A07677 Summary:

BILL NOA07677
 
SAME ASNo Same As
 
SPONSORLavine
 
COSPNSR
 
MLTSPNSR
 
Rpld Art 7 Parts 1, 2, 3, 5 & 8, amd EPT L, generally; amd §100-a, Bank L; amd §5205, CPLR; amd §§706, 715, 806 & 1502, SCPA, amd §1317, N-PC L; amd §1406, Ab Prop L; amd §5-1514, Gen Ob L; amd §43.03, Ment Hyg L; amd §104, Soc Serv L
 
Establishes a new trust code.
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A07677 Actions:

BILL NOA07677
 
05/19/2021referred to judiciary
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A07677 Committee Votes:

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A07677 Floor Votes:

There are no votes for this bill in this legislative session.
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A07677 Memo:

NEW YORK STATE ASSEMBLY
MEMORANDUM IN SUPPORT OF LEGISLATION
submitted in accordance with Assembly Rule III, Sec 1(f)
 
BILL NUMBER: A7677
 
SPONSOR: Lavine
  TITLE OF BILL: An act to amend the estates, powers and trusts law, the surrogate's court procedure act, the banking law, the civil practice law and rules, the not-for-profit corporation law, the abandoned property law, the general obligations law, the mental hygiene law and the social services law, in relation to establishing a new trust code; and to repeal parts 1, 2, 3, 5 and 8 of article 7 of the estates, powers and trusts law, relating thereto This is one in a series of measures being introduced at the request of the Chief Administrative Judge upon the recommendation of his Surro- gate's Court Advisory Committee. 1. The New York Trust Code (EPTL 7-A) A. Introduction The New York Trust Code ("NYTC") is a modern trust code that is designed to replace the State's current outdated and inefficient trust laws, which have not been comprehensively reviewed and revised for over 50 years. The impetus for this change began with the 2012 recommendation by a legislative advisory committee to enact modern trust legislation for New York. Thereupon, the Trusts and Estates Law Section of the New York State Bar Association and two New York City Bar Committees formed the New York Uniform Trust Code Legislative Advisory Group ("NYUTC-LAG") to study the recommended legislation. After five years of comprehensive study, the NYUTC-LAG proposed enactment of a new New York Trust Code. B. Reasons to Enact a Modern Trust Code in New York Although trust practices have dramatically changed over the past 50+ years, New York has not comprehensively reviewed and revised its law of trusts since 1966 when the Estates, Powers and Trusts Law (` EPTL") was first enacted. As a result, New York trust law is seriously outdated, especially when compared with that of other states that have recently enacted modern trust legislation. These include 34 states that have enacted the Uniform Trust Code ("UTC"). Many of the more recent enact- ments have modified portions of the UTC, which has itself not been amended since 2005. Where the NYTC does include UTC provisions, those provisions have been thoroughly examined in the light of changes made by states enacting the UTC, as well as in light of existing New York law. By codifying almost all existing case law, the NYTC will effectively provide the almost-exclusive source for New York trust law, making it far simpler for lawyers to research and practice in this area. The codification of New York trust law will greatly benefit New Yorkers, whatever their level of wealth, as the present costs for trust prepara- tion and operation will be significantly reduced. Also, at a time when Surrogate's Courts are already overburdened, the need for court involve- ment will be reduced by the codification of New York trust law. Many of the provisions of the NYTC will make New York more competitive with other states, as the NYTC dramatically improves upon the UTC.1 The NYTC is the result of comprehensive study and review by several organizations in addition to the Trusts and Estates Law Section of the New York State Bar Association, and the Trusts and Estates and Surro- gate's Court Committee and the Estate and Gift Tax Committee of the City Bar Association. These organizations include the New York Bankers Asso- ciation, the Charities Bureau of the New York Attorney General's Office and OCA's Surrogate's Court Advisory Committee. The NYTC has been approved by the House of Delegates and the Executive Committee of the New York State Bar Association, the President of the City Bar Associ- ation and by OCA's Surrogate's Court Advisory Committee. Both the New York Bankers Association and the Attorney General's office also support the enactment of the NYTC. C. The New York Trust Code The NYTC, to take the form of a new EP IL Article 7-A will consist of: (1) new provisions (2) codification of existing law2 and (3) existing statutes, which are primarily transferred from EPTL Article 7.3 The NYTC will be enacted as new EPTL Article 7-A. To the extent practicable, Article 7-A will contain all of New York's substantive law of trusts for gratuitous trusts, including relevant provisions that are currently contained in EPTL Article 7. To that end, provisions in Article 7 that apply to trusts (other than those that specifically apply to non-gratui- tous trusts) are repealed and included as part of Article 7-A.4 In addi- tion, obsolete provisions in Article 7 are repealed. Where possible, provisions from Articles 10 and 11 are incorporated into Article 7-A. Article 8 (Charitable Trusts) provisions, however, are largely unchanged, with the exception of a few amendments to Section 8-1.1. Significantly, new Article 7-A codifies almost all current New York case law, including some modern modifications and improvements. This measure also contains some conforming amendments to other statutes, primarily those in the EPTL. The NYTC addresses gaps and outmoded provisions in current New York trust law. A prominent example is the inclusion of a New York Directed Trust Act as Part 9 of the new Article 7-A and of section 7-A-7.3-A which creates rules for creating excluded co-trustees. Both provisions modernize the law of trust administration and will make New York a more attractive jurisdiction in which to create trusts. Also salutary is the revision of provisions dealing with lifetime trusts. For example, Section 7-A-4.2-A(d) contains the rules provided in repealed 7-1.18 governing funding of lifetime trusts and additional ways to accomplish funding which are congruent with long-followed common practices. The increasing use of revocable trusts as substitutes for wills makes other changes even more important. As noted below at D.11, Section 7-A-6.1 codifies the standard of capacity necessary to create a revocable trust, a rule on which the courts have disagreed, and D.12 describes Section 7-A-6.4 which creates rules for litigating the validi- ty of a revocable trust after the death of the settlor. Section 7-A-10.13 (D.20, below) creates a trust certification procedure that will greatly simplify transactions dealing with all trusts and will be especially useful when funding a lifetime trust, including revocable trusts. All the content of the NYTC reflects the existence of New York's fully developed law of trusts. Many states adopting the UTC have next to no statutory or case law governing trusts, and their enactment of the uniform provisions involves writing on an almost blank slate. New York, on the other hand, has both statutory and case law addressing every aspect of trusts. Replacing these provisions, which have been applied by the courts for decades, with their UTC equivalents would be unwise. For example, Article 3 of the UTC deals with virtual representation of parties in various judicial and non-judicial proceedings involving trusts. New York has had statutory virtual representation for decades (SCPA 315, first enacted in 1967). We also have long had statutory provisions governing amendment of otherwise irrevocable trusts by consent of the creator and the beneficiaries (EPTL 7-1.9, enacted in 1966 based on earlier statutes), splitting of trusts (EPTL 7-1.13 first enacted in 1995), and the creation of new trusts by a trustee's exercise of the power to distribute trust property of an existing trust, collo- quially called "decanting" (EPTL 10-6.6(b) et seq. first enacted in 1992). All of these provisions are part of the NYTC. D. New and Significant Provisions in the New York Trust Code This Part sets out 20 new and important provisions in the NYTC. Many of these provisions correct serious gaps and flaws in current New York trust law. With these improvements meaningful public harm will thus be avoided. 1.Definitions Section 7-A-1.3 contains over 30 definitions, including definitions for beneficiary, express trusts, settlor, trust contributor and trust direc- tor. An important part of Article 7-A involves qualified beneficiaries who are defined as beneficiaries having important trust interests. In many instances, Article 7-A provisions only entitle qualified benefici- aries to receive notice or to act or both. 2.Default and Mandatory rules Section 7-A-1.5 is an extremely important provision of Article 7-A. It essentially treats most rules that are provided in Article 7-A as default rules. Paragraph (a) states a basic premise for the trust law rules under Article 7-A: they are merely default rules that can be changed by the settlor. Paragraph (b) is an equally important provision that, by contrast identifies almost 30 specific trust rules in Article 7-A that may not be changed by the settlor. In effect, these trust rules are mandatory. For example, the requirements for creating a trust cannot be altered by the settlor. 3.Application of New York Trust Code Section 7-A-11.6(a)(1) provides that the rules in Article 7-A apply not only to new trusts but to virtually all trusts created before the effec- tive date of enactment. Section 7-A-11-1.6(a)(4) is also important: "any rule of construction or presumption provided in this article applies to trust instruments executed before the effective date of the article unless there is a clear indication of a contrary intent in the terms of the trust." Retroactive application of Article 7-A is limited by para- graph (c) which makes clear that vested rights will not be adversely affected. See EPTL 1-1.5. For example, Section 7-A-5.2 provides that the principal interest in a trust is spendthrifted unless the terms of the trust provide otherwise but continues for existing trusts the current rule that the principal interest is not spendthrifted unless the temis of the trust expressly so provide. 4.Governing law Section 7-A-1.7 provides important rules allowing a settlor to determine which state law governs with respect to a particular issue. For exam- ple, a settlor could provide that the laws of a state other than New York govern trustee commissions while rules regarding the trustee's duty of loyalty are governed by the law of a different state. 5.Nonjudicial Settlement Agreements Section 7-A-1.11 is a new and highly significant provision. Except for SCPA 315(8) and 2210, which deal with nonjudicial settlements of accounts of fiduciaries, New York does not currently allow for other nonjudicial settlements. Section 7-A-1.11 allows for trustees and bene- ficiaries to agree to settle most issues without need for judicial intervention, thus reducing current court backlogs. For example, construction proceedings will no longer be necessary. At the same time, court involvement will remain in sensitive areas such as in trust termi- nation or modification. 6.Judicial modification of dispositive provisions Section 7-A-4.12(b) is new. It allows a court to modify dispositive trust provisions based on unanticipated circumstances. For example, if a trust will terminate when a child reaches age 30 but the child has alco- hol or drug issues, a court could delay termination. Under current law, a court can only permit invasion of trust principal for an income bene- ficiary where income is not sufficient to provide for the support or education of the income beneficiary. 7.Cy pres amendments Cy pres is an ancient doctrine allowing courts to modify charitable trusts when unanticipated problems arise. For example, if a charitable organization is a trust beneficiary but ceases to exist, a court by the exercise of its cy pres power can substitute another charitable organization as trust beneficiary. Taking into account the helpful input of the Charities Bureau of the New York Attorney General's office, various modernizing amendments are made to EPTL 8-1.1(c), which is New York's cy pres statute. 8.Reformation to correct mistakes Most significantly, Section 7-A-4.15 allows a court to reform a testamentary trust to correct a mistake which had generally not been allowed by New York courts. The section also codifies New York case law which allows a court to reform a lifetime trust for mistakes. A conforming change is also made. Part 3 of the EPTL is amended by EPTL 33.10 to allow reformation of wills not involv- ing testamentary trusts. It makes no sense for only testamentary trusts to be reformed based on a mistake. Wills generally should be subject to reformation based on a mistake. 9.Rules regarding transfer of principal interests in trust Section 7-A-5.2 changes the default rule governing alienability of interests in trust principal to be the same as that which governs income interests (EPTL 7-1.5, NYTC 7-A-5.1(a)): such interests are inalienable, and therefore protected from claims of creditors to the greatest extent possible, unless the terms of the trust grant a beneficiary the right to transfer the interest. While imposition of a restriction (usually referred to as a spendthrift provision) on a beneficiary's interest in trust principal in the trust terms is recognized under current law (Matter of Vaught, 25 N.Y.2d 163, 303 N.Y.S.2d 61, 250 N.E.2d 343 (1969), experience shows that such restrictions fulfill the aims of the great majority of settlors. Because application of the new rule to existing trusts would destroy existing rights to transfer interests in principal, this new rule is one of the few provisions of the NYTC that applies only to trusts created after the effective date of Article 7-A. 10.Creditor's claim against trust contributor to a revocable trust Section 7-A-5.5 provides new rules for creditors to reach property in a revocable trust during the lifetime and after the death of a trust contributor, As defined in Section 7-A-1.3(27), a trust contributor will include virtually all settlors but also those persons who contribute trust property once a trust has been created. For example, a creditor will be allowed to reach the property that a debtor has contributed to an existing trust. Section 7-A-5.5 departs from present New York law in EPTL 10-10.6 (which is based on the forerunner statute enacted in 1830) under which a crea- tor's creditors can only reach property if the creator had an "unquali- fied" power to revoke. A power to revoke with the consent of a trustee or another person not having a substantial adverse interest would seem to make the power qualified. Such easy avoidance of creditors' rights is inappropriate in modern times. Paragraph (b) effectively makes para- graph (a) prospective to avoid interference with any vested rights. For preexisting trusts, EPTL 10-6.6 will determine creditors' rights. 11.Capacity of trust contributor of revocable trust Section 7-A-6.1 provides that the wills capacity standard should be used to determine the validity of revocable trusts. (New York cases currently disagree on the capacity requirement.) With this change, revocable trusts can be more extensively utilized, with the salutary effect of eliminating the need to create testamentary trusts, which require exten- sive court involvement. 12.Contesting the validity of revocable trust Section 7-A-6.4 provides much needed guidance on procedural rights affecting the contest of revocable trusts. It is patterned on recommen- dations by the EPTLSCPA Legislative Advisory Committee in its 4th Report. 13.Application to excluded co-trustee Section 7-A-7.3-A is a new and extremely important provision which will improve the administration of trusts and redound to the benefit of trust beneficiaries. The section deals with the bifurcation of responsibil- ities between co-trustees. Paragraph (a)(1) deals with the directed trustee situation. If one trustee is given the authority to direct the actions of the so-called excluded trustee, the excluded trustee must follow the directions from the directing trustee and absent extraor- dinary circumstances--willful misconduct as defined in Section 7A-1.3(31)--the excluded (directed) trustee will not be liable for any losses as a result of following those directions. Paragraph (a)(2) deals with conferring exclusive authority to exercise a power on one of two or more trustees. The provision exempts the excluded trustee or trustees from any liability for any losses resulting from exercise of the power. In both situations, Section 7.3-A(a)(3) provides that the excluded trustee has no duty to monitor the conduct of the authorized co-trustee; nor does the excluded trustee have any duty to advise or consult with the authorized co-trustee. Pursuant to Section 7-A-7.3-A(b) ultimate liability to the beneficiaries under Section 7-A-7.3-A lies w ith the authorized trustee. 14. Resignation by testamentary trustee without court approval Section 7-A-7.5 deals with the resignation of a trustee. A significant new feature is that a testamentary trustee can now resign without first obtaining court permission. Until now, SCPA 715 has provided that a testamentary trustee who wished to resign needed to petition the court for permission to do so and the court was then required to analyze such petition, even if all interested parties consented to the resignation. Such court proceedings were often time consuming and expensive, espe- cially where the "virtual representation" provisions of SCPA 315 did not dispense with service on all parties under a disability so that the appointment and compensation of a guardian ad litem was required. The burden of this expense fell upon the beneficiaries of the trust - the very parties who are ostensibly being protected by this requirement - whether they wanted such protection or not. As a mandatory rule, the resignation by a testamentary trustee is not "effective until the trus- tee provides written notice of such resignation to the court that has taken jurisdiction over the trust." Concerns that allowing testamentary trustees to resign without court approval could be detrimental to the interests of the beneficiaries of the trust should be a llayed because the process would not impair an interested party from requiring the resigning trustee to account or from objecting to any such accounting. 15.Powers and duties regarding delegation by trustee another trustee Section 7-A-8.7(e) is a new and very important default power which greatly expands the limited ability of trustees to delegate duties and powers to co-trustees. 16.Duty to inform and report Section 7-A-8.13 strengthens the law found in SCPA sections 2102, 2309, and 2312 regarding a trustee's duty to inform and report to trust bene- ficiaries The section requires a trustee to respond to a beneficiary's request for both information related to the administration of the trust and for a copy of the trust instrument. It also provides time limits within which a trustee must provide qualified beneficiaries with certain information about the trust. Pursuant to Section 7-A-1.5(b)(20), the duty to furnish requested infoiniation is mandatory except with regard to lifetime trusts during the lifetimes of the settlor and the settlor's spouse (and if the settlor was not an individual for a maximum of 21 years from creation of the trust). Pursuant to Section 7-A-1.5(b)(21), the duty to fulfill certain notification duties are "mandatory provisions" with respect to qualified beneficiaries who have attained 25 years of age except with regard to lifetime trusts during the lifetimes of the settlor and the settlor's spouse (and if the settlor was not an individual for a maximum of 21 years). Section 7-A-8.13 also mandates that a trustee furnish annual reports to most beneficiaries and to other beneficiaries who request one. Beneficiaries can waive their rights to be informed and to receive reports. 17.General powers of trustee Section 7-A-8.15 provides a new and significant default rule that allows a trustee, without authorization and involvement by the court, to gener- ally exercise all powers over trust property that an individual would have over individually owned property, any other powers appropriate to achieve proper investment, management, and distributions, and any other powers conferred by Article 7-A. As an important safeguard a trustee must exercise its powers consistent with its trust duties, including the duty to act prudently. As a conforming amendment, reference to trustees in EPTL 11-1.1(a) is repealed, including the more limited default rules for trustees under EPTL 11-1.1(b). 18. New York Uniform Directed Trust Act Part 9 adapts the Uniform Directed Trust Act ("UDTA") to New York law. This is similar to New York's enactment of Article 13-A which adapted the Revised Uniform Fiduciary Access to Digital Assets Act. Part 9 authorizes a popular approach to bifurcating trustee responsibilities: the use of the directed trust. A common example would involve the use of an individual trustee who is unsophisticated in making investments. Under a directed trust scenario, the settlor could give a sophisticated investment advisor the power to direct the individual trustee with respect to investments. Under New York's UDTA, the advisor, referred to in the statutes as the trust director, would have the authority to direct the trustee, referred to as the directed trustee. This power is referred to as the power of direction. Absent willful misconduct on the part of the directed trustee, which will almost be impossible to show, the trust director would have the sole responsibility and liability for investment decisions. A significant limitation on the use of directed trusts involves distrib- ution decisions. For example, if a corporate trustee is given the discretion to distribute trust property but the settlor gives a family member the right to decide how distributions should be made by the trus- tee, the New York Uniform Directed Trust Act will not apply unless the settlor imposes fiduciary duties on the family member. Absent the impo- sition of fiduciary duties, the family member would be deemed to have a power of appointment. Section 7-A-9.4(b)(1) specifically excludes powers of appointment from the reach of the UDTA. Part 9 provides comprehensive rules for trust directors and directed trustees. 19.Actions against trustee Section 7-A-10.5 provides that the statute of limitations will be two years from receipt by a beneficiary of proper notice from the trustee. Two years, rather than the Uniform Trust Code's one-year period, was selected to provide more protection for trust beneficiaries. The two- year statute will not apply to the Attorney General. 20.Certification of trust Section 7-A-10.13 is a new and highly useful statute. It provides that a trustee may furnish a certification of trust instead of a copy of the trust to a non-beneficiary and such certification need only provide the information requested, as outlined within the section. As a result, disclosure of sensitive information in trust instruments may be protected. The section provides a highly useful tool to facilitate tran- sactions by a trustee, especially in light of the increasing use of revocable lifetime trusts, funding of which requires changing recorded title to property to reflect title in the trustee and which in turn requires the owner of the property to deal with third parties such as brokerage firms. A TIN would not be a required item; banks and other entities needing the TIN will be able to obtain it by request but others will not need and should not have the TIN. This measure would take effect immediately, with selected provisions to take effect 180 days thereafter.   2019-20 LEGISLATIVE HISTORY: OCA 2020-93 1 The proposed NYTC will use the structure of the UTC so that lawyers throughout the country will be able to compare New York's trust provisions with those in the UTC. 2 Many statutes that codify New York common law also improve on the common law. As examples, Section 7-A-8.2 codifies the trustee's duty of loyalty but adds several refmements and Section 7-A-10.2 codifies the rules for damages when a trustee commits a breach of trust but also clarifies certain areas. 3 For example, EPTL 7-1.2 (Supplemental Needs Trusts) is repealed but included verbatim in Section 7-A-4.4-A. In other situations, an existing statute is included in NYTC with improvements. Section 7-A-4.9, where repealed EPTL 7-8.1 (pet trusts) has been transferred, allows a court to appoint a trust enforcer. 4 A drastically-reduced EPTL Article 7 will continue provisions for non-gratuitous trusts.
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A07677 Text:



 
                STATE OF NEW YORK
        ________________________________________________________________________
 
                                          7677
 
                               2021-2022 Regular Sessions
 
                   IN ASSEMBLY
 
                                      May 19, 2021
                                       ___________
 
        Introduced  by  M.  of  A.  LAVINE -- (at request of the Office of Court
          Administration) -- read once and referred to the Committee on  Judici-
          ary
 
        AN  ACT  to  amend  the  estates, powers and trusts law, the surrogate's
          court procedure act, the banking  law,  the  civil  practice  law  and
          rules, the not-for-profit corporation law, the abandoned property law,
          the  general  obligations  law,  the mental hygiene law and the social
          services law, in relation to establishing a new  trust  code;  and  to
          repeal  parts 1, 2, 3, 5 and 8 of article 7 of the estates, powers and
          trusts law, relating thereto
 
          The People of the State of New York, represented in Senate and  Assem-
        bly, do enact as follows:
 
     1    Section  1.  The estates, powers and trusts law is amended by adding a
     2  new article 7-A to read as follows:
     3                                 ARTICLE 7-A
     4                             NEW YORK TRUST CODE
 
     5                             PART 1. IN GENERAL
     6  Section 7-A-1.1  Short title.
     7          7-A-1.2  Scope.
     8          7-A-1.3  Purchase-money resulting trust abolished.
     9          7-A-1.4  Definitions.
    10          7-A-1.5  Knowledge.
    11          7-A-1.6  Default and mandatory rules.
    12          7-A-1.7  Common law and principles of equity.
    13          7-A-1.8  Governing law.
    14          7-A-1.9  Principal place of administration.
    15          7-A-1.10 Methods and waiver of notice.
    16          7-A-1.11 Others treated as qualified beneficiaries.
    17          7-A-1.12 Nonjudicial settlement agreements.
 
         EXPLANATION--Matter in italics (underscored) is new; matter in brackets
                              [ ] is old law to be omitted.
                                                                   LBD08437-01-1

        A. 7677                             2
 
     1                        PART 2. JUDICIAL PROCEEDINGS
     2  Section 7-A-2.1 Role of court in administration of trust.
     3          7-A-2.2 Jurisdiction over trustee and beneficiary.
 
     4           PART 3. CREATION, VALIDITY, AMENDMENT, MODIFICATION AND
     5                            TERMINATION OF TRUST
     6  Section 7-A-3.1  Methods of creating trust.
     7          7-A-3.2  General requirements for trust creation.
     8          7-A-3.3  Specific rules for creation of lifetime trusts.
     9          7-A-3.4  Trustee of passive trust not to take.
    10          7-A-3.5  When trust interests not to merge.
    11          7-A-3.6  Trusts created in jurisdictions outside of New York.
    12          7-A-3.7  Trust purposes.
    13          7-A-3.8  Supplemental  needs trusts established for persons with
    14                     severe and chronic or persistent disabilities.
    15          7-A-3.9  Charitable purposes; enforcement.
    16          7-A-3.10 Creation of trust induced by fraud,  duress,  or  undue
    17                     influence or the result of mistake.
    18          7-A-3.11 Oral trusts not recognized.
    19          7-A-3.12 Trusts for pets.
    20          7-A-3.13 Noncharitable trust without ascertainable beneficiary.
    21          7-A-3.14 Amendment  of  trust other than by trust contributor to
    22                     revocable trust.
    23          7-A-3.15 Modification, termination,  or  reformation  of  trust;
    24                     proceedings for approval or disapproval.
    25          7-A-3.16 Revocation  or  amendment of irrevocable lifetime trust
    26                     initiated by consent.
    27          7-A-3.17 Modification or termination  because  of  unanticipated
    28                     circumstances or inability to administer trust effec-
    29                     tively.
    30          7-A-3.18 Cy pres.
    31          7-A-3.19 Modification or termination of uneconomical trust.
    32          7-A-3.20 Reformation to correct mistakes.
    33          7-A-3.21 Modification  to  achieve settlor's tax or supplemental
    34                     needs trust objectives.
    35          7-A-3.22 Combination and division of trusts.
 
    36                     PART 4. BANK ACCOUNTS IN TRUST FORM
    37  Section 7-A-4.1 Definitions.
    38          7-A-4.2 Terms of a trust account.
    39          7-A-4.3 Payment to beneficiary.
    40          7-A-4.4 Effect of payment.
    41          7-A-4.5 Joint depositors.
    42          7-A-4.6 Multiple beneficiaries.
    43          7-A-4.7 Application.
    44          7-A-4.8 Rights not affected.
 
    45       PART 5. RIGHTS OF BENEFICIARIES AND CREDITORS; SPENDTHRIFT AND
    46                            DISCRETIONARY TRUSTS
    47  Section 7-A-5.1 Rules regarding transfer of income  interest  in  trust;
    48                    rights of creditors.
    49          7-A-5.2 Rules regarding transfer of principal interest in trust;
    50                    rights of creditors.
    51          7-A-5.3 When proceeds of life insurance policy inalienable.
    52          7-A-5.4 Special creditor exceptions to restraints on involuntary
    53                    alienation.

        A. 7677                             3
 
     1          7-A-5.5 Discretionary trusts.
     2          7-A-5.6 Creditor's  claim against trust contributor to a revoca-
     3                    ble trust.
     4          7-A-5.7 Creditor claims to property contributed to a trust by  a
     5                    trust beneficiary.
     6          7-A-5.8 Overdue distribution.
     7          7-A-5.9 Personal obligations of trustee.
 
     8                          PART 6. REVOCABLE TRUSTS
     9  Section 7-A-6.1 Capacity of trust contributor of revocable trust.
    10          7-A-6.2 Revocation or amendment of revocable trust.
    11          7-A-6.3 Rights duties in revocable trusts; powers of withdrawal.
    12          7-A-6.4 Limitation  on  action  contesting validity of revocable
    13                    trust; distribution of trust property.
 
    14                          PART 7. OFFICE OF TRUSTEE
    15  Section 7-A-7.1  Accepting or declining trusteeship of a lifetime trust.
    16          7-A-7.2  Trustee's bond.
    17          7-A-7.3  Co-trustees.
    18          7-A-7.4  Application to excluded co-trustee.
    19          7-A-7.5  Vacancy in trusteeship; appointment of successor.
    20          7-A-7.6  Suspension of powers of trustee in war service.
    21          7-A-7.7  Resignation of trustee.
    22          7-A-7.8  Removal of trustee.
    23          7-A-7.9  Delivery of property by former trustee.
    24          7-A-7.10 Compensation of trustee.
    25          7-A-7.11 Reimbursement of expenses.
    26          7-A-7.12 Accounting by trustee in supreme court.
 
    27                    PART 8. DUTIES AND POWERS OF TRUSTEE
    28  Section 7-A-8.1  Duty to administer trust.
    29          7-A-8.2  Duty of loyalty.
    30          7-A-8.3  Duty of impartiality.
    31          7-A-8.4  Duty of prudent administration.
    32          7-A-8.5  Duty regarding costs of administration.
    33          7-A-8.6  Duty to exercise trustee's special  skills  and  exper-
    34                     tise.
    35          7-A-8.7  Powers  and  duties  regarding delegation by trustee to
    36                     agent or another trustee.
    37          7-A-8.8  Duty to control and protect trust property.
    38          7-A-8.9  Duty  regarding  recordkeeping  and  identification  of
    39                     trust property.
    40          7-A-8.10 Duty to enforce and defend claims.
    41          7-A-8.11 Duty to collect trust property.
    42          7-A-8.12 Duty to inform and report.
    43          7-A-8.13 Duty regarding discretionary powers.
    44          7-A-8.14 General powers of trustee.
    45          7-A-8.15 Specific powers of trustee.
    46          7-A-8.16 Duties  and  powers  regarding distribution upon termi-
    47                     nation.
    48          7-A-8.17 Power of trustee to pay income or  principal  to  trust
    49                     contributor as reimbursement for income taxes.
    50          7-A-8.18 Powers and duties regarding decanting.
    51          7-A-8.19 Duty when resulting trust arises.
 
    52                 PART 9. NEW YORK UNIFORM DIRECTED TRUST ACT

        A. 7677                             4
 
     1  Section 7-A-9.1  Short title.
     2          7-A-9.2  Definitions.
     3          7-A-9.3  Application; principal place of administration.
     4          7-A-9.4  Exclusions.
     5          7-A-9.5  Powers of trust director.
     6          7-A-9.6  Limitations on powers of trust director.
     7          7-A-9.7  Duties and liabilities of trust director.
     8          7-A-9.8  Duties and liabilities of directed trustee.
     9          7-A-9.9  Duty  to provide information to trust director or trus-
    10                     tee.
    11          7-A-9.10 No duty to monitor, inform, or advise.
    12          7-A-9.11 Limitation of action against trust director.
    13          7-A-9.12 Defenses in action against trust director.
    14          7-A-9.13 Jurisdiction over trust director.
    15          7-A-9.14 Accepting or declining the position of trust director.
    16          7-A-9.15 Compensation of trust directors and directed trustees.
    17          7-A-9.16 Trust director's bond.
    18          7-A-9.17 Vacancy in the position of trust director;  appointment
    19                     of successor.
    20          7-A-9.18 Resignation of trust director.
    21          7-A-9.19 Removal of trust director.
    22          7-A-9.20 Uniformity of application and construction.
    23          7-A-9.21 Severability clause.
    24          7-A-9.22 Application of part.
 
    25      PART 10. LIABILITY OF TRUSTEES AND RIGHTS OF PERSONS DEALING WITH
    26                                  TRUSTEES
    27  Section 7-A-10.1  Remedies for breach of trust.
    28          7-A-10.2  Liability for breach of trust.
    29          7-A-10.3  Damages in absence of breach.
    30          7-A-10.4  Compensation of attorneys' costs and allowances.
    31          7-A-10.5  Limitation of action against trustee.
    32          7-A-10.6  Reliance on trust instrument.
    33          7-A-10.7  Event affecting administration or distribution.
    34          7-A-10.8  Exculpation of trustee and trust director.
    35          7-A-10.9  Beneficiary's consent, release, or ratification.
    36          7-A-10.10 Limitation on personal liability of trustee.
    37          7-A-10.11 Interest as general partner.
    38          7-A-10.12 Protection of person dealing with trustee.
    39          7-A-10.13 Certification of trust.
 
    40                      PART 11. MISCELLANEOUS PROVISIONS
    41  Section 7-A-11.1 Relation   to   Electronic  Signatures  in  Global  and
    42                     National Commerce Act.
    43          7-A-11.2 Severability clause.
    44          7-A-11.3 Application to existing relationships.
    45                             PART 1. IN GENERAL
    46  § 7-A-1.1 Short title
    47    This article shall be known and may be cited as the  "New  York  Trust
    48  Code".
    49  § 7-A-1.2 Scope
    50    (a)  This article shall apply to: (1) express trusts, defined pursuant
    51  to paragraph (h) of section 7-A-1.4 of this part, (2) resulting  trusts,
    52  and (3) where expressly made applicable, bank accounts in trust form.
    53    (b) This article shall not apply to constructive trusts.

        A. 7677                             5
 
     1    (c)  Cross-reference:  For provisions regarding charitable trusts, see
     2  article eight of this chapter.
     3  § 7-A-1.3 Purchase-money resulting trust abolished
     4    A  disposition  of property to one person for a valuable consideration
     5  paid, in whole or in part, by another is presumed fraudulent as  against
     6  the  creditors  of the payor at the time of such disposition and, unless
     7  the presumption is rebutted, a trust results in favor of such  creditors
     8  to  the extent necessary to satisfy their claims; but title to the prop-
     9  erty vests in the transferee and no trust results to  the  payor  unless
    10  the transferee either:
    11    (a) Takes such property, in his or her own name, as an absolute trans-
    12  fer without the consent or knowledge of the payor; or
    13    (b)  In violation of some trust, purchases the property so transferred
    14  with money or property belonging to another.
    15  § 7-A-1.4 Definitions
    16    For the purposes of this article, the following terms shall  have  the
    17  following meanings:
    18    (a) "Action" shall include a failure to act, with respect to an act of
    19  a trustee.
    20    (b)  "Ascertainable standard" means a standard relating to an individ-
    21  ual's health, education, support, or maintenance within the  meaning  of
    22  section 2041(b)(1)(A) or 2514(c)(1) of the Internal Revenue Code.
    23    (c) "Beneficiary" means a person that:
    24    (1)  has a present or future beneficial interest in a trust, vested or
    25  contingent, including a person who would be entitled to  trust  property
    26  if a resulting trust arose, or
    27    (2)  holds  a  power  of appointment over trust property in a capacity
    28  other than that of trustee.
    29    (d) "Breach of trust" means a violation by a trustee or trust director
    30  of a duty imposed on such trustee or trust director by the terms of  the
    31  trust,  the  provisions  of  this article, or other provisions of law of
    32  this state.
    33    (e) "Charitable trust" means a trust, or portion of a  trust,  created
    34  for a charitable purpose, pursuant to section 8-1.1 of this chapter.
    35    (f) "Creator" means a person defined pursuant to section 1-2.2 of this
    36  chapter.
    37    (g)  "Environmental  law"  means a federal, state, or local law, rule,
    38  regulation, or ordinance relating to protection of the environment.
    39    (h) "Express trust" is defined as follows:
    40    (1) Except as provided in  subparagraph  two  of  this  paragraph,  an
    41  express  trust  means  a fiduciary relationship with respect to property
    42  arising from a manifestation of intent to create such  relationship  and
    43  subjecting the person who holds title to such property to duties to deal
    44  with the property for:
    45    (A) one or more persons, at least one of whom is not the sole trustee;
    46  or
    47    (B) the benefit of charity; or
    48    (C)  the care of an animal, pursuant to section 7-A-3.12 of this arti-
    49  cle; or
    50    (D) a noncharitable purpose, pursuant  to  section  7-A-3.13  of  this
    51  article,  and  includes  a  trust created pursuant to any other statute,
    52  judgment, or decree that requires the trust to be  administered  in  the
    53  manner of an express trust.
    54    (2)  An  express  trust  shall  not include a trust for the benefit of
    55  creditors, a business trust where certificates  of  beneficial  interest
    56  are  issued  to  the beneficiary, an investment trust, a voting trust, a

        A. 7677                             6
 
     1  security instrument such as a deed of trust or a mortgage, a liquidation
     2  or a reorganization trust, a trust for the sole purpose of paying  divi-
     3  dends, interest, interest coupons, salaries, wages, pensions or profits,
     4  a  trust created as an individual retirement account pursuant to section
     5  408(a) of the Internal Revenue Code,  instruments  wherein  persons  are
     6  mere nominees for others, any other type of trust created for a business
     7  or commercial purpose, or a bank account in trust form.
     8    (i)  "Guardian  for property" means a guardian for property management
     9  as appointed pursuant to article seventeen or seventeen-A of  the  SCPA,
    10  or  pursuant  to  article  eighty-one  of the mental hygiene law, or any
    11  person appointed by a court outside of New York for property  management
    12  of  an  incapacitated  person.  Such  term shall not include guardian ad
    13  litem.
    14    (j) "Interests of the beneficiaries" means  the  beneficial  interests
    15  provided in the terms of the trust.
    16    (k)  "Internal  Revenue Code" means the United States Internal Revenue
    17  Code of 1986, as amended. Such references, however, shall be  deemed  to
    18  constitute  references to any corresponding provisions of any subsequent
    19  federal tax code.
    20    (l) "Irrevocable trust" means a trust that is not a revocable trust.
    21    (m) "Jurisdiction" shall  include  a  state  or  country,  or  similar
    22  governmental entity, with respect to a geographic area.
    23    (n)  "Lifetime trust" means an express trust, including all amendments
    24  thereto, created other than by will.
    25    (o) "Person" means a person as defined pursuant to section  1-2.12  of
    26  this  chapter.    As the context indicates, person may include more than
    27  one person.
    28    (p) "Power of withdrawal" means a presently exercisable general  power
    29  of  appointment,  as defined pursuant to paragraph (b) of section 10-3.2
    30  of this chapter and paragraph (b) of section  10-3.3  of  this  chapter,
    31  other  than  a power:   (1) limited by an ascertainable standard; or (2)
    32  exercisable by any person only  upon  consent  of  a  person  holding  a
    33  substantial adverse interest.
    34    (q) "Property" means property as defined pursuant to section 1-2.15 of
    35  this chapter.
    36    (r)  "Qualified  beneficiary" means a beneficiary who, on the date the
    37  beneficiary's status as qualified beneficiary is determined:
    38    (1) is entitled to receive, or is a  permissible  recipient  of  trust
    39  income or principal; or
    40    (2)  would be entitled to receive, or would be a permissible recipient
    41  of trust  income  or  principal  if  the  interests  of  the  recipients
    42  described  in  subparagraph  one terminated on that date without causing
    43  the trust to terminate; or
    44    (3) would be entitled to receive, or would be a permissible  recipient
    45  of trust income or principal if the trust terminated on that date.
    46    (s)  "Resulting trust" means a trust that arises in favor of the sett-
    47  lor or the settlor's successor's interest on the failure of  an  express
    48  trust in whole or in part.
    49    (t)  "Revocable",  as  applied  to a trust, means revocable by a trust
    50  contributor without the  consent  of  a  person  holding  a  substantial
    51  adverse interest.
    52    (u) (1) "Settlor" means a person, including the testator, who:
    53    (A) initially transfers property of the person to a trustee; or
    54    (B)  declares as the owner of property that the person holds identifi-
    55  able property as trustee; or

        A. 7677                             7
 
     1    (C) exercises a power of appointment in favor of a trustee, where  the
     2  terms  of  such trust are created in connection with the exercise of the
     3  power of appointment, including the exercise by a trustee of  a  discre-
     4  tionary power in favor of a trustee.
     5    (2)  For  purposes of this paragraph, if a person authorized to act on
     6  behalf of a person acts with respect to property owned by  such  person,
     7  the person owning the property shall be deemed to have taken the action.
     8    (3)  Cross-reference:  provisions regarding a devise to a trustee, see
     9  section 3-3.7 of this chapter and for provisions regarding a beneficiary
    10  designation of a trustee, see section 13-3.3 of this chapter.
    11    (v) "Spendthrift provision"  means  the  restraint  on  the  voluntary
    12  transfer of a beneficiary's interest as provided by the terms of a trust
    13  or  by  application of sections 7-A-5.1 and 7-A-5.2 of this article, and
    14  the restraint on involuntary transfer of a  beneficiary's  interest,  as
    15  provided by any statutory rule restraining the involuntary transfer of a
    16  beneficiary's  interest.  Such  terms  of  a  trust  shall  include  any
    17  provision stating that the interest of a beneficiary is held subject  to
    18  a spendthrift trust, or words of similar meaning.
    19    (w) "State" means a state of the United States, the District of Colum-
    20  bia,  Puerto Rico, the United States Virgin Islands, or any territory or
    21  insular possession subject to the jurisdiction  of  the  United  States.
    22  Such  term  shall  include an Indian Tribe or band recognized by federal
    23  law or formally acknowledged by a state.
    24    (x) "Terms of a trust" means:
    25    (1) the manifestation of the  settlor's  intent  regarding  a  trust's
    26  provisions,  except  as  otherwise  provided in subparagraph two of this
    27  paragraph, as:
    28    (A) expressed in the trust instrument; or
    29    (B) established by other evidence that would be admissible in a  judi-
    30  cial proceeding; or
    31    (2) the trust's provisions as established, determined, or amended by:
    32    (A) a trustee or trust director in accordance with applicable law; or
    33    (B) a court order; or
    34    (C)  a  nonjudicial settlement agreement, pursuant to section 7-A-1.12
    35  of this part.
    36    (y) "Testamentary trust" means an express trust created under a will.
    37    (z) "Trust", unless otherwise provided, means a lifetime trust  and  a
    38  testamentary trust but shall not include a resulting trust.
    39    (aa) "Trust contributor" means:
    40    (1)  a  settlor, as defined pursuant to paragraph (u) of this section,
    41  other than a person who exercises, or who is considered to  exercise,  a
    42  special power of appointment in favor of a trustee; or
    43    (2)  a person who transfers or is deemed to transfer property owned by
    44  such person to the trustee of an existing trust, except  to  the  extent
    45  another  person  has  the  power to revoke or has a non-lapsing power of
    46  withdrawal over such transferred property.  For  the  purposes  of  this
    47  subparagraph:
    48    (A)  the exercise of a presently exercisable general power of appoint-
    49  ment is deemed to be a transfer of property owned  by  the  powerholder,
    50  and
    51    (B)  a  person  is deemed to transfer property owned by that person if
    52  the person's fiduciary actually transfers such property to, or exercises
    53  a power of appointment in favor of, a trustee; or
    54    (3) if more than one person contributes property to the trustee of  an
    55  existing  trust,  each person is the trust contributor of the portion of
    56  the trust property attributable  to  each  such  person's  contribution,

