 other trust of all liability to beneficiaries of the principal
12 trust for transactions shown in the account so annexed to the
13 same extent as if the annexed account had been separately filed
14 and confirmed. If the fund covered by the annexed account has
15 itself received property from another source under circumstances
16 that would have permitted annexation of an account under this
17 section or under section 3501.2 (relating to annexation of
18 account of terminated trust, guardianship or agency), accounts
19 for both funds may be annexed.
20 § 7799.2. Accounts, audits and distributions.
21 The provisions concerning accounts, audits and distributions
22 in trust estates shall be the same as those set forth in the
23 following provisions of this title for the administration of a
24 decedent's estate:
25 Section 3511 (relating to audits in counties having
26 separate orphans' court division).
27 Section 3512 (relating to audits in counties having no
28 separate orphans' court division).
29 Section 3513 (relating to statement of proposed
30 distribution).
20050S0660B1969 - 117 -
1 Section 3514 (relating to confirmation of account and
2 approval of proposed distribution).
3 Section 3521 (relating to rehearing; relief granted).
4 Section 3533 (relating to award upon final confirmation
5 of account).
6 Section 3536 (relating to recording and registering
7 decrees awarding real estate).
8 Section 3538 (relating to distributions involving persons
9 born out of wedlock).
10 Section 3539 (relating to change in law after pattern of
11 distribution established).
12 Section 3540 (relating to absentee and additional
13 distributees).
14 Section 3541 (relating to order of abatement).
15 Section 3545 (relating to transcripts of balances due by
16 personal representative).
17 § 7799.3. Pooled trusts for persons with disabilities.
18 (a) Scope.--This section relates to pooled trusts.
19 (b) Organization of pooled trust.--
20 (1) A pooled trust shall be administered by a trustee
21 governed by a board. The trust may employ persons as
22 necessary.
23 (2) The members of a board and employees of a trustee,
24 if any, shall stand in a fiduciary relationship to the
25 beneficiaries and the trustee regarding investment of the
26 trust and shall not profit, either directly or indirectly,
27 with respect to the investment.
28 (3) A trustee shall maintain a separate account for each
29 beneficiary of a pooled trust; but, for purposes of
30 investment and management of funds, the trustee may pool
20050S0660B1969 - 118 -
1 these accounts. The trustee shall have exclusive control and
2 authority to manage and invest the money in the pooled trust
3 in accordance with this section, subject, however, to the
4 exercise of that degree of judgment, skill and care under the
5 prevailing circumstances that persons of prudence, discretion
6 and intelligence who are familiar with investment matters
7 exercise in the management of their affairs, considering the
8 probable income to be derived from the investment and the
9 probable safety of their capital. The trustee may charge a
10 trust management fee to cover the costs of administration and
11 management of the pooled trust.
12 (4) A board member shall disclose and abstain from
13 participation in a discussion or voting on an issue if a
14 conflict of interest arises with the board member on a
15 particular issue or vote.
16 (5) No board member may receive compensation for
17 services provided as a member of the board. No fees or
18 commissions may be paid to a board member. A board member may
19 be reimbursed for necessary expenses incurred which are in
20 the best interest of the beneficiaries of the pooled trust as
21 a board member upon presentation of receipts.
22 (6) The trustee shall disburse money from a
23 beneficiary's account only on behalf FOR THE SOLE BENEFIT of <--
24 the beneficiary. A disbursement from a beneficiary's account
25 shall be in the best interest MUST HAVE A REASONABLE <--
26 RELATIONSHIP TO THE NEEDS of the beneficiary.
27 (c) Pooled trust fund.--BEFORE THE FUNDING OF A POOLED <--
28 TRUST, ALL LIENS AND CLAIMS IN FAVOR OF THE DEPARTMENT OF PUBLIC
29 WELFARE FOR REPAYMENT OF CASH AND MEDICAL ASSISTANCE SHALL FIRST
30 BE SATISFIED. All money received for pooled trust funds shall be
20050S0660B1969 - 119 -
1 deposited with a court-approved corporate fiduciary or with the
2 State Treasury if no court-approved corporate fiduciary is
3 available to the trustee. The funds shall be pooled for
4 investment and management. A separate account shall be
5 maintained for each beneficiary, and quarterly accounting
6 statements shall be provided to each beneficiary by the trustee.
