AN ACT
ENTITLED, An Act to
revise certain miscellaneous provisions of the trust statutes.
BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF SOUTH DAKOTA:
Section 1. That § 55-1-20 be amended to read as follows:
55-1-20. Subject to the provisions of § § 55-1-21 and 55-1-22, a trust may be performed if the trust is for a specific lawful noncharitable purpose or for lawful noncharitable purposes to be selected by the trustee.
Section 2. That § 55-1-24 be amended to read as follows:
55-1-24. Terms used in §§ 55-1-24 to 55-1-43, inclusive, mean:
BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF SOUTH DAKOTA:
Section 1. That § 55-1-20 be amended to read as follows:
55-1-20. Subject to the provisions of § § 55-1-21 and 55-1-22, a trust may be performed if the trust is for a specific lawful noncharitable purpose or for lawful noncharitable purposes to be selected by the trustee.
Section 2. That § 55-1-24 be amended to read as follows:
55-1-24. Terms used in §§ 55-1-24 to 55-1-43, inclusive, mean:
(1)
"Beneficial interest," is limited to mean a distribution interest or a remainder interest. A
beneficial interest specifically excludes a power of appointment or a power reserved by
the settlor;
(2)
"Beneficiary," a person that has a present or future beneficial interest in a trust, vested or
contingent. The holder of a power of appointment is not a beneficiary;
(3)
"Distribution beneficiary," a beneficiary who is an eligible distributee or permissible
distributee of trust income or principal;
(4)
"Distribution interest," a distribution interest held by a distribution beneficiary. A
distribution interest may be a current distribution interest or a future distribution interest.
A distribution interest may be classified as a mandatory interest, a support interest, or a
discretionary interest;
(5)
"Power of appointment," an inter-vivos or testamentary power to direct the disposition of
trust property, other than a distribution decision by a trustee to a beneficiary. Powers of
appointment are held by a person to whom a power has been given, not the settlor;
(6)
"Remainder interest," an interest where a trust beneficiary will receive the property
outright at some time during the future;
(7)
"Reserved power," a power held by the settlor.
Section 3. That chapter 55-1 be amended by adding thereto a NEW SECTION to read as follows:
Section 3. That chapter 55-1 be amended by adding thereto a NEW SECTION to read as follows:
For purposes of
§
§
55-1-24 to 55-1-43, inclusive, improper motive is demonstrated by action
such as the following:
(1) A trustee refusing to make or limiting distributions to beneficiaries other than the trustee
due to the trustee's self interest when the trustee also holds a beneficial interest subject to
a discretionary interest; or
(2) A trustee making a distribution in excess of an ascertainable standard to himself or herself
as beneficiary when the trustee is restricted by an ascertainable standard in the trust.
Section 4. That § 55-1-30 be amended to read as follows:
55-1-30. Neither a distribution interest nor a remainder interest are relevant in the equitable division of marital property.
Section 5. That § 55-1-37 be amended to read as follows:
55-1-37. A spendthrift provision applies to both distribution interests and remainder interests. A spendthrift provision is a material provision of a trust.
Section 6. That § 55-1-38 be amended to read as follows:
55-1-38. A distribution interest can be classified in three ways:
Section 4. That § 55-1-30 be amended to read as follows:
55-1-30. Neither a distribution interest nor a remainder interest are relevant in the equitable division of marital property.
Section 5. That § 55-1-37 be amended to read as follows:
55-1-37. A spendthrift provision applies to both distribution interests and remainder interests. A spendthrift provision is a material provision of a trust.
Section 6. That § 55-1-38 be amended to read as follows:
55-1-38. A distribution interest can be classified in three ways:
(1)
As a mandatory interest, which is a distribution interest where the trustee has no
discretion in determining whether the distribution shall be made, or the amount or timing
of such distribution;
(2)
As a support interest, which is not a mandatory interest but still contains mandatory
language such as "shall make distributions" and is coupled with a standard capable of
judicial interpretation; or
(3)
As a discretionary interest, which is any interest where a trustee has any discretion to
make or withhold a distribution.