        A. 7677                             8
 
     1  except  to  the  extent  another person has the power to revoke or has a
     2  non-lapsing power of withdrawal over such portion.
     3    (bb) "Trust director" means a person that is granted a power of direc-
     4  tion,  as  defined  pursuant to paragraph (c) of section 7-A-9.2 of this
     5  article, to the extent such power is exercisable while the person is not
     6  serving as a trustee. Such person is a trust director whether or not the
     7  terms of the trust refer to such person as a trust director and  whether
     8  or not such person is a beneficiary, settlor or trust contributor, other
     9  than a settlor, of the trust.
    10    (cc)  "Trust  instrument"  means  a  properly executed instrument that
    11  contains terms of the trust, including any amendments thereto.
    12    (dd) "Trustee" means a person who has accepted an appointment as trus-
    13  tee or has been issued letters of trusteeship. Such term  shall  include
    14  an original, additional, and successor trustee, and a co-trustee.
    15    (ee)  "Willful  misconduct"  means  intentional  wrongdoing,  not mere
    16  negligence, gross negligence or recklessness.
    17    (ff) "Wrongdoing" means  malicious  conduct  or  conduct  designed  to
    18  defraud or seek an unconscionable advantage.
    19  § 7-A-1.5 Knowledge
    20    (a)  Subject  to paragraph (b) of this section, a person has knowledge
    21  of a fact if such person:
    22    (1) has actual knowledge of such fact;
    23    (2) has received a notice or notification of such fact; or
    24    (3) from all the facts and circumstances known to such person  at  the
    25  time in question, has reason to know such fact.
    26    (b)  An  organization  that  conducts activities through employees has
    27  notice or knowledge of a fact involving a trust only from the  time  the
    28  information was received by an employee having responsibility to act for
    29  the  trust or would have been brought to the employee's attention if the
    30  organization had exercised reasonable diligence. An  organization  exer-
    31  cises  reasonable  diligence  if  it  maintains  reasonable routines for
    32  communicating significant information to the employee  having  responsi-
    33  bility  to act for the trust and there is reasonable compliance with the
    34  routines. Reasonable diligence does  not  require  an  employee  of  the
    35  organization  to  communicate  information  unless such communication is
    36  part of the individual's regular duties or the individual knows a matter
    37  involving the trust would be materially affected by such information.
    38  § 7-A-1.6 Default and mandatory rules
    39    (a) Except as otherwise provided in the  terms  of  the  trust,  court
    40  order,  decree  or  other  applicable law, this article shall govern the
    41  duties and powers of a trustee, relations among trustees, and the rights
    42  and interests of a beneficiary.
    43    (b) The terms of a trust prevail over any provision  of  this  article
    44  except:
    45    (1)  the  rules  for the governing law of a trust, pursuant to section
    46  7-A-1.8 of this part;
    47    (2) the rules regarding the principal place of administration,  pursu-
    48  ant to section 7-A-1.9 of this part;
    49    (3)  the  rules for judicial proceedings, pursuant to sections 7-A-2.1
    50  and 7-A-2.2 of this article;
    51    (4) the requirements for creating and amending a  trust,  pursuant  to
    52  sections 7-A-3.1 through 7-A-3.14 of this article;
    53    (5)  the  rules for commencing a proceeding, pursuant to paragraph (b)
    54  of section 7-A-3.15 of this article, and the limitations on modification
    55  and termination, pursuant to paragraph (c) of section 7-A-3.15  of  this
    56  article;

        A. 7677                             9
 
     1    (6)  the  power  of  the court to amend or revoke a trust, pursuant to
     2  paragraph (c) of section 7-A-3.16 of this article, to modify  or  termi-
     3  nate  a  trust,  pursuant  to  sections 7-A-3.1 through 7-A-3.21 of this
     4  article, or to combine or divide trusts, pursuant to section 7-A-3.22 of
     5  this article;
     6    (7)  the  rights of creditors of trust beneficiaries, pursuant to part
     7  five of this article;
     8    (8) the power of the court to require, dispense with, modify or termi-
     9  nate a bond, pursuant to section 7-A-7.2 of this article;
    10    (9) the requirement that a trustee of a testamentary trust provide the
    11  court with written notice of resignation, pursuant to paragraph  (d)  of
    12  section 7-A-7.7 of this article;
    13    (10) the duty of a trustee to act in good faith and in accordance with
    14  the terms and purposes of the trust, pursuant to section 7-A-8.1 of this
    15  article;
    16    (11)  the duty to administer the trust, pursuant to section 7-A-8.4 of
    17  this article;
    18    (12) the duties relating to delegation if a delegation is made, pursu-
    19  ant to section 7-A-8.7 of this article;
    20    (13) the duties relating to recordkeeping and identification of  prop-
    21  erty, pursuant to section 7-A-8.9 of this article;
    22    (14)  the  duty, pursuant to paragraph (a) of section 7-A-8.12 of this
    23  article, to respond to the reasonable request of  a  beneficiary  of  an
    24  irrevocable  trust  for  information  related to the administration of a
    25  trust, beginning at the death of the later to die of the settlor or  the
    26  settlor's  surviving spouse, or after twenty-one years if the settlor is
    27  not an individual;
    28    (15) the duty, pursuant to subparagraphs two and  three  of  paragraph
    29  (b)  of  section 7-A-8.12 of this article, to notify qualified benefici-
    30  aries of an irrevocable trust, who have attained  twenty-five  years  of
    31  age, of the existence of such trust, of the identity of the trustee, and
    32  of  their  right to request information related to the administration of
    33  the trust, beginning at the death of the later to die of the settlor  or
    34  the settlor's surviving spouse, or after twenty-one years if the settlor
    35  is not an individual;
    36    (16)  the  duty  and  the  restrictions on powers, pursuant to section
    37  7-A-8.18 of this article;
    38    (17) the principles  for  the  computation  of  damages,  pursuant  to
    39  section 7-A-10.2 of this article;
    40    (18)  the effect of an exculpatory provision, pursuant to section 7-A-
    41  10.8 of this article;
    42    (19) the rights of a person  other  than  a  trustee  or  beneficiary,
    43  pursuant to sections 7-A-10.10 through 7-A-10.13 of this article;
    44    (20) periods of limitation for commencing a judicial proceeding; and
    45    (21)  the  power  of  the  court to take such action and exercise such
    46  jurisdiction as may be necessary in the interests of justice.
    47  § 7-A-1.7 Common law and principles of equity
    48    The common law of trusts and  principles  of  equity  supplement  this
    49  article,  except to the extent modified by this article or another stat-
    50  ute of this state.
    51  § 7-A-1.8 Governing law
    52    (a) As used in this section:
    53    (1) "Real property" means land or any estate in land, including lease-
    54  holds, fixtures and mortgages or other  liens  thereon.  Notwithstanding
    55  such  definition of "real property", whether an estate in, leasehold of,
    56  fixture, mortgage or other lien on land is real or  personal  is  deter-

        A. 7677                            10
 
     1  mined  by  the  local law of the jurisdiction in which the land is situ-
     2  ated.
     3    (2)  "Personal  property" means any property other than real property,
     4  including tangible and intangible things.
     5    (3) "Intrinsic validity" relates to the rules of  substantive  law  by
     6  which  a jurisdiction determines the legality of a disposition in trust,
     7  including the general capacity of  the  settlor  and  the  rule  against
     8  perpetuities.
     9    (4)  "Effect"  relates  to the legal consequences attributed under the
    10  law of a jurisdiction to a valid disposition in trust.
    11    (5) "Interpretation" relates to the procedure of applying the law of a
    12  jurisdiction to determine the meaning of language employed by the  sett-
    13  lor where the settlor's intention is not otherwise ascertainable.
    14    (6)  "Local  law"  means  the law which the courts of the jurisdiction
    15  apply in adjudicating legal questions that have no relation  to  another
    16  jurisdiction.
    17    (b)  The  intrinsic  validity, effect, interpretation and amendment of
    18  any term of a lifetime trust, created by a domiciliary or  non-domicili-
    19  ary,  and  the  revocation of a lifetime trust, by a domiciliary or non-
    20  domiciliary, shall be governed by:
    21    (1) the law of the jurisdiction designated  in  the  trust  instrument
    22  unless  the  designation  of  that  jurisdiction's  law is contrary to a
    23  mandatory trust rule, pursuant to paragraph (b) of  section  7-A-1.6  of
    24  this  part, or a strong public policy, including the rule against perpe-
    25  tuities, of the jurisdiction having the most significant relationship to
    26  the matter at issue, in which case subparagraph two  of  this  paragraph
    27  shall  apply.  This  state shall not be the jurisdiction having the most
    28  significant relationship to any matter at issue that  does  not  involve
    29  real  property  located  in this state where the trust instrument desig-
    30  nates the law of a jurisdiction other than this state, provided none  of
    31  the  trustees  are domiciled in this state, whether or not this state is
    32  the domicile of the settlor or of any of the beneficiaries; or
    33    (2) in the absence of a controlling designation in the  trust  instru-
    34  ment, the law of the jurisdiction where the settlor was domiciled at the
    35  time the instrument was executed, except that:
    36    (A)  with respect to real property, the law of the situs shall govern;
    37  and
    38    (B) with respect to the interpretation  of  the  terms  of  the  trust
    39  applying  to  personal  property,  the  local law of the jurisdiction in
    40  which the settlor was domiciled at the time of execution shall govern.
    41    (c) Notwithstanding any provision of paragraph (b) of this section  to
    42  the  contrary, whenever a person, not domiciled in this state, creates a
    43  lifetime trust which provides that one or more terms shall  be  governed
    44  by the laws of this state, such provision shall be given effect by using
    45  the local law of this state to determine the intrinsic validity, effect,
    46  interpretation  and  amendment  of  the designated term or terms and the
    47  revocation of a lifetime trust with respect to:
    48    (1) any trust property situated in this state at the time the trust is
    49  created;
    50    (2) any trust property situated in this state at the time such proper-
    51  ty is added to the trust; and
    52    (3) personal property, wherever situated, if the trustee of the  trust
    53  is  a person residing, incorporated or authorized to do business in this
    54  state, or a national bank having an office in this state.
    55    (d) The law governing any aspect of the  administration  of  a  trust,
    56  created  by a domiciliary or non-domiciliary, shall be the law so desig-

        A. 7677                            11

     1  nated in the trust instrument unless the designation of  that  jurisdic-
     2  tion's  law  is contrary to a mandatory trust rule pursuant to paragraph
     3  (b) of section 7-A-1.6 of this part, or a strong public  policy  of  the
     4  jurisdiction  of the trust's principal place of administration, pursuant
     5  to section 7-A-1.9 of this part. If the terms of the trust do not desig-
     6  nate the governing law, both of the following shall apply:
     7    (1) The law of the  trust's  principal  place  of  administration,  as
     8  determined  pursuant to section 7-A-1.9 of this part, governs the admin-
     9  istration of the trust; and
    10    (2) If the trust's principal place of administration is transferred to
    11  another jurisdiction, pursuant to section 7-A-1.9 of this part, the  law
    12  of  the  new  principal place of administration of the trust governs the
    13  administration of the trust from the time of such transfer.
    14    (e) Notwithstanding any provision of paragraph (d) of this section  to
    15  the  contrary, whenever a person, not domiciled in this state, creates a
    16  trust which provides that one or more  terms  for  trust  administration
    17  shall  be  governed  by  the laws of this state, such provision shall be
    18  given effect by using the local law of this state with respect to:
    19    (1) any trust property situated in this state at the time the trust is
    20  created;
    21    (2) any trust property situated in this state at the time such proper-
    22  ty is added to the trust; and
    23    (3) personal property, wherever situated, if the trustee of the  trust
    24  is  a person residing, incorporated or authorized to do business in this
    25  state, or a national bank having an office in this state.
    26    (f) Cross-reference: For provisions relating  to  the  choice  of  law
    27  rules  involving testamentary trusts, see section 3-5.1 of this chapter,
    28  and for provisions relating to the formal validity of  lifetime  trusts,
    29  see section 7-A-3.6 of this article.
    30  § 7-A-1.9 Principal place of administration
    31    (a)  The  terms of a trust designating the principal place of adminis-
    32  tration of the trust are valid only if there is a sufficient  connection
    33  with  the  designated  jurisdiction.  Without precluding other means for
    34  establishing a sufficient connection with the  designated  jurisdiction,
    35  terms  of  a trust designating the principal place of administration are
    36  valid and controlling if:
    37    (1) a trustee's usual place of business is located in or a trustee  is
    38  a resident of the designated jurisdiction; or
    39    (2)  a  trust  director's  usual  place of business is located in or a
    40  trust director is a resident of the designated jurisdiction; or
    41    (3) all or part of the administration occurs in the designated  juris-
    42  diction.
    43    (b) Unless designated pursuant to paragraph (a) of this section:
    44    (1)  If there is one trustee, the principal place of administration of
    45  a trust is the trustee's  usual  place  of  business  for  administering
    46  trusts or, if the trustee has no such usual place of business, the trus-
    47  tee's residence.
    48    (2)  If  there  are  two  or  more co-trustees, the principal place of
    49  administration is:
    50    (A) the usual place of business for administering trusts of that trus-
    51  tee, if there is only one corporate co-trustee;
    52    (B) the place agreed upon by the co-trustees, if there  is  more  than
    53  one  corporate  co-trustee, where any corporate co-trustee has the usual
    54  place of business for administering trusts or if the co-trustees do  not
    55  agree, the place where a majority of the trust administration occurs, or
    56  if there is no such place, the place as a court may determine; or

        A. 7677                            12

     1    (C) the place agreed upon by the co-trustees, if there is no corporate
     2  co-trustee,  where  any co-trustee carries on the work of trust adminis-
     3  tration or if the co-trustees do not agree, the place where  a  majority
     4  of  the  trust  administration  occurs or if there is no such place, the
     5  place as a court may determine.
     6    (c)  Notwithstanding  the provisions of paragraph (b) of this section,
     7  if a corporate trustee is designated as the trustee of a trust  and  the
     8  corporate  trustee  has offices in multiple states and performs adminis-
     9  trative functions for the trust in multiple states, the corporate  trus-
    10  tee  may designate which state is the corporate trustee's usual place of
    11  business for administering trusts with respect to a particular trust, by
    12  providing notice to the qualified  beneficiaries  and  trust  directors.
    13  Such  notice  is  valid  and  controlling if the corporate trustee has a
    14  connection to the jurisdiction designated in the  notice,  including  an
    15  office  where  trustee services are performed and the actual performance
    16  of some administrative functions for that particular trust take place in
    17  such particular jurisdiction.  The subsequent transfer of  some  of  the
    18  administrative  functions  of  the corporate trustee to another state or
    19  states does not transfer the principal place of administration  as  long
    20  as  the  corporate  trustee  continues to maintain an office and perform
    21  some administrative functions in  the  jurisdiction  designated  in  the
    22  notice and the corporate trustee does not notify the qualified benefici-
    23  aries  of  a change in the principal place of administration pursuant to
    24  paragraph (f) of this section.
    25    (d) A trustee may transfer the trust's  principal  place  of  adminis-
    26  tration  of  a  testamentary trust to another state or to a jurisdiction
    27  outside of the United States upon the approval of  the  court  that  has
    28  most  recently  issued  letters  of  trusteeship  to the trustee of such
    29  trust.
    30    (e) A trustee may transfer the principal place of administration of  a
    31  lifetime  trust  to  another  state  or to a jurisdiction outside of the
    32  United States:
    33    (1) upon the approval of any court  that  has  jurisdiction  over  the
    34  trustee; or
    35    (2)  without  the  approval  of  any  court  and in the absence of any
    36  objection by a qualified beneficiary; or
    37    (3) without the approval of any court or of  any  beneficiary  if  the
    38  terms of the trust so provide.
    39    (f)  A  trustee shall notify the qualified beneficiaries of a proposed
    40  transfer of a trust's principal place of administration  not  less  than
    41  sixty  days, and in the case of a charitable trust, not less than ninety
    42  days, before initiating the transfer. The notice  of  proposed  transfer
    43  shall include:
    44    (1)  the  name  of  the  jurisdiction  to which the principal place of
    45  administration is to be transferred;
    46    (2) the address and phone number of the  new  location  at  which  the
    47  trustee can be contacted;
    48    (3) an explanation of the reasons for the proposed transfer;
    49    (4)  the  date on which the proposed transfer is anticipated to occur;
    50  and
    51    (5) the date, not less than forty-five days, and  in  the  case  of  a
    52  charitable  trust,  not  less  than sixty days, after the giving of such
    53  notice, by which the qualified beneficiary shall notify the  trustee  of
    54  an objection to the proposed transfer.
    55    (g)  In  connection  with a transfer of the trust's principal place of
    56  administration, the trustee may transfer some or all of the trust  prop-

        A. 7677                            13
 
     1  erty  to  a  successor  trustee  designated in the terms of the trust or
     2  appointed pursuant to section 7-A-7.5 of this article.
     3    (h)  If  there  are two or more co-trustees of a trust, decisions made
     4  with respect to actions described pursuant to this section are  governed
     5  by section 7-A-7.3 of this article.
     6    (i)  Nothing  in  this  section shall limit the application of section
     7  7-A-8.18 of this article to any trust.
     8    (j) Notwithstanding any other provision of this article,  the  trustee
     9  has  no  duty  to  inform  beneficiaries  about the availability of this
    10  section and further has no duty to review the trust instrument to deter-
    11  mine whether any action should  be  taken  under  this  section,  unless
    12  requested  to do so in writing by a beneficiary then entitled to receive
    13  reports and information related to the administration of the trust.
    14  § 7-A-1.10 Methods and waiver of notice
    15    (a) Notice to a person pursuant to this article or the  sending  of  a
    16  document to a person pursuant to this article shall be accomplished in a
    17  manner  reasonably suitable under the circumstances and likely to result
    18  in receipt of the notice or document.  Permissible methods of notice  or
    19  sending  a  document  to  the  person's last known place of residence or
    20  place of business include, but are not  limited  to,  first-class  mail,
    21  special mail service, personal delivery, or sending such notice or docu-
    22  ment to an email address provided by the intended recipient.
    23    (b)  Notice  otherwise required pursuant to this article or a document
    24  otherwise required to be sent pursuant  to  this  article  need  not  be
    25  provided  to  a  person whose identity or location is unknown to and not
    26  reasonably ascertainable by the trustee.
    27    (c) Notice pursuant to this article  or  the  sending  of  a  document
    28  pursuant  to  this article may be waived by the person to be notified or
    29  sent the document.
    30    (d) Notice to an incapacitated person may be given to any guardian for
    31  property of such incapacitated person or to a  parent  or  other  person
    32  with whom such incapacitated person resides.
    33    (e)  Notice of a judicial proceeding shall be given as provided pursu-
    34  ant to the SCPA and other applicable rules of civil procedure.
    35    (f) The notice provision of  subparagraph  two  of  paragraph  (i)  of
    36  section  7-A-8.18  of  this article, with respect to the exercise of the
    37  power to appoint to an appointed trust under paragraph  (a)  or  (b)  of
    38  section  7-A-8.18  of  this  article,  shall apply in lieu of the notice
    39  provisions provided by this section.
    40  § 7-A-1.11 Others treated as qualified beneficiaries
    41    (a) A charitable organization expressly designated to receive distrib-
    42  utions under the terms of a charitable trust shall have the rights of  a
    43  qualified  beneficiary pursuant to this article if the charitable organ-
    44  ization, on the date  the  charitable  organization's  qualification  is
    45  being determined:
    46    (1)  is  entitled  to  receive  or is a permissible recipient of trust
    47  income or principal;
    48    (2) would be entitled to receive or  is  a  permissible  recipient  of
    49  trust  income  or  principal  upon  the  termination of the interests of
    50  others entitled to receive or permissible recipients then  receiving  or
    51  eligible to receive distributions; or
    52    (3)  would  be  entitled  to  receive or is a permissible recipient of
    53  trust income or principal if the trust terminated on such date.
    54    (b) A person appointed to enforce a trust created for the care  of  an
    55  animal or another noncharitable purpose, pursuant to section 7-A-3.12 or

        A. 7677                            14
 
     1  7-A-3.13 of this article, shall have the rights of a qualified benefici-
     2  ary pursuant to this article.
     3    (c)  The  attorney  general  of  this state shall have the rights of a
     4  qualified beneficiary with respect to  a  charitable  trust  having  its
     5  principal  place of administration in this state.  Nothing in this para-
     6  graph shall limit the rights of the attorney  general  under  any  other
     7  provision of law.
     8  § 7-A-1.12 Nonjudicial settlement agreements
     9    (a)  For  purposes of this section, "interested persons" means persons
    10  whose consent would be required in order to achieve a binding settlement
    11  were the settlement to be approved by the court,  determined  by  taking
    12  into  account  SCPA  315,  as  if  the  settlement  were the result of a
    13  proceeding in which process was required to be  served  on  all  persons
    14  interested  in the trust. The following persons, if not described by the
    15  foregoing sentence, shall be deemed interested persons: the  settlor  if
    16  no adverse income or transfer tax results would arise from the settlor's
    17  participation and the currently serving trustee or trustees.
    18    (b)  Except  as  otherwise  provided in paragraph (c) of this section,
    19  interested persons may  enter  into  a  binding  nonjudicial  settlement
    20  agreement with respect to any matter involving the trust.
    21    (c) A nonjudicial settlement agreement is valid only to the extent it:
    22  (1)  does not violate the purposes of the trust, unless the settlor is a
    23  party to the agreement, and (2) includes terms and conditions that could
    24  be approved by the court pursuant to this article  or  other  applicable
    25  law.  In the case of a charitable trust, a nonjudicial settlement agree-
    26  ment shall not be valid unless the attorney general is a  party  to  the
    27  agreement  or provides a written statement of no objection to the agree-
    28  ment.  Notwithstanding any other provision of this paragraph, a nonjudi-
    29  cial settlement agreement shall not be used to  transfer  the  principal
    30  place of administration of a testamentary trust or accomplish any of the
    31  following  actions  for  which  court approval is specifically required:
    32  trust termination pursuant to paragraph (b) of section 7-A-3.17 of  this
    33  article,  modification  of  dispositive provisions pursuant to paragraph
    34  (b) of section 7-A-3.17 of this article, cy pres reformation pursuant to
    35  paragraph (c) of section 8-1.1 of this chapter, removal from this  state
    36  of  trust  property in a testamentary trust pursuant to SCPA 710(4); and
    37  appointment of a successor or co-trustee of a testamentary trust  pursu-
    38  ant to SCPA 706(2) and 1502.
    39    (d) Matters that may be resolved by a nonjudicial settlement agreement
    40  include, but are not limited to:
    41    (1) the interpretation or construction of the terms of the trust;
    42    (2) the approval of a trustee's report or accounting;
    43    (3) direction to a trustee to refrain from performing a particular act
    44  or the grant to a trustee of any necessary or desirable power;
    45    (4)  the resignation or appointment of a trustee and the determination
    46  of a trustee's compensation;
    47    (5) transfer of the principal place of administration  of  a  lifetime
    48  trust; and
    49    (6) the liability of a trustee for an action or omission to act relat-
    50  ing to the trust.
    51    (e)  A  nonjudicial settlement agreement shall be in writing and shall
    52  be executed by all interested persons described in paragraph (a) of this
    53  section in the manner required by the laws of this state for the convey-
    54  ance of real property.
    55    (f) An agreement entered into pursuant to this section shall be  final
    56  and  binding  on  all  beneficiaries,  the trustee and all other persons

        A. 7677                            15
 
     1  identified in paragraph (a) of this section as if  ordered  by  a  court
     2  with  jurisdiction  over  the trust. The failure of a court to approve a
     3  nonjudicial settlement agreement as provided in paragraph  (g)  of  this
     4  section shall have no effect on the binding nature of the agreement.
     5    (g)  Notwithstanding  paragraph  (f)  of  this section, any interested
     6  person may petition the court to approve or disapprove a proposed or  an
     7  executed  nonjudicial  settlement agreement. Such petition may request a
     8  court to determine any issue regarding such agreement, including but not
     9  limited to, whether the representation pursuant to SCPA 315 is adequate,
    10  whether the agreement contains terms and  conditions  that  violate  the
    11  purposes of the trust or whether the agreement contains terms and condi-
    12  tions that the court could properly approve.
    13    (h)  A  petition  pursuant  to  paragraph (g) of this section shall be
    14  filed no later than sixty days after the effective date of the agreement
    15  absent a showing of good cause why the petition was  not  timely  filed.
    16  Process  shall  issue to all other interested persons described in para-
    17  graph (a) of this section.
    18    (i) An interested person may also commence a proceeding to  interpret,
    19  apply or enforce a nonjudicial settlement agreement. Process shall issue
    20  to  all  other  interested  persons  described  in paragraph (a) of this
    21  section.
    22    (j) Cross reference: For provisions regarding the revocation or amend-
    23  ment of an irrevocable trust initiated by consent, see section  7-A-3.16
    24  of this article.
 
    25                        PART 2. JUDICIAL PROCEEDINGS
 
    26  § 7-A-2.1 Role of court in administration of trust
    27    The  rules  for court involvement in the administration of a trust are
    28  provided by numerous sections of this  chapter,  the  surrogate's  court
    29  procedure act, and the civil practice law and rules.
    30  § 7-A-2.2 Jurisdiction over trustee and beneficiary
    31    The  jurisdiction  over trusts, trustees and beneficiaries is provided
    32  pursuant to article two of the SCPA.
 
    33          PART 3. CREATION, VALIDITY, AMENDMENT, MODIFICATION, AND
    34                            TERMINATION OF TRUST
 
    35  § 7-A-3.1 Methods of creating trust
    36    (a) Subject to the requirements of sections 7-A-3.2, 7-A-3.3 and  7-A-
    37  3.7 of this part, a trust may be created by:
    38    (1)  a  transfer  of  property to another person as trustee during the
    39  settlor's lifetime or by will  or  other  transfer  of  property  taking
    40  effect upon the settlor's death;
    41    (2) a declaration by the owner of property that such owner holds iden-
    42  tified property as trustee;
    43    (3) the exercise of a power of appointment in favor of a trustee where
    44  the  terms  of  such  trust  are created by the exercise of the power of
    45  appointment, including the exercise by  a  trustee  of  a  discretionary
    46  power in favor of a trustee; or
    47    (4) a statute, judgment or decree that requires the trust to be admin-
    48  istered in the manner of an express trust.
    49    (b) For purposes of subparagraph one of paragraph (a) of this section,
    50  a  transfer of property shall include a beneficiary designation pursuant
    51  to section 13-3.3 of this chapter.

        A. 7677                            16
 
     1    (c) Cross reference: For provisions related to the disposition in will
     2  to a trustee, see section 3-3.7 of this chapter.
     3  § 7-A-3.2 General requirements for trust creation
     4    (a)  In  addition  to  the  requirements for creating a lifetime trust
     5  pursuant to section 7-A-3.3 of this part and the formality  requirements
     6  to create a testamentary trust, and subject to the provisions of section
     7  7-A-3.7  of this part, a trust is created pursuant to section 7-A-3.1 of
     8  this part only if:
     9    (1) the settlor, or a person authorized to act for  the  settlor,  has
    10  capacity to create a trust;
    11    (2)  the settlor, or a person authorized to act for the settlor, indi-
    12  cates an intention to create the trust;
    13    (3) the trust has a definite beneficiary or is:
    14    (A) a charitable trust;
    15    (B) a trust for the care of an animal, pursuant to section 7-A-3.12 of
    16  this part; or
    17    (C) a trust for a noncharitable purpose, pursuant to section  7-A-3.13
    18  of this part;
    19    (4) the trustee has duties to perform; and
    20    (5) the same person is not the sole trustee and sole beneficiary.
    21    (b)  A  beneficiary  is definite if the beneficiary can be ascertained
    22  now or in the future, subject to any applicable rule  against  perpetui-
    23  ties.
    24  § 7-A-3.3 Specific rules for creation of lifetime trusts
    25    (a)  Any  person  may  by  lifetime trust dispose of real and personal
    26  property. A natural person who creates a lifetime trust shall  be  eigh-
    27  teen years of age or older.
    28    (b) Every estate in property may be disposed of by lifetime trust.
    29    (c)  Every lifetime trust shall be in writing and shall be executed by
    30  the settlor or the person authorized to act on  behalf  of  the  settlor
    31  and,  unless  such  person  is the sole trustee, by at least one trustee
    32  thereof. The signature of the settlor, or the person authorized  to  act
    33  on behalf of the settlor, shall either be affixed to the document in the
    34  presence  of two witnesses, who then affix their signatures to the docu-
    35  ment, or acknowledged by the settlor, or the person authorized to act on
    36  behalf of the settlor, in the manner required by the laws of this  state
    37  for  the  conveyance  of real property. If the signature of a trustee is
    38  required, the signature of the trustee shall be either  affixed  to  the
    39  document  in  the presence of two witnesses, who then affix their signa-
    40  tures to the document, or acknowledged by  the  trustee  in  the  manner
    41  required by the laws of this state for the conveyance of real property.
    42    (d)  A  lifetime  trust shall be valid as to any assets therein to the
    43  extent such assets have been transferred to the trustee. A  transfer  is
    44  not  accomplished  by  recital  of assignment, holding or receipt in the
    45  trust instrument. An asset shall be deemed to have been transferred to a
    46  trustee on the delivery of the asset to the trustee,  except  that  when
    47  the settlor is the sole trustee, in the case of assets capable of regis-
    48  tration  such as real estate, stocks, bonds, bank and brokerage accounts
    49  and the like, such assets are deemed transferred on the recording of the
    50  deed or the completion of registration of the asset in the name  of  the
    51  trust  or  trustee,  and  in  the  case of other assets, such assets are
    52  deemed transferred to the trustee:
    53    (1) by a written assignment, either in the trust instrument  or  by  a
    54  separate writing, describing the asset with particularity; or

        A. 7677                            17
 
     1    (2)  by  describing with particularity, either in the trust instrument
     2  or in a schedule attached to the trust instrument, the asset held in the
     3  trust; or
     4    (3) by affixing the asset to the trust instrument.
     5    (e)  A  lifetime  trust  shall  be irrevocable unless the terms of the
     6  trust expressly provide that such trust is revocable and the capacity to
     7  create an irrevocable trust is the same as that required to make a gift.
     8  The capacity needed to create a revocable trust is governed  by  section
     9  7-A-6.1 of this article.
    10  § 7-A-3.4 Trustee of passive trust not to take
    11    Every  disposition of property shall be made directly to the person in
    12  whom the right to possession and income is intended to be vested and not
    13  to another in trust for such person, and if made to any person in  trust
    14  for  another,  no  estate, legal or equitable, vests in the trustee. But
    15  neither this section nor section 7-A-3.5 of this  part  shall  apply  to
    16  trusts arising or resulting by implication of law.
    17  § 7-A-3.5 When trust interests not to merge
    18    A trust shall not be merged or invalid because a person, including but
    19  not  limited  to,  the  settlor  of the trust, is or may become the sole
    20  trustee and the sole holder of the present beneficial interest  therein,
    21  provided that one or more other persons hold a beneficial interest ther-
    22  ein,  whether  such interest be vested or contingent, present or future,
    23  and whether created by an express provision of the instrument  or  as  a
    24  result of reversion to the settlor's estate.
    25  § 7-A-3.6 Trusts created in jurisdictions outside of New York
    26    (a)  A  lifetime  trust  created  outside of New York shall be validly
    27  created if it is in writing and its creation complies with:
    28    (1) the law of the jurisdiction in  which  the  trust  instrument  was
    29  executed, or
    30    (2) the law of the jurisdiction in which, at the time of creation:
    31    (A)  the  settlor  was  domiciled,  had  a  place  of  abode, or was a
    32  national; or
    33    (B) a trustee was domiciled or had a place of business; or
    34    (C) any trust property was situated.
    35    (b) A testamentary trust shall be validly created if the will creating
    36  the trust may be admitted to probate in New York pursuant  to  paragraph
    37  (c)  of  section  3-5.1 of this chapter, provided, however, if the trust
    38  property includes real property, the  trust  shall  be  validly  created
    39  under the law of the jurisdiction in which the land is situated.
    40  § 7-A-3.7 Trust purposes
    41    A trust may be created only to the extent its purposes are lawful, and
    42  not contrary to public policy.
    43  § 7-A-3.8 Supplemental  needs trusts established for persons with severe
    44              and chronic or persistent disabilities
    45    (a) For purposes of this section, the following terms shall  have  the
    46  following  meanings,  unless  otherwise  expressly  stated or unless the
    47  context otherwise requires:
    48    (1)  "Developmental  disability"  means  developmental  disability  as
    49  defined pursuant to subdivision twenty-two of section 1.03 of the mental
    50  hygiene law.
    51    (2)  "Government benefits or assistance" means any program of benefits
    52  or assistance which is intended to provide or pay for  support,  mainte-
    53  nance  or health care and which is established or administered, in whole
    54  or in part, by any federal, state, county, city  or  other  governmental
    55  entity.