7 The court-approved corporate fiduciary or the State Treasury
8 shall provide quarterly accounting statements to the trustee.
9 The court-approved corporate fiduciary or the State Treasury may
10 charge a trust management fee to cover the costs of managing the
11 funds in the pooled trust.
12 (d) Reporting.--
13 (1) In addition to reports required to be filed under 15
14 Pa.C.S. Pt. III (relating to partnerships and limited
15 liability companies), the trustee shall file an annual report
16 with the Office of Attorney General and the Department of
17 Public Welfare, along with an itemized statement which shows
18 the funds collected for the year, income earned, salaries
19 paid, other expenses incurred and the opening and final trust
20 balances. A copy of this statement shall be available to the
21 beneficiary, settlor or designee of the settlor upon request.
22 (2) The trustee shall prepare and provide each settlor
23 or the settlor's designee annually with a detailed individual
24 statement of the services provided to the settlor's
25 beneficiary during the previous 12 months and of the services
26 to be provided during the following 12 months. The trustee
27 shall provide a copy of this statement to the beneficiary
28 upon request.
29 (e) Coordination of services.--
30 (1) The Department of Public Welfare shall review and
20050S0660B1969 - 120 -
1 approve the pooled trust of an applicant for medical
2 assistance.
3 (2) In the determination of eligibility for medical
4 assistance benefits, the interest of a disabled beneficiary
5 in a pooled trust THAT HAS BEEN APPROVED BY THE DEPARTMENT OF <--
6 PUBLIC WELFARE shall not be considered as a resource for
7 purposes of determining the beneficiary's eligibility for
8 medical assistance.
9 (3) No State agency may reduce the benefits or services
10 available to an individual because that person is a
11 beneficiary of a pooled trust. The beneficiary's interest in
12 a pooled trust is not reachable in satisfaction of a claim
13 for support and maintenance of the beneficiary.
14 (f) Notice.--The Office of Attorney General and the
15 Department of Public Welfare shall make available information on
16 the treatment of pooled trusts for the persons with disabilities
17 in the medical assistance program.
18 (g) Applicability.--This section shall apply to all of the
19 following:
20 (1) Pooled trusts established after March 8, 2003.
21 (2) Accounts of individual beneficiaries established
22 after March 8, 2003, in pooled trusts created before March 9,
23 2003.
24 (h) Definitions.--As used in this section, the following
25 words and phrases shall have the meanings given to them in this
26 subsection:
27 "Beneficiary." An individual with a disability who has the
28 right to receive services and benefits of a pooled trust.
29 "Board." A group of persons vested with the management of
30 the business affairs of a trustee.
20050S0660B1969 - 121 -
1 "Disability." A physical or mental impairment as defined in
2 section 1614 of the Social Security Act (49 Stat. 620, 42 U.S.C.
3 § 1382c).
4 "Pooled trust." A trust which meets all of the following:
5 (1) The trust contains assets of more than one
6 beneficiary.
7 (2) Each beneficiary has a disability.
8 (3) The trust is managed by a nonprofit corporation.
9 (4) A separate account is maintained for each
10 beneficiary of the trust, but, for purposes of investment and
11 management of funds, the trust pools these accounts. Accounts
12 in the trust may be established by the parent, grandparent or
13 legal guardian of the individual with a disability, by the
14 individual with a disability or by a court.
15 (5) Upon the death of a beneficiary, or upon the earlier
16 termination of the trust, amounts remaining in the
17 beneficiary's account must be distributed in accordance with
18 one of the following:
19 (i) The trust may retain up to 50% of the remaining
20 balance for the benefit of other beneficiaries. The
21 remaining 50% of the balance must be reimbursed to the
22 Commonwealth and any other state that provided medical
23 assistance up to an amount equal to the total amount of
24 medical assistance paid on behalf of the beneficiary.
25 (ii) The amounts must be used to reimburse the
26 Commonwealth and any other state that provided medical
27 assistance up to an amount equal to the total amount of
28 medical assistance paid on behalf of the beneficiary.
29 "Trustee." A nonprofit organization that manages a pooled
30 trust.
