CHAPTER 2.1. RULES FOR INTERPRETATION OF TRUSTS
IC 30-4-2.1
Chapter 2.1. Rules for Interpretation of Trusts
IC 30-4-2.1-1
Construction
Sec. 1. In the absence of a contrary intent appearing in the trust,a trust shall be construed in accordance with the rules in this chapter.
As added by P.L.4-2003, SEC.7.
IC 30-4-2.1-2
Adopted children
Sec. 2. (a) Except as provided in subsection (b), in construing atrust naming as beneficiary a person described by relationship to thesettlor or to another, a person adopted before:
(1) the person is twenty-one (21) years of age; and
(2) the death of the settlor;
shall be considered the child of the adopting parent or parents andnot the child of the natural or previous adopting parents.
(b) If a natural parent or previous adopting parent marries theadopting parent before the settlor's death, the adopted person shallalso be considered the child of the natural or previous adoptingparent.
(c) A person adopted by the settlor after the person becomestwenty-one (21) years of age shall be considered the child of thesettlor. However, no other person is entitled to establish therelationship to the settlor through the child.
As added by P.L.4-2003, SEC.7.
IC 30-4-2.1-3
No contest provision void
Sec. 3. A provision in a trust that provides, or has the effect ofproviding, that a beneficiary forfeits a benefit from the trust if thebeneficiary contests the trust is void.
As added by P.L.4-2003, SEC.7.
IC 30-4-2.1-4
Children born after trust's creation
Sec. 4. (a) Except as provided in subsection (b) and section 5 ofthis chapter, when a settlor fails to provide in the settlor's trust for achild who is:
(1) born or adopted after the making of the settlor's trust; and
(2) born before or after the settlor's death;
the child is entitled to receive a share in the trust assets. The child'sshare of the trust assets shall be determined by ascertaining what thechild's intestate share would have been under IC 29-1-2-1 if thesettlor had died intestate. The child is entitled to receive a share ofthe trust assets equivalent in value to the intestacy share determinedunder IC 29-1-2-1.
(b) Subsection (a) does not apply to a child of the settlor if:
(1) it appears from the trust that the settlor intentionally failed
to provide in the settlor's trust for the child; or
(2) when the trust was executed:
(A) the settlor had at least one (1) child known to the settlorto be living; and
(B) the settlor devised substantially all of the settlor's estateto the settlor's surviving spouse.
As added by P.L.4-2003, SEC.7.
IC 30-4-2.1-5
Mistaken belief that settlor's child deceased
Sec. 5. (a) Except as provided in subsection (b), if, at the time ofthe making of the trust, the settlor:
(1) believes a child of the settlor to be dead; and
(2) fails to provide for the child in the settlor's trust;
the child is entitled to receive a share in the trust assets. The child'sshare of the trust assets shall be determined by ascertaining what thechild's intestate share would have been under IC 29-1-2-1 if thesettlor had died intestate. The child is entitled to receive a share ofthe trust assets equivalent in value to the intestacy share determinedunder IC 29-1-2-1.
(b) Subsection (a) does not apply to a child of the settlor if itappears from the trust or from other evidence that the settlor wouldnot have devised anything to the child had the settlor known that thechild was alive.
As added by P.L.4-2003, SEC.7.
IC 30-4-2.1-6
Void, revoked, or lapsed devise
Sec. 6. If a devise of real or personal property, not included in theresiduary clause of the trust:
(1) is void;
(2) is revoked; or
(3) lapses;
the devise becomes a part of the residue and passes to the residuarybeneficiary.
As added by P.L.4-2003, SEC.7.
IC 30-4-2.1-7
Beneficiary predeceases settlor
Sec. 7. (a) As used in this section, "descendant" includes thefollowing:
(1) A child adopted before the child is twenty-one (21) years ofage by:
(A) the settlor; or
(B) the settlor's descendants.
(2) A descendant of a child adopted as set forth in subdivision(1).
(3) A child who is born of the mother out of wedlock in eitherof the following circumstances:
(A) The mother is a descendant of the settlor. (B) The mother is the settlor.
(4) If the right of a child born out of wedlock to inherit from thefather is or has been established in the manner provided underIC 29-1-2-7, the child, in either of the following circumstances:
(A) The father is a descendant of the settlor.
(B) The father is the settlor.
(5) A descendant of a child born out of wedlock as set forth insubdivisions (3) and (4).
(b) If:
(1) an estate, real or personal, is devised to a descendant of thesettlor; and
(2) the beneficiary:
(A) dies during the lifetime of the settlor before or after theexecution of the trust; and
(B) leaves a descendant who survives the settlor;
the devise does not lapse, but the property devised vests in thesurviving descendant of the beneficiary as if the beneficiary hadsurvived the settlor and died intestate.