        A. 7677                            18
 
     1    (3)  "Mental  illness"  means  mental  illness  as defined pursuant to
     2  subdivision twenty of section 1.03 of the mental hygiene law.
     3    (4)  "Person with a severe and chronic or persistent disability" means
     4  a person:
     5    (A) with a mental illness, a developmental disability, or other  phys-
     6  ical or mental impairment;
     7    (B) whose disability is expected to, or does, give rise to a long-term
     8  need  for specialized health, mental health, developmental disabilities,
     9  social or other related services; and
    10    (C) who may need to rely on government benefits or assistance.
    11    (5) "Supplemental needs trust" means a discretionary trust established
    12  for the benefit of a person with a  severe  and  chronic  or  persistent
    13  disability  (hereinafter  referred  to in this section as the "benefici-
    14  ary") which conforms to all of the following criteria:
    15    (A) The trust document  clearly  evidences  the  creator's  intent  to
    16  supplement,  not  supplant,  impair  or diminish, government benefits or
    17  assistance for which the beneficiary may otherwise be eligible or  which
    18  the beneficiary may be receiving, except as provided in item (B) of this
    19  subparagraph;
    20    (B)  The  trust  document  prohibits  the  trustee  from  expending or
    21  distributing trust assets in any  way  which  may  supplant,  impair  or
    22  diminish government benefits or assistance for which the beneficiary may
    23  otherwise  be  eligible  or  which  the  beneficiary  may  be receiving.
    24  Provided, however, that the trustee  may  be  authorized  to  make  such
    25  distributions to third parties to meet the beneficiary's needs for food,
    26  clothing, shelter or health care but only if the trustee determines that
    27  the beneficiary's basic needs will be better met if such distribution is
    28  made,  and  that it is in the beneficiary's best interests to suffer the
    29  consequent effect, if any,  on  the  beneficiary's  eligibility  for  or
    30  receipt of government benefits or assistance;
    31    (C)  The  beneficiary  shall  not  have the power to assign, encumber,
    32  direct, distribute or authorize distributions from the trust;
    33    (D) If an inter vivos trust, the creator of the trust is a  person  or
    34  entity other than the beneficiary or the beneficiary's spouse; and
    35    (E)  Notwithstanding item (D) of this subparagraph, the beneficiary of
    36  a supplemental needs trust may be the creator of the trust if such trust
    37  meets the requirements of subparagraph two of paragraph (b) of  subdivi-
    38  sion  two  of section three hundred sixty-six of the social services law
    39  and of the regulations implementing  such  clauses.  Provided,  however,
    40  that  if  the  trust is funded with the proceeds of retroactive payments
    41  made as a result of a court action and due  the  beneficiary  under  the
    42  federal supplemental security income program, as established under title
    43  XVI  of  the federal social security act, the creation of a supplemental
    44  needs trust by the beneficiary under this subparagraph shall not  impair
    45  nor  limit  any  right under applicable law of a representative payee to
    46  receive reimbursement out of such  proceeds  for  expenses  incurred  on
    47  behalf of the beneficiary pending the determination of the beneficiary's
    48  eligibility  for  such federal supplemental security income program, nor
    49  any right under applicable law of any state or local governmental entity
    50  which provided the  beneficiary  with  interim  assistance  pending  the
    51  determination  of the beneficiary's eligibility for such federal supple-
    52  mental security income program to be repaid out of such proceeds for the
    53  amount of such interim assistance.
    54    (b) A supplemental needs trust shall be construed in  accordance  with
    55  the following:

        A. 7677                            19
 
     1    (1)  It  shall be presumed that the creator of the trust intended that
     2  neither principal nor income be used to pay for any expense which  would
     3  otherwise  be  paid  by  government benefits or assistance for which the
     4  beneficiary might otherwise be eligible or which the  beneficiary  might
     5  be receiving, notwithstanding any authority the trustee may have to make
     6  distributions  for food, clothing, shelter or health care as provided in
     7  item (B) of subparagraph five of paragraph (a) of this section;
     8    (2) This paragraph shall not be applicable  to  the  extent  that  the
     9  application  or  possible  application of such paragraph would reduce or
    10  eliminate  the  beneficiary's  entitlement  to  government  benefits  or
    11  assistance;
    12    (3)  Neither  principal  nor  income  held in trust shall be deemed an
    13  available resource to the beneficiary under any  program  of  government
    14  benefits or assistance; however, actual distributions from the trust may
    15  be considered to be income or resources of the beneficiary to the extent
    16  provided by the terms of any such program;
    17    (4)  The trustee of the trust shall not be deemed to be holding assets
    18  for the benefit of the beneficiary for purposes of section 43.03 of  the
    19  mental  hygiene  law  or section one hundred four of the social services
    20  law; and
    21    (5) If the trust provides the  trustee  with  the  authority  to  make
    22  distributions  for food, clothing, shelter or health care as provided in
    23  item (B) of subparagraph five of paragraph (a) of this section,  and  if
    24  the  mere  existence  of  such  authority  would, under the terms of any
    25  program of government benefits or assistance, result  in  the  benefici-
    26  ary's  loss  of government benefits or assistance, regardless of whether
    27  such authority were actually exercised, then:
    28    (A) if the trust instrument expressly provides, such  provision  shall
    29  be  null and void and the trustee's authority to make such distributions
    30  shall cease and shall be limited as otherwise provided; or
    31    (B) the trust shall no longer be treated as a supplemental needs trust
    32  pursuant to this section and the trust shall be construed, and the trust
    33  assets considered, without regard to the provisions of this section.
    34    (c) (1) Paragraph (b) of this section shall not apply  to  the  extent
    35  that  the  trust  is funded, directly or indirectly, by the beneficiary,
    36  except as provided in item (E) of subparagraph five of paragraph (a)  of
    37  this section, by someone with a legal obligation of support to the bene-
    38  ficiary,  or by someone with another financial obligation to the benefi-
    39  ciary to the extent of such obligation, at the time the  beneficiary  is
    40  receiving or applying to receive:
    41    (A) Government benefits or assistance for which an income and resource
    42  calculation is made; or
    43    (B) Services, care or assistance for which payment or reimbursement is
    44  or  may  be  sought  under  section  43.03  of the mental hygiene law or
    45  section one hundred four of the social services law.
    46    (2) To the extent that paragraph (b) of this section does  not  apply,
    47  the  trust shall not be treated as a supplemental needs trust under this
    48  section, and the trust shall be construed, and the trust assets  consid-
    49  ered, without regard to the provisions of this section.
    50    (d) The provisions of paragraph (b) of this section shall not apply to
    51  bar  claims  by  the  government  against persons with an interest in or
    52  under the trust other than the beneficiary.
    53    (e) (1) The following language may be used as part of a trust  instru-
    54  ment,  but  is  not required, to qualify a trust as a supplemental needs
    55  trust:

        A. 7677                            20
 
     1    "1. The property shall be held, IN TRUST, for  the  benefit  of  _____
     2  (hereinafter the "beneficiary") and shall be held, managed, invested and
     3  reinvested  by  the trustee, who shall collect the income therefrom and,
     4  after deducting all charges and expenses properly attributable  thereto,
     5  shall,  at  any time and from time to time, apply for the benefit of the
     6  beneficiary, so much (even to the extent of the whole) of the net income
     7  and/or principal of this trust as the trustee shall deem  advisable,  in
     8  his  or her sole and absolute discretion, subject to the limitations set
     9  forth below. The trustee shall add to the principal of  such  trust  the
    10  balance of net income not so paid or applied.
    11    2.  It  is  the  grantor's intent to create a supplemental needs trust
    12  which conforms to the provisions of  section  7-A-3.8  of  the  estates,
    13  powers and trusts law. The grantor intends that the trust assets be used
    14  to supplement, not supplant, impair or diminish, any benefits or assist-
    15  ance  of  any federal, state, county, city, or other governmental entity
    16  for which the beneficiary may otherwise be eligible or which the benefi-
    17  ciary may be receiving. Consistent with that intent, it is the grantor's
    18  desire that, before expending any amounts from  the  net  income  and/or
    19  principal  of  this  trust, the trustee consider the availability of all
    20  benefits from government or private assistance programs  for  which  the
    21  beneficiary  may  be  eligible  and  that,  where appropriate and to the
    22  extent possible, the trustee endeavor to maximize the collection of such
    23  benefits and to facilitate the distribution of  such  benefits  for  the
    24  benefit of the beneficiary.
    25    3.  None  of the income or principal of this trust shall be applied in
    26  such a manner as to supplant, impair or diminish benefits or  assistance
    27  of  any  federal,  state, county, city, or other governmental entity for
    28  which the beneficiary may otherwise be eligible or which the beneficiary
    29  may be receiving.
    30    4. The beneficiary does  not  have  the  power  to  assign,  encumber,
    31  direct, distribute or authorize distributions from this trust."
    32    (2)  (A)  If the creator elects, the following additional language may
    33  be used:
    34    "Notwithstanding the provisions of paragraphs two and three above, the
    35  trustee may make distributions to meet the beneficiary's need for  food,
    36  clothing,  shelter  or health care even if such distributions may result
    37  in an impairment or diminution of the beneficiary's receipt or eligibil-
    38  ity for government benefits or assistance but only if the trustee deter-
    39  mines that (i) the beneficiary's  needs  will  be  better  met  if  such
    40  distribution is made, and (ii) it is in the beneficiary's best interests
    41  to  suffer the consequent effect, if any, on the beneficiary's eligibil-
    42  ity for or receipt of government benefits or assistance."
    43    (B) If the trustee is provided with the authority to make the distrib-
    44  utions as described in item (A) of subparagraph two of  this  paragraph,
    45  the creator may elect to add the following clause:
    46    ";  provided,  however,  that  if  the mere existence of the trustee's
    47  authority to make distributions pursuant to this paragraph shall  result
    48  in  the beneficiary's loss of government benefits or assistance, regard-
    49  less of whether such authority is  actually  exercised,  this  paragraph
    50  shall be null and void and the trustee's authority to make such distrib-
    51  utions  shall  cease  and shall be limited as provided in paragraphs two
    52  and three above, without exception."
    53    (f) Nothing in this section shall affect the establishment,  interpre-
    54  tation  or  construction  of trust instruments which do not conform with
    55  the provisions of this  section,  nor  shall  this  section  impair  the
    56  state's  authority  to be paid from or seek reimbursement from any trust

        A. 7677                            21
 
     1  which does not conform with the provisions of this section  or  to  deem
     2  the  principal  or  income of such trust an available resource under any
     3  program of government benefits or assistance.
     4  § 7-A-3.9 Charitable purposes; enforcement
     5    The  rules  for  charitable  purposes  and enforcement are provided in
     6  article eight of this chapter.
     7  § 7-A-3.10 Creation of trust induced by fraud, duress, or  undue  influ-
     8               ence or the result of mistake
     9    A  trust is voidable to the extent its creation, amendment or restate-
    10  ment was induced by fraud, duress, or undue influence or  the  creation,
    11  amendment or restatement of the trust was the result of a mistake.
    12  § 7-A-3.11 Oral trusts not recognized
    13    Other than a testamentary trust in a nuncupative will created pursuant
    14  to  section  3-2.2  of this chapter, no oral trust can be created in New
    15  York.
    16  § 7-A-3.12 Trusts for pets
    17    (a) A trust for the care of a designated domestic  or  pet  animal  is
    18  valid.  Such trust shall terminate when the living animal beneficiary or
    19  beneficiaries of such trust are no longer alive.
    20    (b) The intended use of the principal or income of  a  trust  that  is
    21  authorized  pursuant to paragraph (a) of this section may be enforced by
    22  a person designated for that purpose in  the  trust  instrument.  If  no
    23  person  is appointed to act or the person appointed is unable or unwill-
    24  ing to act, a court may appoint a person to act.  A  trustee  or  person
    25  having an interest in the welfare of the animal may request the court to
    26  appoint a person to enforce the trust or to remove a person appointed.
    27    (c) Except as otherwise expressly provided in the trust instrument, no
    28  portion  of  the  principal or income may be converted to the use of the
    29  trustee or to any use other than for the benefit of all covered animals.
    30    (d) Upon termination, the trustee shall transfer the unexpended  trust
    31  property  as  directed  in the trust instrument or, if there are no such
    32  directions in the trust instrument, the property shall pass to the sett-
    33  lor or to the settlor's successors in interest.
    34    (e) A court may reduce the amount of the property  transferred  if  it
    35  determines that the amount substantially exceeds the amount required for
    36  the  intended  use. The amount of the reduction, if any, passes as unex-
    37  pended trust property pursuant to paragraph (d) of this section.
    38    (f) If no trustee is designated or no designated trustee is willing or
    39  able to serve, a court shall appoint a trustee and may make  such  other
    40  orders  and  determinations  as are advisable to carry out the intent of
    41  the settlor and the purposes of this section.
    42  § 7-A-3.13 Noncharitable trust without ascertainable beneficiary
    43    Except as otherwise provided in section 7-A-3.12 of this part,  or  by
    44  another statute, the following rules apply:
    45    (a) A trust may be created for a noncharitable purpose without a defi-
    46  nite  or definitely ascertainable beneficiary or for a noncharitable but
    47  otherwise valid purpose to be selected by the trustee. The  trust  shall
    48  not be enforced for more than twenty-one years.
    49    (b) A trust authorized by this section shall, or may, be enforced by a
    50  person  appointed  in  the  terms  of  the  trust  or,  if  no person is
    51  appointed, or if the person so appointed is unwilling or unable to  act,
    52  by a person appointed by the court.
    53    (c) Property of a trust authorized by this section may be applied only
    54  for  its  intended purpose. Except as otherwise provided by the terms of
    55  the trust, if the court determines that not all of the trust property is

        A. 7677                            22
 
     1  required for its intended purpose, the excess property shall be distrib-
     2  uted to the settlor or to the settlor's successors in interest.
     3  § 7-A-3.14 Amendment of trust other than by trust contributor to a revo-
     4               cable trust
     5    (a)  A trust may be amended by a person other than the trust contribu-
     6  tor to a revocable trust to the extent the trust terms provide.
     7    (b) Any authorized trust amendment by a person other  than  the  trust
     8  contributor to a revocable trust shall be in writing and executed by the
     9  person  authorized  to amend the trust, and except as otherwise provided
    10  in the governing instrument, shall be acknowledged or witnessed  in  the
    11  manner  required  by  paragraph (c) of section 7-A-3.3 of this part, and
    12  shall take effect as of the date of such execution.  Written  notice  of
    13  such amendment shall be delivered to at least one other trustee within a
    14  reasonable  time  if the person executing such amendment is not the sole
    15  trustee, but failure to give such notice shall not affect  the  validity
    16  of  the  amendment  or  the  date  upon  which such amendment shall take
    17  effect. No trustee shall be liable for any act reasonably taken in reli-
    18  ance on an existing trust instrument prior to actual receipt  of  notice
    19  of amendment thereof. Absent written consent, no trustee shall be liable
    20  for  the  failure to comply with an amendment that expands, restricts or
    21  otherwise modifies the trustee's duties, powers, obligations, or compen-
    22  sation for a period of sixty days after receipt of notice of amendment.
    23  § 7-A-3.15 Modification,   termination,   or   reformation   of   trust;
    24               proceedings for approval or disapproval
    25    (a) A trust terminates when and to the extent:
    26    (1) The terms of the trust so provide, including by the valid exercise
    27  of a power to revoke pursuant to the terms of the trust;
    28    (2) No purpose of the trust remains to be achieved;
    29    (3) The purposes of the trust have become unlawful, contrary to public
    30  policy, or impossible to achieve;
    31    (4)  All  of the trust property has been distributed by the trustee in
    32  accordance with the terms of the trust;
    33    (5) A trust is revoked pursuant to section 7-A-3.16 of this part; or
    34    (6) A court orders a termination in a proceeding brought  pursuant  to
    35  either section 7-A-3.17 or section 7-A-3.19 of this part.
    36    (b)  A  proceeding  to  approve or disapprove a modification or termi-
    37  nation pursuant to sections 7-A-3.17,  7-A-3.19  and  7-A-3.21  of  this
    38  part,  or a reformation pursuant to section 7-A-3.20 of this part may be
    39  commenced solely by a trustee or beneficiary on notice  to  the  parties
    40  interested  in the proceeding. The parties interested in such a proceed-
    41  ing shall include the trustee  and  any  person  or  persons  upon  whom
    42  service  of  process  would be required in a proceeding for the judicial
    43  settlement of the account of the trustee, taking into account SCPA  315.
    44  In  addition, the party commencing any proceeding pursuant to this para-
    45  graph shall notify the settlor in writing that such proceeding has  been
    46  commenced.
    47    (c)  Notwithstanding  any  of  the  provisions  in  sections 7-A-3.17,
    48  7-A-3.19 and 7-A-3.21 of this part to the contrary, a trust shall not be
    49  modified or terminated to the extent that doing so would jeopardize:
    50    (A) the deduction or exclusion originally claimed with respect to  any
    51  contribution  to the trust that qualified for the annual exclusion under
    52  section 2503(b) of the Internal  Revenue  Code,  the  marital  deduction
    53  under  section  2056(a)  or 2523(a) of the Internal Revenue Code, or the
    54  charitable deduction under section 170(a), 642(c), 2055(a) or 2522(a) of
    55  the Internal Revenue Code; or

        A. 7677                            23
 
     1    (B) the qualification of a transfer as a  direct  skip  under  section
     2  2642(c) of the Internal Revenue Code; or
     3    (C) any other specific tax benefit for which a contribution originally
     4  qualified  for income, gift, estate, or generation-skipping transfer tax
     5  purposes under the Internal Revenue Code; or
     6    (D) a beneficiary's eligibility for, or a  beneficiary's  receipt  of,
     7  public benefits or both.
     8  § 7-A-3.16 Revocation  or amendment of irrevocable lifetime trust initi-
     9               ated by consent
    10    (a) Upon the written consent, acknowledged or  proved  in  the  manner
    11  required  by the laws of this state for the recording of a conveyance of
    12  real property, of all the living persons beneficially  interested  in  a
    13  trust  of property, heretofore or hereafter created, the creator of such
    14  trust may revoke or amend the whole or any part thereof by an instrument
    15  in writing acknowledged or proved in  like  manner,  and  thereupon  the
    16  estate  of  the  trustees  ceases with respect to any part of such trust
    17  property, the disposition of which has been revoked. If  the  conveyance
    18  or  other  instrument  creating  a trust of property was recorded in the
    19  office of the clerk or register of any county of this state, the instru-
    20  ment revoking  or  amending  such  trust,  together  with  such  written
    21  consents  thereto,  shall be recorded in the same office of every county
    22  in which the conveyance or other  instrument  creating  such  trust  was
    23  recorded.  The  creator's  power to consent to a revocation or amendment
    24  may be exercised by an agent under a  power  of  attorney  only  to  the
    25  extent  authorized  by  the  power of attorney or under the terms of the
    26  trust.
    27    (b) For the purposes of paragraph (a) of this section, a  disposition,
    28  contained  in  a  trust  created  on  or after September first, nineteen
    29  hundred fifty-one, in favor of a class of persons described only as  the
    30  heirs,  next  of  kin or distributees, or by any term of like import, of
    31  the creator of the trust does not create a beneficial interest  in  such
    32  persons.
    33    (c)  If not all of the beneficiaries consent to a revocation or amend-
    34  ment of the trust under paragraph (a) of this section and the creator so
    35  consents, the revocation or amendment may be approved by the court in  a
    36  proceeding  brought  by  the  creator  or  a beneficiary if the court is
    37  satisfied that:
    38    (1) if all of the beneficiaries had consented, the  trust  could  have
    39  been modified or terminated under paragraph (a) of this section; and
    40    (2) the interests of a beneficiary who does not or cannot consent will
    41  be adequately protected; and
    42    (3)  the revocation or amendment will not jeopardize any tax described
    43  in paragraph (c) of section 7-A-3.15 of this part; and
    44    (4) the revocation or amendment will not  jeopardize  a  beneficiary's
    45  eligibility for, or a beneficiary's receipt of, public benefits or both.
    46    (d)  A  trustee  is not an interested person for the purposes of para-
    47  graph (c) of this section.
    48    (e) For the purposes of this section, a trustee who exercises a  power
    49  pursuant to section 7-A-8.18 of this article is not a creator.
    50  § 7-A-3.17 Modification  or termination because of unanticipated circum-
    51               stances or inability to administer trust effectively
    52    (a) The court may modify the administrative terms of a  trust  if  the
    53  modification, because of circumstances not anticipated by the settlor or
    54  for any other compelling reason, will further the purposes of the trust.
    55  To  the extent practicable, the modification shall be made in accordance
    56  with the settlor's probable intention.

        A. 7677                            24
 
     1    (b) The court may modify the dispositive terms of a trust, other  than
     2  a wholly charitable trust or a supplemental needs trust that conforms to
     3  the  provisions of section 7-A-3.8 of this part, or terminate such trust
     4  if, because of circumstances not anticipated by the  settlor,  including
     5  changes in law, modification or termination will further the purposes of
     6  the trust; provided, however, no modification allowing invasion of prin-
     7  cipal for an income beneficiary may be made if the trust terms expressly
     8  provide that the settlor does not intend an invasion of principal for an
     9  income  beneficiary's  health, education, maintenance or support. To the
    10  extent practicable, the modification shall be made  in  accordance  with
    11  the settlor's probable intention.
    12    (c)  Upon termination of a trust under this section, the trustee shall
    13  distribute the trust property in accordance with the terms of the  trust
    14  or as the court may otherwise direct.
    15  § 7-A-3.18 Cy pres
    16    The  rules  for  cy pres to be applied to this article are provided in
    17  subparagraph one of paragraph (c) of section 8-1.1 of this chapter.
    18  § 7-A-3.19 Modification or termination of uneconomical trust
    19    (a) After notice to the qualified  beneficiaries,  the  trustee  of  a
    20  trust  consisting  of  trust property having a total value less than one
    21  hundred  thousand  dollars  may  terminate  the  trust  if  the  trustee
    22  concludes that the value of the trust property is insufficient to justi-
    23  fy  the  cost of administration. Upon termination of a trust pursuant to
    24  this paragraph, the trustee shall distribute the trust property  as  the
    25  trustee determines will best effectuate the settlor's intention.
    26    (b)  The  court  may modify or terminate a trust or remove the trustee
    27  and appoint a different trustee if  it  determines,  under  the  circum-
    28  stances, that the value of the trust property is insufficient to justify
    29  the cost of administration. Upon termination of a trust pursuant to this
    30  paragraph,  the  trust property shall be distributed as the court deter-
    31  mines will best effectuate the  settlor's  intention.  Nothing  in  this
    32  paragraph  shall  be deemed to supersede the provisions of paragraph (c)
    33  of section 8-1.1 of this chapter governing a wholly charitable trust.
    34    (c) Notwithstanding paragraphs (a) and (b) of this  section,  a  trust
    35  shall  not  be terminated if the express terms of the trust prohibit its
    36  early termination.
    37    (d) This section shall not apply to:
    38    (1) an easement for conservation or preservation; or
    39    (2) a supplemental needs trust, pursuant to section  7-A-3.8  of  this
    40  part; or
    41    (3)  a wholly charitable trust, pursuant to subparagraph four of para-
    42  graph (c) of section 8-1.1 of this chapter.
    43  § 7-A-3.20 Reformation to correct mistakes
    44    The court may reform the terms of a trust,  even  if  unambiguous,  to
    45  conform  the  terms  to the settlor's intention if it is proved by clear
    46  and convincing evidence what the settlor's intent was and that  specific
    47  terms  of  the  trust  do not carry out that intent because the specific
    48  terms were affected by a mistake of fact or law, whether  in  expression
    49  or inducement.
    50  § 7-A-3.21 Modification  to  achieve settlor's tax or supplemental needs
    51               trust objectives
    52    (a) The court may modify the terms of a trust in a manner that is  not
    53  contrary  to  the  settlor's  probable intention in order to achieve the
    54  settlor's tax objectives or to conform such trust to the requirements of
    55  section 7-A-3.8 of this part. The court may provide that  the  modifica-
    56  tion has a retroactive effect.

        A. 7677                            25
 
     1    (b)  Cross  reference: For provisions regarding the limited power of a
     2  trustee to amend a trust for certain tax purposes, see  section  11-1.11
     3  of this chapter.
     4  § 7-A-3.22 Combination and division of trusts
     5    (a) After notice to the qualified beneficiaries, a trustee may combine
     6  two  or  more  trusts  into a single trust or divide a trust into two or
     7  more separate trusts and distribute the trust property to the trustee of
     8  each separate trust if the result does not  impair  the  rights  of  any
     9  beneficiary  or  adversely  affect  achievement  of  the purposes of the
    10  trust, including any tax purposes.
    11    (b) The court, having jurisdiction of an express trust, upon the peti-
    12  tion of the trustee or of any qualified beneficiary and upon  notice  to
    13  all  qualified  beneficiaries, may direct the combination of two or more
    14  trusts for any reason not directly contrary to the  primary  purpose  of
    15  each  trust,  or  may  direct  the establishment of two or more separate
    16  trusts for any reason not directly contrary to the  primary  purpose  of
    17  the trust.
    18    (c)  Unless the court otherwise directs, the trusts established pursu-
    19  ant to this section by the division of an existing trust shall be deemed
    20  to have been created as of the  date  the  divided  trust  was  created;
    21  provided  that  the  separate trusts created under paragraph (a) of this
    22  section may be deemed created, unless in violation  of  the  limitations
    23  pursuant  to sections 9-1.1, 10-8.1 and 10-8.2 of this chapter, upon the
    24  date or dates provided in the  instrument  or  instruments  required  by
    25  paragraph (g) of this section.
    26    (d)  Unless  the  court  directs otherwise, a trust established by the
    27  combination of two or more trusts under paragraph (a)  of  this  section
    28  shall be deemed to be created on the date specified by the trustee.
    29    (e)  Unless  the  court  directs  otherwise, and except as provided in
    30  paragraph (f) of this section, the property distributed to the  separate
    31  trust shall be fairly representative of appreciation or depreciation and
    32  shall  be  based upon the fair market value of the assets on the date or
    33  dates of the distributions of such assets to the separate trusts.
    34    (f) Where separate trusts are to  be  created  to  segregate  property
    35  transferred  in  trust  by  a  creator,  including but not limited to, a
    36  transfer treated as made by a spouse by reason of section  2513  of  the
    37  United  States Internal Revenue Code, from property transferred in trust
    38  by one of more different creators or from property transferred  pursuant
    39  to  a disposing instrument from property transferred by the same creator
    40  pursuant to another disposing instrument, paragraph (e) of this  section
    41  shall  not  apply  if  the  original assets transferred remain or can be
    42  traced.
    43    (g) Separate trusts or a  trust  resulting  from  the  combination  of
    44  existing trusts shall be established under paragraph (a) of this section
    45  by  an  instrument or instruments in writing, signed and acknowledged by
    46  the trustee. Such instruments shall be filed in the office of the  clerk
    47  of  the  court having jurisdiction over the trust; except that where the
    48  divided trust was a lifetime trust or where all of the  combined  trusts
    49  were lifetime trusts and the divided trust or all of the combined trusts
    50  have  not  been  the  subject  of  a proceeding in surrogate's court, no
    51  filing is required. Whether or not filing is required,  a  copy  of  the
    52  instrument or instruments shall be served on all qualified beneficiaries
    53  of  the trusts, or the guardian of the property, committee, conservator,
    54  adult guardian, or personal representative of such  persons,  by  regis-
    55  tered or certified mail, return receipt requested, or by personal deliv-

        A. 7677                            26

     1  ery  or  upon application of the trustee in any other manner directed by
     2  the court.
     3    (h)  In  any  case  where  the  Internal Revenue Code requires that an
     4  election or other action be made or taken by  the  executor,  or  if  no
     5  trustee  of  a  trust  under a will has qualified, the term "trustee" as
     6  used in this section shall mean the  executor  or  administrator  of  an
     7  estate. In any such case, the trustee shall comply with any action taken
     8  by the executor or administrator under this section.
     9    (i)  For  purposes  of this section, a division of a trust into two or
    10  more separate trusts to permit one or more such trusts to be governed by
    11  article eleven-A of this chapter and another one or more such trusts  to
    12  be  governed by section 11-2.4 of this chapter shall be deemed to be for
    13  a reason which is not directly contrary to the primary  purpose  of  the
    14  trust  unless  such division is expressly prohibited by the terms of the
    15  disposing instrument.
    16    (j) Unless the terms of the trust that is divided into separate trusts
    17  provide otherwise, the commissions allowed to a  trustee  as  determined
    18  pursuant  to  article  twenty-three of the SCPA, as amended from time to
    19  time, shall not be increased by reason of the establishment of  separate
    20  trusts  pursuant  to  this section unless the court otherwise permits an
    21  increase; provided, however, that such  trustee  shall  be  entitled  to
    22  charge  the  trust  for any additional reasonable and necessary expenses
    23  incurred in the administration of such separate trusts.
 
    24                     PART 4. BANK ACCOUNTS IN TRUST FORM
 
    25  § 7-A-4.1 Definitions
    26    For the purposes of this part, the  following  terms  shall  have  the
    27  following meanings:
    28    (a)  A "beneficiary" means a person who is described by a depositor as
    29  a person for whom a trust account is established or maintained.
    30    (b) A "depositor" means a person in whose name a trust account subject
    31  to this part is established or maintained.
    32    (c) A "financial institution" means a bank,  trust  company,  national
    33  banking  association,  savings  bank,  industrial  bank, private banker,
    34  foreign banking corporation, federal savings  and  loan  association,  a
    35  savings  institution  chartered  and supervised as a savings and loan or
    36  similar institution under federal law or the laws of a state, a  federal
    37  credit  union, or a credit union chartered and supervised under the laws
    38  of a state.
    39    (d) A "trust account" means a savings, share, certificate  or  deposit
    40  account in a financial institution established by a depositor describing
    41  himself  or  herself  as  trustee  for  another,  other than a depositor
    42  describing himself or herself as acting under a will,  trust  instrument
    43  or other instrument, court order or decree.
    44  § 7-A-4.2 Terms of a trust account
    45    The  funds  in  a  trust account, which shall include any dividends or
    46  interest thereon, shall be trust funds subject to the following terms:
    47    (a) The trust can be revoked, terminated or modified by the  depositor
    48  during his or her lifetime only by means of, and to the extent of, with-
    49  drawals  from or charges against the trust account made or authorized by
    50  the depositor or by a writing which specifically names  the  beneficiary
    51  and  the  financial  institution.  The  writing shall be acknowledged or
    52  proved in the manner required to entitle conveyances of real property to
    53  be recorded and shall be filed with the  financial  institution  wherein
    54  the account is maintained.

        A. 7677                            27
 
     1    (b)  A trust can be revoked, terminated or modified by the depositor's
     2  will only by means of, and  to  the  extent  of,  an  express  direction
     3  concerning  such  trust account, which shall be described in the will as
     4  being in trust for a named beneficiary in a named financial institution.
     5  Where  the  depositor  has  more than one trust account for a particular
     6  beneficiary in a particular financial institution, such a direction will
     7  affect all such accounts, unless the direction is limited to one or more
     8  accounts specifically identified by account number in  addition  to  the
     9  foregoing   requirements.  A  testamentary  revocation,  termination  or
    10  modification pursuant to this paragraph can be affected by express words
    11  of revocation, termination or modification, or by a specific bequest  of
    12  the  trust account, or any part of it, to someone other than the benefi-
    13  ciary. A bequest or part of a trust account shall operate as a pro tanto
    14  revocation to the extent of the bequest.
    15    (c) If the depositor survives the beneficiary, the trust shall  termi-
    16  nate  and  title  to  the funds shall continue in the depositor free and
    17  clear of the trust.
    18    (d) If the beneficiary survives the  depositor,  and  the  depositor's
    19  will  contains no provision revoking, terminating or modifying the trust
    20  account under paragraph (b) of this section, the trust  shall  terminate
    21  and  title  to the funds shall vest in the beneficiary free and clear of
    22  the trust, subject to the rules for cy pres,  pursuant  to  subparagraph
    23  one  of paragraph (c) of section 8-1.1 of this chapter, if the benefici-
    24  ary is a charitable organization that at  the  time  of  vesting  or  of
    25  payment of the funds is not in existence or is not carrying out charita-
    26  ble activities or if the circumstances otherwise support the application
    27  of  cy  pres, and further subject to the provisions of section one thou-
    28  sand two-a of the not-for-profit corporation law if the beneficiary is a
    29  dissolved or dissolving charitable corporation  to  which  such  section
    30  applies.  The application of cy pres shall take precedence over the rule
    31  governing payment to multiple beneficiaries pursuant to paragraph (b) of
    32  section 7-A-4.6 of this part.
    33    (e) If the beneficiary survives the depositor and the depositor's will
    34  contains language sufficient under paragraph (b)  of  this  section,  to
    35  revoke, terminate or modify the trust, in whole or in part, that part of
    36  the trust which is affected shall terminate and title to the funds shall
    37  be subject to disposition by the depositor's will, free and clear of the
    38  trust.
    39  § 7-A-4.3 Payment to beneficiary
    40    (a)  If the beneficiary survives the depositor under the circumstances
    41  provided in paragraph (d) of section 7-A-4.2 of  this  part,  the  funds
    42  shall  be paid to the beneficiary upon his or her order, if, at the time
    43  of his or her demand for payment of all or part of the funds, he or  she
    44  is eighteen or more years of age.
    45    (b)  If the beneficiary survives the depositor under the circumstances
    46  provided in paragraph (d) of section 7-A-4.2 of this part,  and  if  the
    47  beneficiary  is  under  eighteen  years  of  age  at the time demand for
    48  payment of any part or all of the funds is made, the funds may  be  paid
    49  to  the order of the parent or parents of the beneficiary to be held for
    50  the use and benefit of such infant beneficiary or to the  order  of  the
    51  duly appointed guardian of the property of the beneficiary, if the funds
    52  are equal to or are less than ten thousand dollars; but if the funds are
    53  more  than  ten  thousand  dollars,  the funds shall be paid only to the
    54  order of the duly appointed guardian of the property of the beneficiary.
    55  § 7-A-4.4 Effect of payment

        A. 7677                            28
 
     1    A financial institution which upon the death of a depositor and, prior
     2  to service upon it of a restraining order, injunction or other appropri-
     3  ate process from a court of competent jurisdiction prohibiting  payment,
     4  makes  payment to a beneficiary, or if the beneficiary is under eighteen
     5  years  of  age,  to  the  guardian  of  the property or to the parent or
     6  parents of the infant pursuant to section 7-A-4.3 of this  part,  shall,
     7  to  the extent of such payment, be released from liability to any person
     8  claiming a right to the funds and the  receipt  or  acquittance  of  the
     9  person  to  whom payment is made shall be a valid and sufficient release
    10  and discharge of the financial institution.
    11  § 7-A-4.5 Joint depositors
    12    If a trust account is established in the names of more than one depos-
    13  itor, in a form to be paid or delivered to any, or the survivor of them,
    14  in trust for another, such account shall be subject to the terms of this
    15  part, except that the title to the funds  on  deposit,  as  between  the
    16  depositors, shall be governed by article XIII-E of the banking law.
    17  § 7-A-4.6 Multiple beneficiaries
    18    (a) Whenever any proceeds of a trust account would pass to two or more
    19  beneficiaries,  pursuant  to section 7-A-4.2 of this part, such proceeds
    20  shall pass to such beneficiaries in equal proportions, unless the  terms
    21  of the trust provide otherwise.
    22    (b) Whenever any proceeds of a trust account would pass to two or more
    23  beneficiaries, pursuant to section 7-A-4.2 of this part, and one or more
    24  of the beneficiaries predeceases the depositor, such proceeds shall pass
    25  to  the  surviving  beneficiary  or  beneficiaries in equal proportions,
    26  unless the terms of the trust provide otherwise or unless the  rules  of
    27  cy pres take precedence, pursuant to section 7-A-4.2 of this part.
    28  § 7-A-4.7 Application
    29    This  part  shall  apply  to  all  funds in trust accounts, as defined
    30  pursuant to paragraph (d) of section 7-A-4.1 of this part, which are  in
    31  existence  on  the  effective  date  of  this  article,  except that its
    32  provisions shall not impair or defeat  any  rights  which  have  accrued
    33  prior to such date.
    34  § 7-A-4.8 Rights not affected
    35    This part shall not affect:
    36    (a) the rights of creditors of the depositor or his or her estate; or
    37    (b) the rights of fiduciaries of the estate of the depositor; or
    38    (c) the rights of the surviving spouse of the depositor.
 
    39       PART 5. RIGHTS OF BENEFICIARIES AND CREDITORS; SPENDTHRIFT AND
    40                            DISCRETIONARY TRUSTS
 
    41  § 7-A-5.1 Rules  regarding transfer of income in trust; rights of credi-
    42              tors
    43    (a) A right of a beneficiary to receive income from property and apply
    44  it to the use of or pay it to any  person  may  not  be  transferred  by
    45  assignment  or  otherwise  unless a power to transfer such right, or any
    46  part thereof, is conferred  upon  such  beneficiary  by  the  instrument
    47  creating  or declaring the trust. The provisions of this paragraph shall
    48  not apply to:
    49    (1) a beneficiary's income interest with  respect  to  trust  property
    50  attributable to such beneficiary; or
    51    (2)  the proceeds of a life insurance policy, pursuant to section 7-A-
    52  5.3 of this part.
    53    (b) Notwithstanding paragraph (a) of this section:

        A. 7677                            29
 
     1    (1) The beneficiary of a trust who has the  right  to  receive  income
     2  from  property  and  apply it to the use of or pay it to any person may,
     3  unless otherwise provided in the instrument creating or  declaring  such
     4  trust,  transfer  any  amount  in  excess of ten thousand dollars of the
     5  annual  income  to  which the beneficiary is entitled from such trust to
     6  the spouse, issue, ancestors, brothers, sisters, uncles, aunts,  nephews
     7  or  nieces  of such beneficiary, or to a trustee, guardian for property,
     8  committee, conservator, curator, custodian, or  the  donee  of  a  power
     9  during  minority  for  the  benefit only of any such person bearing such
    10  relationship  to  the  beneficiary.  Provided  that  such  transfer   is
    11  evidenced by a written instrument that is signed and acknowledged by the
    12  beneficiary  and delivered to the trustee of the trust, together with an
    13  affidavit by the beneficiary that such transfer and  any  like  transfer
    14  concurrently  in effect are for all or part of the excess over ten thou-
    15  sand dollars of the annual income from such trust to which such  benefi-
    16  ciary  is entitled, and that the beneficiary has not received and is not
    17  to receive any consideration in money or money's worth for the transfer.
    18    (2) Any such transfer shall be effective in any year only as to income
    19  from such trust in excess of ten thousand dollars to which such  benefi-
    20  ciary  is  entitled,  and  for this purpose, all previous like transfers
    21  applicable to a given year shall be taken into account. If two  or  more
    22  transfers  are  made  in or for any year in a total amount exceeding the
    23  sum of ten thousand dollars, transferees shall be preferred in the order
    24  in which the instruments of transfer were delivered to the trustee.
    25    (3) A trustee shall be exonerated and fully discharged for any payment
    26  made to a transferee in reliance  on  the  affidavit  of  a  beneficiary
    27  pursuant to subparagraph one of this paragraph.
    28    (4)  The provisions of this paragraph shall not apply to sections 7-A-
    29  5.3 and 7-A-5.5 of this part.
    30    (c) A transferee of income may, if he or she has not  received  or  is
    31  not  to  receive  any  consideration in money or money's worth therefor,
    32  make a further transfer of such income  only  to  one  or  more  of  the
    33  permissible transferees referred to in subparagraph one of paragraph (b)
    34  of  this section, other than a prior transferor; provided, however, that
    35  upon the death of a transferee, any income not so transferred by him  or
    36  her shall be an asset of his or her estate, subject to his or her testa-
    37  mentary  disposition  or  passing  to  his or her distributees under the
    38  statutes of descent and distribution.
    39    (d) A beneficiary who has the right to receive the income from proper-
    40  ty and apply it to the use of or pay it to any person, is not  precluded
    41  by anything contained in this section from transferring by assignment or
    42  otherwise  any  part  or  all  of  such  income to or for the benefit of
    43  persons whom the beneficiary is legally obligated to support.
    44    (e) To the extent a trust  beneficiary  validly  transfers  an  income
    45  interest  during his or her lifetime or at death if the interest has not
    46  terminated, the transferee becomes a beneficiary of the trust.
    47    (f) A beneficiary's income interest is subject to the claims of credi-
    48  tors of the beneficiary to the extent provided by law, including article
    49  fifty-two of the civil practice law and rules and sections  7-A-5.4  and
    50  7-A-5.7 of this part.
    51  § 7-A-5.2 Rules  regarding  transfer  of  principal  interests in trust;
    52               rights of creditors
    53    (a) For all trusts created prior to the effective date of  this  arti-
    54  cle,  the  right of a beneficiary of a trust to receive principal may be
    55  transferred by assignment or otherwise, unless such transfer is  prohib-
    56  ited by the instrument creating or declaring the trust. Such a provision

        A. 7677                            30
 
     1  shall not apply to a beneficiary's interest in principal with respect to
     2  property attributable to that trust beneficiary.
     3    (b)  For  all  trusts  created  on or after the effective date of this
     4  article, the right of a beneficiary of  a  trust  to  receive  principal
     5  shall  not  be transferred by assignment or otherwise, unless a power to
     6  transfer such right, or any part thereof, is conferred upon such benefi-
     7  ciary by the instrument creating or declaring the trust.  The provisions
     8  of this paragraph shall not apply to a beneficiary's interest in princi-
     9  pal with respect to property attributable to that trust beneficiary,  or
    10  to  proceeds  of  a life insurance policy pursuant to section 7-A-5.3 of
    11  this part.
    12    (c) Whenever a trust is created:
    13    (1) to the extent a trust beneficiary validly transfers an interest in
    14  principal during lifetime or at death if the  interest  has  not  termi-
    15  nated, the transferee becomes a beneficiary of the trust.
    16    (2)  a beneficiary's interest in principal is subject to the claims of
    17  creditors of the beneficiary to the extent provided  by  law,  including
    18  article  fifty-two  of  the  civil  practice law and rules, and sections
    19  7-A-5.4 and 7-A-5.7 of this part.
    20  § 7-A-5.3 When proceeds of life insurance policy inalienable
    21    The proceeds of a life insurance policy which, under a trust or  other
    22  agreement,  are  upon  the  death of the insured left with the insurance
    23  company shall not be:
    24    (a) transferred;
    25    (b) subject to commutation or encumbrance; or
    26    (c) subject to legal process except in an action for  necessaries,  if
    27  provisions  to  such  effect  were  incorporated  in such trust or other
    28  agreement.
    29  § 7-A-5.4 Special  creditor  exceptions  to  restraints  on  involuntary
    30              alienation
    31    (a) An order of support directing the payment of alimony, maintenance,
    32  support  or child support may be enforced against the income interest of
    33  a beneficiary who is subject to a  spendthrift  provision,  pursuant  to
    34  section  five  thousand  two hundred forty-one of the civil practice law
    35  and rules, and against  a  principal  interest  that  is  subject  to  a
    36  spendthrift provision.
    37    (b) A spendthrift provision shall be unenforceable against:
    38    (1)  a  judgment creditor who has provided goods or performed services
    39  suitable to the condition in  life  of  the  person  to  whom  they  are
    40  furnished or for whose benefit they are performed, and which meet his or
    41  her  actual  needs  at  the time such goods are provided or services are
    42  performed;
    43    (2) a judgment creditor who has provided services for  the  protection
    44  of a beneficiary's interest in the trust; and
    45    (3) a claim of this state or the United States to the extent a statute
    46  of this state or federal law so provides.
    47    (c)  Nothing in this section shall be construed to limit the rights of
    48  creditors as otherwise provided by law.
    49  § 7-A-5.5 Discretionary trusts
    50    (a) A beneficiary shall not transfer his or  her  discretionary  trust
    51  interest whether or not the interest is spendthrifted.
    52    (b)  A  beneficiary's discretionary trust interest shall be subject to
    53  the claims of creditors of the beneficiary to  the  extent  provided  by
    54  law, including section 7-A-5.7 of this part and article fifty-two of the
    55  civil practice law and rules.

