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H0767......................................................by STATE AFFAIRS TRUST CONSUMER PROTECTION ACT - Adds to existing law to provide for removal of a corporate trustee for cause, to provide the causes for removal, to provide for replacement of the trustee, to provide a definition, to provide for removal without judicial intervention and to provide when judicial action may be invoked, to provide for waiver of the act and to provide for application of the act. 02/25 House intro - 1st rdg - to printing 02/26 Rpt prt - to Bus
H0767|||| LEGISLATURE OF THE STATE OF IDAHO |||| Fifty-fourth Legislature Second Regular Session - 1998IN THE HOUSE OF REPRESENTATIVES HOUSE BILL NO. 767 BY STATE AFFAIRS COMMITTEE 1 AN ACT 2 RELATING TO THE TRUST CONSUMER PROTECTION ACT; AMENDING CHAPTER 7, TITLE 15, 3 IDAHO CODE, BY THE ADDITION OF A NEW PART 5, CHAPTER 7, TITLE 15, IDAHO 4 CODE, TO PROVIDE FOR REMOVAL OF A CORPORATE TRUSTEE FOR CAUSE, TO PROVIDE 5 THE CAUSES FOR REMOVAL, TO PROVIDE FOR REPLACEMENT OF THE TRUSTEE, TO PRO- 6 VIDE A DEFINITION, TO PROVIDE FOR REMOVAL WITHOUT JUDICIAL INTERVENTION 7 AND TO PROVIDE WHEN JUDICIAL ACTION MAY BE INVOKED, TO PROVIDE FOR WAIVER 8 OF THE ACT AND TO PROVIDE FOR APPLICATION OF THE ACT. 9 Be It Enacted by the Legislature of the State of Idaho: 10 SECTION 1. That Chapter 7, Title 15, Idaho Code, be, and the same is 11 hereby amended by the addition thereto of a NEW PART , to be known 12 and designated as Part 5, Chapter 7, Idaho Code, and to read as follows: 13 PART 5 14 TRUST CONSUMER PROTECTION ACT 15 15-7-501. REMOVAL OF CORPORATE TRUSTEE. (1) A majority of current benefi- 16 ciaries of a trust shall have the right to remove a corporate trustee for 17 cause. For purposes of this act, cause for removal shall exist, without limi- 18 tation, when an acting corporate trustee is sold to, acquired by or merged 19 with another corporate trustee prior to or after the date of enactment of this 20 act. 21 (2) Unless a corporate trustee is named as a successor in the governing 22 trust instrument, any trustee removed pursuant to this act shall be replaced 23 by a corporate trustee as designated by a majority of the current beneficia- 24 ries of the trust. 25 (3) The term "corporate trustee" as used in this act shall mean a bank or 26 trust company as defined in section 26-1301, Idaho Code, and a national bank- 27 ing association. 28 (4) The right to remove and replace a trustee under this act may be exer- 29 cised free of judicial intervention and without court order, approval or other 30 action of any court, subject to the jurisdiction of the court as invoked by 31 interested parties or as otherwise exercised as provided by law. 32 (5) This act may be waived by an express reference to the act in the gov- 33 erning trust agreement. 34 (6) This act shall apply to all trusts subject to the jurisdiction of an 35 Idaho court under section 5-514, Idaho Code, or chapter 7, title 15, Idaho 36 Code.
STATEMENT OF PURPOSE
RS 08126
The intent of the Trust Consumers Protection Act is to
protect consumers of trust services from the negative
STATEMENT OF PURPOSE RS08126
The intent of the Trust Consumers Protection is to
protect consumers of trust services from consequences of
bank mergers.
Nationally chartered banks doing business in Idaho have
undergone a series of mergers in recent years. The
positive and negative effects of these mergers on
consumers in such areas as personal service, charges, and
local decision making (among others) have been well
documented. However, a less prominent area affected, with
no less a consequence to consumers, is in the area of
trust services, in particular, the area of irrevocable
trusts.
Irrevocable trusts are commonly established naming the
trust department of a bank or an independent trust company as
the trustee. These trusts are established to benefit a
particular person or group of people for a period of time.
Often these trusts are designed to last for an extended
period of years. In fact, Idaho is among only five states
that allow such trusts to last in perpetuity. A bank or trust
company is selected by the person(s) creating the trust
(known as the "settlor" of the trust) to ensure a trustee
will be there to meet the long-term commitment created by the
trust. The bank selected by the settlor is commonly the
hometown bank of the settlor. Once the irrevocable trust is
established the selection of the bank as trustee is
irrevocable.
The era of bank mergers could not have been foreseen by
settlors of trusts. The hometown bank who was chosen to
administer the trust has disappeared, replaced by an
out-of-state mega-bank. However, given the irrevocable
character of the trusts at issue, the change in the trustee is
out of the control of the beneficiaries without a court battle
against normally resistant bank attorneys.
The Trust Consumers Protection Act is designed to codify
the right of beneficiaries to replace a corporate trustee with
another trustee for cause. This preserves the intent of the
trust settlor to have a corporate trustee while honoring the
additional intent that a "local" institution be trustee.
Furthermore, it provides trust beneficiaries with the right to
control who their business relationship is with and allows
local management of their account.
FISCAL NOTE
None.
Contact: Rep. Jeff Alltus
(208)332-1000
Mr. Tom Prohaska, Idaho Trust
(208)664-6448
H 767