As added by P.L.4-2003, SEC.7.
IC 30-4-2.1-8
Kindred of the half blood
Sec. 8. Kindred of the half blood are entitled to receive the sametrust interest that they would have received if they had been of thewhole blood.
As added by P.L.4-2003, SEC.7.
IC 30-4-2.1-9
Applicability of adultery and abandonment forfeiture provisions
Sec. 9. A trust of a deceased spouse is subject to the following:
(1) IC 29-1-2-14.
(2) IC 29-1-2-15.
As added by P.L.238-2005, SEC.28.
IC 30-4-2.1-10
Reserved
IC 30-4-2.1-11
Written statement or list disposing of tangible personal property
Sec. 11. (a) A written statement or list that:
(1) complies with this section; and
(2) is referred to in a settlor's trust that was revocable during thesettlor's lifetime;
may be used to dispose of items of tangible personal property, otherthan property used in a trade or business, not otherwise specificallydisposed of by the trust.
(b) To be admissible under this section as evidence of theintended disposition, the writing must be signed by the settlor andmust describe the items and the beneficiaries with reasonablecertainty. The writing may be prepared before or after the execution
of the trust. The writing may be altered by the settlor after the writingis prepared. The writing may have no significance apart from thewriting's effect on the dispositions made by the trust.
(c) If more than one (1) otherwise effective writing exists, then,to the extent of a conflict among the writings, the provisions of themost recent writing revoke the inconsistent provisions of each earlierwriting.
As added by P.L.238-2005, SEC.29.
IC 30-4-2.1-12
Order of abatement; other rules governing abatement
Sec. 12. (a) If a trust is terminated or partially terminated and theavailable trust property is not sufficient to fully satisfy the interestsof all beneficiaries, the interests must be abated in the followingorder:
(1) The interests that would be characterized as residuarydevises if the trust were a will.
(2) The interests that would be characterized as general devisesif the trust were a will.
(3) The interests that would be characterized as specific devisesif the trust were a will.
The amount abated for each beneficiary within each classificationdescribed in subdivisions (1) through (3) must be proportional to theamount of property that each beneficiary would have received if fulldistribution of the trust property had been made in accordance withthe terms of the trust instrument.
(b) If:
(1) a trust instrument expresses an order of abatement thatdiffers from the order set forth in subsection (a); or
(2) the order of abatement stated in subsection (a) would impairan express or implied purpose of the trust;
the interests of the beneficiaries must be abated in the mannerdetermined appropriate to give effect to the settlor's intent.
(c) If, under the terms of a trust that was revocable at the time ofthe settlor's death, the subject of a preferred devise is sold or used topay debts, expenses, taxes, or other obligations incident to thesettlement of the settlor's affairs, abatement must be achieved byadjustment in, or contribution from, other interests in the remainingtrust property.
(d) Where applicable, the abatement of beneficiary interests in atrust is subject to IC 32-17-13-4.
As added by P.L.101-2008, SEC.8.
IC 30-4-2.1-13
Construction of trusts with respect to federal estate tax laws in2010
Sec. 13. (a) A trust of a decedent who dies after December 31,2009, and before January 1, 2011, that contains a formula referringto:
(1) the unified credit; (2) the estate tax exemption;
(3) the applicable credit amount;
(4) the applicable exclusion amount;
(5) the generation-skipping transfer tax exemption;
(6) the GST exemption;
(7) the marital deduction;
(8) the maximum marital deduction;
(9) the unlimited marital deduction;
(10) the inclusion ratio;
(11) the applicable fraction;
(12) any section of the Internal Revenue Code:
(A) relating to the:
(i) federal estate tax; or
(ii) generation-skipping transfer tax; and
(B) that measures a share of trust;
based on the amount that can pass free of federal estate taxesor the amount that can pass free of federalgeneration-skipping transfer tax law; or
(13) a provision of federal estate tax or generation-skippingtransfer tax law that is similar to subdivisions (1) through (12);
refers to the federal estate tax and generation-skipping transfer taxlaws as they applied with respect to estates of decedents onDecember 31, 2009.
(b) Subsection (a) does not apply to a trust:
(1) that is executed or amended after December 31, 2009; or
(2) that manifests an intent that a contrary rule apply if thedecedent dies on a date on which there is no then applicablefederal estate or generation-skipping transfer tax.
(c) If the federal estate or generation-skipping transfer taxbecomes effective before January 1, 2011, the reference to January1, 2011, in subsection (a) shall refer instead to the first date on whichthe tax becomes legally effective.
(d) Within three (3) months following the latest to occur of the:
(1) decedent's death;
(2) trustee's appointment; or
(3) enactment of this subsection;
the trustee of a trust to which subsection (a) applies shall give writtennotice regarding the beneficiary's right to commence a proceedingunder subsection (e) to any beneficiary having a right to trust incomeor principal under subsection (a), of the existence of this statute, andof the beneficiary's right to commence a proceeding under subsection(e).