        A. 7677                            31
 
     1    (c)  A  beneficiary of a discretionary trust interest has the right to
     2  maintain a judicial  proceeding  against  a  trustee  for  an  abuse  of
     3  discretion or failure to comply with a standard for distribution.
     4  § 7-A-5.6 Creditor's  claim  against  trust  contributor  to a revocable
     5              trust
     6    (a) Whether or  not  the  terms  of  a  trust  contain  a  spendthrift
     7  provision, the following rules shall apply:
     8    (1)  During  the  lifetime of the trust contributor, the property of a
     9  trust which is revocable by the trust contributor shall  be  subject  to
    10  claims of the trust contributor's creditors.
    11    (2)  After  the death of a trust contributor, and subject to the trust
    12  contributor's right to direct the source from which liabilities shall be
    13  paid, the property of a trust over which immediately  before  the  trust
    14  contributor's  death  the  trust  contributor has the power to revoke is
    15  subject to claims of the trust contributor's creditors, costs of  admin-
    16  istration  of  the  trust  contributor's estate, and the expenses of the
    17  trust contributor's funeral and  disposal  of  the  trust  contributor's
    18  remains  to  the  extent  the  settlor's probate estate is inadequate to
    19  satisfy those claims, costs, and expenses.
    20    (b) For purposes of paragraph (a) of this  section,  a  trust  created
    21  before  the  date  of the enactment of this article is a revocable trust
    22  only if the creator reserved an unqualified power of revocation pursuant
    23  to section 10-10.6 of this chapter.
    24    (c) During the period the holder of a power of withdrawal may exercise
    25  such power, the property subject to the power is subject to  the  claims
    26  of  the  powerholder's  creditors,  the  creditors  of the powerholder's
    27  estate and the expense of administering the powerholder's estate to  the
    28  extent provided pursuant to section 10-7.2 of this chapter.
    29  § 7-A-5.7 Creditor  claims to property contributed to a trust by a trust
    30              beneficiary
    31    (a) To the extent that a beneficiary's trust interest is  attributable
    32  to  property  contributed by a beneficiary, whether or not the benefici-
    33  ary's interest is subject to a spendthrift provision,  the  interest  is
    34  subject to the claims of the beneficiary's existing or subsequent credi-
    35  tors.
    36    (b) For the purposes of paragraph (a) of this section, upon the lapse,
    37  release,  or waiver of a power of withdrawal, the holder of the power of
    38  withdrawal is treated as making a contribution of property to the  trust
    39  only  to  the  extent  the  value of the property affected by the lapse,
    40  release, or waiver exceeds the greatest amount specified at the time  of
    41  the  lapse, release, or waiver in section 2041(b)(2), 2503(b) or 2514(e)
    42  of the Internal Revenue Code.
    43    (c) Paragraph (a) of this section shall not apply to property contrib-
    44  uted by a beneficiary to a trust for the beneficiary's spouse:
    45    (1) described in section 2523(e) of the Internal Revenue Code; or
    46    (2) for which the election described in section 2523(f) of the  Inter-
    47  nal Revenue Code has been made; and
    48    (3) to a trust to the extent the assets of such trust are attributable
    49  to a trust described in either subparagraph one or two of this paragraph
    50  after the death of the beneficiary's spouse.
    51    (d)  A  provision  in  any trust, other than a testamentary trust or a
    52  trust which meets the requirements of subparagraph two of paragraph  (b)
    53  of  subdivision  two  of  section  three hundred sixty-six of the social
    54  services law and of the regulations implementing such provisions,  which
    55  provides  directly  or  indirectly  for  the  suspension, termination or
    56  diversion of the principal, income or beneficial interest of either  the

        A. 7677                            32
 
     1  creator  or  the creator's spouse in the event that the creator or crea-
     2  tor's spouse should apply for medical  assistance  or  require  medical,
     3  hospital or nursing care or long term custodial, nursing or medical care
     4  shall  be  void  as  against the public policy of the state of New York,
     5  without regard to the irrevocability of the trust  or  the  purpose  for
     6  which the trust was created.
     7    (e)  Paragraph  (a)  of  this section shall not apply by reason of the
     8  trustee's authority to pay  trust  income  or  principal  to  the  trust
     9  contributor  pursuant  to  section  7-A-8.17  of this article. Nor shall
    10  paragraph (a) of this section apply where the trustee, as defined pursu-
    11  ant to paragraph (b) of section  7-A-8.17  of  this  article,  shall  be
    12  authorized  under  the trust instrument or any other provision of law to
    13  pay or reimburse the trust contributor for any tax on  trust  income  or
    14  trust  principal  that is payable by the trust contributor under the law
    15  imposing such tax or to pay any such tax directly to the taxing authori-
    16  ties. No creditor of a trust contributor shall be entitled to reach  any
    17  trust property based on the discretionary powers described in this para-
    18  graph.
    19    (f)  Cross-reference:  For  provisions  regarding  protections  for  a
    20  debtor's benefits under  the  terms  of  a  specified  retirement  plan,
    21  savings  plan,  or individual retirement account, see subdivision (c) of
    22  section five thousand two hundred five of the  civil  practice  law  and
    23  rules.
    24  § 7-A-5.8 Overdue distribution
    25    (a) For the purposes of this section, "mandatory distribution" means a
    26  distribution  of  income  or  principal which the trustee is required to
    27  make to a beneficiary under the terms of the trust, including a distrib-
    28  ution upon termination of the  trust.  The  term  shall  not  include  a
    29  distribution subject to the exercise of the trustee's discretion even if
    30  the  discretion  is expressed in the form of a standard of distribution,
    31  or the terms of the trust authorizing a distribution couple language  of
    32  discretion with language of direction.
    33    (b)  Whether or not a trust contains a spendthrift provision, a credi-
    34  tor may compel the trustee to make a mandatory distribution of income or
    35  principal, including a distribution upon termination of  the  trust,  to
    36  the  beneficiary  if  the  trustee  has not made the distribution to the
    37  beneficiary within a reasonable time after the  designated  distribution
    38  date.
    39  § 7-A-5.9 Personal obligations of trustee
    40    Trust  property  shall  not  be subject to personal obligations of the
    41  trustee, even if the trustee becomes insolvent or bankrupt.
 
    42                          PART 6. REVOCABLE TRUSTS
 
    43  § 7-A-6.1 Capacity of trust contributor of revocable trust
    44    The trust contributor's capacity to  create,  amend,  revoke,  or  add
    45  property  to  a revocable trust, or to direct the actions of the trustee
    46  of a revocable trust, is the same as  that  required  to  make  a  will.
    47  Notwithstanding the foregoing, the trust contributor's capacity required
    48  to  irrevocably  release  a power to revoke or amend such a trust is the
    49  same as that required to make a gift.
    50  § 7-A-6.2 Revocation or amendment of revocable trust
    51    (a) If a revocable trust has more than one trust contributor:
    52    (1) to the extent the trust consists of community property, the  trust
    53  may  be  revoked by either spouse acting alone but shall be amended only
    54  by joint action of both spouses;

        A. 7677                            33
 
     1    (2) to the extent the trust consists of property other than  community
     2  property,  each  trust  contributor  may  revoke or amend the trust with
     3  regard to the portion of the trust property attributable to  such  trust
     4  contributor's contribution; and
     5    (3) upon the revocation or amendment of the trust by fewer than all of
     6  the  trust  contributors,  the  trustee  shall promptly notify the other
     7  trust contributors of such revocation or amendment.
     8    (b) The trust contributor may revoke or amend a revocable trust:
     9    (1) by substantially complying with any method provided in  the  terms
    10  of the trust requiring a writing; or
    11    (2)  if  the  terms of the trust do not provide a method or the method
    12  provided in the terms is not expressly made exclusive, by:
    13    (A) a later will that expressly refers to the trust  or  a  particular
    14  provision thereof; or
    15    (B) by executing an instrument that both expressly refers to the trust
    16  or  a particular provision thereof and complies with the formalities for
    17  the creation of a lifetime trust as provided pursuant to  paragraph  (c)
    18  of  section  7-A-3.3  of  this article, and such revocation or amendment
    19  shall take effect as of the date of such execution.
    20    (c) Upon the revocation of a revocable trust, the trustee shall deliv-
    21  er the trust property as the trust contributor directs.
    22    (d) A trust contributor's powers with respect  to  revocation,  amend-
    23  ment,  or  distribution  of  trust property may be exercised by an agent
    24  under a power of attorney only to the extent expressly authorized by the
    25  terms of the trust, the power of attorney, or by law.
    26    (e) A guardian of the trust contributor may exercise a trust contribu-
    27  tor's powers with respect to revocation, amendment, or  distribution  of
    28  trust property only with the approval of the court supervising the guar-
    29  dianship.
    30    (f)  A  trustee  who  does  not  know that a trust has been revoked or
    31  amended shall not be liable  to  the  trust  contributor  or  the  trust
    32  contributor's  successors  in  interest for distributions made and other
    33  actions taken on the assumption that such trust had not been amended  or
    34  revoked.
    35    (g) Written notice of an amendment or revocation by the trust contrib-
    36  utor  shall  be delivered to at least one other trustee within a reason-
    37  able time if the trust contributor is not the sole trustee, but  failure
    38  to  give  such  notice shall not affect the validity of the amendment or
    39  revocation, or the date upon which the  amendment  or  revocation  shall
    40  take  effect. No trustee shall be liable for any act reasonably taken in
    41  reliance on an existing trust instrument  prior  to  actual  receipt  of
    42  notice  of  amendment  or revocation thereof. Absent written consent, no
    43  trustee shall be liable for the failure to comply with an amendment that
    44  expands, restricts or otherwise modifies the trustee's  duties,  powers,
    45  obligations, or compensation for a period of sixty days after receipt of
    46  notice of amendment.
    47    (h)  Cross-reference:  For  provisions regarding lifetime trusts being
    48  irrevocable unless the terms of the trust expressly  provide  otherwise,
    49  see paragraph (e) of section 7-A-3.3 of this article.
    50  § 7-A-6.3 Rights and duties in revocable trusts; powers of withdrawal
    51    (a)  While  a trust is revocable, the trustee shall follow a direction
    52  of the person having the unqualified power to revoke such trust that  is
    53  contrary  to the terms of the trust, unless the trustee has actual know-
    54  ledge of the settlor's lack of capacity. The trustee shall not be liable
    55  for complying with the terms of the revocable trust or  any  revocation,

        A. 7677                            34
 
     1  amendment  or  direction  by the settlor when the settlor lacks capacity
     2  unless the trustee has actual knowledge of the lack of capacity.
     3    (b)  While  a  trust  is  revocable and the person having the power to
     4  revoke such trust is the only present beneficiary,  the  rights  of  all
     5  other  beneficiaries  are  subject  to the control of, the duties of the
     6  trustee are owed exclusively to, and the trustee is exclusively account-
     7  able to such person having the power to revoke the trust.
     8    (c) After the death of a person, pursuant to  paragraph  (b)  of  this
     9  section:
    10    (1)  the  personal representative of such person has standing to peti-
    11  tion the court for an order compelling the trustee to  account  for  the
    12  period before the death of the person having the power to revoke and has
    13  standing to file objections on the grounds that the trustee violated the
    14  trustee's duties to the person having the power to revoke; and
    15    (2) the beneficiaries of the trust have standing to petition the court
    16  for an order compelling the trustee to account for the period before the
    17  death of the person having the power to revoke and have standing to file
    18  objections on the grounds that the trustee violated the trustee's duties
    19  to  the  person having the power to revoke and consequently impaired the
    20  interests of the objecting beneficiaries in such trust.
    21    (d) If the person having the power  to  revoke  the  trust  loses  the
    22  capacity  to  exercise the power to revoke and if by reason of that loss
    23  of capacity additional  persons  become  present  beneficiaries  of  the
    24  trust,  the  trustee's duties shall be owed to those persons as well, so
    25  long as they are present beneficiaries of the trust.
    26    (e) During the period the power to revoke the trust may be  exercised,
    27  the  holder  of  a non-lapsing power of withdrawal shall be treated, for
    28  the purposes of paragraphs (a) and (b) of this section, as if the holder
    29  of the non-lapsing power of withdrawal were the person having a power to
    30  revoke the trust to the extent of the property subject to such power.
    31  § 7-A-6.4 Limitations on action contesting validity of revocable  trust;
    32              distribution of trust property
    33    (a) The following persons may commence a judicial proceeding after the
    34  settlor's death to contest the validity of a trust that was revocable at
    35  the settlor's death:
    36    (1) the personal representative of the settlor;
    37    (2)  the trustee of a trust created under the will of the settlor duly
    38  admitted to probate by a court of competent jurisdiction;
    39    (3) the trustee of a trust to which a disposition was validly made  by
    40  the will of the settlor duly admitted to probate by a court of competent
    41  jurisdiction;
    42    (4)  an  adversely-affected  beneficiary  of  the  will of the settlor
    43  admitted to probate by any court of competent jurisdiction, or the guar-
    44  dian of or the agent duly authorized under a power of  attorney  granted
    45  by such beneficiary;
    46    (5)  the  attorney general if an adversely-affected beneficiary of the
    47  will of the settlor admitted to probate by any court of competent juris-
    48  diction is a charitable organization or an unnamed charitable  benefici-
    49  ary; or
    50    (6) any adversely-affected distributee of the settlor.
    51    A  person  who  has  been issued limited letters under SCPA 702(9) may
    52  also commence a proceeding under this paragraph.
    53    (b) A petition to contest the validity of a revocable trust  shall  be
    54  filed by the earlier of:

        A. 7677                            35
 
     1    (1)  six  years  after  the  settlor's  death in the case of trusts in
     2  existence on the effective date of this article, and in all other cases,
     3  three years after the settlor's death; or
     4    (2)  one  hundred  twenty  days  after  the  trustee sent the persons,
     5  described pursuant to paragraph (a) of this section, a copy of the trust
     6  instrument and a notice informing such persons of the trust's existence,
     7  of the trustee's name and address, and of the time allowed for  commenc-
     8  ing  a  proceeding.  Notice  given  to  some but not all of the persons,
     9  described pursuant to paragraph (a) of this section is effective only as
    10  to the person or persons receiving such notice.
    11    (c) Process shall issue to the following persons if not petitioners:
    12    (1) all trustees of the trust that  was  revocable  at  the  settlor's
    13  death;
    14    (2)  all  persons  designated  as  beneficiaries in the trust that was
    15  revocable at the settlor's death;
    16    (3) all distributees of the settlor, unless the court  dispenses  with
    17  such process;
    18    (4) the administrator of the settlor's estate, if any;
    19    (5) the executor or executors named in and the beneficiaries under the
    20  will  of  the  settlor admitted to probate or offered for probate in any
    21  court of competent jurisdiction;
    22    (6) the trustee of a trust to which a disposition was validly made  by
    23  the  will of the settlor duly admitted to probate or offered for probate
    24  in a court of competent jurisdiction;
    25    (7) the attorney general if  the  trust  that  was  revocable  at  the
    26  settlor's death is a charitable trust; and
    27    (8)  such other persons as the court in its discretion may deem neces-
    28  sary.
    29    (d) In any proceeding concerning the validity  of  a  trust  that  was
    30  revocable  at  the  settlor's death, the burden of proof on the issue of
    31  the settlor's capacity, due execution, the existence of undue influence,
    32  and the existence of fraud shall be on the person or persons seeking  to
    33  challenge the validity of the trust instrument.
    34    (e) Upon the death of the settlor of a trust that was revocable at the
    35  settlor's death, the trustee may proceed to distribute the trust proper-
    36  ty  in  accordance with the terms of the trust. The trustee shall not be
    37  subject to liability for doing so, unless:
    38    (1) the trustee knows of a pending judicial proceeding contesting  the
    39  validity of the trust; or
    40    (2)  a  potential  contestant  has  notified the trustee of a possible
    41  judicial proceeding to contest the trust and a  judicial  proceeding  is
    42  commenced within sixty days after the contestant sent the notification.
    43    (f)  A  beneficiary of a trust that is determined to have been invalid
    44  shall be liable to return any distribution received.
    45    (g) Where applicable, this section shall apply to a trust  contributor
    46  who is not a settlor.

    47                          PART 7. OFFICE OF TRUSTEE
 
    48  § 7-A-7.1 Accepting or declining trusteeship of a lifetime trust
    49    (a)  Except  as otherwise provided in paragraph (c) of this section, a
    50  person designated as trustee of a lifetime trust shall accept the  trus-
    51  teeship by:
    52    (1)  complying  with  the execution requirements pursuant to paragraph
    53  (c) of section 7-A-3.3 of this article; or

        A. 7677                            36
 
     1    (2) substantially complying with a method of  acceptance  provided  in
     2  the terms of the trust; or
     3    (3)  accepting  delivery  of  the trust property, exercising powers or
     4  performing duties as trustee, or otherwise indicating acceptance of  the
     5  trusteeship,  if  the  terms of the trust do not provide a method or the
     6  method provided in the terms is not expressly made exclusive.
     7    (b) A person designated as trustee of a lifetime trust who has not yet
     8  accepted the trusteeship may reject the trusteeship. A designated  trus-
     9  tee  of  a  lifetime  trust who does not accept the trusteeship within a
    10  reasonable time after knowing of the  designation  and  knowing  of  the
    11  occurrence  of  the event that makes the designation effective is deemed
    12  to have rejected the trusteeship.
    13    (c) A person designated  as  trustee  of  a  lifetime  trust,  without
    14  accepting the trusteeship, may:
    15    (1)  act  to  preserve the trust property if, within a reasonable time
    16  after acting, such person sends a rejection of the  trusteeship  to  the
    17  settlor  or,  if  the  settlor is dead or lacks capacity, to a qualified
    18  beneficiary; and
    19    (2) inspect or  investigate  trust  property  to  determine  potential
    20  liability under environmental or other law or for any other purpose.
    21  § 7-A-7.2 Trustee's bond
    22    (a)  Except  as  provided  in SCPA 710(2) and by paragraph (c) of this
    23  section, a trustee shall give bond to secure performance  of  the  trus-
    24  tee's  duties  only  if the court finds that a bond is needed to protect
    25  the interests of the beneficiaries or is required by the  terms  of  the
    26  trust and the court has not dispensed with the requirement.
    27    (b)  The  court may specify the amount of a bond, its liabilities, and
    28  whether sureties are necessary. The court may modify or terminate a bond
    29  at any time.
    30    (c) A trust company, as defined pursuant to subdivision two of section
    31  two of the banking law, any bank authorized to exercise fiduciary powers
    32  and any national bank having a principal, branch or trust office in this
    33  state and duly authorized to exercise fiduciary powers need not  give  a
    34  bond  unless  a bond is expressly required of such trust company or bank
    35  by the terms of the trust.
    36  § 7-A-7.3 Co-trustees
    37    (a) Co-trustees who are unable to  reach  a  unanimous  decision  with
    38  respect to the exercise of a joint power may act by majority decision.
    39    (b) If a vacancy occurs in a co-trusteeship, the remaining co-trustees
    40  may continue to act as trustees.
    41    (c)  A  co-trustee  shall  participate  in  carrying out the trustee's
    42  duties and in exercising joint powers unless the co-trustee is  unavail-
    43  able  to do so because of absence, illness, disqualification under other
    44  law, or other temporary incapacity or the co-trustee has properly deleg-
    45  ated the performance of the duty or exercise of the joint  power  to  an
    46  agent or another trustee pursuant to section 7-A-8.7 of this article.
    47    (d)  If a co-trustee is either unwilling to perform duties or exercise
    48  joint powers or is unavailable  to  perform  duties  or  exercise  joint
    49  powers because of absence, illness, disqualification under other law, or
    50  other  temporary  incapacity,  and prompt action is necessary to achieve
    51  the purposes of the trust or to avoid injury to the trust property,  the
    52  remaining co-trustee or a majority of the remaining co-trustees may act.
    53    (e)  The  rules  for  delegation  by  a trustee to another trustee are
    54  provided in paragraph (e) of section 7-A-8.7 of this article.
    55    (f) Except as otherwise provided in paragraph (h) of this  section,  a
    56  trustee  who  does not join in an action of another trustee shall not be

        A. 7677                            37
 
     1  liable for the action if such trustee is  unavailable  to  join  in  the
     2  action  due  to  absence,  illness,  disqualification under other law or
     3  other temporary incapacity, or if such trustee  has  properly  delegated
     4  the  performance of the action pursuant to section 7-A-8.7 of this arti-
     5  cle.
     6    (g) Except as otherwise provided in paragraph (h) of this  section,  a
     7  dissenting trustee who joins in carrying out a decision of a majority of
     8  the  trustees  and who notified in writing any co-trustee of the dissent
     9  at or before the time of carrying out the decision shall not  be  liable
    10  for the consequences of the majority decision.
    11    (h) A trustee shall not be excused from liability for failing to exer-
    12  cise reasonable care to:
    13    (1) prevent a co-trustee from committing a breach of trust; and
    14    (2) compel a co-trustee to redress a breach of trust.
    15    (i)  For  the  purposes of this section, a joint power shall include a
    16  power in a  trustee  to  invade  trust  principal  pursuant  to  section
    17  7-A-8.18  of  this article or under the terms of the dispositive instru-
    18  ment.
    19    (j) Cross-reference: For provisions  regarding  excluded  co-trustees,
    20  see section 7-A-5.1 of this article.
    21  § 7-A-7.4 Application to excluded co-trustee
    22    (a)  If the terms of the trust confer upon a co-trustee, to the exclu-
    23  sion of another co-trustee, the  power  to  take  certain  actions  with
    24  respect  to  the trust, including the power to direct or prevent certain
    25  actions of the trustees, the duties  and  liabilities  of  the  excluded
    26  trustee are as follows:
    27    (1)  If the terms of the governing instrument confer upon the co-trus-
    28  tee the power to direct certain actions of  the  excluded  trustee,  the
    29  excluded  trustee  shall  act in accordance with the direction and shall
    30  have no duty to act in the absence of such direction and  shall  not  be
    31  liable,  individually or as a fiduciary, for any loss resulting directly
    32  or indirectly from compliance with the direction, unless compliance with
    33  such direction  constitutes  willful  misconduct  on  the  part  of  the
    34  directed co-trustee;
    35    (2)  If the terms of the governing instrument confer upon the co-trus-
    36  tee exclusive authority to exercise  any  power,  the  excluded  trustee
    37  shall  not  be  liable,  individually  or  as  a fiduciary, for any loss
    38  resulting directly or indirectly from the action taken by such  co-trus-
    39  tee in the exercise of the power; and
    40    (3)  The  excluded  trustee  has no duty to monitor the conduct of the
    41  co-trustee, provide advice to the co-trustee or consult with or  request
    42  directions  from  the  co-trustee.    The  excluded trustee shall not be
    43  required to give notice to any beneficiary of any action  taken  or  not
    44  taken  by the co-trustee whether or not the excluded trustee agrees with
    45  the result. Administrative actions taken by the excluded trustee for the
    46  purpose of implementing directions of the co-trustee, including confirm-
    47  ing that the directions of the co-trustee have been carried out, do  not
    48  constitute  monitoring  of the co-trustee nor do they constitute partic-
    49  ipation in decisions within the scope of the co-trustee's authority.
    50    (b) The co-trustee holding the power  to  take  certain  actions  with
    51  respect  to  the trust shall be liable to the beneficiaries with respect
    52  to the exercise of the power as if the  excluded  trustee  were  not  in
    53  office and shall have the exclusive obligation to account to the benefi-
    54  ciaries  and defend any action brought by the beneficiaries with respect
    55  to the exercise of the power.
    56  § 7-A-7.5 Vacancy in trusteeship; appointment of successor

        A. 7677                            38

     1    (a) A vacancy in a trusteeship occurs if:
     2    (1) a person designated as trustee rejects the trusteeship;
     3    (2)  a  person  designated as trustee cannot be identified or does not
     4  exist;
     5    (3) a trustee resigns;
     6    (4) a trustee is disqualified or removed;
     7    (5) a trustee dies;
     8    (6) a guardian is appointed for an individual serving as trustee; or
     9    (7) a trust instrument so provides.
    10    (b) If one or more co-trustees remain in office, a vacancy in a  trus-
    11  teeship  need  not be filled. A vacancy in a trusteeship shall be filled
    12  if the trust has no remaining trustee. If for any reason the  trust  has
    13  no  remaining trustee, the trust estate immediately vests in the supreme
    14  court or surrogate's court, as the  case  may  be,  unless  the  settlor
    15  provides otherwise.
    16    (c)  A vacancy in a trusteeship of a lifetime noncharitable trust that
    17  is required to be filled shall be  filled  in  the  following  order  of
    18  priority:
    19    (1) by a person designated in the terms of the trust to act as succes-
    20  sor trustee;
    21    (2)  by  a  person  appointed  by unanimous agreement of the qualified
    22  beneficiaries; or
    23    (3) by a person appointed by the court.
    24    (d) A vacancy in a trusteeship of a lifetime charitable trust that  is
    25  required  to be filled shall be filled in the following order of priori-
    26  ty:
    27    (1) by a person designated in the terms of the trust to act as succes-
    28  sor trustee;
    29    (2) by a person selected by  the  charitable  organizations  expressly
    30  designated  to receive distributions under the terms of the trust if the
    31  attorney general concurs in the selection; or
    32    (3) by a person appointed by the court.
    33    (e) A vacancy in  a  trusteeship  of  a  testamentary  trust  that  is
    34  required  to  be  filled shall be filled pursuant to SCPA 706 or 1502 by
    35  the court having jurisdiction of the decedent's estate.
    36    (f) Whether or not a vacancy in a trusteeship exists or is required to
    37  be filled, the court may appoint an additional trustee  as  provided  in
    38  SCPA 1502.
    39    (g)  Nothing  in this section shall be construed to limit the applica-
    40  tion of SCPA 706 and any other application of SCPA 1502.
    41  § 7-A-7.6 Suspension of powers of trustee in war service
    42    (a) Whenever a trustee of an express trust is engaged in war  service,
    43  as  defined  pursuant  to this section, such trustee or any other person
    44  interested in the trust estate may present a  petition  to  the  supreme
    45  court  or  the  surrogate's  court,  as  the case may be, to suspend the
    46  powers of such trustee while he or she  is  so  engaged  and  until  the
    47  further  order  of the court, and if the suspension of such trustee will
    48  leave no person acting as trustee or leave a beneficiary of  such  trust
    49  as  the  only  acting  trustee  thereof, the petition shall pray for the
    50  appointment of a successor trustee, unless a successor has been named in
    51  the trust instrument and is not engaged in war service or is not for any
    52  other reason unable or unwilling to act as such trustee.
    53    (b) For the purposes of this section, a  trustee  is  engaged  in  war
    54  service in any of the following cases:

        A. 7677                            39
 
     1    (1)  If  the  trustee  is  a  member of the armed forces of the United
     2  States or of any of its allies, or if the trustee has been accepted  for
     3  such service and is awaiting induction.
     4    (2)  If the trustee is engaged in any work abroad in connection with a
     5  governmental agency of the United States or with the American Red  Cross
     6  or any other body with similar objectives.
     7    (3) If the trustee is interned in any enemy country or is in a foreign
     8  country or a possession or dependency of the United States and is unable
     9  to return to this state.
    10    (4)  If  the  trustee  is  a  member of the merchant marine or similar
    11  service.
    12    (c) Where the application is made by a trustee engaged in war service,
    13  notice shall be given to such persons and in such manner  as  the  court
    14  may  direct.    Where the application is made by any other person inter-
    15  ested in the trust estate and the trustee is in the armed forces of  the
    16  United  States,  notice shall be given to such trustee in such manner as
    17  the court may direct. In every other case, where the application is made
    18  by a person other than the trustee, notice thereof  shall  be  given  to
    19  such persons and in such manner as the court may direct.
    20    (d)  Upon  the  filing  of the petition and proof of service of notice
    21  pursuant to paragraph (c) of this section, the court may,  notwithstand-
    22  ing  any  other  provision  of  law,  suspend the trustee engaged in war
    23  service from the exercise of all of such  trustee's  powers  and  duties
    24  while  engaged in such service and until further order of the court. The
    25  order may further provide that the remaining trustee  or,  if  there  is
    26  none,  the  successor  named in the trust instrument or appointed by the
    27  court may exercise all of the powers and be subject to all of the duties
    28  of the original trustee.
    29    (e) The successor trustee shall be limited to commissions as  computed
    30  pursuant  to  SCPA  2308  or  2309, whichever is applicable, upon income
    31  received and disbursed and upon  principal  disbursed.  Commissions  may
    32  also be allowed under such sections upon rents if the trustee is author-
    33  ized  or  required  to collect the rents of and manage real property. In
    34  case of the resignation or removal of the suspended trustee, or  in  the
    35  event  of such trustee's death, the provisions of this paragraph comput-
    36  ing the commissions shall not apply and the trustee's commissions  shall
    37  be computed in the same manner as those of any other trustee.
    38    (f)  When  the  suspended trustee ceases to be engaged in war service,
    39  the trustee may, upon application to the court and upon such  notice  as
    40  the  court  may direct, be reinstated as trustee if any of the duties of
    41  such office remain unexecuted. If the suspended trustee  is  reinstated,
    42  the court shall remove the trustee's successor and make such other order
    43  as  justice  requires, but such removal shall not bar the successor from
    44  subsequently qualifying as a trustee if for  any  reason  it  thereafter
    45  becomes necessary to appoint a trustee.
    46  § 7-A-7.7 Resignation of trustee
    47    (a) A trustee may resign:
    48    (1) upon at least thirty days' notice to the trust contributor and all
    49  co-trustees  in the case of a revocable trust or the qualified benefici-
    50  aries and all co-trustees, in the case of any other trust; or
    51    (2) with the approval of the court.
    52    (b) In approving a resignation, the court may issue orders and  impose
    53  conditions  reasonably necessary for the protection of the trust proper-
    54  ty.

        A. 7677                            40
 
     1    (c) Any liability of a resigning trustee or of  any  sureties  on  the
     2  trustee's  bond  for  acts  or  omissions  of  the  trustee shall not be
     3  discharged or affected by the trustee's resignation.
     4    (d)  The resignation of a trustee of a testamentary trust shall not be
     5  effective until the trustee provides written notice of such  resignation
     6  to the court that has taken jurisdiction over the trust.
     7  § 7-A-7.8 Removal of trustee
     8    (a)  In addition to any provision for removal in the trust instrument,
     9  the settlor, a co-trustee, or a beneficiary may  request  the  court  to
    10  remove  a  trustee,  or a trustee may be removed by the court on its own
    11  initiative.
    12    (b) The court may remove a trustee if:
    13    (1) the trustee has committed a serious breach of trust;
    14    (2) lack of cooperation among co-trustees  substantially  impairs  the
    15  administration of the trust;
    16    (3)  because of unfitness, unwillingness, or persistent failure of the
    17  trustee to administer the trust effectively, the court  determines  that
    18  removal  of  the trustee best serves the interests of the beneficiaries;
    19  or
    20    (4) there has been a substantial change of circumstances or removal is
    21  requested by all of the qualified beneficiaries, provided that the court
    22  finds that removal of the trustee best serves the interests  of  all  of
    23  the  beneficiaries  and  is  not  inconsistent  with the purposes of the
    24  trust, and a suitable co-trustee or successor trustee  is  available.  A
    25  corporate  reorganization  is  presumptively not a substantial change of
    26  circumstances.
    27    (c) Pending a final decision on a request to remove a trustee,  or  in
    28  lieu  of  or in addition to removing a trustee, the court may order such
    29  appropriate relief pursuant to paragraph (b) of section 7-A-10.1 of this
    30  article as may be necessary to protect the trust property or the  inter-
    31  ests of the beneficiaries.
    32    (d)  For  the  purposes  of  this  section, "court" shall refer to the
    33  supreme court or the surrogate's court.
    34    (e) Nothing in this section shall be construed to limit  the  applica-
    35  tion of SCPA 711, 712, 713 and 719.
    36  § 7-A-7.9 Delivery of property by former trustee
    37    (a)  Unless  a co-trustee remains in office or the court orders other-
    38  wise, and until the trust property is delivered to a  successor  trustee
    39  or  other  person  entitled  to  such  trust property, a trustee who has
    40  resigned or been removed shall have the duties  of  a  trustee  and  the
    41  powers necessary to protect the trust property.
    42    (b)  A  trustee  who  has resigned or been removed shall proceed expe-
    43  ditiously to deliver the trust property within the trustee's possession,
    44  subject to a reasonable reserve  for  the  expenses  of  such  trustee's
    45  accounting,  to the co-trustee, successor trustee, or other person enti-
    46  tled to such trust property.
    47  § 7-A-7.10 Compensation of trustee
    48    The rules for compensating a trustee are provided in SCPA 2308 through
    49  2313.
    50  § 7-A-7.11 Reimbursement of expenses
    51    (a) A trustee is entitled to be reimbursed out of the trust  property,
    52  with interest, if appropriate, at a reasonable rate, for:
    53    (1)  expenses that were properly incurred in the administration of the
    54  trust; and

        A. 7677                            41

     1    (2) expenses that were not properly incurred in the administration  of
     2  the  trust,  to the extent necessary to prevent unjust enrichment of the
     3  trust property.
     4    (b) An advance by the trustee of money for the protection of the trust
     5  property  shall  give  rise  to  a lien against trust property to secure
     6  reimbursement with reasonable interest.
     7  § 7-A-7.12 Accounting by trustee in supreme court
     8    Any proceeding for an accounting or other relief brought by a  trustee
     9  or  brought  by  a  substituted or successor trustee may be commenced by
    10  such notice to the beneficiaries of the trust as the supreme  court  may
    11  direct.
 
    12                    PART 8. DUTIES AND POWERS OF TRUSTEE

    13  § 7-A-8.1 Duty to administer trust
    14    The  trustee  shall  administer the trust in good faith, in accordance
    15  with its terms and purposes, and in accordance  with  this  article  and
    16  other applicable law.
    17  § 7-A-8.2 Duty of loyalty
    18    (a)  As  between  a trustee and the beneficiaries, the duty of loyalty
    19  requires that a trustee shall administer the trust solely in the  inter-
    20  ests of the beneficiaries.
    21    (b)  Subject  to  the  rights of persons dealing with or assisting the
    22  trustee pursuant to section 7-A-10.11 of this article,  a  sale,  encum-
    23  brance,  or  other transaction involving the investment or management of
    24  trust property entered  into  by  the  trustee  for  the  trustee's  own
    25  personal  account,  or which is otherwise affected by a conflict between
    26  the trustee's fiduciary and personal interests, is a breach of the  duty
    27  of loyalty and voidable by a qualified beneficiary unless:
    28    (1) the transaction was authorized by the terms of the trust;
    29    (2) the transaction was approved by the court;
    30    (3)  the  qualified beneficiary did not commence a judicial proceeding
    31  within the time allowed by section 7-A-10.5 of this article;
    32    (4) the qualified beneficiary  consented  to  the  trustee's  conduct,
    33  ratified  the  transaction,  or  released the trustee in compliance with
    34  section 7-A-10.8 of this article; or
    35    (5) the transaction involves a contract entered into or claim acquired
    36  by the trustee before such person became trustee.
    37    (c) For the purposes of paragraph (b) of this section, a sale,  encum-
    38  brance,  or  other transaction involving the investment or management of
    39  trust property is conclusively presumed to be  affected  by  a  conflict
    40  between  personal  and  fiduciary interests if it is entered into by the
    41  trustee with:
    42    (1) the trustee's spouse;
    43    (2) the trustee's issue, siblings, parents, or their spouses;
    44    (3) an agent or attorney of the trustee; or
    45    (4) a corporation or other person or enterprise in which the  trustee,
    46  or  a  person  described in subparagraph one, two or three of this para-
    47  graph, or a person that owns a significant interest in the trustee,  has
    48  an interest that might affect the trustee's best judgment.
    49    (d)  A  transaction between a trustee and a qualified beneficiary that
    50  does not concern trust property but that occurs during the existence  of
    51  the  trust,  and  which  is outside the ordinary course of the trustee's
    52  business or on terms and conditions substantially  less  favorable  than
    53  those  the  trustee generally offers customers similarly situated, shall

        A. 7677                            42
 
     1  be voidable by the qualified beneficiary unless the trustee  establishes
     2  that the transaction was fair to the beneficiary.
     3    (e)  A  transaction not concerning trust property in which the trustee
     4  engages in the trustee's individual capacity is affected by  a  conflict
     5  between  personal and fiduciary interests if the transaction concerns an
     6  opportunity properly belonging to  the  trust.  Such  transaction  is  a
     7  breach  of  the duty of loyalty and is voidable by a qualified benefici-
     8  ary, subject to the exceptions in  subparagraphs  one  through  five  of
     9  paragraph (b) of this section.
    10    (f)  In voting shares of stock or in exercising powers of control over
    11  similar interests in other forms of enterprise, the trustee shall act in
    12  the best interests of the beneficiaries. If  the  trustee  is  the  sole
    13  owner  of  a  corporation or other form of enterprise, the trustee shall
    14  elect or appoint directors or other managers who shall manage the corpo-
    15  ration or enterprise in the best interests of the beneficiaries.
    16    (g) This section shall not preclude  the  following  transactions,  if
    17  fair to the beneficiaries:
    18    (1)  an  agreement between a trustee and a beneficiary relating to the
    19  appointment or compensation of the trustee;
    20    (2) payment of reasonable compensation to the trustee;
    21    (3) a transaction between a trustee and  another  trustee  of  another
    22  trust  or  decedent's  estate  or guardianship of which the trustee is a
    23  fiduciary or in which a beneficiary has an interest;
    24    (4) a deposit of trust money in a bank, banking department or  insured
    25  depository institution operated by the trustee or an affiliate; or
    26    (5)  an  advance  by  the  trustee  of money for the protection of the
    27  trust.
    28    (h) The court may appoint a special fiduciary to make a decision  with
    29  respect  to  any  proposed  transaction that may violate this section if
    30  entered into by the trustee.
    31    (i) Cross-reference: For provisions regarding  other  remedies  for  a
    32  breach  of  trust,  see  section  7-A-10.1  of  this  article,  and  for
    33  provisions regarding a trustee's liability that may require the restora-
    34  tion of trust property, see subparagraph two of paragraph (b) of section
    35  7-A-10.2 of this article.
    36  § 7-A-8.3 Duty of impartiality
    37    If a trust has two or more beneficiaries, the trustee shall  have  the
    38  duty  to act impartially in investing, managing, distributing and other-
    39  wise administering the trust property, giving due regard to the  benefi-
    40  ciaries' respective interests.
    41  § 7-A-8.4 Duty of prudent administration
    42    (a) A trustee shall have the duty to administer the trust as a prudent
    43  person   would,  by  considering  the  purposes,  terms,  distributional
    44  requirements, and other circumstances of the trust. In  satisfying  this
    45  standard,  the  trustee  shall  exercise  reasonable  care,  skill,  and
    46  caution.
    47    (b) Cross-reference: For provisions regarding  the  duties  under  the
    48  prudent investor act, see section 11-2.3 of this chapter.
    49  § 7-A-8.5 Duty regarding costs of administration
    50    In  administering a trust, the trustee shall have a duty to incur only
    51  costs that are  reasonable  in  relation  to  the  trust  property,  the
    52  purposes of the trust, and the skills of the trustee taking into account
    53  the  provisions  of  section  7-A-8.7  of  this  part to the extent such
    54  section applies.
    55  § 7-A-8.6 Duty to exercise trustee's special skills and expertise

