State Codes and Statutes

Statutes > North-carolina > Chapter_36C > GS_36C-8-816_1

§ 36C‑8‑816.1. Trustee's special power to appoint to a second trust.

(a)        For purposes ofthis section, the following definitions apply:

(1)        Current beneficiary.– A person who is a permissible distributee of trust income or principal.

(2)        Original trust. – Atrust established under an irrevocable trust instrument pursuant to the termsof which a trustee has a discretionary power to distribute principal or incomeof the trust to or for the benefit of one or more current beneficiaries of thetrust.

(3)        Second trust. – Atrust established under an irrevocable trust instrument, the currentbeneficiaries of which are one or more of the current beneficiaries of theoriginal trust. The second trust may be a trust created under the same trustinstrument as the original trust or under a different trust instrument.

(b)        A trustee of anoriginal trust may, without authorization by the court, exercise thediscretionary power to distribute principal or income to or for the benefit ofone or more current beneficiaries of the original trust by appointing all orpart of the principal or income of the original trust subject to the power infavor of a trustee of a second trust. The trustee of the original trust mayexercise this power whether or not there is a current need to distributeprincipal or income under any standard provided in the terms of the originaltrust. The trustee's special power to appoint trust principal or income infurther trust under this section includes the power to create the second trust.

(c)        The terms of thesecond trust shall be subject to all of the following:

(1)        The beneficiaries ofthe second trust may include only beneficiaries of the original trust.

(2)        A beneficiary whohas only a future beneficial interest, vested or contingent, in the originaltrust cannot have the future beneficial interest accelerated to a presentinterest in the second trust.

(3)        The terms of thesecond trust may not reduce any fixed income, annuity, or unitrust interest ofa beneficiary in the assets of the original trust.

(4)        If any contributionto the original trust qualified for a marital or charitable deduction forfederal income, gift, or estate tax purposes under the Internal Revenue Code,then the second trust shall not contain any provision that, if included in theoriginal trust, would have prevented the original trust from qualifying for thededuction or that would have reduced the amount of the deduction.

(5)        If contributions tothe original trust have been excluded from the gift tax by the application ofsection 2503(b) and section 2503(c) of the Internal Revenue Code, then thesecond trust shall provide that the beneficiary's remainder interest in thecontributions shall vest and become distributable no later than the date uponwhich the interest would have vested and become distributable under the termsof the original trust.

(6)        If any beneficiaryof the original trust has a power of withdrawal over trust property, theneither:

a.         The terms of thesecond trust must provide a power of withdrawal in the second trust identicalto the power of withdrawal in the original trust; or

b.         Sufficient trustproperty must remain in the original trust to satisfy the outstanding power ofwithdrawal.

(7)        If the power todistribute principal or income in the original trust is subject to anascertainable standard, then the power to distribute income or principal in thesecond trust must be subject to the same ascertainable standard as in theoriginal trust and must be exercisable in favor of the same currentbeneficiaries as in the original trust.

(8)        The second trust mayconfer a power of appointment upon a beneficiary of the original trust to whomor for the benefit of whom the trustee has the power to distribute principal orincome of the original trust. The permissible appointees of the power ofappointment conferred upon a beneficiary may include persons who are notbeneficiaries of the original or second trust. The power of appointmentconferred upon a beneficiary shall be subject to the provisions of G.S. 41‑23covering the time at which the permissible period of the rule againstperpetuities and suspension of power of alienation begins and the law thatdetermines the permissible period of the rule against perpetuities andsuspension of power of alienation of the original trust.

(d)        A trustee may notexercise the power to appoint principal or income under subsection (b) of thissection if the trustee is a beneficiary of the original trust, but theremaining cotrustee or a majority of the remaining cotrustees may act for thetrust. If all the trustees are beneficiaries of the original trust, then thecourt may appoint a special fiduciary with authority to exercise the power toappoint principal or income under subsection (b) of this section.

(e)        The exercise of thepower to appoint principal or income under subsection (b) of this section:

(1)        Shall be consideredthe exercise of a power of appointment, other than a power to appoint to thetrustee, the trustee's creditors, the trustee's estate, or the creditors of thetrustee's estate; and

(2)        Shall be subject tothe provisions of G.S. 41‑23 covering the time at which the permissibleperiod of the rule against perpetuities and suspension of power of alienationbegins and the law that determines the permissible period of the rule againstperpetuities and suspension of power of alienation of the original trust; and

(3)        Is not prohibited bya spendthrift provision or by a provision in the original trust instrument thatprohibits amendment or revocation of the trust.

(f)         To effect theexercise of the power to appoint principal or income under subsection (b) ofthis section, all of the following shall apply:

(1)        The exercise of thepower to appoint shall be made by an instrument in writing, signed andacknowledged by the trustee, setting forth the manner of the exercise of thepower, including the terms of the second trust, and the effective date of theexercise of the power. The instrument shall be filed with the records of theoriginal trust.