A discretionary interest includes permissive language such as "may make distributions" or it may
include mandatory language that is negated by the uncontrolled language of the trustee, such as "the
trustee shall make distributions in the trustee's sole and absolute discretion." A support interest that
includes mandatory language such as "shall" but is subsequently qualified by discretionary language
shall be classified as a discretionary interest and not as a support interest. A discretionary interest
is any interest that is not a mandatory or a support interest.
Section 7. That § 55-1-40 be amended to read as follows:
55-1-40. Although not the exclusive means to create a distribution interest, absent clear and convincing evidence to the contrary, the following language by itself results in the following classification of distribution interest:
Section 7. That § 55-1-40 be amended to read as follows:
55-1-40. Although not the exclusive means to create a distribution interest, absent clear and convincing evidence to the contrary, the following language by itself results in the following classification of distribution interest:
(1)
Mandatory interest:
(a)
"All income shall be distributed to (named beneficiary)"; or
(b)
"One hundred thousand dollars a year shall be distributed to (named beneficiary)";
(2)
Support interest:
(a)
"The trustee shall make distributions for health, education, maintenance, and
support";
(3)
Discretionary interest:
(a)
"The trustee, may, in the trustee's sole and absolute discretion make distributions
for health, education, maintenance, and support";
(b)
"The trustee, in the trustee's sole and absolute discretion, shall make distributions
for health, education, maintenance, and support";
(c)
"The trustee may make distributions for health, education, maintenance, and
support";
(d)
"The trustee shall make distributions for health, education, maintenance, and
support. The trustees may exclude any of the beneficiaries or may make unequal
distributions among them";
(e)
"The trustee may make distributions for health, education, maintenance, support,
comfort, and general welfare.
Section 8. That § 55-1-42 be amended to read as follows:
55-1-42. The following provisions apply only to support interests:
Section 8. That § 55-1-42 be amended to read as follows:
55-1-42. The following provisions apply only to support interests:
(1)
A beneficiary of a support interest has an enforceable right to a distribution pursuant to
a court's review. A trustee's distribution decision may be reviewed for unreasonableness,
dishonesty, improper motivation, or failure to act. This does not raise the beneficiary's
interest to the level of a property interest;
(2)
If the trust contains a spendthrift provision, notwithstanding the beneficiary's right to force
a distribution of a support interest, no creditor may force a distribution of a support
interest. No creditor may attach present or future support distributions of a support interest
at the trust level.
With respect to a mandatory interest, if a trust contains a spendthrift provision, notwithstanding
the beneficiary's right to force a distribution of a mandatory interest, no creditor may force a
distribution of a mandatory interest. No creditor may attach present or future mandatory distributions
of a mandatory interest at the trust level.
Regardless of whether a beneficiary has any outstanding creditor, a trustee of a mandatory or a
support interest may directly pay any expense on behalf of such beneficiary. No trustee is liable to
any creditor for paying the expenses of a beneficiary who holds a mandatory or support interest.
Section 9. That subdivision (2) of § 55-1B-1 be amended to read as follows:
Section 9. That subdivision (2) of § 55-1B-1 be amended to read as follows:
(2)
"Trust protector," any person whose appointment is provided for in the instrument;
Section 10.
That
§
55-2-13
be amended to read as follows:
55-2-13. For purposes of this section, the term, qualified beneficiary, means a beneficiary who, on the date the beneficiary's qualification is determined:
55-2-13. For purposes of this section, the term, qualified beneficiary, means a beneficiary who, on the date the beneficiary's qualification is determined:
(1)
Is a distributee or permissible distributee of trust income or principal;
(2)
Would be a distributee or permissible distributee of trust income or principal if the
interests of the distributees terminated on that date; or
(3)
Would be a distributee or permissible distributee of trust income or principal if the trust
terminated on that date.