        A. 7677                            43
 
     1    A trustee who has represented to the settlor  that  such  trustee  has
     2  special  skills,  other  than  special  investment skills, or expertise,
     3  shall use those special  skills  or  expertise,  subject  to  the  rules
     4  governing  trustees  with special investment skills pursuant to subpara-
     5  graph six of paragraph (b) of section 11-2.3 of this chapter.
     6  § 7-A-8.7 Powers  and duties regarding delegation by trustee to agent or
     7              another trustee
     8    (a) A trustee may delegate to  an  agent  duties  and  powers  that  a
     9  prudent  trustee  could  properly  delegate under the circumstances. The
    10  trustee shall exercise reasonable care, skill, and caution in:
    11    (1) selecting an agent suitable to exercise  the  delegated  function,
    12  taking  into  account the nature and value of the assets subject to such
    13  delegation and the expertise of the agent;
    14    (2) establishing the scope and terms  of  the  delegation,  consistent
    15  with the purposes of the governing instrument;
    16    (3) periodically reviewing the agent's exercise of the delegated func-
    17  tion and compliance with the scope and terms of the delegation;
    18    (4) taking any appropriate action based on the trustee's review; and
    19    (5) controlling the overall cost by reason of the delegation.
    20    (b)  In  performing  a delegated function, an agent owes a duty to the
    21  trustee and the beneficiaries to comply with the scope and terms of  the
    22  delegation  and to exercise the delegated function with reasonable care,
    23  skill and caution. An attempted exoneration of the agent from  liability
    24  for failure to meet such duty is contrary to public policy and void.
    25    (c)  A  trustee  who complies with paragraph (a) of this section shall
    26  not be liable for an action of the agent to whom the function was deleg-
    27  ated.
    28    (d) By accepting a delegation of duties or powers from the trustee  of
    29  a  trust  that is subject to the laws of this state, an agent submits to
    30  the jurisdiction of the courts of New York.
    31    (e) A trustee may delegate duties and powers to a  co-trustee  that  a
    32  prudent trustee could properly delegate under the circumstances.
    33    (1)  In  making  a  delegation under this paragraph, the trustee shall
    34  exercise reasonable care, skill, and caution in:
    35    (A) selecting a trustee suitable to exercise the delegated function;
    36    (B) establishing the scope and terms of the delegation consistent with
    37  the purposes of the governing instrument; and
    38    (C) periodically reviewing the trustee's  exercise  of  the  delegated
    39  function and compliance with the scope and terms of such delegation.
    40    (2)  A  trustee  who  complies with subparagraph one of this paragraph
    41  shall not be liable for an action of the trustee to  whom  the  function
    42  was delegated.
    43    (3) Unless a delegation was irrevocable, a trustee may revoke a deleg-
    44  ation previously made pursuant to this paragraph.
    45  § 7-A-8.8 Duty to control and protect trust property
    46    A trustee shall have the duty to take reasonable steps to take control
    47  of and protect the trust property.
    48  § 7-A-8.9 Duty regarding recordkeeping and identification of trust prop-
    49              erty
    50    (a)  A  trustee  shall  have  the duty to keep adequate records of the
    51  administration of the trust.
    52    (b) A trustee shall have the duty to keep trust property separate from
    53  the trustee's own property.
    54    (c) Except as otherwise provided in paragraph (d) of this section,  or
    55  in any other provision of this article, a trustee shall have the duty to
    56  cause  the  trust  property  to  be  designated as held in the trustee's

        A. 7677                            44
 
     1  capacity as trustee so that the interest of the trustee, to  the  extent
     2  capable  of registration, appears in records maintained by a party other
     3  than a trustee or beneficiary.
     4    (d)  If  the  trustee  may invest as a whole the property in which the
     5  trustee has interests under two or more trust instruments,  the  trustee
     6  shall  have  the duty to maintain records clearly indicating the respec-
     7  tive interests of the trustee under each trust instrument.
     8    (e) Notwithstanding any other provision of this section to the contra-
     9  ry, this section shall not be construed to abridge in any way any duties
    10  imposed, or any  powers  conferred,  upon  a  trustee  under  any  other
    11  provision  of this chapter, including but not limited to, the provisions
    12  of section 11-1.6 of this chapter.
    13  § 7-A-8.10 Duty to enforce and defend claims
    14    A trustee shall have the duty to  take  reasonable  steps  to  enforce
    15  claims  of  the  trustee in the trustee's capacity as such and to defend
    16  claims against the trustee in such capacity.
    17  § 7-A-8.11 Duty to collect trust property
    18    A trustee shall take reasonable steps to compel a  former  trustee  or
    19  other  person to deliver trust property to the trustee, and to redress a
    20  breach of trust known to the trustee to have been committed by a  former
    21  trustee.
    22  § 7-A-8.12 Duty to inform and report
    23    (a)  Unless unreasonable under the circumstances, a trustee shall have
    24  the duty to promptly respond to a beneficiary's request for  information
    25  related  to  the  administration  of  a specifically identified trust in
    26  which the beneficiary has an interest, including a report containing the
    27  information referred to in paragraph (c) of this section.
    28    (b) A trustee:
    29    (1) upon request of a beneficiary, shall have  the  duty  to  promptly
    30  furnish  to  the  beneficiary  a  copy  of  the  terms of the trust that
    31  describe or affect the beneficiary's interest;
    32    (2) within sixty days after accepting a trusteeship or if later, sixty
    33  days after the effective date of this article, the  trustee  shall  have
    34  the  duty to notify the qualified beneficiaries of the acceptance and of
    35  the trustee's name, address, and telephone number;
    36    (3) within sixty days after the date the trustee acquires knowledge of
    37  the creation of an irrevocable trust, or the date the  trustee  acquires
    38  knowledge that a formerly revocable trust has become irrevocable, wheth-
    39  er  by  the  death  of the settlor or otherwise, or if later, sixty days
    40  after the effective date of this article, the  trustee  shall  have  the
    41  duty  to notify the qualified beneficiaries of the trust's existence, of
    42  the identity of the settlor or settlors, of the right to request a  copy
    43  of  the  trust  instrument,  and  of  the right to a trustee's report as
    44  provided pursuant to paragraph (c) of this section; and
    45    (4) shall notify the qualified beneficiaries in advance of any  change
    46  in the method or rate of the trustee's compensation.
    47    (c)  A  trustee  shall  have the duty to send to current recipients or
    48  permissible recipients of trust income or principal, and to other quali-
    49  fied or nonqualified beneficiaries who request it, at least annually and
    50  at the termination of the trust, a report of the trust property, liabil-
    51  ities, receipts, and disbursements, including the source and  amount  of
    52  the trustee's compensation, a listing of the trust assets and, if feasi-
    53  ble,  their  respective  market values. Upon a vacancy in a trusteeship,
    54  unless a co-trustee remains in office, a report shall  be  sent  to  the
    55  qualified beneficiaries by the former trustee. A personal representative

        A. 7677                            45
 
     1  or guardian may send the qualified beneficiaries a report on behalf of a
     2  deceased or incapacitated trustee.
     3    (d)  A  beneficiary may waive the right to a trustee's report or other
     4  information otherwise required to be furnished  under  this  section.  A
     5  beneficiary,  with  respect to future reports and other information, may
     6  withdraw a waiver previously given.
     7    (e) Subparagraphs two and three of paragraph (b) shall not apply to  a
     8  trustee  who accepted a trusteeship or was issued letters of trusteeship
     9  before the effective date of  this  article,  to  an  irrevocable  trust
    10  created  before  the  effective  date of this article, or to a revocable
    11  trust that becomes irrevocable before the effective date of  this  arti-
    12  cle.
    13    (f)  Nothing  in this section shall be construed to limit the applica-
    14  tion of SCPA 2102(1), 2309(4) and 2312(6).
    15    (g) Cross-reference: For provisions regarding the rights and duties in
    16  revocable trusts, see section 7-A-6.3 of this article.
    17  § 7-A-8.13 Duty regarding discretionary powers
    18    (a) Notwithstanding the breadth of discretion granted to a trustee  in
    19  the  terms  of the trust, including the use of such terms as "absolute",
    20  "sole", or "uncontrolled", the trustee shall have the duty to exercise a
    21  discretionary power in good faith and in accordance with the  terms  and
    22  purposes of the trust.
    23    (b)  The  trustee  shall  not  be  compelled to exercise the trustee's
    24  discretion under paragraph (a) of this section in such a way that  would
    25  jeopardize  a beneficiary's eligibility for, or receipt of, public bene-
    26  fits or both.
    27    (c) The rules that address the exercise of discretionary powers  by  a
    28  trustee-beneficiary are set forth in section 10-10.1 of this chapter.
    29  § 7-A-8.14 General powers of trustee
    30    (a) A trustee, without authorization by the court, may exercise:
    31    (1) powers conferred by the terms of the trust; and
    32    (2)  except  as  limited  by  the terms of the trust, a court order or
    33  decree or other applicable law:
    34    (A) all powers over the trust property which  an  unmarried  competent
    35  owner has over individually owned property;
    36    (B)  any  other  powers  appropriate to achieve the proper investment,
    37  management, and distribution of the trust property; and
    38    (C) any other powers conferred by this article.
    39    (b) The court having jurisdiction of the trust may authorize the trus-
    40  tee to exercise any power which in the judgment of the court  is  neces-
    41  sary for the proper administration of the trust.
    42    (c)  The  exercise  of  a  power  is  subject  to the fiduciary duties
    43  prescribed by this chapter.
    44  § 7-A-8.15 Specific powers of trustee
    45    Without limiting the authority conferred, or the restrictions  imposed
    46  by section 7-A-8.14 of this part, a trustee may:
    47    (a) collect trust property and accept or reject additions to the trust
    48  property from a settlor or any other person;
    49    (b) acquire or sell trust property at a public or private sale, and on
    50  such terms as in the opinion of the trustee will be most advantageous to
    51  those interested therein;
    52    (c)  exchange,  partition,  or otherwise change the character of trust
    53  property;
    54    (d) deposit trust money in an account  in  a  bank  or  other  insured
    55  depository institution;

        A. 7677                            46
 
     1    (e)  borrow  money,  with  or without security, and mortgage or pledge
     2  trust property for a period within or extending beyond the  duration  of
     3  the trust;
     4    (f)  with  respect  to  an interest in a proprietorship and subject to
     5  SCPA 2108,  partnership,  limited  liability  company,  business  trust,
     6  corporation, or other form of business or enterprise, continue the busi-
     7  ness or other enterprise and take any action that may be taken by share-
     8  holders,  members, or property owners, including merging, dissolving, or
     9  otherwise changing the form of  business  organization  or  contributing
    10  additional capital;
    11    (g)  with  respect  to  stocks  or other securities held as a trustee,
    12  exercise the rights of an absolute owner, including the right to:
    13    (1) vote, or give proxies to vote, with or without  power  of  substi-
    14  tution, or enter into or continue a voting trust agreement;
    15    (2)  employ  a financial institution as custodian of any such stock or
    16  other securities as in the same manner as  authorized  for  a  fiduciary
    17  pursuant to subparagraph nine of paragraph (b) of section 11-1.1 of this
    18  chapter;
    19    (3) cause any such stock or other securities to be registered and held
    20  in  the name of a nominee in the same manner as authorized for a fiduci-
    21  ary pursuant to subparagraph ten of paragraph (b) of section  11-1.1  of
    22  this chapter;
    23    (4)  cause  any  such stock or other securities to be deposited in the
    24  same manner as authorized for a fiduciary pursuant  to  sections  11-1.8
    25  and 11-1.9 of this chapter;
    26    (5)  employ  a broker-dealer as a custodian of any such stock or other
    27  securities and to register such securities in the name of  such  broker-
    28  dealer  in  the  same  manner  as authorized for a fiduciary pursuant to
    29  section 11-1.10 of this chapter;
    30    (6) pay calls, assessments, and  other  sums  chargeable  or  accruing
    31  against the securities, in the same manner as authorized for a fiduciary
    32  pursuant  to  subparagraph fifteen of paragraph (b) of section 11-1.1 of
    33  this chapter; and
    34    (7) sell or exercise stock subscription or conversion rights,  partic-
    35  ipate  in  foreclosures,  reorganizations,  consolidations,  mergers  or
    36  liquidations, and consent to corporate sales, leases and encumbrances in
    37  the same manner as authorized for a fiduciary pursuant  to  subparagraph
    38  sixteen of paragraph (b) of section 11-1.1 of this chapter;
    39    (h) with respect to repairs and other actions:
    40    (1)  for  an interest in real property, construct, or make ordinary or
    41  extraordinary repairs to, alterations to, or improvements in,  buildings
    42  or  other  structures, demolish improvements, raze existing or erect new
    43  party walls or buildings, subdivide or develop land,  dedicate  land  to
    44  public  use  or  grant  public  or private easements, and make or vacate
    45  plats and adjust boundaries; and
    46    (2) for an interest in tangible personal property,  make  repairs  to,
    47  conserve or improve such property;
    48    (i)  enter into a lease for any purpose as lessor or lessee, including
    49  a lease or other arrangement for  exploration  and  removal  of  natural
    50  resources, with or without the option to purchase or renew, for a period
    51  within or extending beyond the duration of the trust;
    52    (j)  grant  an option involving a sale, lease, or other disposition of
    53  trust property or acquire an option for  the  acquisition  of  property,
    54  including  an  option  exercisable beyond the duration of the trust, and
    55  exercise an option so acquired;

        A. 7677                            47
 
     1    (k) effect and keep in force fire, rent, title, liability casualty  or
     2  other  insurance to protect the property of the trust and to protect the
     3  trustee;
     4    (l) abandon or decline to administer property of no value or of insuf-
     5  ficient value to justify its collection or continued administration;
     6    (m)  with  respect  to  possible liability for a violation of environ-
     7  mental law:
     8    (1) inspect or investigate property the  trustee  holds  or  has  been
     9  asked to hold, or property owned or operated by an organization in which
    10  the trustee holds or has been asked to hold an interest, for the purpose
    11  of  determining the application of environmental law with respect to the
    12  property;
    13    (2) take action to prevent, abate, or otherwise remedy any  actual  or
    14  potential  violation  of  any  environmental law affecting property held
    15  directly or indirectly by the trustee, whether taken before or after the
    16  assertion of a claim or the initiation of governmental enforcement;
    17    (3) decline to accept property into trust or disclaim any  power  with
    18  respect  to  property  that  is  or  may  be burdened with liability for
    19  violation of environmental law;
    20    (4) compromise claims against the trust which may be asserted  for  an
    21  alleged violation of environmental law; and
    22    (5)  pay the expense of any inspection, review, abatement, or remedial
    23  action to comply with environmental law;
    24    (n) pay or contest any claim, settle a claim by or against the  trust,
    25  and release, in whole or in part, a claim belonging to the trust;
    26    (o) pay taxes, assessments, compensation of the trustee and of employ-
    27  ees and agents of the trust, and other expenses incurred in the adminis-
    28  tration  of the trust, including the reasonable expense of obtaining and
    29  continuing the trustee's bond and any reasonable counsel fees the  trus-
    30  tee may necessarily incur;
    31    (p)  exercise  elections  with  respect  to  federal, state, and local
    32  taxes;
    33    (q) select a mode of payment under any employee benefit or  retirement
    34  plan, annuity, or life insurance payable to the trustee, exercise rights
    35  thereunder,  including  exercise  of  the  right  to indemnification for
    36  expenses and against liabilities, and take appropriate action to collect
    37  the proceeds;
    38    (r) make loans out of trust property, including loans to a beneficiary
    39  on terms and conditions the trustee considers to be fair and  reasonable
    40  under  the  circumstances, and the trustee has a lien on future distrib-
    41  utions for repayment of those loans;
    42    (s) pledge trust property to guarantee loans made  by  others  to  the
    43  beneficiary;
    44    (t)  appoint  a trustee to act in another jurisdiction with respect to
    45  real or tangible or personal trust property located in the other  juris-
    46  diction,  confer upon the appointed trustee all of the powers and duties
    47  of the appointing trustee, require that the  appointed  trustee  furnish
    48  security, and remove any trustee so appointed;
    49    (u)  pay an amount distributable to a beneficiary who is under a legal
    50  disability by paying it directly to the beneficiary or applying  it  for
    51  the beneficiary's benefit, or by:
    52    (1) paying it to the beneficiary's guardian;
    53    (2)  paying it to the beneficiary's custodian under New York's Uniform
    54  Transfers to Minors Act and, for that purpose, creating a  custodianship
    55  pursuant to sections 7-6.5 and 7-6.6 of this chapter;

        A. 7677                            48
 
     1    (3) if the amount is not in excess of ten thousand dollars, paying the
     2  amount  to  an  adult  relative or other person having legal or physical
     3  care or custody of the beneficiary, to be expended on the  beneficiary's
     4  behalf;
     5    (4)  managing  it  as  a  separate  fund  on the beneficiary's behalf,
     6  subject to the beneficiary's continuing right to withdraw  the  distrib-
     7  ution; or
     8    (5)  if  the  sum  payable to a patient in an institution in the state
     9  department of mental hygiene is not in excess of the  amount  which  the
    10  director of the institution is authorized to receive under section 29.23
    11  of  the  mental hygiene law, paying such sum to such director for use as
    12  provided in such section.
    13    (v) on distribution of trust property or the division  or  termination
    14  of  a  trust,  make  distributions  in  cash, in kind valued at the fair
    15  market value of the property at the date of distribution, or  partly  in
    16  each, and make distributions in divided or undivided interests, allocate
    17  particular assets in proportionate or disproportionate shares, value the
    18  trust  property for those purposes, and adjust for resulting differences
    19  in valuation;
    20    (w) seek resolution of a dispute concerning the interpretation of  the
    21  trust  or  its administration by mediation, arbitration, or other proce-
    22  dure for alternative dispute resolution;
    23    (x) contest, compromise or otherwise settle any claim in favor of  the
    24  trust  or trustee, or in favor of third persons and against the trust or
    25  trustee;
    26    (y) sign and deliver contracts and other instruments that  are  useful
    27  to achieve or facilitate the exercise of the trustee's powers;
    28    (z)  on  termination  of the trust, exercise the powers appropriate to
    29  wind up the administration of the trust and distribute the trust proper-
    30  ty to the persons entitled to it;
    31    (aa) acquire the remaining undivided interest in  the  property  of  a
    32  trust  in  which  the trustee, in the trustee's capacity, holds an undi-
    33  vided interest;
    34    (bb) invest and reinvest property of the trust under the provisions of
    35  the will, deed or other instrument or as otherwise provided by law;
    36    (cc) take possession of, collect the rents from and manage any proper-
    37  ty or any estate owned by the trustee;
    38    (dd) with respect to any mortgage on property owned  by  the  trustee,
    39  continue  the  same upon and after the maturity, with or without renewal
    40  or extension, upon such terms as the trustee deems advisable; foreclose,
    41  as an incident to collection of any bond or note, any mortgage  securing
    42  such  bond  or  note; and purchase the mortgaged property or acquire the
    43  property by deed from the mortgagor in lieu of foreclosure;
    44    (ee) in the case of a successor or substitute trustee, succeed to  all
    45  of  the  powers,  duties  and  discretion  of the original trustee, with
    46  respect to the trust, as were given to the original trustee  unless  the
    47  exercise  of such powers, duties or discretion of the original fiduciary
    48  are expressly prohibited by the will, deed or other  instrument  to  any
    49  successor or substituted fiduciary;
    50    (ff) hold the property of two or more trusts, or parts of such trusts,
    51  created  by the same instrument as an undivided whole without separation
    52  as between such trusts or parts, provided that such separate  trusts  or
    53  parts  shall  have  undivided interests and, provided further, that such
    54  holding shall not defer the vesting  of  any  estate  in  possession  or
    55  otherwise;

        A. 7677                            49
 
     1    (gg) invest as a whole the property in which the trustee has interests
     2  under two or more trust instruments;
     3    (hh)  employ and compensate persons deemed necessary by the trustee to
     4  advise or assist in the proper administration of  any  trust,  including
     5  but  not  limited  to:  agents,  accountants, brokers, attorneys-at-law,
     6  attorneys-in-fact,  real  estate  managers,  rental  agents,   realtors,
     7  appraisers,  investment counsel, custodians and other professional advi-
     8  sors as may reasonably be required or desired  in  managing,  protecting
     9  and investing any trust; and
    10    (ii)  in  addition to those expenses specifically provided for in this
    11  section, to pay all other reasonable and  proper  expenses  of  adminis-
    12  tration from the property of the trust, including the reasonable expense
    13  of  obtaining and continuing the trustee's bond and any reasonable coun-
    14  sel fees the trustee may necessarily incur.
    15  § 7-A-8.16 Duties and powers regarding distribution upon termination
    16    (a) Upon termination or partial termination of a  trust,  the  trustee
    17  may  send  to  the beneficiaries a proposal for distribution. Subject to
    18  the provisions of paragraph (c) of this section, the right of any  bene-
    19  ficiary to object to the proposed distribution terminates if the benefi-
    20  ciary  does  not  notify  the trustee of an objection within thirty days
    21  after the proposal was sent, but only if the proposal informed the bene-
    22  ficiary of the right  to  object  and  of  the  time  allowed  for  such
    23  objection.
    24    (b) Upon the occurrence of an event terminating or partially terminat-
    25  ing  a  trust, the trustee shall proceed expeditiously to distribute the
    26  trust property to the persons entitled to it, subject to  the  right  of
    27  the  trustee  to  retain  a reasonable reserve for the payment of debts,
    28  expenses, and taxes.
    29    (c) A release by a beneficiary of a trustee from liability for  breach
    30  of trust shall be invalid to the extent:
    31    (1) it was induced by improper conduct of the trustee; or
    32    (2)  the  beneficiary, at the time of the release, did not know of the
    33  beneficiary's rights or of the material facts relating to the breach.
    34  § 7-A-8.17 Power of trustee to pay income or principal to trust contrib-
    35               utor as reimbursement for income taxes
    36    (a) Notwithstanding any other provision of law to  the  contrary,  the
    37  trustee,  unless  otherwise  provided  in the disposing instrument, may,
    38  from time to time pay to, or apply on behalf of, a trust contributor  of
    39  such  trust  an  amount  equal to any income taxes on any portion of the
    40  trust income or trust principal  of  which  such  trust  contributor  is
    41  treated as the owner pursuant to Part 1 of Subchapter J of Subtitle 1 of
    42  the  Internal  Revenue Code. If the income tax is based on amounts allo-
    43  cated to trust income, payment shall be made from such trust income.  If
    44  the income tax is based on amounts allocated to trust principal, payment
    45  shall be made from such trust principal.
    46    (b) For the purposes of paragraph (a) of this section, a trustee shall
    47  not include a trust contributor unless the trust contributor has a power
    48  of revocation with respect to the trust.
    49    (c)  Paragraph (a) of this section shall not apply if the application,
    50  or the possibility of the application of paragraph (a) of this  section,
    51  to  any trust would reduce or eliminate a charitable deduction otherwise
    52  available to any person under any  provision  of  the  Internal  Revenue
    53  Code.
    54    (d)  Paragraph (a) of this section shall not apply if the application,
    55  or the possibility of the application of paragraph (a) of this  section,
    56  to any trust would reduce or eliminate for any person a gift tax marital

        A. 7677                            50
 
     1  deduction  or  a  gift  tax  annual exclusion under the Internal Revenue
     2  Code.
     3    (e)  Paragraph (a) of this section shall not apply if the application,
     4  or the possibility of the application of paragraph (a) of this  section,
     5  would  reduce  or  eliminate a public benefit otherwise available to the
     6  trust contributor or to the trust contributor's spouse.
     7  § 7-A-8.18 Powers and duties regarding decanting
     8    (a) An authorized trustee with unlimited discretion  to  invade  trust
     9  principal  may  appoint part or all of such principal to a trustee of an
    10  appointed trust for, and only for the benefit of, one, more than one  or
    11  all  of the current beneficiaries of the invaded trust, to the exclusion
    12  of any one or more of such  current  beneficiaries.  The  successor  and
    13  remainder  beneficiaries  of  such appointed trust may be one, more than
    14  one or all of the successor and remainder beneficiaries of such  invaded
    15  trust, to the exclusion of any one, more than one or all of such succes-
    16  sor and remainder beneficiaries.
    17    (1)  An authorized trustee exercising the power pursuant to this para-
    18  graph may grant a discretionary power of appointment as defined pursuant
    19  to paragraph (b) of section 10-3.4 of this chapter, including a present-
    20  ly exercisable power of appointment, in the appointed trust  to  one  or
    21  more  of  the  current beneficiaries of the invaded trust, provided that
    22  the beneficiary granted a power to appoint could receive  the  principal
    23  outright under the terms of the invaded trust.
    24    (2)  If  the  authorized  trustee  grants a power of appointment under
    25  subparagraph one of this paragraph,  except  as  otherwise  provided  in
    26  subparagraph three of this paragraph, the granted power may only exclude
    27  as permissible appointees one or more of the beneficiaries, the creator,
    28  or  the creator's spouse, or any of the estates, creditors, or creditors
    29  of the estates of the beneficiary, the creator or the creator's spouse.
    30    (3) If the authorized trustee exercises the  power  pursuant  to  this
    31  paragraph,  the  appointed  trust  may  grant  any  power of appointment
    32  included in the invaded trust, provided such power has the same class of
    33  permissible appointees as the power of appointment in the invaded  trust
    34  and  is  exercisable  in the same fashion as the power of appointment in
    35  the invaded trust.
    36    (4) If the beneficiary or  beneficiaries  of  the  invaded  trust  are
    37  described  by a class, the beneficiary or beneficiaries of the appointed
    38  trust may include present or future members of such class.
    39    (b) An authorized trustee with the power to  invade  trust  principal,
    40  but without unlimited discretion, may appoint part or all of the princi-
    41  pal  of  the trust to a trustee of an appointed trust, provided that the
    42  current beneficiaries of the appointed trust shall be the  same  as  the
    43  current beneficiaries of the invaded trust and the successor and remain-
    44  der  beneficiaries  of  the  appointed  trust  shall  be the same as the
    45  successor and remainder beneficiaries of the invaded trust.
    46    (1) If the authorized trustee exercises the  power  pursuant  to  this
    47  paragraph, the appointed trust shall include the same language authoriz-
    48  ing  the trustee to distribute the income or invade the principal of the
    49  appointed trust as in the invaded trust.
    50    (2) If the authorized trustee exercises the  power  pursuant  to  this
    51  paragraph  to  extend the term of the appointed trust beyond the term of
    52  the invaded trust, for any period after the  invaded  trust  would  have
    53  otherwise  terminated  under  the  provisions  of the invaded trust, the
    54  appointed trust, in addition to the language required to be included  in
    55  the  appointed trust pursuant to subparagraph one of this paragraph, may
    56  also include language providing the trustees with  unlimited  discretion

        A. 7677                            51
 
     1  to  invade  the  principal  of  the appointed trust during such extended
     2  term.
     3    (3)  If  the  beneficiary  or  beneficiaries  of the invaded trust are
     4  described by a class, the beneficiary or beneficiaries of the  appointed
     5  trust shall include present or future members of such class.
     6    (4)  If  the  authorized  trustee exercises the power pursuant to this
     7  paragraph and if the invaded trust grants a power of  appointment  to  a
     8  beneficiary  of the trust, the appointed trust shall grant such power of
     9  appointment in the appointed trust and the class of permissible appoint-
    10  ees shall be the same as in the invaded trust.
    11    (c) An exercise of the power to invade  trust  principal  under  para-
    12  graphs (a) and (b) of this section shall be considered the exercise of a
    13  special  power  of  appointment as defined pursuant to section 10-3.2 of
    14  this chapter.
    15    (d) The appointed trust to which an authorized  trustee  appoints  the
    16  assets of the invaded trust may have a term that is longer than the term
    17  set  forth  in  the  invaded trust, including but not limited to, a term
    18  measured by the lifetime of a current beneficiary.
    19    (e) If an authorized trustee has unlimited discretion  to  invade  the
    20  principal  of  a  trust  and the same trustee or another trustee has the
    21  power to invade principal under the trust instrument, which power is not
    22  subject to unlimited discretion, such authorized trustee having unlimit-
    23  ed discretion may exercise the power of appointment  pursuant  to  para-
    24  graph (a) of this section.
    25    (f)  An  authorized trustee may exercise the power to appoint in favor
    26  of an appointed trust pursuant to paragraphs (a) and (b) of this section
    27  whether or not there is a current need to  invade  principal  under  the
    28  terms of the invaded trust.
    29    (g)  An  authorized  trustee  exercising  the  power  pursuant to this
    30  section shall have a fiduciary duty to exercise the power  in  the  best
    31  interests of one or more proper objects of the exercise of the power and
    32  as  a  prudent  person  would  exercise  the  power under the prevailing
    33  circumstances. The authorized  trustee  shall  not  exercise  the  power
    34  pursuant  to this section if there is substantial evidence of a contrary
    35  intent of the creator and it cannot  be  established  that  the  creator
    36  would  be  likely  to  have  changed such intent under the circumstances
    37  existing at the time of the exercise of the power. The provisions of the
    38  invaded trust alone shall not be viewed as  substantial  evidence  of  a
    39  contrary  intent  of  the  creator  unless  the  invaded trust expressly
    40  prohibits the exercise of the  power  in  the  manner  intended  by  the
    41  authorized trustee.
    42    (h) Unless the authorized trustee provides otherwise:
    43    (1)  The  appointment of all of the assets comprising the principal of
    44  the invaded trust to  an  appointed  trust  shall  include  subsequently
    45  discovered  assets  of  the invaded trust and undistributed principal of
    46  the invaded trust acquired after the appointment to the appointed trust;
    47  and
    48    (2) The appointment of part but not all of the assets  comprising  the
    49  principal  of  the invaded trust to an appointed trust shall not include
    50  subsequently discovered assets belonging to the invaded trust, and prin-
    51  cipal paid to or acquired by the invaded trust after the appointment  to
    52  the  appointed trust; such assets shall remain the assets of the invaded
    53  trust.
    54    (i) The exercise of the power to appoint to an appointed trust  pursu-
    55  ant  to  paragraph  (a)  or (b) of this section shall be evidenced by an
    56  instrument in writing, signed, dated and acknowledged by the  authorized

        A. 7677                            52
 
     1  trustee.  The exercise of the power shall be effective thirty days after
     2  the date of service of the instrument as specified in  subparagraph  two
     3  of  this  paragraph,  unless  the  person entitled to notice consents in
     4  writing to a sooner effective date.
     5    (1)  An  authorized trustee may exercise the power authorized by para-
     6  graphs (a) and (b) of this section without the consent of  the  creator,
     7  or  of  the  persons  interested in the invaded trust, and without court
     8  approval, provided that the authorized trustee seek court  approval  for
     9  the exercise with notice to all persons interested in the invaded trust.
    10    (2)  A  copy of the instrument exercising the power and a copy of each
    11  of the invaded trust and the appointed trust shall be delivered:
    12    (A) to the creator, if living, of the invaded trust;
    13    (B) to any person having the right,  pursuant  to  the  terms  of  the
    14  invaded  trust,  to  remove or replace the authorized trustee exercising
    15  the power under paragraph (b) or (c) of this section; and
    16    (C) to any persons interested in the invaded trust and  the  appointed
    17  trust,  or,  in  the case of any persons interested in the trust, to any
    18  guardian of the property, conservator or personal representative of  any
    19  such  person  or  the  parent  or person with whom any such minor person
    20  resides, by registered or certified mail, return receipt  requested,  or
    21  by personal delivery or in any other manner directed by the court having
    22  jurisdiction over the invaded trust.
    23    (3)  The  instrument  exercising  the  power  shall  state whether the
    24  appointment is of all the assets comprising the principal of the invaded
    25  trust, or a part but not all the assets comprising the principal of  the
    26  invaded  trust and if a part, the approximate percentage of the value of
    27  the principal of the invaded trust that is the subject of  the  appoint-
    28  ment.
    29    (4)  A  person interested in the invaded trust may object to the trus-
    30  tee's exercise of the power pursuant to this section by serving a  writ-
    31  ten  notice of objection upon the trustee prior to the effective date of
    32  the exercise of the power. The failure to object shall not constitute  a
    33  consent.
    34    (5) The receipt of a copy of the instrument exercising the power shall
    35  not  affect  the  right of any person interested in the invaded trust to
    36  compel the authorized trustee who exercised the power, pursuant to para-
    37  graph (a) or (b) of this section, to account for such exercise and shall
    38  not foreclose any such interested person from objecting to an account or
    39  compelling a trustee to account. Whether the exercise of a power  pursu-
    40  ant  to  paragraph  (a) or (b) of this section begins the running of the
    41  statute of limitations on an action to compel a trustee to account shall
    42  be based on all the facts and circumstances of the situation.
    43    (6) A copy of the instrument exercising the power shall be  kept  with
    44  the  records of the invaded trust and the original shall be filed in the
    45  court having jurisdiction over the invaded trust. Where a trustee of  an
    46  inter  vivos  trust  exercises  the power and the trust has not been the
    47  subject of a proceeding in the surrogate's court,  no  filing  shall  be
    48  required.   The instrument shall state that in certain circumstances the
    49  appointment shall begin the running of the statute of  limitations  that
    50  will preclude persons interested in the invaded trust from compelling an
    51  accounting by the trustees after the expiration of a given time.
    52    (7)  Prior to the effective date of this article, a trustee may revoke
    53  the exercise of the power to invade to a new trust. Where a trustee  has
    54  served  notice of the exercise of the power pursuant to subparagraph two
    55  of this paragraph, the trustee shall serve notice of the  revocation  of
    56  the exercise of the power to persons interested in the invaded trust and

        A. 7677                            53
 
     1  the  appointed  trust  by  registered  or certified mail, return receipt
     2  requested, or by personal delivery or in any other  manner  directed  by
     3  the  court  having jurisdiction over the invaded trust. Where the notice
     4  of the exercise of the power was filed with the court, the trustee shall
     5  file  the  notice  of  revocation of the exercise of the power with such
     6  court.
     7    (j) This section shall not be construed to abridge the  right  of  any
     8  trustee to appoint property in further trust that arises under the terms
     9  of  the  governing instrument of a trust or under any other provision of
    10  law or under common law, or as directed by any court having jurisdiction
    11  over the trust.
    12    (k) Nothing in this section shall be intended to  create  or  imply  a
    13  duty to exercise a power to invade principal, and no inference of impro-
    14  priety shall be made as a result of an authorized trustee not exercising
    15  the power conferred pursuant to paragraph (a) or (b) of this section.
    16    (l)  A power authorized by paragraph (a) or (b) of this section may be
    17  exercised, subject to the provisions of paragraph (g) of  this  section,
    18  unless  expressly  prohibited  by the terms of the governing instrument,
    19  but a general prohibition of the amendment or revocation of the  invaded
    20  trust  or a provision that constitutes a spendthrift provision shall not
    21  preclude the exercise of a power pursuant to paragraph  (a)  or  (b)  of
    22  this section.
    23    (m)  An  authorized  trustee  shall not exercise a power authorized by
    24  paragraph (a) or (b) of this section to effect any of the following:
    25    (1) To reduce, limit or modify any beneficiary's current  right  to  a
    26  mandatory  distribution  of  income or principal, a mandatory annuity or
    27  unitrust interest, a right to withdraw a percentage of the value of  the
    28  trust  or  a  right to withdraw a specified dollar amount, provided that
    29  such mandatory right has come into effect with respect to the  benefici-
    30  ary.  Notwithstanding any other provision of this paragraph, but subject
    31  to the other limitations pursuant to this section, an authorized trustee
    32  may exercise a power authorized pursuant to paragraph (a) or (b) of this
    33  section, to appoint to an appointed trust that is a  supplemental  needs
    34  trust  that  conforms to the provisions of section 7-A-3.8 of this arti-
    35  cle;
    36    (2) To decrease or indemnify against a trustee's liability or  exoner-
    37  ate  a  trustee  from liability for failure to exercise reasonable care,
    38  diligence and prudence;
    39    (3) To eliminate a provision granting  another  person  the  right  to
    40  remove  or  replace the authorized trustee exercising the power pursuant
    41  to paragraph (a) or (b) of this section, unless a court having jurisdic-
    42  tion over the trust specifies otherwise;
    43    (4) To make a binding and conclusive fixation  of  the  value  of  any
    44  asset for the purposes of distribution, allocation or otherwise; or
    45    (5) To jeopardize:
    46    (A)  the deduction or exclusion originally claimed with respect to any
    47  contribution to the invaded trust that qualified for the  annual  exclu-
    48  sion pursuant to section 2503(b) of the Internal Revenue Code, the mari-
    49  tal  deduction  under section 2056(a) or 2523(a) of the Internal Revenue
    50  Code, or the charitable deduction under section 170(a), 642(c),  2055(a)
    51  or 2522(a) of the Internal Revenue Code;
    52    (B)  the  qualification  of  a  transfer  as a direct skip pursuant to
    53  section 2642(c) of the Internal Revenue Code; or
    54    (C) any other specific tax benefit for which a contribution originally
    55  qualified for income, gift, estate, or generation-skipping transfer  tax
    56  purposes pursuant to the Internal Revenue Code.

        A. 7677                            54
 
     1    (n)  An  authorized trustee shall consider the tax implications of the
     2  exercise of the power pursuant to paragraph (a) or (b) of this section.
     3    (o)  An  authorized  trustee  shall  not exercise a power described in
     4  paragraph (a) or (b) of this section in  violation  of  the  limitations
     5  under  sections  9-1.1,  10-8.1 and 10-8.2 of this chapter, and any such
     6  exercise shall void the entire exercise of such power.
     7    (p) (1) Unless a court otherwise directs, an authorized trustee  shall
     8  not  exercise a power authorized by paragraph (a) or (b) of this section
     9  to change the provisions regarding the determination of the compensation
    10  of any trustee; the commissions or other  compensation  payable  to  the
    11  trustees of the invaded trust may continue to be paid to the trustees of
    12  the  appointed trust during the term of the appointed trust and shall be
    13  determined in the same manner as in the invaded trust.
    14    (2) No trustee shall receive any paying commission  or  other  compen-
    15  sation  for  the  appointing  of  property  from the invaded trust to an
    16  appointed trust pursuant to paragraph (a) or (b) of this section.
    17    (q) Unless  the  invaded  trust  expressly  provides  otherwise,  this
    18  section shall apply to:
    19    (1)  any  trust  governed by the laws of this state, including a trust
    20  whose governing law has been changed to the laws of this state; and
    21    (2) any trust that has a trustee who is  an  individual  domiciled  in
    22  this  state  or  a  trustee  which is an entity having an office in this
    23  state, provided that a majority of the trustees select this state as the
    24  location for the primary administration of the trust by an instrument in
    25  writing, signed and acknowledged by a  majority  of  the  trustees.  The
    26  instrument  exercising  this selection shall be kept with the records of
    27  the invaded trust.
    28    (r) For the purposes of this section:
    29    (1) The term  "appointed  trust"  means  an  irrevocable  trust  which
    30  receives  principal  from an invaded trust under paragraph (a) or (b) of
    31  this section, including a new  trust  created  by  the  creator  of  the
    32  invaded  trust  or  by  the  trustees,  in that capacity, of the invaded
    33  trust.
    34    (2) The term "authorized trustee" means, as to an invaded  trust,  any
    35  trustee  or trustees with authority to pay trust principal to or for one
    36  or more current beneficiaries other than:
    37    (A) the creator; or
    38    (B) a beneficiary to whom income or principal shall be paid  currently
    39  or  in  the  future,  or  who  is  or  will become eligible to receive a
    40  distribution of income or principal in the discretion  of  the  trustee,
    41  other than by the exercise of a power of appointment held in a non-fidu-
    42  ciary capacity.
    43    (3)  The  term "current beneficiary or beneficiaries" means the person
    44  or persons, or as to a class, any person or  persons  who  are  or  will
    45  become  members of such class, to whom the trustees may distribute prin-
    46  cipal at the time of the exercise of the power; provided, however,  that
    47  the  interest of a beneficiary to whom income, but not principal, may be
    48  distributed in the discretion of the trustee of the invaded trust may be
    49  continued in the appointed trust.
    50    (4) The term "invade" means the power to pay directly to the benefici-
    51  ary of a trust or make application for the benefit of the beneficiary.
    52    (5) The term "invaded trust"  means  any  existing  irrevocable  inter
    53  vivos or testamentary trust whose principal is appointed under paragraph
    54  (a) or (b) of this section.
    55    (6) The term "person or persons interested in the invaded trust" shall
    56  mean  any  person  or  persons  upon  whom  service  of process would be

        A. 7677                            55
 
     1  required in a proceeding for the judicial settlement of the  account  of
     2  the trustee, taking into account the provisions of SCPA 315.
     3    (7)  The term "principal" shall include the income of the trust at the
     4  time of the exercise of the power that is not currently required  to  be
     5  distributed, including accrued and accumulated income.
     6    (8)  The  term  "unlimited  discretion"  means  the unlimited right to
     7  distribute principal that is not modified in any manner. A power to  pay
     8  principal  that includes words such as best interests, welfare, comfort,
     9  or happiness shall not be considered a limitation or modification of the
    10  right to distribute principal.
    11    (9) A trust contributor shall not be considered to be a beneficiary of
    12  an invaded or appointed trust by reason of the  trustee's  authority  to
    13  pay  trust  income  or  principal  to  the  creator  pursuant to section
    14  7-A-8.17 of this part, or by reason of the trustee's authority under the
    15  trust instrument or any other provision of law to pay or  reimburse  the
    16  trust contributor for any tax on trust income or trust principal that is
    17  payable  by  the trust contributor under the law imposing such tax or to
    18  pay any such tax directly to the taxing authorities.
    19    (s) Cross-reference: For provisions  regarding  the  exercise  of  the
    20  power  pursuant  to paragraph (a) or (b) of this section where there are
    21  multiple trustees, see sections 10-6.7 and 10-10.7 of this chapter.
    22  § 7-A-8.19 Duty when a resulting trust arises
    23    Subject to the provisions of section 7-A-8.16 of this part, the  trus-
    24  tee  has  the  duty  to  distribute trust property to the settlor or the
    25  settlor's successors in interest when a resulting trust arises.
 
