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to replace the State's current outdated and inefficient trust laws,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 As a result, New York trust law is seriously outdated,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.
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:
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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;
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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;
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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.
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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:
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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
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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.
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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:
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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:
A. 7677 85
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.
A. 7677 86
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.