(2)        The trustee shallgive written notice to all qualified beneficiaries of the original trust, atleast 60 days prior to the effective date of the exercise of the power toappoint, of the trustee's intention to exercise the power. The notice shallinclude a copy of the instrument described in subdivision (1) of thissubsection.

(3)        If all qualifiedbeneficiaries waive the notice period by a signed written instrument deliveredto the trustee, the trustee's power to appoint principal or income shall beexercisable after notice is waived by all qualified beneficiaries,notwithstanding the effective date of the exercise of the power.

(4)        The trustee's noticeunder this subsection shall not limit the right of any beneficiary to object tothe exercise of the trustee's power to appoint and bring an action for breachof trust seeking appropriate relief as provided by G.S. 36C‑10‑1001.

(g)        Nothing in thissection shall be construed to create or imply a duty of the trustee to exercisethe power to distribute principal or income, and no inference of improprietyshall be made as a result of a trustee not exercising the power to appointprincipal or income conferred under subsection (b) of this section. Nothing inthis section shall be construed to abridge the right of any trustee who has apower to appoint property in further trust that arises under the terms of theoriginal trust or under any other section of this Chapter or under anotherprovision of law or under common law.

(h)        A trustee orbeneficiary may commence a proceeding to approve or disapprove a proposed exerciseof the trustee's special power to appoint to a second trust pursuant tosubsection (b) of this section.  (2009‑318, s. 1.)

State Codes and Statutes

Statutes > North-carolina > Chapter_36C > GS_36C-8-816_1

§ 36C‑8‑816.1. Trustee's special power to appoint to a second trust.

(a)        For purposes ofthis section, the following definitions apply:

(1)        Current beneficiary.– A person who is a permissible distributee of trust income or principal.

(2)        Original trust. – Atrust established under an irrevocable trust instrument pursuant to the termsof which a trustee has a discretionary power to distribute principal or incomeof the trust to or for the benefit of one or more current beneficiaries of thetrust.

(3)        Second trust. – Atrust established under an irrevocable trust instrument, the currentbeneficiaries of which are one or more of the current beneficiaries of theoriginal trust. The second trust may be a trust created under the same trustinstrument as the original trust or under a different trust instrument.

(b)        A trustee of anoriginal trust may, without authorization by the court, exercise thediscretionary power to distribute principal or income to or for the benefit ofone or more current beneficiaries of the original trust by appointing all orpart of the principal or income of the original trust subject to the power infavor of a trustee of a second trust. The trustee of the original trust mayexercise this power whether or not there is a current need to distributeprincipal or income under any standard provided in the terms of the originaltrust. The trustee's special power to appoint trust principal or income infurther trust under this section includes the power to create the second trust.

(c)        The terms of thesecond trust shall be subject to all of the following:

(1)        The beneficiaries ofthe second trust may include only beneficiaries of the original trust.

(2)        A beneficiary whohas only a future beneficial interest, vested or contingent, in the originaltrust cannot have the future beneficial interest accelerated to a presentinterest in the second trust.

(3)        The terms of thesecond trust may not reduce any fixed income, annuity, or unitrust interest ofa beneficiary in the assets of the original trust.

(4)        If any contributionto the original trust qualified for a marital or charitable deduction forfederal income, gift, or estate tax purposes under the Internal Revenue Code,then the second trust shall not contain any provision that, if included in theoriginal trust, would have prevented the original trust from qualifying for thededuction or that would have reduced the amount of the deduction.

(5)        If contributions tothe original trust have been excluded from the gift tax by the application ofsection 2503(b) and section 2503(c) of the Internal Revenue Code, then thesecond trust shall provide that the beneficiary's remainder interest in thecontributions shall vest and become distributable no later than the date uponwhich the interest would have vested and become distributable under the termsof the original trust.

(6)        If any beneficiaryof the original trust has a power of withdrawal over trust property, theneither:

a.         The terms of thesecond trust must provide a power of withdrawal in the second trust identicalto the power of withdrawal in the original trust; or

b.         Sufficient trustproperty must remain in the original trust to satisfy the outstanding power ofwithdrawal.

(7)        If the power todistribute principal or income in the original trust is subject to anascertainable standard, then the power to distribute income or principal in thesecond trust must be subject to the same ascertainable standard as in theoriginal trust and must be exercisable in favor of the same currentbeneficiaries as in the original trust.