20050S0660B1969 - 122 -
1 Section 10. The definitions of "principal" and "sui juris
2 beneficiary" in section 8102 of Title 20 are amended to read:
3 § 8102. Definitions.
4 The following words and phrases when used in this chapter
5 shall have the meanings given to them in this section unless the
6 context clearly indicates otherwise:
7 * * *
8 "Principal." Property held in trust for distribution to a
9 remainder beneficiary when the trust terminates or property held
10 in trust in perpetuity.
11 * * *
12 "Sui juris beneficiary." Includes:
13 (1) a court-appointed guardian of an incapacitated
14 beneficiary;
15 (2) an agent for an incompetent beneficiary; and
16 (3) a court-appointed guardian of a minor beneficiary's
17 estate [or, if none, the parents of the minor beneficiary].
18 * * *
19 Section 11. Sections 8104(c)(4), 8105 and 8107 of Title 20
20 are amended to read:
21 § 8104. Trustee's power to adjust.
22 * * *
23 (c) Prohibited adjustments.--A trustee may not make an
24 adjustment under this section if any of the following apply:
25 * * *
26 (4) The adjustment is from any amount which is
27 permanently set aside for charitable purposes under the
28 governing instrument and for which a Federal estate or gift
29 tax charitable deduction has been taken unless both income
30 and principal are so set aside.
20050S0660B1969 - 123 -
1 * * *
2 § 8105. Power to convert to unitrust.
3 (a) Conversion.--Unless expressly prohibited by the
4 governing instrument, a trustee may release the power under
5 section 8104 (relating to trustee's power to adjust) and convert
6 a trust into a unitrust as described in this section if all of
7 the following apply:
8 (1) The trustee determines that the conversion will
9 enable the trustee to better carry out the intent of the
10 settlor or testator and the purposes of the trust.
11 (2) The trustee gives written notice of the trustee's
12 intention to release the power to adjust and to convert the
13 trust into a unitrust and of how the unitrust will operate,
14 including what initial decisions the trustee will make under
15 this section, to all the sui juris beneficiaries who:
16 (i) are currently eligible to receive income from
17 the trust; [and]
18 (ii) would be eligible to receive, if no powers of
19 appointment were exercised, income from the trust if the
20 interest of all those eligible to receive income under
21 subparagraph (i) were to terminate immediately prior to
22 the giving of notice; and
23 (iii) would receive, if no powers of appointment
24 were exercised, a distribution of principal if the trust
25 were to terminate immediately prior to the giving of
26 notice.
27 (3) There is at least one sui juris beneficiary under
28 paragraph (2)(i) and at least one sui juris beneficiary under
29 either paragraph (2)(ii) or (iii).
30 (4) No sui juris beneficiary objects to the conversion
20050S0660B1969 - 124 -
1 to a unitrust in a writing delivered to the trustee within 60
2 days of the mailing of the notice under paragraph (2).
3 (b) Judicially approved conversion.--
4 (1) The trustee may petition the court to approve the
5 conversion to a unitrust if any of the following apply:
6 (i) A beneficiary timely objects to the conversion
7 to a unitrust.
8 (ii) There are no sui juris beneficiaries under
9 subsection (a)(2)(i).
10 (iii) There are no sui juris beneficiaries under
11 either subsection (a)(2)(ii) or (iii).
12 (2) A beneficiary may request a trustee to convert to a
13 unitrust. If the trustee does not convert, the beneficiary
14 may petition the court to order the conversion.
15 (3) The court shall approve the conversion or direct the
16 requested conversion if the court concludes that the
17 conversion will enable the trustee to better carry out the
18 intent of the settlor or testator and the purposes of the
19 trust.
20 (c) Consideration.--In deciding whether to exercise the
21 power conferred by subsection (a), a trustee may consider, among
22 other things, all of the following:
23 (1) The size of the trust.
24 (2) The nature and estimated duration of the trust.
25 (3) The liquidity and distribution requirements of the
26 trust.
27 (4) The needs for regular distributions and preservation
28 and appreciation of capital.
29 (5) The expected tax consequences of the conversion.
30 (6) The assets held in the trust; the extent to which
20050S0660B1969 - 125 -
1 they consist of financial assets, interests in closely held
2 enterprises, tangible and intangible personal property or
3 real property; and the extent to which an asset is used by a
4 beneficiary.