    26                 PART 9. NEW YORK UNIFORM DIRECTED TRUST ACT
 
    27  § 7-A-9.1 Short title
    28    This part shall be known and may be cited as  the  "New  York  uniform
    29  directed trust act".
    30  § 7-A-9.2 Definitions
    31    For the purposes of this part:
    32    (a)  "Directed  trust"  means a trust for which the terms of the trust
    33  grant a power of direction.
    34    (b) "Directed trustee" means a trustee  who  is  subject  to  a  trust
    35  director's power of direction.
    36    (c)  "Power  of  direction"  means  a  power over a trust granted to a
    37  person by the terms of the trust to the extent such power is exercisable
    38  while the person is not then  serving  as  a  trustee.  The  term  shall
    39  include  a  power  over  the  investment, management, or distribution of
    40  trust property or other matters of trust administration. The term  shall
    41  not  include the powers described in paragraph (b) of section 7-A-9.4 of
    42  this part.
    43    (d) "Trust director" means a trust director  as  defined  pursuant  to
    44  paragraph (bb) of section 7-A-1.4 of this article.
    45    (e)  "Willful misconduct" means willful misconduct as defined pursuant
    46  to paragraph (ee) of section 7-A-1.4 of this article.
    47  § 7-A-9.3 Application; principal place of administration
    48    (a) This part shall apply to a trust, whenever created, that  has  its
    49  principal  place of administration in this state, subject to the follow-
    50  ing rules:
    51    (1) If the trust was created before the effective date of  this  arti-
    52  cle,  this part shall only apply to a decision or action occurring on or
    53  after the effective date of this article.

        A. 7677                            56
 
     1    (2) If the principal place of administration of the trust  is  changed
     2  to  this state on or after the effective date of this article, this part
     3  shall only apply to a decision or action occurring on or after the  date
     4  of such change.
     5    (b)   Without   precluding  other  means  to  establish  a  sufficient
     6  connection with the designated jurisdiction in a directed  trust,  terms
     7  of  the  trust  which designate the principal place of administration of
     8  the trust are valid and controlling if those terms satisfy the  require-
     9  ments of paragraph (a) of section 7-A-1.9 of this article.
    10  § 7-A-9.4 Exclusions
    11    (a)  For  the purposes of this section, "power of appointment" means a
    12  power of appointment as defined pursuant to  paragraph  (a)  of  section
    13  10-3.1 of this chapter.
    14    (b) This part shall not apply to a person who has a:
    15    (1) power of appointment;
    16    (2) power to appoint or remove a trustee or trust director;
    17    (3) power of a trust contributor over a trust to the extent such trust
    18  contributor has a power to revoke the trust;
    19    (4)  power of a beneficiary over a trust to the extent the exercise or
    20  non-exercise of such power affects the beneficial interest of:
    21    (A) the beneficiary; or
    22    (B) another beneficiary represented by  the  beneficiary  pursuant  to
    23  SCPA 315 with respect to the exercise or non-exercise of such power; or
    24    (5) power over a trust if:
    25    (A)  the terms of the trust provide that the power is held in a nonfi-
    26  duciary capacity; and
    27    (B) the power shall be held in a nonfiduciary capacity to achieve  the
    28  trust  contributor's  tax objectives under the Internal Revenue Code and
    29  regulations issued thereunder, as amended.
    30    (c) A power granted to a person by the terms of the trust  that  would
    31  otherwise be a power of appointment is a power of direction if the terms
    32  of  the  trust  impose fiduciary duties on that person's exercise of the
    33  power.
    34  § 7-A-9.5 Powers of trust director
    35    (a) The terms of a trust may grant to a trust  director  one  or  more
    36  powers  of direction. Such powers, the listing of which is not exclusive
    37  but illustrative, may include a power to:
    38    (1) direct investments;
    39    (2) adjust between principal and income or convert to a unitrust;
    40    (3) modify, reform, terminate, or decant a trust;
    41    (4) direct a trustee's or another trust  director's  delegation  of  a
    42  trustee's or other trust director's powers;
    43    (5)  change the principal place of administration, situs, or governing
    44  law of the trust;
    45    (6) ascertain the happening of an  event  that  affects  the  adminis-
    46  tration of the trust;
    47    (7)  determine  the capacity of a trustee, settlor, trust director, or
    48  beneficiary of the trust;
    49    (8) determine the compensation to be paid to a trustee or trust direc-
    50  tor;
    51    (9) prosecute, defend, or join an action, claim, or judicial  proceed-
    52  ing relating to the trust;
    53    (10)  grant  or  withhold permission before a trustee or another trust
    54  director may exercise a power of the trustee or other trust director;

        A. 7677                            57
 
     1    (11) release a trustee or another trust director from liability for an
     2  action proposed or previously taken by the trustee or other trust direc-
     3  tor;
     4    (12) authorize loans to trust beneficiaries;
     5    (13) guarantee loans made by trust beneficiaries;
     6    (14)  enforce  a  trust  for pets pursuant to section 7-A-3.12 of this
     7  article; or
     8    (15) enforce a non-charitable trust without an ascertainable benefici-
     9  ary pursuant to section 7-A-3.13 of this article.
    10    (b) For the purposes of subparagraph one  of  paragraph  (a)  of  this
    11  section,  unless  the terms of the trust provide otherwise, the power to
    12  direct investments shall mean with respect to all of the trust's invest-
    13  ments, or, if applicable, to  investments  specified  in  the  governing
    14  instrument, the power to direct the retention, purchase, sale, exchange,
    15  tender  or other transaction or decision affecting the ownership thereof
    16  or rights therein, including the powers to borrow and lend  for  invest-
    17  ment  purposes,  to  direct  the exercise of all management, control and
    18  voting powers  related  directly  or  indirectly  to  such  investments,
    19  including,  without  limitation,  non-publicly  traded  investments,  to
    20  direct the selection of custodians or subcustodians other than the trus-
    21  tee, the selection and compensation of, and delegation  to,  investments
    22  advisors,  managers  or  other investment providers, and with respect to
    23  non-publicly traded investments, the valuation thereof.
    24    (c) Unless the terms of a trust provide otherwise,  a  trust  director
    25  may  exercise any further power appropriate to the exercise or non-exer-
    26  cise of a power of direction granted to the trust director  under  para-
    27  graph  (a) of this section. Such further powers, the listing of which is
    28  not exclusive but illustrative, may include a power to:
    29    (1) incur reasonable costs and direct indemnification for such costs;
    30    (2) make a report or accounting to a beneficiary or  other  interested
    31  party;
    32    (3)  direct  a  trustee  to issue a certification of trust pursuant to
    33  section 7-A-10.13 of this article;
    34    (4) prosecute, defend, or join an action, claim, or judicial  proceed-
    35  ing relating to a trust;
    36    (5)  employ  a  professional to assist or advise the trust director in
    37  the exercise or non-exercise or the trust director's powers;
    38    (6) delegate the trust director's power to an agent without  liability
    39  for  the  actions of the agent provided the trust director exercises the
    40  reasonable care, skill, and caution that is required  of  a  trustee  in
    41  making a delegation pursuant to paragraph (a) of section 7-A-8.7 of this
    42  article; or
    43    (7)  prosecute, defend, or join an action, claim, or judicial proceed-
    44  ing pertaining to the trust where appropriate under the circumstances to
    45  the trust director's exercise or non-exercise of  the  trust  director's
    46  power of direction.
    47    (d)  Unless  the  terms  of a trust provide otherwise, trust directors
    48  with joint powers shall act by majority decision.
    49  § 7-A-9.6 Limitations on powers of trust director
    50    A trust director having the power either to direct the trustee to make
    51  a discretionary distribution of principal or income to the trust  direc-
    52  tor  as  a  beneficiary  or  to  consent to such a distribution shall be
    53  subject to the provisions of section 10-10.1 of this chapter, other than
    54  the last sentence thereof, as if for the purposes of  such  section  the
    55  trust  director  were a trustee having the power to make a discretionary
    56  distribution to the trustee as beneficiary.

        A. 7677                            58
 
     1  § 7-A-9.7 General duties and liabilities of trust director
     2    (a) Subject to paragraph (b) of this section:
     3    (1)  the  trust  director  is a fiduciary and has the same duties as a
     4  trustee pursuant to part eight of this article, and the same liabilities
     5  of a trustee pursuant to part ten of this article, that a trustee  would
     6  have  if  the power of direction authorized under the terms of the trust
     7  or any further power, pursuant to paragraph (c) of  section  7-A-9.5  of
     8  this  part,  was  held by a trustee. If the power is held jointly with a
     9  trustee or another trust director, the rules applicable  to  co-trustees
    10  pursuant  to  section  7-A-7.3  of  this article shall also apply to the
    11  trust director; and
    12    (2) the terms of the trust may vary the trust director's duties to the
    13  same extent the terms of the trust could vary the duties of a trustee.
    14    (b) Unless the terms of a trust provide otherwise, if a trust director
    15  is licensed, certified, or otherwise authorized  or  permitted  by  law,
    16  other  than  this part, to provide health care in the ordinary course of
    17  the trust director's business or practice of a profession, to the extent
    18  the trust director acts in that capacity, the trust director shall  have
    19  no duty or liability under this part and section 7-A-3.9 of this article
    20  shall not apply.
    21    (c)  The  terms  of  a trust may impose a duty or liability on a trust
    22  director in addition to the duties and liabilities under this section.
    23    (d) Cross-reference: For provisions regarding the additional duties of
    24  a trust director, see paragraph (b) of section 7-A-9.8 of this part.
    25  § 7-A-9.8 Duties and liabilities of directed  trustee  with  respect  to
    26               power of direction
    27    (a) Subject to paragraph (b) of this section, a directed trustee shall
    28  take  reasonable  action  to  comply with a trust director's exercise or
    29  non-exercise of a power of direction or  a  further  power  pursuant  to
    30  paragraph  (c)  of section 7-A-9.5 of this part and, notwithstanding the
    31  provisions of subparagraph two of paragraph (m) of section  7-A-8.18  of
    32  this  article  and  section 11-1.7 of this chapter, the directed trustee
    33  shall not be liable for any loss resulting directly or  indirectly  from
    34  any  action  taken  pursuant to such exercise of a power of direction or
    35  any action not taken pursuant to the non-exercise of a power  of  direc-
    36  tion.
    37    (b)  A directed trustee shall not comply with a trust director's exer-
    38  cise or non-exercise of a power of direction or further  power  pursuant
    39  to  paragraph  (c) of section 7-A-9.5 of this part to the extent that by
    40  complying the trustee would engage in willful misconduct.
    41    (c) A directed trustee that has reasonable doubt about its duty not to
    42  engage  in  willful  misconduct  may  timely  petition  the  court   for
    43  instructions or present the issue in a pending proceeding.
    44    (d)  The terms of a trust may impose a duty or liability on a directed
    45  trustee in addition to the  duties  and  liabilities  pursuant  to  this
    46  section.
    47    (e) Cross-reference: For provisions regarding the additional duties of
    48  directed trustees, see paragraph (a) of section 7-A-9.9 of this part
    49  § 7-A-9.9 Duty to provide information to trust director or trustee
    50    (a)  Unless the terms of a trust provide otherwise, and subject to the
    51  provisions of paragraph (a) of section 7-A-9.10 of this part, a  trustee
    52  shall provide information to a trust director to the extent the informa-
    53  tion is reasonably related both to:
    54    (1) the powers or duties of the trustee; and
    55    (2) the powers or duties of the trust director.

        A. 7677                            59
 
     1    (b)  Unless the terms of a trust provide otherwise, and subject to the
     2  provisions of paragraph (b) of section 7-A-9.10 of this  part,  a  trust
     3  director  shall provide information to a trustee or another trust direc-
     4  tor to the extent the information is reasonably related both to:
     5    (1) the powers or duties of the trust director; and
     6    (2) the powers or duties of the trustee or other trust director.
     7    (c)  Notwithstanding the provisions of section 11-1.7 of this chapter,
     8  a trustee that acts in reliance  on  information  provided  by  a  trust
     9  director  shall  not  be liable for a breach of trust to the extent such
    10  breach resulted from the reliance,  unless  by  so  acting  the  trustee
    11  engages in willful misconduct.
    12    (d)  Notwithstanding the provisions of section 11-1.7 of this chapter,
    13  a trust director that acts in reliance  on  information  provided  by  a
    14  trustee  or  another  trust director shall not be liable for a breach of
    15  trust to the extent such breach resulted from the reliance, unless by so
    16  acting the trust director engages in willful misconduct.
    17  § 7-A-9.10 No duty to monitor, inform, or advise
    18    (a) Unless the terms of a trust provide otherwise:
    19    (1) a trustee shall not have a duty to:
    20    (A) monitor a trust director; or
    21    (B) inform or give advice to a settlor, trust contributor, other  than
    22  a  settlor,  beneficiary,  trustee,  or  trust  director  concerning  an
    23  instance in which the trustee might  have  acted  differently  than  the
    24  trust director; and
    25    (2)  by  taking  an  action pursuant to subparagraph one of this para-
    26  graph, a trustee shall not assume the duty  excluded  by  such  subpara-
    27  graph.
    28    (b) Unless the terms of a trust provide otherwise:
    29    (1) a trust director shall not have a duty to:
    30    (A) monitor a trustee or another trust director; or
    31    (B)  inform or give advice to a settlor, trust contributor, other than
    32  a settlor, beneficiary, trustee, or another trust director concerning an
    33  instance in which the trust director might have acted differently than a
    34  trustee or another trust director; and
    35    (2) by taking an action described in subparagraph one  of  this  para-
    36  graph,  a  trust  director  shall  not  assume the duty excluded by such
    37  subparagraph.
    38  § 7-A-9.11 Limitation of action against trust director
    39    An action against a trust  director  for  breach  of  trust  shall  be
    40  commenced  within  the same limitation period as an action for breach of
    41  trust against a trustee pursuant to section 7-A-10.5 of this article.
    42  § 7-A-9.12 Defenses in action against trust director
    43    In an action against a trust director for breach of trust,  the  trust
    44  director  may  assert  the  same  defenses as a trustee may assert in an
    45  action for breach of trust against the trustee.
    46  § 7-A-9.13 Jurisdiction over trust director
    47    (a) By accepting appointment as a trust director of a trust subject to
    48  this part, the trust director submits to the  personal  jurisdiction  of
    49  the courts of this state regarding any matter related to a power or duty
    50  of the trust director.
    51    (b)  This section shall not preclude other methods of obtaining juris-
    52  diction over a trust director.
    53  § 7-A-9.14 Accepting or declining the position of trust director
    54    (a) A person designated as trust  director  accepts  the  position  of
    55  trust director:

        A. 7677                            60
 
     1    (1) by substantially complying with a method of acceptance provided in
     2  the terms of the trust; or
     3    (2)  by  exercising  powers or performing duties as trust director, or
     4  otherwise indicating acceptance of the position of  trust  director,  if
     5  the terms of the trust do not provide a method or the method provided in
     6  the terms is not expressly made exclusive.
     7    (b) A person designated as trust director who has not yet accepted the
     8  directorship  may  reject  the  position of trust director. A designated
     9  trust director of a lifetime trust who does not accept the  position  of
    10  trust director within a reasonable time after knowing of the designation
    11  and  knowing  of  the occurrence of the event that makes the designation
    12  effective shall be deemed to have rejected the position of trust  direc-
    13  tor.
    14  § 7-A-9.15 Compensation of trust directors and directed trustees
    15    (a) If the terms of the trust provide for specific rates or amounts of
    16  commissions,  other  than  a general reference to commissions allowed by
    17  law or words of like import, for a trust director or a directed trustee,
    18  or, if a corporate directed trustee has agreed to accept specific  rates
    19  or  amounts of commissions, a trust director or a directed trustee shall
    20  be entitled to be compensated in  accordance  with  such  provisions  or
    21  agreement, as the case may be.
    22    (b)  If  the  terms  of the trust do not so provide, a trust director,
    23  other than one described in paragraph (b) of  section  7-A-9.7  of  this
    24  part,  and  a directed trustee shall be entitled to such compensation as
    25  may be reasonable, and the court, upon application of  a  person  inter-
    26  ested in the trust, may review the reasonableness of such compensation.
    27    (c)  If  the  terms  of the trust do not provide for the allocation of
    28  payment of commissions to income and  principal,  commissions  shall  be
    29  payable as pursuant to SCPA.
    30    (d)  Notwithstanding  the provisions of paragraphs (a) and (b) of this
    31  section, in the case of a charitable  trust,  the  compensation  of  any
    32  trust  director or directed trustee, other than a corporate trust direc-
    33  tor or corporate directed trustee, shall not exceed the amount  provided
    34  pursuant  to  SCPA  2312 and the compensation of all trust directors and
    35  trustees, including directed trustees, of such trust shall  be  limited,
    36  pursuant to SCPA 2313.
    37  § 7-A-9.16 Trust director's bond
    38    (a)  Except  as  provided  by  paragraph  (c) of this section, a trust
    39  director shall give bond to secure performance of the  trust  director's
    40  duties  only  if  the  court  finds that a bond is needed to protect the
    41  interests of the beneficiaries or is required by the terms of the  trust
    42  and the court has not dispensed with the requirement.
    43    (b)  The  court may specify the amount of a bond, its liabilities, and
    44  whether sureties are necessary. The court may modify or terminate a bond
    45  at any time.
    46    (c) A trust company, as defined pursuant to subdivision two of section
    47  two of the banking law, any bank authorized to exercise fiduciary powers
    48  and any national bank having a principal, branch or trust office in this
    49  state and duly authorized to exercise fiduciary powers need not  give  a
    50  bond unless a bond is expressly required of the trust company or bank by
    51  the terms of the trust.
    52  § 7-A-9.17 Vacancy  in  the  position  of trust director; appointment of
    53               successor
    54    (a) A vacancy in the position of trust director occurs if:
    55    (1) a person designated as trust  director  rejects  the  position  of
    56  trust director;

        A. 7677                            61
 
     1    (2) a person designated as trust director cannot be identified or does
     2  not exist;
     3    (3) a trust director resigns;
     4    (4) a trust director is disqualified or removed;
     5    (5) a trust director dies;
     6    (6)  a guardian is appointed for an individual serving as trust direc-
     7  tor; or
     8    (7) a trust instrument so provides.
     9    (b) A vacancy in the position of trust director shall be  filled  only
    10  if  expressly required by the terms of the trust, or if the terms of the
    11  trust expressly provide that trustees, other trust directors,  or  other
    12  persons  may  fill  the vacancy in their discretion. If the terms of the
    13  trust do not expressly require that a vacancy be filled, and there is no
    14  other trust director then serving that is  authorized  to  exercise  the
    15  same  power  of  direction as that held by the trust director that is no
    16  longer serving, the trustee or co-trustee shall be authorized  to  exer-
    17  cise the power or powers authorized by that power of direction.
    18    (c)  A  vacancy  in  the position of trust director of a noncharitable
    19  trust that is required to be filled shall be  filled  in  the  following
    20  order of priority:
    21    (1) by a person designated in the terms of the trust to act as succes-
    22  sor trust director;
    23    (2)  by  a  person  appointed  by unanimous agreement of the qualified
    24  beneficiaries; or
    25    (3) by a person appointed by the court.
    26    (d) A vacancy in the position of trust director of a charitable  trust
    27  that  is required to be filled shall be filled in the following order of
    28  priority:
    29    (1) by a person designated in the terms of the trust to act as succes-
    30  sor trust director;
    31    (2) by a person selected by  the  charitable  organizations  expressly
    32  designated  to receive distributions under the terms of the trust if the
    33  attorney general concurs in the selection; or
    34    (3) by a person appointed by the court.
    35    § 7-A-9.18 Resignation of trust director
    36    (a) Unless the terms of a trust provide otherwise,  a  trust  director
    37  may resign:
    38    (1) upon at least thirty days' notice, pursuant to section 7-A-1.10 of
    39  this  article,  to  the trust contributor, all co-trustees and all other
    40  trust directors in the case of a revocable trust, or the qualified bene-
    41  ficiaries, all co-trustees and all other trust directors, in the case of
    42  any other trust; or
    43    (2) with the approval of the court.
    44    (b) In approving a resignation, the court may issue orders and  impose
    45  conditions  reasonably necessary for the protection of the trust proper-
    46  ty.
    47    (c) Any liability of a resigning trust director and of any sureties on
    48  the trust director's bond for acts or omissions of  the  trust  director
    49  are not discharged or affected by the trust director's resignation.
    50    § 7-A-9.19 Removal of trust director
    51    (a)  In addition to any provision for removal in the trust instrument,
    52  the settlor, a  co-trustee,  co-trust  director  or  a  beneficiary  may
    53  request  the court to remove a trust director or a trust director may be
    54  removed by the court on its own initiative.
    55    (b) The court may remove a trust director if:
    56    (1) the trust director has committed a serious breach of trust;

        A. 7677                            62
 
     1    (2) lack of cooperation among co-trust directors substantially impairs
     2  the administration of the trust;
     3    (3)  because of unfitness, unwillingness, or persistent failure of the
     4  trust director to effectively exercise the power of  direction  held  by
     5  the  trust  director,  the  court  determines  that removal of the trust
     6  director best serves the interests of the beneficiaries; or
     7    (4) there has been a substantial change of circumstances or removal is
     8  requested by all of the qualified beneficiaries, provided that the court
     9  finds that removal of the trust director best serves  the  interests  of
    10  all  of  the  beneficiaries and is not inconsistent with the purposes of
    11  the trust, and a suitable co-trust director or successor trust  director
    12  is available.
    13    (c)  Pending a final decision on a request to remove a trust director,
    14  or in lieu of or in addition to removing a trust director, the court may
    15  order such appropriate relief pursuant to paragraph (b) of section  7-A-
    16  10.1  of this article, as may be necessary to protect the trust property
    17  or the interests of the beneficiaries.
    18  § 7-A-9.20 Uniformity of application and construction
    19    In applying and construing this uniform act,  consideration  shall  be
    20  given  to  the need to promote uniformity of the law with respect to its
    21  subject matter among states that enact it.
    22  § 7-A-9.21 Severability clause
    23    If any provision of this part or its  application  to  any  person  or
    24  circumstances  is  held  invalid,  the invalidity shall not affect other
    25  provisions or applications of this part which can be given effect  with-
    26  out the invalid provision or application, and to this end the provisions
    27  of this part are severable.
    28  § 7-A-9.22 Application of part
    29    This part shall apply to trusts created on or after the effective date
    30  of this article.
 
    31      PART 10. LIABILITY OF TRUSTEES AND RIGHTS OF PERSONS DEALING WITH
    32                                  TRUSTEES

    33  § 7-A-10.1 Remedies for breach of trust
    34    (a)  A violation by a trustee of a duty such trustee owes to a benefi-
    35  ciary is a breach of trust.
    36    (b) To remedy a breach of trust that has occurred or  may  occur,  the
    37  court may:
    38    (1) compel the trustee to perform the trustee's duties;
    39    (2) enjoin the trustee from committing a breach of trust;
    40    (3)  compel  the trustee to redress a breach of trust by paying money,
    41  by restoring property, or by other means;
    42    (4) order a trustee to account;
    43    (5) appoint a successor trustee or co-trustee to  take  possession  of
    44  the trust property and administer the trust as provided pursuant to SCPA
    45  1502;
    46    (6) suspend the trustee;
    47    (7) remove the trustee, pursuant to section 7-A-7.8 of this article;
    48    (8) reduce or deny compensation to the trustee;
    49    (9)  void an act of the trustee, impose a lien or a constructive trust
    50  on trust property, or trace trust property wrongfully  disposed  of  and
    51  recover  the  property or its proceeds, pursuant to section 7-A-10.11 of
    52  this part; or
    53    (10) order any other appropriate relief.

        A. 7677                            63
 
     1    (c) Nothing in this section shall be construed to  limit  the  court's
     2  application  of remedial provisions that are provided in the surrogate's
     3  court procedure act.
     4    § 7-A-10.2 Liability for breach of trust
     5    (a) Unless section 7-A-10.9 of this part applies, and except as other-
     6  wise  provided  in this section, a trustee who commits a breach of trust
     7  is chargeable with the value of the capital lost by reason of the breach
     8  plus prejudgment interest as determined by the court.
     9    (b) Unless section 7-A-10.9  of  this  part  applies,  a  trustee  who
    10  commits  a breach of trust, other than breaching the duty of loyalty, by
    11  conduct constituting gross negligence,  recklessness  or  bad  faith  is
    12  chargeable with the greater of:
    13    (1)  the  value  of  the  capital  lost  by  reason of the breach plus
    14  prejudgment interest as determined by the court; or
    15    (2) the amount at the time of  the  decree  required  to  restore  the
    16  values of the trust property to what they would have been if the portion
    17  of the trust affected by the breach had been properly administered.
    18    (c)  Unless  section  7-A-10.9  of  this  part  applies, a trustee who
    19  commits a breach of trust by breaching the duty of loyalty is chargeable
    20  with:
    21    (1) the greater of:
    22    (A) the value of the  capital  lost  by  reason  of  the  breach  plus
    23  prejudgment interest as determined by the court; or
    24    (B) the amount required to restore the values of the trust property to
    25  what  they  would  have been if the portion of the trust affected by the
    26  breach had been properly administered; and
    27    (2) the amount of any benefit to the trustee personally as a result of
    28  the breach to the extent that such amount is not included in the  amount
    29  determined  under item (A) or item (B) of subparagraph one of this para-
    30  graph.
    31    (d) In addition to charging the trustee pursuant to paragraphs (b) and
    32  (c) of this section, a trustee may be  additionally  chargeable  as  the
    33  court deems appropriate to fashion complete equitable relief.
    34    (e)  Except  as otherwise provided in this paragraph, if more than one
    35  trustee is liable to the beneficiaries for a breach of trust, a  trustee
    36  may  be  entitled  to contribution from the other trustee or trustees in
    37  accordance with applicable law. A  trustee  shall  not  be  entitled  to
    38  contribution  if  the trustee committed the breach of trust in bad faith
    39  or with reckless indifference to the purposes of the trust or the inter-
    40  ests of the beneficiaries. A trustee who received  a  benefit  from  the
    41  breach of trust shall not be entitled to contribution from another trus-
    42  tee to the extent of the benefit received.
    43    (f) Cross-reference: For provisions regarding allowing qualified bene-
    44  ficiaries to void a transaction if a trustee breaches the duty of loyal-
    45  ty, see section 7-A-8.2 of this article.
    46  § 7-A-10.3 Damages in absence of breach
    47    (a)  A trustee shall be accountable to an affected beneficiary for any
    48  profit made by the trustee arising from the administration of the trust,
    49  even absent a breach of trust.
    50    (b) Absent a breach of trust, a trustee shall not be liable to a bene-
    51  ficiary for a loss or depreciation in the value of trust property or for
    52  not having made a profit.
    53  § 7-A-10.4 Compensation of attorneys' fees, costs and allowances
    54    (a) In a judicial proceeding involving the administration of a  trust,
    55  a court shall be authorized to:

        A. 7677                            64
 
     1    (1) fix and determine the compensation of an attorney pursuant to SCPA
     2  2110; and
     3    (2) award costs and allowances pursuant to article twenty-three of the
     4  SCPA.
     5    (b)  Cross-reference:  For provisions regarding a trustee's payment of
     6  reasonable counsel fees, see paragraph (ii) of section 7-A-8.15 of  this
     7  article.
     8  § 7-A-10.5 Limitation of action against trustee
     9    (a)  A  beneficiary  shall not commence a proceeding against a trustee
    10  for breach of trust more than two years after the date  the  beneficiary
    11  or a representative of the beneficiary was sent a report that adequately
    12  disclosed  the  existence  of  a potential claim for breach of trust and
    13  informed the beneficiary of the time allowed for commencing  a  proceed-
    14  ing.
    15    (b)  A  report adequately discloses the existence of a potential claim
    16  for breach of trust if it provides sufficient information  so  that  the
    17  beneficiary  or  representative  knows  of the potential claim or should
    18  have inquired into its existence.
    19    (c) If paragraph (a) of  this  section  does  not  apply,  a  judicial
    20  proceeding  by  a beneficiary against a trustee for breach of trust must
    21  be commenced within six years after the first to occur of:
    22    (1) the removal, resignation, or death of the trustee;
    23    (2) the termination of the beneficiary's interest in the trust;
    24    (3) the termination of the trust; or
    25    (4) the open repudiation of the trust by the trustee.
    26    (d) Paragraph (a) of this section shall  not  apply  to  the  attorney
    27  general  acting  under  the  authority pursuant to article eight of this
    28  chapter or pursuant to any other provision of law.
    29  § 7-A-10.6 Reliance on trust instrument
    30    To the extent section 11-2.3 of this chapter does not apply, a trustee
    31  who acts in reasonable reliance on the terms of the trust  as  expressed
    32  in  the  trust  instrument  shall  not  be liable to a beneficiary for a
    33  breach of trust to the extent the breach resulted from the reliance.
    34  § 7-A-10.7 Event affecting administration or distribution
    35    If the happening of an event, including but not limited to,  marriage,
    36  divorce,  performance of educational requirements, or death, affects the
    37  administration or distribution of a trust, a trustee who  has  exercised
    38  reasonable  care  to  ascertain  the happening of the event shall not be
    39  liable for a loss resulting from the trustee's lack of knowledge.
    40  § 7-A-10.8 Exculpation of trustee and trust director
    41    The rules for the exculpation of a trustee and a  trust  director  are
    42  provided in section 11-1.7 of this chapter.
    43  § 7-A-10.9 Beneficiary's consent, release, or ratification
    44    (a) A trustee shall not be liable to a beneficiary for breach of trust
    45  if  the beneficiary consented in writing to the conduct constituting the
    46  breach, executed a written release of the trustee from liability for the
    47  breach, or ratified in writing the transaction constituting the  breach,
    48  unless:
    49    (1)  the  consent,  release,  or  ratification  of the beneficiary was
    50  induced by improper conduct of the trustee; or
    51    (2) at the time of the consent, release, or ratification, the  benefi-
    52  ciary  did not know of the beneficiary's rights or of the material facts
    53  relating to the breach.
    54    (b) A consent, release, or ratification, pursuant to paragraph (a)  of
    55  this section, that is made by a beneficiary upon whom service of process
    56  would  be  required  in a proceeding to settle the trustee's account, is

        A. 7677                            65
 
     1  binding upon all persons upon whom  service  of  process  would  not  be
     2  required  pursuant to SCPA 315 because process was served upon the bene-
     3  ficiary.
     4  § 7-A-10.10 Limitation on personal liability of trustee
     5    (a)  Except as otherwise provided in the contract, a trustee shall not
     6  be personally liable on a contract properly entered into  in  the  trus-
     7  tee's fiduciary capacity in the course of administering the trust if the
     8  trustee disclosed the fiduciary capacity in the contract.
     9    (b)  A  trustee  shall be personally liable for torts committed in the
    10  course of administering a trust, or for obligations arising from  owner-
    11  ship  or control of trust property, including liability for violation of
    12  environmental law, only if the trustee  failed  to  exercise  reasonable
    13  care, diligence, and prudence.
    14    (c) A claim based on a contract entered into by a trustee in the trus-
    15  tee's  fiduciary  capacity,  on  an obligation arising from ownership or
    16  control of trust property, or on a  tort  committed  in  the  course  of
    17  administering  a trust, may be asserted in a judicial proceeding against
    18  the trustee in the trustee's fiduciary  capacity,  whether  or  not  the
    19  trustee is personally liable for such claim.
    20    (d)  In  any  case where liability is found against the trustee as the
    21  result of an action or proceeding brought under paragraph  (c)  of  this
    22  section,  issues  of  liability  as between the trustee in the trustee's
    23  fiduciary capacity and the trustee in the trustee's individual  capacity
    24  shall,  if  necessary, be determined in an accounting proceeding brought
    25  pursuant to SCPA 2205.
    26  § 7-A-10.11 Interest as general partner
    27    (a) Unless personal liability is imposed in the  contract,  a  trustee
    28  who holds an interest as a general partner in a general or limited part-
    29  nership shall not be personally liable on a contract entered into by the
    30  partnership after the trustee's acquisition of the interest if the fidu-
    31  ciary capacity was disclosed in the contract or disclosed in a statement
    32  previously filed pursuant to the partnership law.
    33    (b)  A trustee who holds an interest as a general partner shall not be
    34  personally liable for torts committed by the partnership  or  for  obli-
    35  gations  arising  from  ownership  or control of the interest unless the
    36  trustee is personally at fault.
    37    (c) If the trustee of a revocable trust holds an interest as a general
    38  partner, the trust contributor shall be personally liable for  contracts
    39  and  other  obligations  of  the partnership as if the trust contributor
    40  were a general partner.
    41  § 7-A-10.12 Protection of person dealing with trustee
    42    (a) Except in the case of a breach pursuant to section 7-A-8.2 of this
    43  article, a person other than a beneficiary who in good faith  assists  a
    44  trustee,  or who in good faith and for value deals with a trustee, with-
    45  out knowledge that such trustee is exceeding  or  improperly  exercising
    46  the  trustee's  powers,  is  protected  from liability as if the trustee
    47  properly exercised the power.
    48    (b) A person other than a beneficiary who in good faith deals  with  a
    49  trustee  is  not  required  to inquire into the extent of such trustee's
    50  powers or the propriety of their exercise.
    51    (c) A person who in good faith transfers money or property to a  trus-
    52  tee is not responsible for the proper application of such money or prop-
    53  erty;  and  any right or title derived by him or her from the trustee in
    54  consideration of such transfer shall not be affected  by  the  trustee's
    55  misapplication of such money or property.

        A. 7677                            66
 
     1    (d)  A  person  other  than  a beneficiary who in good faith assists a
     2  former trustee, or who in good faith and for value deals with  a  former
     3  trustee,  without knowledge that the trusteeship has terminated shall be
     4  protected from liability as if the former trustee were still a trustee.
     5    (e) Comparable protective provisions of other laws relating to commer-
     6  cial  transactions or transfer of securities by fiduciaries prevail over
     7  the protection provided by this section.
     8    (f) Paragraphs (a) through (e) of this section  shall  apply  only  to
     9  transactions that occur after the effective date of this article.
    10    (g) With respect to transactions between a trustee or trustees and any
    11  person occurring before the effective date of this article:
    12    (1) If the trust is expressed in the instrument creating the estate of
    13  the  trustee,  every  sale,  conveyance  or other act of the trustee, in
    14  contravention of the trust, except as authorized in this article and  by
    15  any other provision of law, is void.
    16    (2) An express trust not declared in the disposition to the trustee or
    17  an  implied or resulting trust shall not defeat the title of a purchaser
    18  from the trustee for value and without  notice  of  the  trust,  or  the
    19  rights of a creditor who extended credit to the trustee in reliance upon
    20  his or her apparent ownership of the trust property.
    21  § 7-A-10.13 Certification of trust
    22    (a)  Instead  of furnishing a copy of the trust instrument to a person
    23  other than a beneficiary, the  trustee  may  furnish  to  the  person  a
    24  certification  of  trust containing so much of the following information
    25  as is requested by such person:
    26    (1) that the trust exists  and  the  date  the  trust  instrument  was
    27  executed;
    28    (2) the identity of the settlor;
    29    (3) the identity and address of the currently acting trustee;
    30    (4) the powers of the trustee;
    31    (5)  the  revocability or irrevocability of the trust and the identity
    32  of any person holding a power to revoke the trust;
    33    (6) the authority of co-trustees to sign or otherwise authenticate and
    34  whether all or less than all are required in order to exercise powers of
    35  the trustee;
    36    (7) the manner of taking title to trust property.
    37    (b) A certification of trust may be signed or otherwise  authenticated
    38  by any trustee.
    39    (c)  A  certification of trust shall state that the trust has not been
    40  revoked, modified, or amended in any manner that would cause the repres-
    41  entations contained in the certification of trust to be incorrect.
    42    (d) A certification of trust need not contain the dispositive terms of
    43  a trust.
    44    (e) A recipient of a certification of trust may require the trustee to
    45  furnish copies of those excerpts from the original trust instrument  and
    46  later amendments which designate the trustee and confer upon the trustee
    47  the power to act in the pending transaction.
    48    (f)  A person who acts in reliance upon a certification of trust with-
    49  out knowledge that the representations contained therein  are  incorrect
    50  shall  not  be liable to any person for so acting and may assume without
    51  inquiry the existence of the facts contained in the certification. Know-
    52  ledge of the terms of the trust may not be inferred solely from the fact
    53  that a copy of all or part of the trust instrument is held by the person
    54  relying upon the certification.
    55    (g) A person who in good faith enters into a transaction  in  reliance
    56  upon  a  certification  of trust may enforce the transaction against the

        A. 7677                            67
 
     1  trust property as if the representations contained in the  certification
     2  were correct.
     3    (h)  A person making a demand for the trust instrument, in addition to
     4  a certification of trust or excerpts, is liable for damages if the court
     5  determines that the person did not act in good faith  in  demanding  the
     6  trust instrument.
     7    (i)  This  section  shall  not limit the right of a person to obtain a
     8  copy of the trust instrument in a  judicial  proceeding  concerning  the
     9  trust.
 