Except as otherwise provided by the terms of the trust or otherwise directed by the settlor at any
time, within sixty days after the date the trustee of an irrevocable trust acquires knowledge of the
creation of an irrevocable trust, or upon the date the trustee acquires knowledge that a formerly
revocable trust has become irrevocable, whether by death of the settlor or otherwise, the trustee shall
notify the qualified beneficiaries of the trust's existence, of the identity of the settlor or settlors, and
of the right of the beneficiary to request a copy of the trust instrument.
Subject to the previous provision, a trustee of an irrevocable trust:
(1)
Upon request of a qualified beneficiary, shall promptly furnish to the qualified beneficiary
a copy of the trust instrument;
(2)
If notification of the trust has not been accomplished pursuant to this section within sixty
days after accepting a trusteeship, shall notify the qualified beneficiaries of the acceptance
and of the trustee's name, address, and telephone number;
(3)
Shall promptly respond to a qualified beneficiary's request for information related to the
administration of the trust, unless the request is unreasonable under the circumstances.
The provisions of this section are effective for trusts created after July 1, 2002.
Section 11. That subdivision (4) of § 55-2-15 be amended to read as follows:
Section 11. That subdivision (4) of § 55-2-15 be amended to read as follows:
(4)
The exercise of such authority does not reduce any income interest of any income
beneficiary of any of the following trusts:
(a) A trust for which a marital deduction has been taken for federal tax purposes under
I.R.C. § 2056 or § 2523 or for state tax purposes under any comparable provision
of applicable state law;
(b) A charitable remainder trust under I.R.C.
§
664; or
(c) A grantor retained annuity trust under I.R.C.
§
2702; and
Section 12.
That chapter
55-4
be amended by adding thereto a NEW SECTION to read as
follows:
If a co-trustee is unable to perform duties because of absence, illness, disqualification under other
law, or other incapacity, or fails to perform duties due to inaction or neglect, and action is necessary
or appropriate under the circumstances to achieve the purposes of the trust or to avoid injury to the
trust property, the remaining co-trustee or a majority of the remaining co-trustees may act for the
trust.
Section 13. That § 55-10A-1 be amended by adding thereto a NEW SUBDIVISION to read as follows:
Section 13. That § 55-10A-1 be amended by adding thereto a NEW SUBDIVISION to read as follows:
(11A) "Qualified minor's trust," a trust, including a trust created by a custodian, of which a
minor is the sole income beneficiary and that satisfies the requirements of Section 2503(c)
of the Federal Internal Revenue Code of 1986 and the regulations implementing that
section;
Section 14. That § 55-10A-15 be amended to read as follows:
55-10A-15. A custodian, acting in a custodial capacity, has all the rights, powers, and authority over custodial property that unmarried adult owners have over their own property, but a custodian
Section 14. That § 55-10A-15 be amended to read as follows:
55-10A-15. A custodian, acting in a custodial capacity, has all the rights, powers, and authority over custodial property that unmarried adult owners have over their own property, but a custodian
may exercise those rights, powers, and authority in that capacity only. This section does not relieve
a custodian from liability for breach of § 55-10A-14.
At any time, a custodian may transfer part or all of a custodial property to a qualified minor's
trust without a court order. Such transfer terminates the custodianship to the extent of the transfer.
Section 15. That § 55-13A-602 be amended to read as follows:
55-13A-602. This chapter applies to every trust or will created after July 1, 2007, except as otherwise expressly provided in the will or the terms of the trust or in this chapter. No trust or decedent's estate based upon a will executed after July 1, 2007, may utilize the provisions of chapter 55-13. Every trust existing on June 30, 2007, or any decedent's estate existing on June 30, 2007, and based upon a will executed prior to July 1, 2007, may elect to apply the provisions of either chapter 55-13 or this chapter. The election may be made by the trustee or personal representative upon providing sixty days written notice of the election to the beneficiaries of the trust or estate, as the case may be.