5 (7) To the extent reasonably known to the trustee, the
6 needs of the beneficiaries for present and future
7 distributions authorized or required by the governing
8 instrument.
9 (8) Whether and to what extent the governing instrument
10 gives the trustee the power to invade principal or accumulate
11 income or prohibits the trustee from invading principal or
12 accumulating income and the extent to which the trustee has
13 exercised a power from time to time to invade principal or
14 accumulate income.
15 (9) The actual and anticipated effect of economic
16 conditions on principal and income and effects of inflation
17 and deflation.
18 (d) Post conversion.--After a trust is converted to a
19 unitrust, all of the following apply:
20 (1) The trustee shall follow an investment policy
21 seeking a total return for the investments held by the trust,
22 whether the return is to be derived:
23 (i) from appreciation of capital;
24 (ii) from earnings and distributions from capital;
25 or
26 (iii) from both.
27 (2) The trustee shall make regular distributions in
28 accordance with the governing instrument construed in
29 accordance with the provisions of this section.
30 (3) The term "income" in the governing instrument shall
20050S0660B1969 - 126 -
1 mean an annual distribution (the unitrust distribution) equal
2 to 4% (the payout percentage) of the net fair market value of
3 the trust's assets, whether such assets would be considered
4 income or principal under other provisions of this chapter,
5 averaged over the lesser of:
6 (i) the three preceding years; or
7 (ii) the period during which the trust has been in
8 existence.
9 (e) Discretion of trustee.--The trustee may, in the
10 trustee's discretion from time to time, determine all of the
11 following:
12 (1) The effective date of a conversion to a unitrust.
13 (2) The provisions for prorating a unitrust distribution
14 for a short year in which a beneficiary's right to payments
15 commences or ceases.
16 (3) The frequency of unitrust distributions during the
17 year.
18 (4) The effect of other payments from or contributions
19 to the trust on the trust's valuation.
20 (5) Whether to value the trust's assets annually or more
21 frequently.
22 (6) What valuation dates to use.
23 (7) How frequently to value nonliquid assets and whether
24 to estimate their value.
25 (8) Whether to omit from the calculations trust property
26 occupied or possessed by a beneficiary.
27 (9) Any other matters necessary for the proper
28 functioning of the unitrust.
29 (f) Allocation.--
30 (1) Expenses which would be deducted from income if the
20050S0660B1969 - 127 -
1 trust were not a unitrust may not be deducted from the
2 unitrust distribution.
3 (2) Unless otherwise provided by the governing
4 instrument, the unitrust distribution shall be considered to
5 have been paid from [net income as such term would be
6 determined if the trust were not a unitrust. To the extent
7 net income is insufficient, the unitrust distribution shall
8 be paid from net realized short-term capital gains. To the
9 extent income and net realized short-term capital gains are
10 insufficient, the unitrust distribution shall be paid from
11 net realized long-term capital gains. To the extent income
12 and net realized short-term and long-term capital gains are
13 insufficient, the unitrust distribution shall be paid from
14 the principal of the trust.] the following sources in order
15 of priority:
16 (i) net income determined as if the trust were not a
17 unitrust;
18 (ii) ordinary income for Federal income tax purposes
19 that is not allocable to net income under subparagraph
20 (i);
21 (iii) net realized short-term capital gains for
22 Federal income tax purposes;
23 (iv) net realized long-term capital gains for
24 Federal income tax purposes; and
25 (v) the principal of the trust estate.
26 (g) Court orders.--The trustee or, if the trustee declines
27 to do so, a beneficiary may petition the court to:
28 (1) Select a payout percentage different than 4%.
29 (2) Provide for a distribution of net income, as would
30 be determined if the trust were not a unitrust, in excess of
20050S0660B1969 - 128 -
1 the unitrust distribution if such distribution is necessary
2 to preserve a tax benefit.
3 (3) Average the valuation of the trust's net assets over
4 a period other than three years.
5 (4) Reconvert from a unitrust. Upon a reconversion, the
6 power to adjust under section 8104 shall be revived.