    10                      PART 11. MISCELLANEOUS PROVISIONS
 
    11  § 7-A-11.1 Relation  to  Electronic  Signatures  in  Global and National
    12               Commerce Act
    13    This article modifies, limits, and supersedes the  federal  Electronic
    14  Signatures  in  Global and National Commerce Act, 15 U.S.C. Section 7001
    15  et seq., except that nothing in this article modifies, limits, or super-
    16  sedes Sections 101(c) and 7001(c) of such act or  authorizes  electronic
    17  delivery  of any of the notices described in Sections 103(b) and 7003(b)
    18  of such act.
    19  § 7-A-11.2 Severability clause
    20    If any provision of this article or its application to any  person  or
    21  circumstances  is  held  invalid,  the invalidity shall not affect other
    22  provisions or applications of this article which  can  be  given  effect
    23  without  the  invalid  provision  or  application,  and  to this end the
    24  provisions of this article are severable.
    25  § 7-A-11.3 Application to existing relationships
    26    (a) Except as otherwise provided in this  article,  on  the  effective
    27  date of this article:
    28    (1)  this  article  shall  apply  to all trusts created before, on, or
    29  after its effective date;
    30    (2) this article shall apply to all  judicial  proceedings  concerning
    31  trusts commenced on or after its effective date;
    32    (3) this article shall apply to judicial proceedings concerning trusts
    33  commenced before its effective date unless the court finds that applica-
    34  tion  of  a  particular  provision  of  this article would substantially
    35  interfere with the effective conduct  of  the  judicial  proceedings  or
    36  prejudice  the  rights  of  the  parties,  in  which case the particular
    37  provisions of this article shall not apply and the superseding law shall
    38  apply;
    39    (4) any rule of construction or presumption provided by  this  article
    40  shall  apply  to trust instruments executed before the effective date of
    41  this article unless there is a clear indication of a contrary intent  in
    42  the terms of the trust; and
    43    (5) an act done before the effective date of this article shall not be
    44  affected by this article.
    45    (b)  If  a right is acquired, extinguished, or barred upon the expira-
    46  tion of a prescribed period that has commenced to run  under  any  other
    47  statute  before  the  effective date of this article, such other statute
    48  shall continue to apply to the right even if it  has  been  repealed  or
    49  superseded.
    50    (c)  The  provisions  of  this  article shall not impair or defeat any
    51  rights which have accrued under dispositions or appointments  in  effect
    52  prior to its effective date.
    53    § 2. Section 1-2.4 of the estates, powers and trusts law is amended to
    54  read as follows:

        A. 7677                            68
 
     1  § 1-2.4 Disposition
     2    (a)  A disposition is a transfer of property by a person during his or
     3  her lifetime or by will.
     4    (b) Cross-reference: For provisions  regarding  cy  pres  applications
     5  where  a charitable organization is designated as a beneficiary or payee
     6  upon the person making the disposition in certain non-probate transfers,
     7  see subparagraph two of paragraph (c) of section 8-1.1 of this chapter.
     8    § 3. Section 1-2.12 of the estates, powers and trusts law  is  amended
     9  to read as follows:
    10  § 1-2.12 Person
    11    The  term  "person" includes [a natural person, an association, board,
    12  any corporation, whether municipal, stock or non-stock,  court,  govern-
    13  mental  agency,  authority or subdivision, partnership or other firm and
    14  the state] an individual, corporation, business trust, estate,  partner-
    15  ship,  limited  liability company, association or joint venture; govern-
    16  ment; government subdivision, agency or instrumentality;  public  corpo-
    17  ration, or any other legal or commercial entity.
    18    §  4.  The  estates,  powers and trusts law is amended by adding a new
    19  section 1-2.21 to read as follows:
    20  § 1-2.21 Charitable organization
    21    The term "charitable organization"  shall  mean  an  "institution"  as
    22  defined  pursuant  to paragraph (d) of section five hundred fifty-one of
    23  the not-for-profit corporation law.
    24    § 5. The estates, powers and trusts law is amended  by  adding  a  new
    25  section 3-3.10 to read as follows:
    26  § 3-3.10 Reformation of wills to correct mistakes
    27    The  court  may  reform  the  terms of a will, even if unambiguous, to
    28  conform the terms to the testator's intent if it is proved by clear  and
    29  convincing  evidence  the  testator's  intent and that such terms of the
    30  will do not carry out such testator's intent  because  such  terms  were
    31  affected  by  a mistake of fact or law, whether in expression or induce-
    32  ment.
    33    § 6. The article heading of article  7  of  the  estates,  powers  and
    34  trusts law is amended to read as follows:
    35                  [TRUSTS] NON-GRATUITOUS TRUSTS, TRANSFERS
    36                TO MINORS AND CHILD PERFORMER TRUST ACCOUNTS
    37    §  7.  Part  1  of  article 7 of the estates, powers and trusts law is
    38  REPEALED and a new part 1 is added to read as follows:
 
    39                PART 1. RULES GOVERNING NON-GRATUITOUS TRUSTS
    40  Section 7-1.1  Scope.
    41          7-1.2  Purposes for which trust may be created.
    42          7-1.3  Duration of trust for benefit of creditors.
    43          7-1.4  Provision by non-domiciliary creator as to law to  govern
    44                     trust.
    45          7-1.5  Extent of trustee's estate.
    46          7-1.6  Trust estate not to descend on death of trustee; appoint-
    47                     ment, duties and rights of successor trustee.
    48          7-1.7  Suspension of powers of trustee in war service.
    49          7-1.8  Resignation, suspension or removal of trustee.
    50          7-1.9   Accounting by trustee in supreme court.
    51          7-1.10 Commissions of trust to sell real property for benefit of
    52                     creditors.
    53          7-1.11 Common law and principles of equity.
 
    54               PART 1. RULES GOVERNING NON-GRATUITIOUS TRUSTS

        A. 7677                            69
 
     1  § 7-1.1 Scope
     2    (a)  This  part provides rules for non-gratuitous trusts.  Non-gratui-
     3  tous trusts are trusts that are not governed by article seven-A of  this
     4  chapter.
     5    (b) Cross-reference: For trusts governed by article seven-A, see para-
     6  graph (a) of section 7-A-1.2.
     7  § 7-1.2 Purposes for which trust may be created
     8    A non-gratuitous trust may be created for any lawful purpose.
     9  § 7-1.3 Duration of trust for benefit of creditors
    10    (a)  Where  an  estate in real property has vested or shall vest in an
    11  assignee or other trustee for the benefit of creditors, it  shall  cease
    12  at  the  expiration  of  ten  years from the time the trust was created,
    13  except where a different  limitation  is  contained  in  the  instrument
    14  creating  the trust or is otherwise prescribed by law. Such estate shall
    15  then revert to the assignor.
    16    (b) This section shall not apply to a trust of personal property or to
    17  a trust of real property created in connection  with  the  salvaging  of
    18  mortgage  participation certificates.  Nor shall this section affect any
    19  rights to the proceeds of a sale of real property made by  the  assignee
    20  or other trustee for the benefit of creditors.
    21  § 7-1.4 Provision by non-domiciliary creator as to law to govern trust
    22    Whenever  a person, not domiciled in this state, creates a non-gratui-
    23  tous trust which provides that it shall be governed by the laws of  this
    24  state, such provision shall be given effect in determining the validity,
    25  effect and interpretation of the disposition in such trust of:
    26    (a) Any trust property situated in this state at the time the trust is
    27  created.
    28    (b)  Personal property, wherever situated, if the trustee of the trust
    29  is a person residing, incorporated or authorized to do business in  this
    30  state or a national bank having an office in this state.
    31  § 7-1.5 Extent of trustee's estate
    32    (a)  A trust pursuant to sections 9-1.5, 9-1.6 and 9-1.7 of this chap-
    33  ter, including a business trust as defined pursuant to  subdivision  two
    34  of  section two of the general associations law, may acquire property in
    35  the name of the trust as such  name  is  designated  in  the  instrument
    36  creating  such  trust.  Any property so acquired can be conveyed, encum-
    37  bered or otherwise disposed of only in such name by a conveyance, encum-
    38  brance or other instrument executed by:
    39    (1) the person or persons authorized by the instrument  creating  such
    40  trust; or
    41    (2)  the  person or persons authorized by a resolution duly adopted by
    42  the trustees; or
    43    (3) a majority of the trustees, unless the  instrument  creating  such
    44  trust provides otherwise.
    45    (b) Any instrument of conveyance, encumbrance or disposition delivered
    46  prior  to  the  effective date of this section to or by a trust to which
    47  this section applies, in its trust name is hereby  validated;  provided,
    48  however, that no action or proceeding to cancel or disaffirm it shall be
    49  instituted  within one year from the effective date of this section, but
    50  no provision of this section shall affect any  such  pending  action  or
    51  proceeding.
    52  § 7-1.6 Trust  estate  not  to descend on death of trustee; appointment,
    53            duties and rights of successor trustee
    54    (a) On the death of the sole surviving  trustee  of  a  non-gratuitous
    55  trust,  the trust estate shall not vest in his or her personal represen-
    56  tative or pass to his or her  distributees  or  devisees,  but,  in  the

        A. 7677                            70
 
     1  absence  of  a  contrary  direction by the creator, if the trust has not
     2  been executed, the trust estate shall vest in the supreme court  or  the
     3  surrogate's  court,  as the case may be, and the trust shall be executed
     4  by a person appointed by the court.
     5    (b)  Upon  such notice to the beneficiaries of the trust, as the court
     6  may direct, of an application for the appointment of a  successor  trus-
     7  tee,  unless the creator has directed otherwise, the court may appoint a
     8  successor trustee, even though the trust has terminated, whenever in the
     9  opinion of the court such appointment is  necessary  for  the  effective
    10  administration  and  distribution  of  the  trust estate, subject to the
    11  following:
    12    (1) A successor trustee shall give security  in  such  amount  as  the
    13  court may direct; and
    14    (2)  A  successor  trustee  shall be subject to the same duties, as to
    15  accounting and trust administration, as are imposed by law  on  trustees
    16  and,  in  addition  to the reasonable expenses incurred in the course of
    17  trust administration, such successor trustee shall be entitled  to  such
    18  commissions  as  may  be  fixed by any court having jurisdiction to pass
    19  upon such trustee's final account, which shall in  no  case  exceed  the
    20  commissions allowable by law.
    21  § 7-1.7 Suspension of powers of trustee in war service
    22    (a)  Whenever a trustee of a non-gratuitous trust, not governed pursu-
    23  ant to article seven-A of this chapter, is engaged in  war  service,  as
    24  defined  pursuant  to  this  section,  such  trustee or any other person
    25  interested in the trust estate may present a  petition  to  the  supreme
    26  court  or  the  surrogate's  court,  as  the case may be, to suspend the
    27  powers of such trustee while the trustee is so  engaged  and  until  the
    28  further  order  of the court, and if the suspension of such trustee will
    29  leave no person acting as trustee or leave a beneficiary of  such  trust
    30  as  the  only  acting  trustee  thereof, the petition shall pray for the
    31  appointment of a successor trustee, unless a successor has been named in
    32  the trust instrument and is not engaged in war service or is not for any
    33  other reason unable or unwilling to act as such trustee.
    34    (b) For the purposes of this section, a  trustee  is  engaged  in  war
    35  service in any of the following cases:
    36    (1)  If  the  trustee  is  a  member of the armed forces of the United
    37  States or of any of its allies, or if he  has  been  accepted  for  such
    38  service and is awaiting induction.
    39    (2)  If the trustee is engaged in any work abroad in connection with a
    40  governmental agency of the United States or with the American Red  Cross
    41  or any other body with similar objectives.
    42    (3) If the trustee is interned in any enemy country or is in a foreign
    43  country or a possession or dependency of the United States and is unable
    44  to return to this state.
    45    (4)  If  the  trustee  is  a  member of the merchant marine or similar
    46  service.
    47    (c) Where the application is made by a trustee engaged in war service,
    48  notice shall be given to such persons and in such manner  as  the  court
    49  may  direct.    Where the application is made by any other person inter-
    50  ested in the trust estate and the trustee is in the armed forces of  the
    51  United  States,  notice shall be given to such trustee in such manner as
    52  the court may direct. In every other case, where the application is made
    53  by a person other than the trustee, notice thereof  shall  be  given  to
    54  such persons and in such manner as the court may direct.
    55    (d)  Upon  the  filing  of the petition and proof of service of notice
    56  prescribed in paragraph (c) of this section,  the  court  may,  notwith-

        A. 7677                            71
 
     1  standing  any other provision of law, suspend the trustee engaged in war
     2  service from the exercise of all of  the  trustee's  powers  and  duties
     3  while  engaged in such service and until the further order of the court.
     4  The order may further provide that the remaining trustee or, if there is
     5  none,  the  successor  named in the trust instrument or appointed by the
     6  court may exercise all of the powers and be subject to all of the duties
     7  of the original trustee.
     8    (e) The successor trustee shall be limited to commissions as  computed
     9  pursuant  to  SCPA  2308  or  2309, whichever is applicable, upon income
    10  received and disbursed and upon  principal  disbursed.  Commissions  may
    11  also  be  allowed pursuant to such sections upon rents if the trustee is
    12  authorized or required to collect the rents of and manage real property.
    13  In case of the resignation or removal of the suspended  trustee,  or  in
    14  the event of such trustee's death, the foregoing basis for computing the
    15  commissions  shall  not  apply  and  the  trustee's commissions shall be
    16  computed in the same manner as those of any other trustee.
    17    (f) When the suspended trustee ceases to be engaged in war service the
    18  trustee may, upon application to the court and upon such notice  as  the
    19  court  may direct, be reinstated as trustee if any of the duties of such
    20  office remain unexecuted. If the suspended trustee  is  reinstated,  the
    21  court shall thereupon remove the trustee's successor and make such other
    22  order  as justice requires, but such removal shall not bar the successor
    23  from subsequently qualifying as a trustee if for any reason it thereaft-
    24  er becomes necessary to appoint a trustee.
    25  § 7-1.8 Resignation, suspension or removal of trustee
    26    (a) Subject to the relevant provisions of the civil practice  law  and
    27  rules, the supreme court has power:
    28    (1)  On  the  application  of  a trustee of a non-gratuitous trust, to
    29  accept the trustee's resignation and to discharge the  trustee  on  such
    30  terms as it deems proper.
    31    (2)  On  the application of any person interested in the trust estate,
    32  to suspend or remove a trustee who has violated or threatens to  violate
    33  his  or  her  trust, who is insolvent or whose insolvency is imminent or
    34  apprehended or who for any reason is a person unsuitable to execute  the
    35  trust.
    36    (3) In the case of the resignation or removal of a trustee, to appoint
    37  a  successor  trustee  and,  if there is no acting trustee, to cause the
    38  trust to be executed by a receiver or other officer under its direction.
    39  This section shall not apply to a trust arising or resulting  by  impli-
    40  cation  of law, nor to other provisions made by law for the resignation,
    41  suspension or removal of a trustee or the  appointment  of  a  successor
    42  trustee.
    43  § 7-1.9 Accounting by trustee in supreme court
    44    (a)  With  respect  to  a  non-gratuitous trust, any proceeding for an
    45  accounting or other relief brought by a trustee or by a  substituted  or
    46  successor  trustee  may be commenced by such notice to the beneficiaries
    47  of the trust as the supreme court may direct.
    48    (b) In case of the resignation, suspension  or  removal,  pursuant  to
    49  this  part,  of  any trustee of a trust which includes real property and
    50  mortgage participation certificates held by more  than  one  person  and
    51  secured by a mortgage on real property or any estate therein, payment of
    52  which  certificates are not guaranteed by the trustee or by any title or
    53  mortgage guaranty or investment company, the court, in  its  discretion,
    54  may  dispense with a formal accounting by such trustee; provided, howev-
    55  er, such trustee shall file with the court a statement of the  condition
    56  of  the trust and of the security underlying such certificates as of the

        A. 7677                            72
 
     1  date of his or her resignation, suspension or removal and shall  assign,
     2  transfer or convey all of the assets of the trust to the successor trus-
     3  tee or the receiver or other officer appointed by the court.
     4  § 7-1.10 Commissions of trust to sell real property for benefit of cred-
     5             itors
     6    A  trustee  of a trust to sell real property for the benefit of credi-
     7  tors is entitled to the same commissions as an assignee for the  benefit
     8  of creditors.
     9  § 7-1.11 Common law and principles of equity
    10    Unless  displaced  by  the  provisions of this part, the common law of
    11  trusts and the principles of equity supplement its provisions.
    12    § 8. Part 2 of article 7 of the estates,  powers  and  trusts  law  is
    13  REPEALED.
    14    §  9.  Part  3  of  article 7 of the estates, powers and trusts law is
    15  REPEALED.
    16    § 10. Part 5 of article 7 of the estates, powers  and  trusts  law  is
    17  REPEALED.
    18    §  11.  Part  8  of article 7 of the estates, powers and trusts law is
    19  REPEALED.
    20    § 12. Paragraph (c) of section 8-1.1 of the estates, powers and trusts
    21  law, subparagraph 1 as designated and subparagraph 2 as added by chapter
    22  492 of the laws of 1985, is amended to read as follows:
    23    (c) (1) [The supreme court and, where the disposition is made by will,
    24  the surrogate's court in which such will is probated  have]  Subject  to
    25  subparagraph  three  of this paragraph, whenever it appears to the court
    26  having jurisdiction over the dispositions referred to and authorized  by
    27  paragraphs  (a) and (b) of this section, and whenever it appears to such
    28  court that circumstances have so  changed  since  the  execution  of  an
    29  instrument  making  a disposition for religious, charitable, educational
    30  or benevolent purposes  as  to  render  impracticable  or  impossible  a
    31  literal  compliance with the terms of such disposition, [the] such court
    32  may, on application of the [trustee or of] donor, a charitable benefici-
    33  ary named in the disposition, the attorney general,  the  fiduciary,  or
    34  the  person having custody of the property subject to the disposition on
    35  notice to the attorney general, and to the donor if such donor is avail-
    36  able, and on such additional notice as the court  may  direct,  make  an
    37  order  or  decree  directing  that  such disposition be administered and
    38  applied, in whole or in part, in [such manner as in the judgment of  the
    39  court  will  most  effectively accomplish its general purposes] a manner
    40  consistent with the donor's intent, which shall be presumed to be gener-
    41  ally charitable subject to rebuttal, free from any specific restriction,
    42  limitation or direction contained therein[; provided, however, that  any
    43  such  order  or decree is effective only with the consent of the creator
    44  of the disposition if he is living].  For the purposes of this  subpara-
    45  graph,  "donor"  means the creator of a disposition, including a settler
    46  as defined pursuant to paragraph (u) of section 7-A-1.4 of this chapter.
    47  A donor is deemed available if the donor: (A) is living, or (B) is not a
    48  natural person, such donor is in existence, is conducting activities and
    49  can be identified and located within reasonable efforts.
    50    (2) [(i)] For the purposes of subparagraph one of this paragraph,  the
    51  designation  of a charitable organization as a beneficiary or payee upon
    52  the death of the person making the designation with respect  to:  (A)  a
    53  trust  account,  as defined pursuant to paragraph (d) of section 7-A-4.1
    54  of this chapter; or (B) a  pension,  retirement,  death  benefit,  stock
    55  bonus  or profit-sharing plan, system or trust, or an annuity or supple-
    56  mental insurance contract, pursuant to section 13-3.2 of  this  chapter;

        A. 7677                            73
 
     1  or  (C)  a  security registered in beneficiary form, pursuant to section
     2  13-4.4 of this chapter, constitutes a disposition for religious,  chari-
     3  table, educational or benevolent purposes. Such disposition is effective
     4  at  the  time  ownership passes or the funds or assets become payable to
     5  such beneficiary or payee or would have passed or become payable to such
     6  beneficiary or payee but for the applicability of cy pres, but does  not
     7  change the legal character of such designation for any other purpose.
     8    (3)  A  provision  in the terms of a charitable disposition that would
     9  result in distribution of the subject property to a noncharitable  bene-
    10  ficiary  or  a different charitable beneficiary, hereinafter referred to
    11  as an "alternative disposition", shall prevail over  the  power  of  the
    12  court  to  apply  its powers under subparagraph one of this paragraph to
    13  modify or terminate the disposition.  An alternative  disposition  shall
    14  not  include language in a beneficiary designation form, contract, poli-
    15  cy, application, instrument, agreement or other document supplied by the
    16  insurer, financial institution, brokerage firm, investment firm or other
    17  entity that is not the owner, donor or customer, which  states  how  the
    18  property  shall  be  distributed  on  the  death  of the owner, donor or
    19  customer if no payee or beneficiary is designated.
    20    (4) The attorney general or any trustee or beneficiary of a  testamen-
    21  tary or lifetime trust wholly benefitting one or more charitable benefi-
    22  ciaries may petition a court of competent jurisdiction, on notice to the
    23  attorney  general  and  all  parties  interested in the trust, seeking a
    24  termination of such trust when the trust is  comprised  of  assets,  the
    25  market  value  of  which is one hundred thousand dollars or less and the
    26  expense of administering the trust is uneconomic when  considered  rela-
    27  tive  to income. When the court finds upon such application that contin-
    28  uation of the trust is economically impracticable or is not in the  best
    29  interests  of the beneficiaries, the court shall make an order or decree
    30  terminating the trust and directing the distribution of the trust assets
    31  to accomplish its charitable purposes, provided, however,  that  if  the
    32  trust  is  one for the benefit of a particular charitable beneficiary or
    33  beneficiaries named therein, the court shall direct the distribution  of
    34  the  trust assets to such named charitable beneficiary or beneficiaries,
    35  and provided further that no such proceeding may be  instituted  without
    36  the consent of the creator of the disposition if he is living.
    37    [(ii)]  For purposes of this paragraph, the term "charitable benefici-
    38  ary" shall mean the beneficiary of a disposition for a religious, chari-
    39  table, educational or benevolent purpose.
    40    § 13. Section 10-6.6 of  the  estates,  powers  and  trusts  law,  the
    41  section  heading  as  amended  by chapter 591 of the laws of 1992, para-
    42  graphs (b), (c), (d), (e), (f), (g), (h), (i), (j), (k), (l), (m),  (n),
    43  (o),  (p), (q), (r) and (s) as added by chapter 451 of the laws of 2011,
    44  the opening paragraph of paragraph (b), subparagraph 5 of paragraph (j),
    45  subparagraphs 1 and 4 of paragraph (s) as amended and paragraph  (t)  as
    46  added by chapter 482 of the laws of 2013, the opening paragraph of para-
    47  graph  (j)  and  subparagraph 6 of paragraph (j) as amended and subpara-
    48  graph 7 of paragraph (j) as added by chapter 441 of the laws of 2015 and
    49  subparagraph 10 of paragraph (s) as amended by chapter 130 of  the  laws
    50  of 2014, is amended to read as follows:
    51  § 10-6.6 Exercise  of a power of appointment; effect when more extensive
    52             or less extensive than  authorized;  trustee's  authority  to
    53             invade principal in trust[.]
    54    (a)  An  exercise  of  a  power of appointment is not void because its
    55  exercise is:

        A. 7677                            74
 
     1    (1) More extensive than was authorized but  is  valid  to  the  extent
     2  authorized by the instrument creating the power.
     3    (2)  Less  extensive  than  authorized  by the instrument creating the
     4  power, unless the donor has manifested a contrary intention.
     5    (b) [An authorized trustee with unlimited discretion to  invade  trust
     6  principal  may  appoint part or all of such principal to a trustee of an
     7  appointed trust for, and only for the benefit of, one, more than one  or
     8  all  of the current beneficiaries of the invaded trust (to the exclusion
     9  of any one or more of such current  beneficiaries).  The  successor  and
    10  remainder  beneficiaries  of  such appointed trust may be one, more than
    11  one or all of the successor and remainder beneficiaries of such  invaded
    12  trust (to the exclusion of any one, more than one or all of such succes-
    13  sor  and  remainder  beneficiaries)] Cross-reference: For the powers and
    14  duties regarding decanting, see section 7-A-8.18 of this chapter.
    15    [(1) An authorized trustee exercising the power under  this  paragraph
    16  may  grant  a discretionary power of appointment as defined in paragraph
    17  (c) of section 10-3.4 of this article (including a presently exercisable
    18  power of appointment) in the appointed trust  to  one  or  more  of  the
    19  current  beneficiaries of the invaded trust, provided that the benefici-
    20  ary granted a power to appoint  could  receive  the  principal  outright
    21  under the terms of the invaded trust.
    22    (2)  If  the  authorized  trustee  grants a power of appointment under
    23  subparagraph (l) of this paragraph,  except  as  otherwise  provided  in
    24  subparagraph  (3)  of this paragraph, the granted power may only exclude
    25  as permissible appointees one or more of the beneficiary,  the  creator,
    26  or  the creator's spouse, or any of the estates, creditors, or creditors
    27  of the estates of the beneficiary, the creator or the creator's spouse.
    28    (3) If the authorized trustee exercises the  power  under  this  para-
    29  graph,  the  appointed trust may grant any power of appointment included
    30  in the invaded trust provided such power has the same class of permissi-
    31  ble appointees as the power of appointment in the invaded trust  and  is
    32  exercisable  in  the  same  fashion  as  the power of appointment in the
    33  invaded trust.
    34    (4) If the beneficiary or  beneficiaries  of  the  invaded  trust  are
    35  described  by a class, the beneficiary or beneficiaries of the appointed
    36  trust may include present or future members of such class.
    37    (c) An authorized trustee with the power to invade trust principal but
    38  without unlimited discretion may appoint part or all of the principal of
    39  the trust to a trustee of an appointed trust, provided that the  current
    40  beneficiaries  of  the  appointed trust shall be the same as the current
    41  beneficiaries of the invaded trust and the successor and remainder bene-
    42  ficiaries of the appointed trust shall be the same as the successor  and
    43  remainder beneficiaries of the invaded trust.
    44    (1)  If  the  authorized  trustee exercises the power under this para-
    45  graph, the appointed trust shall include the same  language  authorizing
    46  the  trustee  to  distribute  the  income or invade the principal of the
    47  appointed trust as in the invaded trust.
    48    (2) If the authorized trustee exercises the power under this paragraph
    49  to extend the term of the appointed trust beyond the term of the invaded
    50  trust, for any period after  the  invaded  trust  would  have  otherwise
    51  terminated  under  the  provisions  of  the invaded trust, the appointed
    52  trust, in addition to the  language  required  to  be  included  in  the
    53  appointed trust pursuant to subparagraph (1) of this paragraph, may also
    54  include  language  providing  the  trustees with unlimited discretion to
    55  invade the principal of the appointed trust during such extended term.

        A. 7677                            75

     1    (3) If the beneficiary or  beneficiaries  of  the  invaded  trust  are
     2  described  by a class, the beneficiary or beneficiaries of the appointed
     3  trust shall include present or future members of such class.
     4    (4) If the authorized trustee exercises the power under this paragraph
     5  and  if the invaded trust grants a power of appointment to a beneficiary
     6  of the trust, the appointed trust shall grant such power of  appointment
     7  in  the appointed trust and the class of permissible appointees shall be
     8  the same as in the invaded trust.
     9    (d) An exercise of the power to invade  trust  principal  under  para-
    10  graphs (b) and (c) of this section shall be considered the exercise of a
    11  special  power of appointment as defined in section 10-3.2 of this arti-
    12  cle.
    13    (e) The appointed trust to which an authorized  trustee  appoints  the
    14  assets of the invaded trust may have a term that is longer than the term
    15  set  forth  in  the invaded trust, including, but not limited to, a term
    16  measured by the lifetime of a current beneficiary.
    17    (f) If an authorized trustee has unlimited discretion  to  invade  the
    18  principal  of  a  trust  and the same trustee or another trustee has the
    19  power to invade principal under the trust instrument which power is  not
    20  subject to unlimited discretion, such authorized trustee having unlimit-
    21  ed  discretion may exercise the power of appointment under paragraph (b)
    22  of this section.
    23    (g) An authorized trustee may exercise the power to appoint  in  favor
    24  of  an  appointed  trust  under  paragraphs  (b) and (c) of this section
    25  whether or not there is a current need to  invade  principal  under  the
    26  terms of the invaded trust.
    27    (h)  An authorized trustee exercising the power under this section has
    28  a fiduciary duty to exercise the power in the best interests of  one  or
    29  more proper objects of the exercise of the power and as a prudent person
    30  would exercise the power under the prevailing circumstances. The author-
    31  ized  trustee  may not exercise the power under this section if there is
    32  substantial evidence of a contrary intent of the creator and  it  cannot
    33  be  established  that  the  creator would be likely to have changed such
    34  intention under the circumstances existing at the time of  the  exercise
    35  of  the  power.  The provisions of the invaded trust alone are not to be
    36  viewed as substantial evidence of  a  contrary  intent  of  the  creator
    37  unless  the  invaded trust expressly prohibits the exercise of the power
    38  in the manner intended by the authorized trustee.
    39    (i) Unless the authorized trustee provides otherwise:
    40    (1) The appointment of all of the assets comprising the  principal  of
    41  the  invaded  trust  to  an  appointed  trust shall include subsequently
    42  discovered assets of the invaded trust and  undistributed  principal  of
    43  the invaded trust acquired after the appointment to the appointed trust;
    44  and
    45    (2)  The  appointment of part but not all of the assets comprising the
    46  principal of the invaded trust to an appointed trust shall  not  include
    47  subsequently  discovered assets belonging to the invaded trust and prin-
    48  cipal paid to or acquired by the invaded trust after the appointment  to
    49  the  appointed trust; such assets shall remain the assets of the invaded
    50  trust.
    51    (j) The exercise of the power to appoint to an appointed  trust  under
    52  paragraph (b) or (c) of this section shall be evidenced by an instrument
    53  in  writing,  signed,  dated and acknowledged by the authorized trustee.
    54  The exercise of the power shall be effective thirty days after the  date
    55  of  service  of  the instrument as specified in subparagraph (2) of this
    56  paragraph, unless the persons entitled to notice consent in writing to a

        A. 7677                            76

     1  sooner effective date. The exercise of the power is irrevocable on  such
     2  effective  date,  either  thirty days following service of the notice or
     3  the effective date as set forth in the written consent.
     4    (1)  An  authorized trustee may exercise the power authorized by para-
     5  graphs (b) and (c) of this section without the consent of  the  creator,
     6  or  of  the  persons  interested in the invaded trust, and without court
     7  approval, provided that the authorized trustee may seek  court  approval
     8  for  the  exercise  with notice to all persons interested in the invaded
     9  trust.
    10    (2) A copy of the instrument exercising the power and a copy  of  each
    11  of  the  invaded trust and the appointed trust shall be delivered (A) to
    12  the creator, if living, of the invaded trust, (B) to any  person  having
    13  the  right,  pursuant  to  the  terms of the invaded trust, to remove or
    14  replace the authorized trustee exercising the power under paragraph  (b)
    15  or (c) of this section, and (C) to any persons interested in the invaded
    16  trust and the appointed trust (or, in the case of any persons interested
    17  in  the  trust, to any guardian of the property, conservator or personal
    18  representative of any such person or the parent or person with whom  any
    19  such  minor  person  resides),  by  registered or certified mail, return
    20  receipt requested, or by  personal  delivery  or  in  any  other  manner
    21  directed by the court having jurisdiction over the invaded trust.
    22    (3)  The  instrument  exercising  the  power  shall  state whether the
    23  appointment is of all the assets comprising the principal of the invaded
    24  trust or a part but not all the assets comprising the principal  of  the
    25  invaded  trust and if a part, the approximate percentage of the value of
    26  the principal of the invaded trust that is the subject of  the  appoint-
    27  ment.
    28    (4)  A  person interested in the invaded trust may object to the trus-
    29  tee's exercise of the power under this  section  by  serving  a  written
    30  notice  of objection upon the trustee prior to the effective date of the
    31  exercise of the power. The failure to  object  shall  not  constitute  a
    32  consent.
    33    (5) The receipt of a copy of the instrument exercising the power shall
    34  not  affect  the  right of any person interested in the invaded trust to
    35  compel the authorized trustee who exercised the  power  under  paragraph
    36  (b)  or  (c)  of this section to account for such exercise and shall not
    37  foreclose any such interested person from objecting  to  an  account  or
    38  compelling  a  trustee to account. Whether the exercise of a power under
    39  paragraph (b) or (c) of this section begins the running of  the  statute
    40  of  limitations  on  an  action  to compel a trustee to account shall be
    41  based on all the facts and circumstances of the situation.
    42    (6) A copy of the instrument exercising the power shall be  kept  with
    43  the  records  of the invaded trust and, within twenty days of the effec-
    44  tive date, the original shall be filed in the court having  jurisdiction
    45  over  the  invaded  trust. Where a trustee of an inter vivos trust exer-
    46  cises the power and the trust has not been the subject of  a  proceeding
    47  in  the  surrogate's  court, no filing is required. The instrument shall
    48  state that in certain  circumstances  the  appointment  will  begin  the
    49  running  of the statute of limitations that will preclude persons inter-
    50  ested in the invaded trust from compelling an accounting by the trustees
    51  after the expiration of a given time.
    52    (7) Prior to the effective date as  provided  herein,  a  trustee  may
    53  revoke the exercise of the power to invade to a new trust. Where a trus-
    54  tee  has served notice of the exercise of the power pursuant to subpara-
    55  graph (2) of this paragraph, the trustee shall serve notice of the revo-
    56  cation of the exercise of the power to persons interested in the invaded

        A. 7677                            77

     1  trust and the appointed trust by registered or  certified  mail,  return
     2  receipt  requested,  or  by  personal  delivery  or  in any other manner
     3  directed by the court having jurisdiction over the invaded trust.  Where
     4  the  notice  of  the exercise of the power was filed with the court, the
     5  trustee shall file the notice of revocation of the exercise of the power
     6  with such court.
     7    (k) This section shall not be construed to abridge the  right  of  any
     8  trustee to appoint property in further trust that arises under the terms
     9  of  the  governing instrument of a trust or under any other provision of
    10  law or under common law, or as directed by any court having jurisdiction
    11  over the trust.
    12    (1) Nothing in this section is intended to create or imply a  duty  to
    13  exercise  a  power  to invade principal, and no inference of impropriety
    14  shall be made as a result of an authorized trustee  not  exercising  the
    15  power conferred under paragraph (b) or (c) of this section.
    16    (m)  A power authorized by paragraph (b) or (c) of this section may be
    17  exercised, subject to the provisions of paragraph (h) of  this  section,
    18  unless  expressly  prohibited  by the terms of the governing instrument,
    19  but a general prohibition of the amendment or revocation of the  invaded
    20  trust  or  a  provision  that constitutes a spendthrift clause shall not
    21  preclude the exercise of a power under paragraph  (b)  or  (c)  of  this
    22  section.
    23    (n) An authorized trustee may not exercise a power authorized by para-
    24  graph (b) or (c) of this section to effect any of the following:
    25    (1)  To  reduce,  limit or modify any beneficiary's current right to a
    26  mandatory distribution of income or principal, a  mandatory  annuity  or
    27  unitrust  interest, a right to withdraw a percentage of the value of the
    28  trust or a right to withdraw a specified dollar  amount,  provided  that
    29  such  mandatory right has come into effect with respect to the benefici-
    30  ary. Notwithstanding the foregoing, but subject to the other limitations
    31  in this section, an authorized trustee may exercise a  power  authorized
    32  by paragraph (b) or (c) of this section to appoint to an appointed trust
    33  that  is  a  supplemental needs trust that conforms to the provisions of
    34  section 7-1.12 of this chapter;
    35    (2) To decrease or indemnify against a trustee's liability or  exoner-
    36  ate  a  trustee  from liability for failure to exercise reasonable care,
    37  diligence and prudence;
    38    (3) To eliminate a provision granting  another  person  the  right  to
    39  remove  or  replace  the  authorized  trustee exercising the power under
    40  paragraph (b) or (c) of this section unless a court having  jurisdiction
    41  over the trust specifies otherwise;
    42    (4)  To  make  a  binding  and conclusive fixation of the value of any
    43  asset for purposes of distribution, allocation or otherwise; or
    44    (5) To jeopardize (A) the deduction or  exclusion  originally  claimed
    45  with respect to any contribution to the invaded trust that qualified for
    46  the annual exclusion under section 2503(b) of the internal revenue code,
    47  the  marital  deduction under section 2056(a) or 2523(a) of the internal
    48  revenue code, or the charitable deduction under section 170(a),  642(c),
    49  2055(a)  or  2522(a) of the internal revenue code, (B) the qualification
    50  of a transfer as a direct skip under section  2642(c)  of  the  internal
    51  revenue code, or (C) any other specific tax benefit for which a contrib-
    52  ution originally qualified for income, gift, estate, or generation-skip-
    53  ping transfer tax purposes under the internal revenue code.
    54    (o)  An  authorized trustee shall consider the tax implications of the
    55  exercise of the power under paragraph (b) or (c) of this section.

        A. 7677                            78

     1    (p) An authorized trustee may not exercise a power described in  para-
     2  graph  (b)  or (c) of this section in violation of the limitations under
     3  sections 9-1.1, 10-8.1 and 10-8.2 of this chapter, and any such exercise
     4  shall void the entire exercise of such power.
     5    (q)(1) Unless a court otherwise directs, an authorized trustee may not
     6  exercise  a  power authorized by paragraph (b) or (c) of this section to
     7  change the provisions regarding the determination of the compensation of
     8  any trustee; the commissions or other compensation payable to the  trus-
     9  tees of the invaded trust may continue to be paid to the trustees of the
    10  appointed  trust  during  the  term  of the appointed trust and shall be
    11  determined in the same manner as in the invaded trust.
    12    (2) No trustee shall receive any paying commission  or  other  compen-
    13  sation for appointing of property from the invaded trust to an appointed
    14  trust pursuant to paragraph (b) or (c) of this section.
    15    (r)  Unless  the  invaded  trust  expressly  provides  otherwise, this
    16  section applies to:
    17    (1) Any trust governed by the laws of this state,  including  a  trust
    18  whose governing law has been changed to the laws of this state; and
    19    (2)  Any  trust  that  has a trustee who is an individual domiciled in
    20  this state or a trustee which is an entity  having  an  office  in  this
    21  state, provided that a majority of the trustees select this state as the
    22  location for the primary administration of the trust by an instrument in
    23  writing,  signed  and  acknowledged  by  a majority of the trustees. The
    24  instrument exercising this selection shall be kept with the  records  of
    25  the invaded trust.
    26    (s) For purposes of this section:
    27    (1)  The  term  "appointed  trust"  means  an  irrevocable trust which
    28  receives principal from an invaded trust under paragraph (b) or  (c)  of
    29  this section including a new trust created by the creator of the invaded
    30  trust  or  by  the trustees, in that capacity, of the invaded trust. For
    31  purposes of creating the new trust, the requirement of section 7-1.17 of
    32  this chapter that the instrument be executed  and  acknowledged  by  the
    33  person  establishing  such  trust  shall  be  deemed  satisfied  by  the
    34  execution and acknowledgment of the trustee of the appointed trust.
    35    (2) The term "authorized trustee" means, as to an invaded  trust,  any
    36  trustee  or trustees with authority to pay trust principal to or for one
    37  or more current beneficiaries other than (i)  the  creator,  or  (ii)  a
    38  beneficiary to whom income or principal must be paid currently or in the
    39  future,  or  who is or will become eligible to receive a distribution of
    40  income or principal in the discretion of the trustee (other than by  the
    41  exercise of a power of appointment held in a non-fiduciary capacity).
    42    (3) References to sections of the "internal revenue code" refer to the
    43  United  States  internal  revenue  code of 1986, as amended from time to
    44  time, or to corresponding  provisions  of  subsequent  internal  revenue
    45  laws, and also refer to corresponding provisions of state law.
    46    (4)  The  term "current beneficiary or beneficiaries" means the person
    47  or persons (or as to a class, any person or  persons  who  are  or  will
    48  become  members of such class) to whom the trustees may distribute prin-
    49  cipal at the time of the exercise of the power,  provided  however  that
    50  the  interest of a beneficiary to whom income, but not principal, may be
    51  distributed in the discretion of the trustee of the invaded trust may be
    52  continued in the appointed trust.
    53    (5) The term "invade" shall mean the power  to  pay  directly  to  the
    54  beneficiary  of a trust or make application for the benefit of the bene-
    55  ficiary.