(8)        The second trust mayconfer a power of appointment upon a beneficiary of the original trust to whomor for the benefit of whom the trustee has the power to distribute principal orincome of the original trust. The permissible appointees of the power ofappointment conferred upon a beneficiary may include persons who are notbeneficiaries of the original or second trust. The power of appointmentconferred upon a beneficiary shall be subject to the provisions of G.S. 41‑23covering the time at which the permissible period of the rule againstperpetuities and suspension of power of alienation begins and the law thatdetermines the permissible period of the rule against perpetuities andsuspension of power of alienation of the original trust.

(d)        A trustee may notexercise the power to appoint principal or income under subsection (b) of thissection if the trustee is a beneficiary of the original trust, but theremaining cotrustee or a majority of the remaining cotrustees may act for thetrust. If all the trustees are beneficiaries of the original trust, then thecourt may appoint a special fiduciary with authority to exercise the power toappoint principal or income under subsection (b) of this section.

(e)        The exercise of thepower to appoint principal or income under subsection (b) of this section:

(1)        Shall be consideredthe exercise of a power of appointment, other than a power to appoint to thetrustee, the trustee's creditors, the trustee's estate, or the creditors of thetrustee's estate; and

(2)        Shall be subject tothe provisions of G.S. 41‑23 covering the time at which the permissibleperiod of the rule against perpetuities and suspension of power of alienationbegins and the law that determines the permissible period of the rule againstperpetuities and suspension of power of alienation of the original trust; and

(3)        Is not prohibited bya spendthrift provision or by a provision in the original trust instrument thatprohibits amendment or revocation of the trust.

(f)         To effect theexercise of the power to appoint principal or income under subsection (b) ofthis section, all of the following shall apply:

(1)        The exercise of thepower to appoint shall be made by an instrument in writing, signed andacknowledged by the trustee, setting forth the manner of the exercise of thepower, including the terms of the second trust, and the effective date of theexercise of the power. The instrument shall be filed with the records of theoriginal trust.

(2)        The trustee shallgive written notice to all qualified beneficiaries of the original trust, atleast 60 days prior to the effective date of the exercise of the power toappoint, of the trustee's intention to exercise the power. The notice shallinclude a copy of the instrument described in subdivision (1) of thissubsection.

(3)        If all qualifiedbeneficiaries waive the notice period by a signed written instrument deliveredto the trustee, the trustee's power to appoint principal or income shall beexercisable after notice is waived by all qualified beneficiaries,notwithstanding the effective date of the exercise of the power.

(4)        The trustee's noticeunder this subsection shall not limit the right of any beneficiary to object tothe exercise of the trustee's power to appoint and bring an action for breachof trust seeking appropriate relief as provided by G.S. 36C‑10‑1001.

(g)        Nothing in thissection shall be construed to create or imply a duty of the trustee to exercisethe power to distribute principal or income, and no inference of improprietyshall be made as a result of a trustee not exercising the power to appointprincipal or income conferred under subsection (b) of this section. Nothing inthis section shall be construed to abridge the right of any trustee who has apower to appoint property in further trust that arises under the terms of theoriginal trust or under any other section of this Chapter or under anotherprovision of law or under common law.

(h)        A trustee orbeneficiary may commence a proceeding to approve or disapprove a proposed exerciseof the trustee's special power to appoint to a second trust pursuant tosubsection (b) of this section.  (2009‑318, s. 1.)


State Codes and Statutes

State Codes and Statutes

Statutes > North-carolina > Chapter_36C > GS_36C-8-816_1

§ 36C‑8‑816.1. Trustee's special power to appoint to a second trust.

(a)        For purposes ofthis section, the following definitions apply:

(1)        Current beneficiary.– A person who is a permissible distributee of trust income or principal.

(2)        Original trust. – Atrust established under an irrevocable trust instrument pursuant to the termsof which a trustee has a discretionary power to distribute principal or incomeof the trust to or for the benefit of one or more current beneficiaries of thetrust.

(3)        Second trust. – Atrust established under an irrevocable trust instrument, the currentbeneficiaries of which are one or more of the current beneficiaries of theoriginal trust. The second trust may be a trust created under the same trustinstrument as the original trust or under a different trust instrument.

(b)        A trustee of anoriginal trust may, without authorization by the court, exercise thediscretionary power to distribute principal or income to or for the benefit ofone or more current beneficiaries of the original trust by appointing all orpart of the principal or income of the original trust subject to the power infavor of a trustee of a second trust. The trustee of the original trust mayexercise this power whether or not there is a current need to distributeprincipal or income under any standard provided in the terms of the originaltrust. The trustee's special power to appoint trust principal or income infurther trust under this section includes the power to create the second trust.

(c)        The terms of thesecond trust shall be subject to all of the following:

(1)        The beneficiaries ofthe second trust may include only beneficiaries of the original trust.

(2)        A beneficiary whohas only a future beneficial interest, vested or contingent, in the originaltrust cannot have the future beneficial interest accelerated to a presentinterest in the second trust.