7 (g.1) Reconversion from unitrust.--A trustee may reconvert a
8 unitrust following the same procedures as in subsection (a) for
9 converting a trust into a unitrust with the exception that the
10 written notice shall state that the intent is to reconvert the
11 unitrust into a trust for which income is defined under this
12 chapter. Upon reconversion, the power to adjust under section
13 8104 shall be revived.
14 (h) Application.--A conversion to a unitrust does not affect
15 a provision in the governing instrument directing or authorizing
16 the trustee to distribute principal or authorizing a beneficiary
17 to withdraw a portion or all of the principal.
18 (i) Prohibited conversions.--A trustee may not convert a
19 trust into a unitrust in any of the following circumstances:
20 (1) If payment of the unitrust distribution would change
21 the amount payable to a beneficiary as a fixed annuity or a
22 fixed fraction of the value of the trust assets.
23 (2) If the unitrust distribution would be made from [any
24 amount] trust funds which [is] are permanently set aside for
25 charitable purposes under the governing instrument and for
26 which a Federal estate or gift tax charitable deduction has
27 been taken, unless both income and principal are so set
28 aside. If both income and principal are so set aside, then
29 section 8113 (relating to charitable trusts) and not this
30 section shall be available.
20050S0660B1969 - 129 -
1 (3) If:
2 (i) possessing or exercising the power to convert
3 would cause an individual to be treated as the owner of
4 all or part of the trust for Federal income tax purposes;
5 and
6 (ii) the individual would not be treated as the
7 owner if the trustee did not possess the power to
8 convert.
9 (4) If:
10 (i) possessing or exercising the power to convert
11 would cause all or part of the trust assets to be subject
12 to Federal estate or gift tax with respect to an
13 individual; and
14 (ii) the assets would not be subject to Federal
15 estate or gift tax with respect to the individual if the
16 trustee did not possess the power to convert.
17 (5) If the conversion would result in the disallowance
18 of a Federal estate tax or gift tax marital deduction which
19 would be allowed if the trustee did not have the power to
20 convert.
21 (6) If the trustee is a beneficiary of the trust.
22 (j) Permissible conversion when otherwise prohibited.--
23 (1) If subsection (i)(3), (4) or (6) applies to a
24 trustee and there is more than one trustee, a co-trustee to
25 whom the provision does not apply may convert the trust
26 unless the exercise of the power by the remaining trustee or
27 trustees is prohibited by the governing instrument.
28 (2) If subsection (i)(3), (4) or (6) applies to all the
29 trustees, the trustees may petition the court to direct a
30 conversion.
20050S0660B1969 - 130 -
1 (k) Release of the power to convert.--
2 (1) A trustee may release the power conferred by
3 subsection (a) to convert to a unitrust if any of the
4 following apply:
5 (i) The trustee is uncertain about whether
6 possessing or exercising the power will cause a result
7 described in subsection (i)(3), (4) or (5).
8 (ii) The trustee determines that possessing or
9 exercising the power will or may deprive the trust of a
10 tax benefit or impose a tax burden not described in
11 subsection (i).
12 (2) The release may be permanent or for a specified
13 period, including a period measured by the life of an
14 individual.
15 § 8107. [(Reserved).] Express trusts.
16 (a) General rule.--In the absence of a contrary intent
17 appearing in the governing instrument of an express unitrust,
18 the governing instrument shall be construed in accordance with
19 the following rules:
20 (1) The trustee shall follow an investment policy
21 seeking a total return for the investments held by the trust,
22 whether the return is to be derived from:
23 (i) appreciation of capital;
24 (ii) earnings and distributions from capital; or
25 (iii) both.
26 (2) The unitrust distribution shall be an annual
27 distribution of an amount equal to 4% of the net fair market
28 value of the trust's assets, whether the assets would be
29 considered income or principal under other provisions of this
30 chapter, averaged over the lesser of:
20050S0660B1969 - 131 -
1 (i) the three preceding years; or
2 (ii) the period during which the trust has been in
3 existence.
4 (3) The trustee may, in the trustee's discretion from
5 time to time, determine all of the following:
6 (i) The provisions for prorating a unitrust
7 distribution for a short year in which the beneficiary's
8 right to payments commences or ceases.
9 (ii) The frequency of unitrust distributions during
10 the year.