        A. 7677                            79

     1    (6) The term "invaded trust"  means  any  existing  irrevocable  inter
     2  vivos or testamentary trust whose principal is appointed under paragraph
     3  (b) or (c) of this section.
     4    (7) The term "person or persons interested in the invaded trust" shall
     5  mean  any  person  or  persons  upon  whom  service  of process would be
     6  required in a proceeding for the judicial settlement of the  account  of
     7  the  trustee,  taking  into account section three hundred fifteen of the
     8  surrogate's court procedure act.
     9    (8) The term "principal" shall include the income of the trust at  the
    10  time  of  the exercise of the power that is not currently required to be
    11  distributed, including accrued and accumulated income.
    12    (9) The term "unlimited  discretion"  means  the  unlimited  right  to
    13  distribute  principal that is not modified in any manner. A power to pay
    14  principal that includes words such as best interests, welfare,  comfort,
    15  or happiness shall not be considered a limitation or modification of the
    16  right to distribute principal.
    17    (10)  The  creator  shall  not be considered to be a beneficiary of an
    18  invaded or appointed trust by reason of the trustee's authority  to  pay
    19  trust  principal to the creator pursuant to section 7-1.11 of this chap-
    20  ter or by reason of the trustee's authority under the  trust  instrument
    21  or  any  other  provision of law to pay or reimburse the creator for any
    22  tax on trust income or trust principal that is payable  by  the  creator
    23  under  the  law imposing such tax or to pay any such tax directly to the
    24  taxing authorities.
    25    (t) Cross-reference. For the exercise of the power under paragraph (b)
    26  or (c) of this section where there are multiple trustees,  see  sections
    27  10-6.7 and 10-10.7 of this article.]
    28    § 14. Section 10-10.1 of the estates, powers and trust law, as amended
    29  by chapter 82 of the laws of 2004, is amended to read as follows:
    30  § 10-10.1 Power  to distribute principal or allocate income; restriction
    31              on exercise
    32    A power held by a person as trustee of an  express  trust  to  make  a
    33  discretionary  distribution of either principal or income to such person
    34  as a beneficiary, or  to  make  a  discretionary  [allocations  in  such
    35  person's  favor  of  receipts  or  expenses  as between] distribution of
    36  either principal [and] or income in discharge of the trustee's  personal
    37  obligation  of  support,  cannot  be exercised by such person unless (1)
    38  such person is the grantor of the trust and the trust  is  revocable  by
    39  such  person  during such person's lifetime, or (2) the power is a power
    40  to provide for such person's health, education, maintenance  or  support
    41  within  the  meaning  of  sections 2041 and 2514 of the Internal Revenue
    42  Code, or (3) the trust instrument, by express reference to this section,
    43  provides otherwise. If the power is conferred on two or  more  trustees,
    44  it  may be exercised by the trustee or trustees who are not so disquali-
    45  fied. If there is no trustee qualified to exercise the power, its  exer-
    46  cise devolves on the supreme court or the surrogate's court, except that
    47  if  the  power  is  created by will, its exercise devolves on the surro-
    48  gate's court having jurisdiction of the  estate  of  the  donor  of  the
    49  power.
    50    § 15. Section 10-10.6 of the estates, powers and trusts law is amended
    51  to read as follows:
    52  § 10-10.6 Effect of reserved unqualified power to revoke
    53    Where  a  creator  reserves  an  unqualified  power  of revocation, he
    54  remains the absolute owner of the property disposed of  so  far  as  the
    55  rights  of  his  or  her  creditors  or purchasers are concerned.   This

        A. 7677                            80

     1  section shall not apply to the trust contributor  of  an  express  trust
     2  created after the effective date of section 7-A-5.6 of this chapter.
     3    §  16.  Section  10-10.7  of  the  estates,  powers and trusts law, as
     4  amended by chapter 482 of the laws  of  2013,  is  amended  to  read  as
     5  follows:
     6  § 10-10.7 Exercise  of powers by multiple fiduciaries; joint and several
     7              powers
     8    Unless contrary to the express provisions of an  instrument  affecting
     9  the  disposition  of  property,  a  joint  power  other  than a power of
    10  appointment [but including a power in a trustee to invade trust  princi-
    11  pal  under  section  10-6.6  of  this  article or under the terms of the
    12  dispositive instrument], conferred upon three or  more  fiduciaries,  as
    13  that  term is defined in section 11-1.1 of this chapter, by the terms of
    14  such instrument, or by statute, or arising by operation of law,  may  be
    15  exercised  by a majority of such fiduciaries, or by a majority of survi-
    16  vor fiduciaries, or by the survivor fiduciary. Such  a  power  conferred
    17  upon  or  surviving  to two such fiduciaries may be exercised jointly by
    18  both such fiduciaries or by the survivor fiduciary, unless  contrary  to
    19  the  express terms of the instrument creating the power. A fiduciary who
    20  fails to act through absence or disability, or  a  dissenting  fiduciary
    21  who  joins in carrying out the decision of a majority of the fiduciaries
    22  if his or her dissent is expressed promptly in writing  to  his  or  her
    23  co-fiduciaries, shall not be liable for the consequences of any majority
    24  decision,  provided  that liability for failure to join in administering
    25  the estate [or trust or to prevent a breach of the trust] may  not  thus
    26  be  avoided. A power vested in one or more persons under a trust of real
    27  property created in connection with the salvaging  of  mortgage  partic-
    28  ipation  certificates  may be executed by one or more of such persons as
    29  provided in such trust. This section shall not affect the right  of  any
    30  one  of two or more personal representatives of a decedent to exercise a
    31  several power.
    32    § 17. Section 11-1.1 of the estates, powers and trusts law, as amended
    33  by chapter 686 of the laws of 1967, item (D) of subparagraph 5 of  para-
    34  graph  (b)  as  amended,  item (E) of subparagraph 5 of paragraph (b) as
    35  added and item (F) of subparagraph 5 of paragraph (b) as  relettered  by
    36  chapter 257 of the laws of 1968, subparagraphs 9 and 10 of paragraph (b)
    37  as  amended by chapter 501 of the laws of 1970 and the opening paragraph
    38  of subparagraph 9 of paragraph (b), item (B) of subparagraph 9 of  para-
    39  graph (b), the opening paragraph of subparagraph 10 of paragraph (b) and
    40  item  (B)  of  subparagraph  10  of  paragraph (b) as further amended by
    41  section 104 of part A of chapter 62 of the laws of  2011,  subparagraphs
    42  13, 14, 15, 16, 17, 18, 21 and 22 of paragraph (b) as amended by chapter
    43  686  of  the  laws  of  1967 as renumbered by chapter 904 of the laws of
    44  1973, subparagraph 19 of paragraph (b) as amended by chapter 595 of  the
    45  laws of 1992, subparagraph 20 of paragraph (b) as amended by chapter 519
    46  of  the  laws of 1987 and paragraph (d) as amended by chapter 158 of the
    47  laws of 1975, is amended to read as follows:
    48  § 11-1.1 Fiduciaries' powers
    49    (a) As used in this section, unless  the  context  or  subject  matter
    50  otherwise  requires,  (1)  the term "estate" means the estate of a dece-
    51  dent; (2) the term "trust" means any express trust of property,  created
    52  by  a  will,  deed  or other instrument, whereby there is imposed upon a
    53  trustee the duty to administer property for the benefit of  a  named  or
    54  otherwise  described  income  or principal beneficiary, or both. A trust
    55  shall not include trusts for the  benefit  of  creditors,  resulting  or
    56  constructive  trusts,  business  trusts where certificates of beneficial

        A. 7677                            81
 
     1  interest are  issued  to  the  beneficiary,  investment  trusts,  voting
     2  trusts,  security  instruments  such  as  deeds  of trust and mortgages,
     3  trusts created by the judgment or decree  of  a  court,  liquidation  or
     4  reorganization  trusts, trusts for the sole purpose of paying dividends,
     5  interest,  interest  coupons,  salaries,  wages,  pensions  or  profits,
     6  instruments  wherein  persons  are  mere  nominees for others, or trusts
     7  created in deposits in any  banking  institution  or  savings  and  loan
     8  institution;  (3)  the term "fiduciary" means administrators, executors,
     9  preliminary    executors,    administrators    d.b.n.,    administrators
    10  c.t.a.d.b.n.,  administrators  c.t.a.,  ancillary  executors,  ancillary
    11  administrators, ancillary administrators c.t.a [and trustees of  express
    12  trusts],  including  a  corporate  as well as a natural person acting as
    13  fiduciary, and a successor or substitute fiduciary,  whether  designated
    14  in a trust instrument or otherwise.
    15    (b)  In  the  absence  of contrary or limiting provisions in the court
    16  order or decree appointing a fiduciary, or  in  a  subsequent  order  or
    17  decree,  or  in  the  will, deed or other instrument, every fiduciary is
    18  authorized:
    19    (1) To accept additions to any estate [or trust]  from  sources  other
    20  than the estate of the decedent [or the settlor of a trust].
    21    (2)  To acquire the remaining undivided interest in the property of an
    22  estate [or trust] in which the fiduciary, in his or her fiduciary capac-
    23  ity, holds an undivided interest.
    24    (3) To invest and reinvest property of the estate [or trust] under the
    25  provisions of the  will,  deed  or  other  instrument  or  as  otherwise
    26  provided by law.
    27    (4) To effect and keep in force fire, rent, title, liability, casualty
    28  or  other insurance to protect the property of the estate [or trust] and
    29  to protect the fiduciary.
    30    (5) With respect to any property or any estate  therein  owned  by  an
    31  estate  [or  trust], except where such property or any estate therein is
    32  specifically disposed of:
    33    (A) To take possession of, collect the rents from and manage the same.
    34    (B) To sell the same at public or private sale, and on such  terms  as
    35  in  the  opinion  of  the  fiduciary  will be most advantageous to those
    36  interested therein.
    37    (C) With respect to fiduciaries [other than a trustee], to  lease  the
    38  same  for  a term not exceeding three years [and, in the case of a trus-
    39  tee, to lease the same for a term not exceeding ten years although  such
    40  term  extends  beyond  the  duration of the trust and, in either of such
    41  cases], including the right to explore for and remove mineral  or  other
    42  natural  resources,  and in connection with mineral leases to enter into
    43  pooling and unitization agreements.
    44    (D) To mortgage the same.
    45    (E) Any power to take possession of, collect the  rent  from,  manage,
    46  sell,  lease  or  mortgage, granted by this subparagraph [(5)], which is
    47  prohibited by the terms of the will, deed or other instrument or by  the
    48  provisions  of  this  subparagraph  [(5)],  nonetheless exists, upon the
    49  approval of the  surrogate,  where  such  power  is  necessary  for  the
    50  purposes set forth in SCPA 1902.
    51    (F)  A  fiduciary  acting  under a will may exercise all of the powers
    52  granted by this subparagraph [(5)] notwithstanding the effect upon  such
    53  will of the birth of a child after its execution or of any election by a
    54  surviving spouse.
    55    (6) To make ordinary repairs to the property of the estate [or trust].

        A. 7677                            82
 
     1    (7) To grant options for the sale of property for a period not exceed-
     2  ing six months.
     3    (8)  With respect to any mortgage held by the estate [or trust] (A) to
     4  continue the same upon and after maturity, with or  without  renewal  or
     5  extension,  upon  such  terms  as  the fiduciary deems advisable; (B) to
     6  foreclose, as an incident to collection of any bond or note,  any  mort-
     7  gage  securing such bond or note, and to purchase the mortgaged property
     8  or acquire the property by deed from the mortgagor in lieu  of  foreclo-
     9  sure.
    10    (9)  To  employ  any bank or trust company incorporated in this state,
    11  any national bank located in this  state  or  any  private  banker  duly
    12  authorized  by the superintendent of financial services of this state to
    13  engage in business here (who, as private banker, maintains  a  permanent
    14  capital  of not less than one million dollars) as custodian of any stock
    15  or other securities held as a fiduciary, and the cost thereof, except in
    16  the case of a corporate fiduciary, shall be a charge upon the estate  or
    17  trust.  The  records of such bank, trust company or private banker shall
    18  at all times show the ownership of such stock or other securities.  Such
    19  stock  or  other securities shall at all times be kept separate from the
    20  assets of such bank, trust company or private banker and may be kept  by
    21  such bank, trust company or private banker:
    22    (A) in a manner such that all certificates representing the securities
    23  from  time to time constituting the assets of a particular estate, trust
    24  or other fiduciary account are held separate from  those  of  all  other
    25  estates, trusts or accounts; or
    26    (B)  in  a  manner  such  that,  without certification as to ownership
    27  attached, certificates representing securities of the same class of  the
    28  same  issuer  and  from  time  to time constituting assets of particular
    29  estates, trusts or other fiduciary accounts are held in bulk, including,
    30  to the extent feasible, the merging of  certificates  of  small  denomi-
    31  nation  into  one  or  more certificates of large denomination, provided
    32  that a bank, trust company or private banker, when operating  under  the
    33  method  of  safekeeping security certificates described in this subpara-
    34  graph [(B)], shall be subject to such rules and regulations as,  in  the
    35  case of state chartered institutions, the state superintendent of finan-
    36  cial  services  and,  in  the case of national banking associations, the
    37  comptroller of the currency may from time  to  time  issue.  Such  bank,
    38  trust  company  or  private  banker  shall,  on demand by the fiduciary,
    39  certify in writing the securities held by it for such estate,  trust  or
    40  fiduciary account.
    41    (10)  To  cause any stock or other securities (hereinafter referred to
    42  as "securities") held by any bank or trust company, when acting as fidu-
    43  ciary, whether alone or jointly with an individual, with the consent  of
    44  the  individual fiduciary, if any (who is hereby authorized to give such
    45  consent), to be registered and held in the name of  a  nominee  of  such
    46  bank  or trust company without disclosure of the fiduciary relationship;
    47  and, in the case of an individual acting as  fiduciary,  to  direct  any
    48  bank  or  trust  company  incorporated under the laws of this state, any
    49  national bank located in this state or any private banker  duly  author-
    50  ized by the superintendent of financial services of this state to engage
    51  in  business here (who, as private banker, maintains a permanent capital
    52  of not less than one million dollars) to register and hold  any  securi-
    53  ties  deposited with such bank, trust company or private banker (herein-
    54  after referred to as "bank") in the name of a nominee of such bank.  The
    55  bank  shall  not  redeliver such securities to the individual fiduciary,
    56  who authorized their registration in the name of a nominee of the  bank,

        A. 7677                            83
 
     1  without  first  registering the securities in the name of the individual
     2  fiduciary, as such. But, any sale of such securities by the bank at  the
     3  direction of the individual fiduciary shall not be treated as a redeliv-
     4  ery.  The  bank  may  make  any  disposition of such securities which is
     5  authorized or directed by an order or decree of the court having  juris-
     6  diction of the estate or trust. Any such bank shall be absolutely liable
     7  for  any  loss occasioned by the acts of its nominee with respect to the
     8  securities so registered. The records of the bank  shall  at  all  times
     9  show  the  ownership  of any such securities and of those held in bearer
    10  form. Such securities and those held in bearer form shall at  all  times
    11  be  kept  separate  from  the assets of the bank and may be kept by such
    12  bank:
    13    (A) in a manner such that all certificates representing the securities
    14  from time to time constituting the assets of a particular estate,  trust
    15  or  other  fiduciary  account  are held separate from those of all other
    16  estates, trusts or accounts; or
    17    (B) in a manner such  that,  without  certification  as  to  ownership
    18  attached,  certificates representing securities of the same class of the
    19  same issuer and from time to  time  constituting  assets  of  particular
    20  estates, trusts or other fiduciary accounts are held in bulk, including,
    21  to  the  extent  feasible,  the merging of certificates of small denomi-
    22  nation into one or more certificates  of  large  denomination,  provided
    23  that  a  bank,  when  operating under the method of safekeeping security
    24  certificates described in this subparagraph (B),  shall  be  subject  to
    25  such  rules  and  regulations  as, in the case of state chartered insti-
    26  tutions, the state superintendent of financial services and, in the case
    27  of national banking associations, the comptroller of  the  currency  may
    28  from  time to time issue. Such bank or trust company shall, on demand by
    29  any party to an accounting by such bank or trust company as fiduciary or
    30  on demand by the attorney for such party, certify in writing the securi-
    31  ties held by such bank or trust company as such fiduciary.
    32    (11) In the case of the  survivor  of  two  or  more  fiduciaries,  to
    33  continue to administer the property of the estate [or trust] without the
    34  appointment of a successor to the fiduciary who has ceased to act and to
    35  exercise  or perform all of the powers given to the original fiduciaries
    36  unless contrary to the express provision of  the  will,  deed  or  other
    37  instrument.
    38    (12)  As  successor  or substitute fiduciary, to succeed to all of the
    39  powers, duties and discretion of the original fiduciary, with respect to
    40  the estate [or trust], as were given to the original  fiduciary,  unless
    41  the  exercise of such powers, duties or discretion of the original fidu-
    42  ciary are expressly prohibited by the will, deed or other instrument  to
    43  any successor or substituted fiduciary.
    44    (13)  To contest, compromise or otherwise settle any claim in favor of
    45  the estate[, trust] or fiduciary  or  in  favor  of  third  persons  and
    46  against the estate[, trust] or fiduciary.
    47    (14) To vote in person or by proxy, discretionary or otherwise, shares
    48  of stock or other securities held by him as fiduciary.
    49    (15) To pay calls, assessments and any other sums chargeable or accru-
    50  ing against or on account of shares of stock, bonds, debentures or other
    51  corporate  securities held by a fiduciary, whenever such payments may be
    52  legally enforceable against the fiduciary or any property of the  estate
    53  [or  trust]  or  the  fiduciary deems payment expedient and for the best
    54  interests of the estate [or trust].
    55    (16) To sell or exercise  stock  subscription  or  conversion  rights,
    56  participate in foreclosures, reorganizations, consolidations, mergers or

        A. 7677                            84
 
     1  liquidations,  and to consent to corporate sales, leases and encumbranc-
     2  es. In the exercise of such powers the fiduciary is authorized to depos-
     3  it stocks, bonds or other securities with any protective or other  simi-
     4  lar  committee  under  such  terms and conditions respecting the deposit
     5  thereof as the fiduciary may approve.
     6    (17) To execute and deliver agreements, assignments,  bills  of  sale,
     7  contracts,  deeds, notes, receipts and any other instrument necessary or
     8  appropriate for the administration of the estate [or trust].
     9    (18) [In the case of a trustee, to hold the property of  two  or  more
    10  trusts  or  parts  of  such  trusts created by the same instrument as an
    11  undivided whole without separation as  between  such  trusts  or  parts,
    12  provided  that such separate trusts or parts shall have undivided inter-
    13  ests and provided further that no such holding shall defer  the  vesting
    14  of any estate in possession or otherwise.
    15    (19)]  When a legacy, a distributive share, the proceeds of any action
    16  brought as prescribed by 5-4.1, or the proceeds of a  settlement  of  an
    17  action  brought in behalf of an infant for personal injuries are payable
    18  to an infant, incompetent, conservatee or person  under  disability  and
    19  the sum does not exceed ten thousand dollars, to make payment thereof to
    20  the  father  or  mother  or to some competent adult person with whom the
    21  infant, incompetent, conservatee or person under disability  resides  or
    22  who  has  some interest in his or her welfare for the use and benefit of
    23  such infant, incompetent, conservatee or person under disability. If the
    24  sum payable to a patient in an institution in the  state  department  of
    25  mental  hygiene is not in excess of the amount which the director of the
    26  institution is authorized to receive under section 29.23 of  the  mental
    27  hygiene  law,  to  make  payment of such sum to such director for use as
    28  provided in that section.
    29    [(20)] (19) To make distribution in cash, in kind valued at  the  fair
    30  market  value  of the property at the date of distribution, or partly in
    31  each, without being required to make pro rata distributions of  specific
    32  property.
    33    [(21)]  (20)  To join with the surviving spouse or the executor of his
    34  or her will or the administrator of his or her estate in  the  execution
    35  and  filing  of  a  joint  income tax return for any period prior to the
    36  death of a decedent for which he has not filed a return or  a  gift  tax
    37  return  on gifts made by the decedent's surviving spouse, and to consent
    38  to treat such gifts as being made one-half  by  the  decedent,  for  any
    39  period prior to a decedent's death, and to pay such taxes thereon as are
    40  chargeable to the decedent.
    41    [(22)] (21) In addition to those expenses specifically provided for in
    42  this  paragraph,  to  pay  all  other  reasonable and proper expenses of
    43  administration from the property of the estate or trust,  including  the
    44  reasonable  expense  of obtaining and continuing his or her bond and any
    45  reasonable counsel fees he may necessarily incur.
    46    (c) The court having jurisdiction of the estate [or trust] may author-
    47  ize the fiduciary to exercise any other power which in the  judgment  of
    48  the  court  is necessary for the proper administration of the estate [or
    49  trust].
    50    (d) The powers set forth in this section shall apply  to  all  estates
    51  [and trusts] now in existence or which may hereafter come into existence
    52  and are in addition to the powers granted by law or by the will, deed or
    53  other instrument.
    54    §  18.  Paragraph  (c)  of  section  11-2.3 of the estates, powers and
    55  trusts law, as added by chapter 609 of the laws of 1994, is  amended  to
    56  read as follows:

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     1    (c) Delegation of investment or management functions.
     2    (1) [Delegation] Except as provided in subparagraph four of this para-
     3  graph,  delegation  of  an  investment or management function requires a
     4  trustee to exercise care, skill and caution in:
     5    (A) selecting a delegee suitable to exercise the  delegated  function,
     6  taking  into  account the nature and value of the assets subject to such
     7  delegation and the expertise of the delegee;
     8    (B) establishing the scope and terms of the delegation consistent with
     9  the purposes of the governing instrument;
    10    (C) periodically reviewing the delegee's  exercise  of  the  delegated
    11  function and compliance with the scope and terms of the delegation; and
    12    (D) controlling the overall cost by reason of the delegation.
    13    (2)  The  delegee has a duty to the trustee and to the trust to comply
    14  with the scope and terms of the delegation and to exercise the delegated
    15  function with reasonable care, skill and caution. An attempted  exonera-
    16  tion  of  the  delegee  from  liability for failure to meet such duty is
    17  contrary to public policy and void.
    18    (3) By accepting the delegation of a trustee's function from the trus-
    19  tee of a trust that is subject to the  law  of  New  York,  the  delegee
    20  submits  to  the jurisdiction of the courts of New York even if a deleg-
    21  ation agreement provides otherwise, and the delegee may be made a  party
    22  to  any  proceeding in such courts that places in issue the decisions or
    23  actions of the delegee.
    24    (4) A trustee, as  defined  pursuant  to  paragraph  (dd)  of  section
    25  7-A-1.4  of this chapter, shall be authorized to delegate in its invest-
    26  ment or management functions pursuant to section 7-A-8.7 of  this  chap-
    27  ter.
    28    §  19.  Paragraph  (a)  and subparagraph 3 of paragraph (d) of section
    29  13-3.2 of the estates, powers and trusts law, paragraph  (d)  as  relet-
    30  tered  by  chapter  595  of  the  laws  of  1992, are amended to read as
    31  follows:
    32    (a) If a person is entitled to receive (1) payment in  money,  securi-
    33  ties or other property under a pension, retirement, death benefit, stock
    34  bonus or profit-sharing plan, system or trust or (2) money payable by an
    35  insurance  company  or a savings bank authorized to conduct the business
    36  of life insurance under an annuity or pure endowment contract or a poli-
    37  cy of life, group life, industrial life or accident  and  health  insur-
    38  ance,  or  if a contract made by such an insurer relating to the payment
    39  of proceeds or avails of such insurance designates a payee or  benefici-
    40  ary  to  receive  such  payment  upon the death of the person making the
    41  designation or another, the rights of persons so entitled or  designated
    42  and  the  ownership  of  money,  securities  or  other  property thereby
    43  received shall not be impaired or defeated by any statute or rule of law
    44  governing the transfer of property by will, gift or intestacy, except as
    45  provided in subparagraph three of paragraph (d) of this section.
    46    (3) Any person entitled to receive payment by reason  of  a  payee  or
    47  beneficiary  designation  described  in this section; provided, however,
    48  that the rules for cy pres, pursuant to section 7-A-3.18 of  this  chap-
    49  ter,  shall  apply if at the time of payment such person is a charitable
    50  organization that is not in existence or is not carrying out  charitable
    51  activities, or if the circumstances otherwise support the application of
    52  cy  pres; provided further, however, that the provisions of subparagraph
    53  one of paragraph (c) of section one thousand two-a of the not-for-profit
    54  corporation law shall apply if at the time of payment such person  is  a
    55  dissolved  or  dissolving  charitable  corporation to which such section
    56  applies.

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     1    § 20. Section 13-4.7 of the estates, powers and trusts law,  as  added
     2  by chapter 325 of the laws of 2005, is amended to read as follows:
     3  § 13-4.7 Ownership on death of owner
     4    On  death  of  a sole owner or the last to die of all multiple owners,
     5  ownership of securities registered in beneficiary  form  passes  to  the
     6  beneficiary  or beneficiaries who survive all owners; provided, however,
     7  that if any beneficiary is a charitable organization, the rules  for  cy
     8  pres,  pursuant  to  section 7-A-3.18 of this chapter, shall apply if at
     9  the time ownership passes to the beneficiary, or at any  time  prior  to
    10  payment  or  distribution  to the beneficiary, the beneficiary is not in
    11  existence or is not  carrying  out  charitable  activities,  or  if  the
    12  circumstances  support  the  application  of  cy pres; provided further,
    13  however, that the provisions of subparagraph one  of  paragraph  (c)  of
    14  section  one  thousand two-a of the not-for-profit corporation law shall
    15  apply if at such time the beneficiary is a dissolved or dissolving char-
    16  itable corporation to which such section applies. On proof of  death  of
    17  all owners and compliance with any applicable requirements of the regis-
    18  tering entity, a security registered in beneficiary form may be reregis-
    19  tered  in  the name of the beneficiary or beneficiaries who survived the
    20  death of all owners. Until division of the security after the  death  of
    21  all  owners,  multiple  beneficiaries  surviving the death of all owners
    22  hold their interests as tenants in common. If  no  beneficiary  survives
    23  the  death  of  all  owners,  the  security belongs to the estate of the
    24  deceased sole owner or the estate of the last to  die  of  all  multiple
    25  owners.
    26    § 21. Subdivision 5 of section 100-a of the banking law, as amended by
    27  chapter 961 of the laws of 1966, is amended to read as follows:
    28    5.  Bonds.  No bond or other security, except as hereinafter provided,
    29  shall be required from any trust company  [for  or  in  respect  to  any
    30  trust, nor] when appointed executor, administrator, guardian, [trustee,]
    31  receiver, committee or depositary or in any other fiduciary capacity nor
    32  when  receiving  commissions  under the provisions of SCPA 2310 or 2311.
    33  The settlor of a trust pursuant  to  article  seven-A  of  the  estates,
    34  powers and trusts law may expressly require that a trust company furnish
    35  a  bond.  The court, or officer making such appointment may, upon proper
    36  application, require  any  trust  company,  which  shall  have  been  so
    37  appointed  to  give  such security as to the court or officer shall seem
    38  proper, or upon failure of  such  trust  company  to  give  security  as
    39  required,  may  remove  such trust company from and revoke such appoint-
    40  ment.
    41    § 22. Paragraph 1 of subdivision (c) of  section  5205  of  the  civil
    42  practice law and rules, as amended by chapter 93 of the laws of 1995, is
    43  amended and a new paragraph 6 is added to read as follows:
    44    1.  Except  as provided in paragraphs four [and], five and six of this
    45  subdivision, all property while held in trust  for  a  judgment  debtor,
    46  where  the  trust  has been created by, or the fund so held in trust has
    47  proceeded from, a person other than the judgment debtor, is exempt  from
    48  application to the satisfaction of a money judgment.
    49    6.  For  purposes  of  this subdivision, a trust shall be considered a
    50  trust which has been created by, or which has proceeded from  the  judg-
    51  ment debtor on the lapse, release or waiver of a power held by the judg-
    52  ment  debtor to withdraw property from the trust only to the extent that
    53  the value of the property affected  by  the  lapse,  release  or  waiver
    54  exceeds  the greatest amount specified at the time of the lapse, release
    55  or waiver, pursuant to section 2041(b)(2), 2503(b)  or  2514(e)  of  the
    56  Internal Revenue Code of 1986, as amended.

        A. 7677                            87
 
     1    §  23. Subdivision 2 of section 706 of the surrogate's court procedure
     2  act, as amended by chapter 503 of the laws of 1980, is amended  to  read
     3  as follows:
     4    2.  When all the persons to whom letters have been issued die or where
     5  letters  issued  to  all  of  them  have been revoked by a decree of the
     6  surrogate's court, or, in the case of a lifetime trust, when all persons
     7  serving as trustee die or are removed,  without  any  successor  trustee
     8  having  been effectively appointed pursuant to the terms of the lifetime
     9  trust instrument, or if a trustee is appointed pursuant to  subparagraph
    10  two  of  paragraph  (c)  or  subparagraph  two  paragraph (d) of section
    11  7-A-7.5 of the estates, powers and trusts law, that court has, except in
    12  a case where it is otherwise specially prescribed by law, the same power
    13  to appoint a successor to the person or persons whose powers have ceased
    14  as if the letters had not been issued or as if no appointment  had  been
    15  made.    The  successor  may  complete  the administration of the estate
    16  committed to his or her predecessor, he or she may continue  in  his  or
    17  her own name a civil action or proceeding pending in favor of his or her
    18  predecessor  and  he  or  she may enforce a judgment, order or decree in
    19  favor of the latter.
    20    § 24. Section 715 of the surrogate's court procedure act,  as  amended
    21  by chapter 483 of the laws of 2013, is amended to read as follows:
    22  § 715. Application by fiduciary for permission to resign
    23    A  fiduciary  may  present to the court at any time a petition praying
    24  that he or she be permitted to  resign,  that  his  or  her  letters  be
    25  revoked  and  that  he  or she be permitted to settle his or her account
    26  judicially or informally as such  fiduciary,  and  that  notice  of  the
    27  application  be  given  to the persons and in the manner directed by the
    28  court.  Notwithstanding any other provision of this section, a testamen-
    29  tary trustee may resign in accordance with  the  provisions  of  section
    30  7-A-7.7  of  the estates, powers and trusts law. The petition shall show
    31  the facts upon which the application is founded.
    32    § 25. Section 806 of the surrogate's court procedure act,  as  amended
    33  by chapter 503 of the laws of 1980, is amended to read as follows:
    34  § 806. Bond of [a testamentary trustee or] an executor acting as trustee
    35    Whenever  [a testamentary trustee is appointed by will or order of the
    36  court or] an executor is appointed who is required to  hold,  manage  or
    37  invest  real  or  personal property for the benefit of another, he shall
    38  unless the will provides otherwise, execute and file a bond.
    39    § 26. Subdivision 2 of section 1502 of the surrogate's court procedure
    40  act, as amended by chapter 503 of the laws of 1980, is amended  to  read
    41  as follows:
    42    2.   The court shall not appoint a trustee, successor or co-trustee if
    43  the appointment would contravene the express terms of the will or  life-
    44  time  trust  instrument  or if a trustee may be or has been named in the
    45  will or lifetime trust instrument as successor, substitute or co-trustee
    46  and is not disqualified to act, or if a trustee is appointed pursuant to
    47  subparagraph two of paragraph (c) or subparagraph two of  paragraph  (d)
    48  of section 7-A-7.5 of the estates, powers and trusts law.
    49    §  27. Paragraph (e) of section 1317 of the not-for-profit corporation
    50  law is amended to read as follows:
    51    (e)  Where the voting trust agreement shall vest in the voting trustee
    52  the right to vote the shares of  a  foreign  corporation  which  has  an
    53  office  in this state for conducting activities and either the principal
    54  activity of which is conducted within this state or the greater part  of
    55  its property is located within this state, the voting trust agreement is
    56  an  express  trust  created under the laws of this state and the supreme

        A. 7677                            88
 
     1  court upon the petition of a voting trust certificate holder  may  exer-
     2  cise  such  power  over  the  trustee named therein as is granted to the
     3  court by section [7-2.6] 7-1.8 of the estates, powers and trusts law.
     4    §  28. Paragraph (b) of subdivision 5 of section 1406 of the abandoned
     5  property law, as added by chapter 57 of the laws of 1978, is amended  to
     6  read as follows:
     7    (b) Payment by the comptroller on a claim for the proceeds of a depos-
     8  it  account,  including  any  additions  or accruals thereon, originally
     9  established pursuant to section [7-5.2] 7-A-4.2 of the  estates,  powers
    10  and  trusts law or former subdivision two of section one hundred thirty-
    11  four of the banking law, may be made to the beneficiary of such  deposit
    12  account  upon  presentation  of  satisfactory  proof of entitlement. The
    13  receipt or acquittance of such beneficiary shall be a valid  and  suffi-
    14  cient  release and discharge to the comptroller for the deposit account,
    15  or any part thereof, for such payment prior to the receipt by the  comp-
    16  troller  of  notice in writing that there exists a testamentary disposi-
    17  tion sufficient to dispose of such  deposit  account  pursuant  to  said
    18  section [7-5.2] 7-A-4.2 of the estates, powers and trusts law.
    19    §  29.  Paragraph  3 of subdivision 3 of section 5-1514 of the general
    20  obligations law, as amended by chapter 340  of  the  laws  of  2010,  is
    21  amended to read as follows:
    22    (3)  opening, modifying or terminating a bank account in trust form as
    23  described in section [7-5.1] 7-A-4.1 of the estates, powers  and  trusts
    24  law,  and  designate  or change the beneficiary or beneficiaries of such
    25  account;
    26    § 30. Subparagraph 1 and item A of subparagraph 2 of paragraph (b)  of
    27  section  2-1.11  of  the  estates,  powers and trusts law, as amended by
    28  chapter 27 of the laws of 2010, and subparagraph 1 of paragraph  (b)  as
    29  amended  by  chapter  285  of  the  laws of 2011, are amended to read as
    30  follows:
    31    (1) The term "disposition" shall include a disposition created under a
    32  will or trust agreement including, without limitation, the granting of a
    33  power of appointment, a disposition created by the exercise or  nonexer-
    34  cise  of  a  power  of  appointment, a distributive share under 4-1.1, a
    35  transfer created by a trust account as defined  in  [7-5.1]  7-A-4.1,  a
    36  transfer  created  by  a  life insurance or annuity contract, a transfer
    37  resulting from the creation of a joint tenancy or tenancy by the entire-
    38  ty, succession to an interest occurring by operation of law on the death
    39  of a joint tenant or tenant by the entirety, a transfer under an employ-
    40  ee benefit plan (including, without limitation, any pension, retirement,
    41  death benefit, stock bonus or profit-sharing plan, system or  trust),  a
    42  transfer of a security to a beneficiary pursuant to part 4 of article 13
    43  of this chapter, any other disposition or transfer created by any testa-
    44  mentary  or  nontestamentary instrument, or by operation of law, and any
    45  of the foregoing created or increased by reason of a  renunciation  made
    46  by another person.
    47    A.  If the disposition is created by will, the exercise or nonexercise
    48  of a testamentary power  of  appointment,  a  distribution  pursuant  to
    49  4-1.1,  the  deposit  of  money in a trust account as defined in [7-5.1]
    50  7-A-4.1, the registration of a security in beneficiary form pursuant  to
    51  part  4  of  article  13  of  this  chapter, a life insurance or annuity
    52  contract, the death of a joint tenant or tenant by the entirety,  or  an
    53  employee benefit plan, the date of death of the deceased testator, hold-
    54  er of the power of appointment, intestate, creator of the trust account,
    55  registered owner of the security, insured, annuitant, other joint tenant
    56  or tenant by the entirety, or employee, as the case may be;

        A. 7677                            89
 
     1    § 31. Subparagraph 1 of paragraph (b) of section 3-3.7 of the estates,
     2  powers and trusts law, as amended by chapter 352 of the laws of 2019, is
     3  amended to read as follows:
     4    (1) The trust instrument is amendable or revocable, or both, provided,
     5  however,  that  the  disposition or appointment shall be given effect in
     6  accordance with the terms of the trust instrument, including  an  amend-
     7  ment  thereto,  as  they appear in writing on the date of the testator's
     8  death and, where the testator so directs, including  amendments  to  the
     9  trust  instrument  after  his or her death, if the instrument evidencing
    10  such amendment is executed and acknowledged in the manner  provided  for
    11  in paragraph [(b)] (g) of [7-1.17] section 7-A-6.2 of this chapter.
    12    §  32.  Section 9-1.7 of the estates, powers and trusts law is amended
    13  to read as follows:
    14  § 9-1.7 Trust for self-employed individuals and others
    15    No trust created under a retirement plan, which is exempt from federal
    16  income taxation under the laws of  the  United  States,  is  invalid  as
    17  violating the rule against perpetuities or the rules governing the accu-
    18  mulation  of income.   Such a trust may continue for such time as may be
    19  necessary to accomplish the purposes for which it is created; may permit
    20  the accumulation of income until such time as the income is  distributed
    21  to the beneficiaries under the terms of the trust; and may, according to
    22  its  terms,  be  made  irrevocable and the interest of its beneficiaries
    23  nontransferable by assignment or otherwise.  A trust so made irrevocable
    24  is not subject to revocation upon the written consent of  its  benefici-
    25  aries as provided in [7-1.9] section 7-A-3.16 of this chapter.
    26    §  33.  Subdivision (d) of section 43.03 of the mental hygiene law, as
    27  added by chapter 433 of the laws of 1993, is amended to read as follows:
    28    (d) The trustee of a supplemental needs trust for  the  benefit  of  a
    29  patient,  which  trust  conforms  to  the provisions of section [7-1.12]
    30  7-A-3.8 of the estates, powers and trusts law, shall not be deemed to be
    31  holding assets for the patient or on his or her behalf, as described  in
    32  such section [7-1.12] 7-A-3.8.  As such, neither the trust nor the trus-
    33  tee shall be liable for the fees for services rendered to the patient.
    34    §  34.  Subdivision  3  of  section 104 of the social services law, as
    35  added by chapter 433 of the laws of 1993, is amended to read as follows:
    36    3. To the extent described in section [7-1.12] 7-A-3.8 of the estates,
    37  powers and trusts law, the trustee of a supplemental needs  trust  which
    38  conforms to the provisions of such section [7-1.12] 7-A-3.8 shall not be
    39  deemed  to  be  holding  assets for the benefit of a beneficiary who may
    40  otherwise be the subject of a claim under this section and no action may
    41  be brought against either the trust or the trustee to recover  the  cost
    42  of  assistance  or  care  provided  to  such person, or anyone for whose
    43  support such person is or was liable.
    44    § 35. This act shall take effect immediately; provided, however,  that
    45  sections  two  through  twenty-four and section twenty-seven of this act
    46  shall take effect on the one hundred eightieth day after it  shall  have
    47  become  a  law; provided, further, that the amendments to section 5-1514
    48  of the general obligations law made by section twenty-nine of  this  act
    49  shall  not affect the expiration and repeal of such section and shall be
    50  deemed repealed therewith.
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