(3)        The terms of thesecond trust may not reduce any fixed income, annuity, or unitrust interest ofa beneficiary in the assets of the original trust.

(4)        If any contributionto the original trust qualified for a marital or charitable deduction forfederal income, gift, or estate tax purposes under the Internal Revenue Code,then the second trust shall not contain any provision that, if included in theoriginal trust, would have prevented the original trust from qualifying for thededuction or that would have reduced the amount of the deduction.

(5)        If contributions tothe original trust have been excluded from the gift tax by the application ofsection 2503(b) and section 2503(c) of the Internal Revenue Code, then thesecond trust shall provide that the beneficiary's remainder interest in thecontributions shall vest and become distributable no later than the date uponwhich the interest would have vested and become distributable under the termsof the original trust.

(6)        If any beneficiaryof the original trust has a power of withdrawal over trust property, theneither:

a.         The terms of thesecond trust must provide a power of withdrawal in the second trust identicalto the power of withdrawal in the original trust; or

b.         Sufficient trustproperty must remain in the original trust to satisfy the outstanding power ofwithdrawal.

(7)        If the power todistribute principal or income in the original trust is subject to anascertainable standard, then the power to distribute income or principal in thesecond trust must be subject to the same ascertainable standard as in theoriginal trust and must be exercisable in favor of the same currentbeneficiaries as in the original trust.

(8)        The second trust mayconfer a power of appointment upon a beneficiary of the original trust to whomor for the benefit of whom the trustee has the power to distribute principal orincome of the original trust. The permissible appointees of the power ofappointment conferred upon a beneficiary may include persons who are notbeneficiaries of the original or second trust. The power of appointmentconferred upon a beneficiary shall be subject to the provisions of G.S. 41‑23covering the time at which the permissible period of the rule againstperpetuities and suspension of power of alienation begins and the law thatdetermines the permissible period of the rule against perpetuities andsuspension of power of alienation of the original trust.

(d)        A trustee may notexercise the power to appoint principal or income under subsection (b) of thissection if the trustee is a beneficiary of the original trust, but theremaining cotrustee or a majority of the remaining cotrustees may act for thetrust. If all the trustees are beneficiaries of the original trust, then thecourt may appoint a special fiduciary with authority to exercise the power toappoint principal or income under subsection (b) of this section.

(e)        The exercise of thepower to appoint principal or income under subsection (b) of this section:

(1)        Shall be consideredthe exercise of a power of appointment, other than a power to appoint to thetrustee, the trustee's creditors, the trustee's estate, or the creditors of thetrustee's estate; and

(2)        Shall be subject tothe provisions of G.S. 41‑23 covering the time at which the permissibleperiod of the rule against perpetuities and suspension of power of alienationbegins and the law that determines the permissible period of the rule againstperpetuities and suspension of power of alienation of the original trust; and

(3)        Is not prohibited bya spendthrift provision or by a provision in the original trust instrument thatprohibits amendment or revocation of the trust.

(f)         To effect theexercise of the power to appoint principal or income under subsection (b) ofthis section, all of the following shall apply:

(1)        The exercise of thepower to appoint shall be made by an instrument in writing, signed andacknowledged by the trustee, setting forth the manner of the exercise of thepower, including the terms of the second trust, and the effective date of theexercise of the power. The instrument shall be filed with the records of theoriginal trust.

(2)        The trustee shallgive written notice to all qualified beneficiaries of the original trust, atleast 60 days prior to the effective date of the exercise of the power toappoint, of the trustee's intention to exercise the power. The notice shallinclude a copy of the instrument described in subdivision (1) of thissubsection.

(3)        If all qualifiedbeneficiaries waive the notice period by a signed written instrument deliveredto the trustee, the trustee's power to appoint principal or income shall beexercisable after notice is waived by all qualified beneficiaries,notwithstanding the effective date of the exercise of the power.

(4)        The trustee's noticeunder this subsection shall not limit the right of any beneficiary to object tothe exercise of the trustee's power to appoint and bring an action for breachof trust seeking appropriate relief as provided by G.S. 36C‑10‑1001.

(g)        Nothing in thissection shall be construed to create or imply a duty of the trustee to exercisethe power to distribute principal or income, and no inference of improprietyshall be made as a result of a trustee not exercising the power to appointprincipal or income conferred under subsection (b) of this section. Nothing inthis section shall be construed to abridge the right of any trustee who has apower to appoint property in further trust that arises under the terms of theoriginal trust or under any other section of this Chapter or under anotherprovision of law or under common law.

(h)        A trustee orbeneficiary may commence a proceeding to approve or disapprove a proposed exerciseof the trustee's special power to appoint to a second trust pursuant tosubsection (b) of this section.  (2009‑318, s. 1.)