11 (iii) The effect of other payments from or
12 contributions to the trust on the trust's valuation.
13 (iv) Whether to value the trust's assets annually or
14 more frequently.
15 (v) What valuation dates to use.
16 (vi) How frequently to value nonliquid assets and
17 whether to estimate their value.
18 (vii) Whether to omit from the calculations
19 residential real estate, tangible personal property or
20 other trust property used, occupied or possessed by a
21 beneficiary.
22 (viii) Any other matters necessary for the proper
23 functioning of the unitrust.
24 (4) Expenses which would be deducted from income if the
25 trust were not a unitrust shall not be deducted from the
26 unitrust distribution.
27 (5) The unitrust distribution shall be considered to
28 have been paid from the following sources in order of
29 priority:
30 (i) net income determined as if the trust were not
20050S0660B1969 - 132 -
1 an express unitrust;
2 (ii) ordinary income for Federal income tax purposes
3 that is not allocable to net income under subparagraph
4 (i);
5 (iii) net realized short-term capital gains for
6 Federal income tax purposes;
7 (iv) net realized long-term capital gains for
8 Federal income tax purposes; and
9 (v) the principal of the trust estate.
10 (b) Definition.--As used in this section, the term "express
11 unitrust" shall mean a trust which by its governing instrument
12 creates a trust, other than a trust solely for charitable
13 purposes or a qualified charitable split interest trust under
14 section 664(d) or 170(f)(2)(B) of the Internal Revenue Code of
15 1986 (Public Law 99-514, 26 U.S.C. § 664(d) or 170(f)(2)(B)),
16 and provides for an annual distribution, the unitrust
17 distribution, equal to a fixed percentage of the net fair market
18 value of the trust's assets, valued at least annually, and
19 computed with reference to such value in one or more years. If
20 the fixed percentage is not less than 3% nor more than 5%, the
21 unitrust distribution shall be considered the income of the
22 trust for the purposes of this chapter.
23 Section 12. Section 8113(c) of Title 20 is amended and the
24 section is amended by adding a subsection to read:
25 § 8113. Charitable trusts.
26 * * *
27 (c) Effect of election.--If an election is made to be
28 governed by this section, the term "income" shall mean a
29 percentage of the value of the trust. The trustee shall, in a
30 writing maintained as part of the permanent records of the
20050S0660B1969 - 133 -
1 trust, [annually] select the percentage and determine that it is
2 consistent with the long-term preservation of the real value of
3 the principal of the trust, but in no event shall the percentage
4 be less than 2% nor more than 7% per year. The term "principal"
5 shall mean all other assets held by the trustee with respect to
6 the trust. The selection may be made either annually or subject
7 to change only when the trustee deems such change necessary and
8 prudent.
9 * * *
10 (f) Charitable organizations.--For a charitable organization
11 defined under the act of June 17, 1971 (P.L.181, No.23), known
12 as the Charitable Instruments Act of 1971, the provisions of
13 that act shall supersede subsection (c) if necessary to comply
14 with the minimum investment return requirements.
15 Section 13. Sections 8121(2) and 8141(c) and (d) of Title 20
16 are amended to read:
17 § 8121. Determination and distribution of net income.
18 After a decedent dies in the case of an estate or after an
19 income interest in a trust ends, the following rules apply:
20 * * *
21 (2) A fiduciary shall distribute to a beneficiary who
22 receives a pecuniary amount outright and shall allocate to a
23 pecuniary amount in trust the [interest, other] income or
24 other amount provided by the governing instrument or, in the
25 absence of any such provision, the income provided in section
26 3543 (relating to [interest or] income on distributive
27 shares) or [7187] 7799 (relating to [interest or] income on
28 distributive shares) from net income determined under
29 paragraph (3) or from principal to the extent that net income
30 is insufficient.
20050S0660B1969 - 134 -
1 * * *
2 § 8141. Character of receipts.
3 * * *
4 (c) When received in partial liquidation.--Money is received
5 in partial liquidation:
6 (1) to the extent that the entity, at or near the time
7 of a distribution, indicates that it is a distribution in
8 partial liquidation; or
9 (2) if the total amount of money and property [received]
10 distributed by the entity to its owners in [a] one
11 distribution or a series of related distributions is greater
12 than 20% of the entity's gross assets, as shown by the
13 entity's year-end financial statements immediately preceding
14 the initial receipt.