Section 15. That § 55-13A-602 be amended to read as follows:
55-13A-602. This chapter applies to every trust or will created after July 1, 2007, except as otherwise expressly provided in the will or the terms of the trust or in this chapter. No trust or decedent's estate based upon a will executed after July 1, 2007, may utilize the provisions of chapter 55-13. Every trust existing on June 30, 2007, or any decedent's estate existing on June 30, 2007, and based upon a will executed prior to July 1, 2007, may elect to apply the provisions of either chapter 55-13 or this chapter. The election may be made by the trustee or personal representative upon providing sixty days written notice of the election to the beneficiaries of the trust or estate, as the case may be.
Any election made prior to July 1, 2008, is hereby ratified and remains in full force and effect.
Section 16. That § 55-16-9 be amended to read as follows:
55-16-9. Notwithstanding any other provision of law, no action of any kind, including an action to enforce a judgement entered by a court or other body having adjudicative authority, may be brought at law or in equity for an attachment or other provisional remedy against property that is the subject of a qualified disposition or for avoidance of a qualified disposition unless the settlor's transfer of property was made with the intent to defraud that specific creditor.
Section 17. That § 55-16-10 be amended to read as follows:
55-16-10. A cause of action or claim for relief with respect to a fraudulent transfer of a settlor's assets under § 55-16-9 is extinguished unless the action under § 55-16-9 is brought by a creditor of the settlor who meets one of the following requirements:
Section 16. That § 55-16-9 be amended to read as follows:
55-16-9. Notwithstanding any other provision of law, no action of any kind, including an action to enforce a judgement entered by a court or other body having adjudicative authority, may be brought at law or in equity for an attachment or other provisional remedy against property that is the subject of a qualified disposition or for avoidance of a qualified disposition unless the settlor's transfer of property was made with the intent to defraud that specific creditor.
Section 17. That § 55-16-10 be amended to read as follows:
55-16-10. A cause of action or claim for relief with respect to a fraudulent transfer of a settlor's assets under § 55-16-9 is extinguished unless the action under § 55-16-9 is brought by a creditor of the settlor who meets one of the following requirements:
(1) Is a creditor of the settlor before the settlor's assets are transferred to the trust, and the
action under
§
55-16-9 is brought within the later of:
(a) Three years after the transfer is made; or
(b) One year after the transfer is or reasonably could have been discovered by the
creditor if the creditor:
(i) Can demonstrate that the creditor asserted a specific claim against the settlor
before the transfer; or
(ii) Files another action, other than an action under
§
55-16-9, against the settlor
that asserts a claim based on an act or omission of the settlor that occurred
before the transfer, and the action described in this sub-subsection is filed
within three years after the transfer; or
(2) Becomes a creditor subsequent to the transfer into trust, and the action under
§
55-16-9
is brought within three years after the transfer is made.
In any action described in § 55-16-9, the burden to prove the matter by clear and convincing
evidence is upon the creditor.
An Act to revise certain miscellaneous provisions of the trust statutes.
An Act to revise certain miscellaneous provisions of the trust statutes.
I certify that the attached Act originated in the
SENATE as
Bill
No.
84
____________________________ Secretary of the Senate ____________________________ President of the Senate
Attest:
____________________________ Secretary of the Senate
____________________________
Attest:
____________________________ Chief Clerk
Senate
Bill
No.
84
File No. ____ Chapter No. ______ |
Received at this Executive Office this _____ day of _____________ ,
20____ at ____________ M.
By _________________________ for the Governor
The attached Act is hereby
approved this ________ day of
______________ , A.D., 20___
____________________________ Governor STATE OF SOUTH DAKOTA, ss. Office of the Secretary of State
Filed ____________ , 20___
____________________________ Secretary of State
By _________________________ |