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S1078................................................by JUDICIARY AND RULES
TRUST PROTECTOR - Adds to existing law to establish the terms and
conditions under which, and subject to which, a trust protector may be
appointed in trust cases.
02/02 Senate intro - 1st rdg - to printing
02/03 Rpt prt - to Jud
02/11 Rpt out - rec d/p - to 2nd rdg
02/12 2nd rdg - to 3rd rdg
02/16 3rd rdg - PASSED - 31-0-4
AYES--Boatright, Branch, Bunderson, Burtenshaw, Cameron, Crow,
Danielson, Darrington, Davis, Deide, Dunklin, Frasure, Geddes,
Hawkins, Ingram, Keough, King, Lee, McLaughlin, Parry, Richardson,
Riggs, Risch, Sandy, Schroeder, Sorensen, Stegner, Thorne, Twiggs,
Wheeler, Whitworth
NAYS--None
Absent and excused--Andreason, Ipsen, Noh, Stennett
Floor Sponsor - Risch
Title apvd - to House
02/17 House intro - 1st rdg - to Jud
03/18 Rpt out - rec d/p - to 2nd rdg
03/19 2nd rdg - to 3rd rdg
Rules susp - PASSED - 57-0-13
AYES -- Alltus, Barraclough, Bell, Bieter, Black, Boe, Bruneel,
Callister, Campbell, Chase, Clark, Crow, Cuddy, Deal, Denney,
Field(13), Field(20), Gagner, Gould, Hammond, Hansen(23), Hansen(29),
Henbest, Hornbeck, Jaquet, Jones, Judd, Kellogg, Kempton, Kendell,
Kunz, Lake, Limbaugh, Loertscher, Mader, Marley, McKague,
Meyer(Duncan), Montgomery, Moyle, Pischner, Pomeroy, Reynolds,
Ridinger, Ringo, Robison, Sali, Schaefer, Sellman, Smylie, Stevenson,
Stoicheff, Stone, Watson, Wheeler, Zimmermann, Mr Speaker
NAYS -- None
Absent and excused -- Barrett, Ellsworth, Geddes, Hadley, Linford,
Mortensen, Smith, Taylor, Tilman, Tippets, Trail, Williams, Wood
Floor Sponsor - Clark
Title apvd - to Senate
03/22 To enrol - rpt enrol - Pres signed - Sp signed
03/23 To Governor
03/24 Governor signed
Session Law Chapter 331
Effective: 07/01/99
S1078|||| LEGISLATURE OF THE STATE OF IDAHO |||| Fifty-fifth Legislature First Regular Session - 1999IN THE SENATE SENATE BILL NO. 1078 BY JUDICIARY AND RULES COMMITTEE 1 AN ACT 2 RELATING TO TRUST PROTECTORS; AMENDING CHAPTER 7, TITLE 15, IDAHO CODE, BY THE 3 ADDITION OF A NEW PART 5, CHAPTER 7, TITLE 15, IDAHO CODE, TO ESTABLISH 4 THE TERMS AND CONDITIONS UNDER WHICH, AND SUBJECT TO WHICH, A TRUST PRO- 5 TECTOR MAY BE APPOINTED. 6 Be It Enacted by the Legislature of the State of Idaho: 7 SECTION 1. That Chapter 7, Title 15, Idaho Code, be, and the same is 8 hereby amended by the addition thereto of a NEW PART , to be known 9 and designated as Part 5, Chapter 7, Title 15, Idaho Code, and to read as fol- 10 lows: 11 PART 5. TRUST PROTECTOR 12 15-7-501. TRUST PROTECTOR. (1) Definition of terms: 13 (a) "Excluded fiduciary" means any fiduciary excluded from exercising 14 certain powers under the instrument, which powers may be exercised by the 15 grantor or a trust advisor or a trust protector. 16 (b) "Fiduciary" means a trustee under any testamentary or other trust, an 17 executor, administrator, or personal representative of a decedent's 18 estate, or any other party, including a trust advisor or a trust protec- 19 tor, who is acting in a fiduciary capacity for any person, trust or 20 estate. 21 (c) "Instrument" means any revocable or irrevocable trust document 22 whether created inter vivos or testamentary. 23 (d) "Trust advisor" means the grantor of an instrument, or other fiducia- 24 ries, in which any power, including the power and authority to direct the 25 acquisition, disposition, or retention of any investment, or the power to 26 authorize any act that an excluded fiduciary may propose, is reserved to 27 the exclusion of another fiduciary also acting under the instrument. 28 "Trust advisor" also includes any party accepting the delegation of a 29 fiduciary's power to direct the acquisition, disposition or retention of 30 any investment. 31 (e) "Trust protector" means any disinterested third party whose appoint- 32 ment is provided for in the trust instrument. 33 (2) Liability limits of excluded fiduciary. An excluded fiduciary is not 34 liable, either individually or as a fiduciary, for either of the following: 35 (a) Any loss that results from compliance with a direction of the trust 36 advisor; 37 (b) Any loss that results from a failure to take any action proposed by 38 an excluded fiduciary that requires a prior authorization of the trust 39 advisor if that excluded fiduciary timely sought but failed to obtain that 40 authorization. 