15 (d) When not received in partial liquidation.--Money is not
16 received in partial liquidation nor may it be taken into account
17 under subsection (c)(2) to the extent that it does not exceed
18 the amount of income tax that a [trustee or] trust beneficiary
19 must pay on taxable income of the entity that distributes the
20 money.
21 * * *
22 Section 14. The act of December 9, 2002 (P.L.1379, No.168),
23 known as the Pooled Trust Act, is repealed.
24 Section 15. (a) Except as set forth in subsection (b), the
25 addition of 20 Pa.C.S. § 7799.3 is a consolidation of the act of
26 December 9, 2002 (P.L.1379, No.168), known as the Pooled Trust
27 Act. Any differences between 20 Pa.C.S. § 7799.3 and the Pooled
28 Trust Act are intended only to conform to the style of the
29 Pennsylvania Consolidated Statutes and are not intended to
30 change or affect the legislative intent, judicial construction
20050S0660B1969 - 135 -
1 or administration and implementation of the Pooled Trust Act.
2 (b) Subsection (a) does not apply to the addition of 20
3 Pa.C.S. § 7799.3(d)(1), (e)(1), (f) and paragraph (5) of the
4 definition of "pooled trust" in subsection (h).
5 Section 16. The following apply:
6 (1) The addition of 20 Pa.C.S. § 3534.1 shall apply to
7 the estates of decedents who die on or after the effective
8 date of this paragraph.
9 (2) The amendment of 20 Pa.C.S. § 3702(h) shall apply to
10 the estates of decedents who die on or after the effective
11 date of this paragraph.
12 (3) Except as provided in paragraph (4), the addition of
13 20 Pa.C.S. Ch. 77 shall apply to all trusts created before,
14 on or after the effective date of this paragraph.
15 (4) The following apply:
16 (i) The addition of 20 Pa.C.S. § 7737 shall not
17 apply to oral trusts created before the effective date of
18 this paragraph.
19 (ii) The addition of 20 Pa.C.S. § 7752(a) shall not
20 apply to trusts created before the effective date of this
21 paragraph.
22 Section 17. This act shall take effect as follows:
23 (1) The following provisions shall take effect in 60
24 days:
25 (i) The amendment of 20 Pa.C.S. § 908(a).
26 (ii) The addition of 20 Pa.C.S. § 3534.1.
27 (iii) The amendment of 20 Pa.C.S. § 3543.
28 (iv) The amendment of 20 Pa.C.S. § 7503(b).
29 (v) The addition of 20 Pa.C.S. § 7504(c).
30 (vi) The amendment of 20 Pa.C.S. § 7506.
20050S0660B1969 - 136 -
1 (vii) The amendment of the definitions of
2 "principal" and "sui juris beneficiary" in 20 Pa.C.S. §
3 8102.
4 (viii) The amendment of 20 Pa.C.S. § 8104(c).
5 (ix) The amendment of 20 Pa.C.S. § 8105.
6 (x) The amendment of 20 Pa.C.S. § 8107.
7 (xi) The amendment of 20 Pa.C.S. § 8113.
8 (xii) The amendment of 20 Pa.C.S. § 8141.
9 (xiii) Section 16(1) of this act.
10 (2) The following provisions shall take effect
11 immediately:
12 (i) The amendment of 20 Pa.C.S. § 3702(h).
13 (ii) The amendment of 20 Pa.C.S. § 6104(d).
14 (iii) The amendment of 20 Pa.C.S. § 6106.
15 (iv) The amendment of 20 Pa.C.S. § 6107.
16 (v) The addition of 20 Pa.C.S. § 6107.1.
17 (vi) The amendment of the definition of "mutual
18 fund" in 20 Pa.C.S. § 7201.
19 (vii) The amendment of 20 Pa.C.S. § 7314.1.
20 (viii) Section 15 of this act.
21 (ix) Section 16(2) of this act.
22 (x) This section.
23 (3) The remainder of this act shall take effect in 120
24 days.
D6L20BIL/20050S0660B1969 - 137 -