1999 Legislation
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SENATE BILL NO. 1078 – Trust protector, appointed, when


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Daily Data Tracking History

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
      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

Bill Text


 ||||              LEGISLATURE OF THE STATE OF IDAHO             ||||
Fifty-fifth Legislature                 First Regular Session - 1999

                                      IN THE SENATE

                                   SENATE BILL NO. 1078

                             BY JUDICIARY AND RULES COMMITTEE

 1                                        AN ACT

 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


 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 / Fiscal Impact

                       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


                                                           S 1078