41 Any excluded fiduciary is also relieved from any obligation to perform invest- 42 ment reviews and make recommendations with respect to any investments to the 2 1 extent the trust advisor had authority to direct the acquisition, disposition 2 or retention of any such investment. 3 (3) Death of grantor. An excluded fiduciary may continue to follow the 4 direction of the trust advisor upon the incapacity or death of the grantor if 5 the instrument so allows. 6 (4) When trust advisor considered as fiduciary. If one (1) or more trust 7 advisors are given authority by the terms of a governing instrument to direct, 8 consent to, or disapprove a fiduciary's investment decisions, or proposed 9 investment decisions, such trust advisors shall be considered to be fiducia- 10 ries when exercising such authority unless the governing instrument provides 11 otherwise. 12 (5) Excluded fiduciary's liability for loss if trust protector appointed. 13 If an instrument appoints a trust protector, the excluded fiduciary is not 14 liable for any loss resulting from any action taken upon such trust 15 protector's direction. 16 (6) Powers and discretions of trust protector. The powers and discretions 17 of a trust protector shall be as provided in the governing instrument and may, 18 in the best interests of the trust, be exercised or not exercised in the sole 19 and absolute discretion of the trust protector and shall be binding on all 20 other persons. Such powers and discretion may include the following: 21 (a) To modify or amend the trust instrument to achieve favorable tax sta- 22 tus or because of changes in the Internal Revenue Code, state law, or the 23 rulings and regulations thereunder; 24 (b) To increase or decrease the interests of any beneficiaries to the 25 trust; and 26 (c) To modify the terms of any power of appointment granted by the trust. 27 However, a modification or amendment may not grant a beneficial interest 28 to any individual or class of individuals not specifically provided for 29 under the trust instrument. 30 (7) Submission to court jurisdiction -- Effect on trust advisor or trust 31 protector. By accepting an appointment to serve as a trust advisor or trust 32 protector of a trust that is subject to the laws of this state, the trust 33 advisor or the trust protector submits to the jurisdiction of the courts of 34 Idaho even if investment advisory agreements or other related agreements pro- 35 vide otherwise, and the trust advisor or trust protector may be made a party 36 to any action or proceeding if issues relate to a decision or action of the 37 trust advisor or trust protector.
STATEMENT OF PURPOSE
RS 08784
This bill established the office of the "trust protector",
which must be filled by appointment through the governing
instrument. Subject to the terms and conditions of the
governing instrument, the trust protector may modify the terms
and conditions of a trust, primarily to comply with changes in
tax law or rules and regulations, or other such changes in non-
tax law, which might otherwise invalidate the trust or cause
negative tax or economic repercussions. Many irrevocable trusts
were in full compliance with tax and other law when
established, but cannot be amended to comply with changes after
their establishments. Dynasty trust, especially, may last many
decades, with resulting major changes in tax and other laws,
but are irrevocable.
The bill also allows the appointment in the governing
instrument of a "trust advisor' who may make limited decisions
on the investments of the trust and who may be the grantor. In
such event, and also if a trust protector is named, the main
trustee is an "excluded fiduciary" as to the areas in which the
trust advisor and/or trust protector has power and is freed
from liability for acting upon the directions of the trust
advisor and/or trust protector.
The bill allows trusts which last for extended periods of time
to stay in compliance with various laws, especially tax laws,
while still being deemed "irrevocable". It avoids unforeseeable
and inadvertent violation of future laws.
FISCAL NOTE
This bill should have no effect on revenues or expenditures.
CONTACT: Robert L. Aldrich
1209 North Eighth Street
Boise, Idaho 83702-4297
Telephone: Office: 208-336-9880 Home: 208-888-4668
FAX: 208-336-9882
e-mail: roberta@micron.net
STATEMENT OF PURPOSE/FISCAL NOTE
S 1078