(e) The trustee of any beneficiary under the trust having a presentright to income or principal of the trust may initiate a proceeding todetermine whether the decedent intended that a formula described insubsection (a) be construed with respect to the law as it existed afterDecember 31, 2009. A proceeding under this subsection must becommenced within nine (9) months after the death of the settlor.
As added by P.L.6-2010, SEC.13.
IC 30-4-2.1-14
Rules of interpretation concerning discretionary interests
Sec. 14. (a) The following rules apply only to discretionaryinterests:
(1) A discretionary interest is a mere expectancy that is neithera property interest nor an enforceable right.
(2) A creditor may not:
(A) require a trustee to exercise the trustee's discretion tomake a distribution; or
(B) cause a court to foreclose a discretionary interest.
(3) A court may review a trustee's distribution discretion onlyif the trustee acts dishonestly or with an improper motive.
(b) Words such as sole, absolute, uncontrolled, or unfettereddiscretion dispense with the trustee acting reasonably.
(c) Absent express language to the contrary, if the distributionlanguage in a discretionary interest permits unequal distributionsbetween beneficiaries or distributions to the exclusion of otherbeneficiaries, a trustee may, in the trustee's discretion, distribute allof the accumulated, accrued, or undistributed income and principalto one (1) beneficiary to the exclusion of the other beneficiaries.
(d) Regardless of whether a beneficiary has any outstandingcreditors, a trustee of a discretionary interest may directly pay anyexpense on behalf of the beneficiary and may exhaust the income andprincipal of the trust for the benefit of the beneficiary. A trustee isnot liable to a creditor for paying the expenses of a beneficiary whoholds a discretionary interest.
As added by P.L.6-2010, SEC.14.
IC 30-4-2.1-15
Rules of interpretation concerning a beneficiary's influence overa trust
Sec. 15. If a party challenges a settlor or a beneficiary's influenceover a trust, none of the following factors, alone or in combination,may be considered dominion and control over a trust:
(1) A beneficiary serving as a trustee or co-trustee.
(2) The settlor or beneficiary holds an unrestricted power toremove or replace a trustee.
(3) The settlor or a beneficiary:
(A) is a trust administrator, a general partner of apartnership, a manager of a limited liability company, or anofficer of a corporation; or
(B) has any other managerial function in any other entity;
that is owned in whole or in part by the trust.
(4) A person related by blood or adoption to a settlor orbeneficiary is appointed as trustee.
(5) An agent, accountant, attorney, financial adviser, or friendof the settlor or a beneficiary is appointed as trustee.
(6) A business associate of the settlor or a beneficiary isappointed as trustee.
(7) A beneficiary holds any power of appointment over part or
all of the trust property.
(8) The settlor holds a power to substitute property ofequivalent value.
(9) The trustee may loan trust property to the settlor for lessthan a full and adequate rate of interest or without adequatesecurity.
(10) The trust contains broad purposes or highly discretionarydistribution language.
(11) The trust has only one (1) beneficiary eligible for currentdistributions.
As added by P.L.6-2010, SEC.15.
IC 30-4-2.1-16
Rules of interpretation concerning a trustee's independence fromthe settlor
Sec. 16. Absent clear and convincing evidence otherwise, a settlorof an irrevocable trust may not be considered the alter ego of atrustee. The following factors, alone or in combination, are notsufficient evidence to conclude that the settlor controls a trustee oris the alter ego of the trustee:
(1) Any combination of the factors listed in section 15 of thischapter.
(2) Isolated occurrences of the settlor signing checks, makingdisbursements, or executing other documents related to the trustas a trustee when the settlor is, in fact, not a trustee.
(3) Requesting a trustee to make distributions on behalf of abeneficiary.
(4) Requesting a trustee to hold, purchase, or sell any trustproperty.
As added by P.L.6-2010, SEC.16.
IC 30-4-2.1-17
Limits on creditors of beneficiaries who may replace or remove atrustee or who are also trustees or co-trustees
Sec. 17. (a) A creditor may not reach, exercise, or otherwiseacquire an interest of a beneficiary or any other person who holds anunconditional or conditional removal or replacement power over atrustee. A power described in this subsection is personal to abeneficiary or other person and may not be exercised by the person'screditors. A court may not direct a person to exercise the power.
(b) A creditor may not:
(1) reach an interest of a beneficiary who is also a trustee orco-trustee; or
(2) otherwise compel a distribution to a beneficiary who is alsoa trustee or co-trustee.
(c) A court may not foreclose against an interest held by abeneficiary described in subsection (b).
As added by P.L.6-2010, SEC.17.