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S1057................................................by JUDICIARY AND RULES
TRUSTS - Amends, repeals and adds to existing law relating to trusts to
define "settlor"; to amend trust protector provisions; to repeal provisions
relating to restrictions on transfers in trust; to set forth provisions
applicable to spendthrift trusts; and to revise provisions applicable to
fraudulent transfers of personalty.
01/29 Senate intro - 1st rdg - to printing
01/30 Rpt prt - to Jud
02/06 Rpt out - rec d/p - to 2nd rdg
02/07 2nd rdg - to 3rd rdg
02/12 3rd rdg - PASSED - 35-0-0
AYES -- Andreason, Bair, Bastian, Bilyeu, Broadsword, Burkett,
Cameron, Coiner, Corder, Darrington, Davis, Fulcher, Gannon, Geddes,
Goedde, Hammond, Heinrich, Hill, Jorgenson, Kelly, Keough, Langhorst,
Little, Lodge, Malepeai, McGee, McKague, McKenzie, Pearce,
Richardson, Schroeder, Siddoway, Stegner, Stennett, Werk
NAYS -- None
Absent and excused -- None
Floor Sponsor - Davis
Title apvd - to House
02/13 House intro - 1st rdg - to Jud
02/28 Rpt out - rec d/p - to 2nd rdg
03/01 2nd rdg - to 3rd rdg
03/06 3rd rdg - PASSED - 67-0-3
AYES -- Anderson, Andrus, Barrett, Bayer, Bedke, Bell, Bilbao, Black,
Block, Bock, Boe, Bolz, Brackett, Bradford, Chadderdon, Chavez, Chew,
Clark, Collins, Crane, Durst, Edmunson, Eskridge, Hagedorn, Hart,
Harwood, Henbest, Henderson, Jaquet, Killen, King, Kren, Lake,
LeFavour, Loertscher, Luker, Marriott, Mathews, McGeachin, Mortimer,
Moyle, Nielsen, Nonini, Pasley-Stuart, Patrick, Pence, Raybould,
Ring, Roberts, Ruchti, Rusche, Sayler, Schaefer, Shepherd(2),
Shepherd(8), Shirley, Shively, Smith(30), Snodgrass, Stevenson,
Thayn, Trail, Vander Woude, Wills, Wood(27), Wood(35), Mr. Speaker
NAYS -- None
Absent and excused -- Labrador, Ringo, Smith(24)
Floor Sponsor - Wills
Title apvd - to Senate
03/07 To enrol
03/08 Rpt enrol - Pres signed - Sp signed
03/09 To Governor
03/13 Governor signed
Session Law Chapter 68
Effective: 07/01/07
]]]] LEGISLATURE OF THE STATE OF IDAHO ]]]]
Fifty-ninth Legislature First Regular Session - 2007
IN THE SENATE
SENATE BILL NO. 1057
BY JUDICIARY AND RULES COMMITTEE
1 AN ACT
2 RELATING TO TRUSTS; AMENDING SECTION 15-1-201, IDAHO CODE, TO DEFINE "SETTLOR"
3 AND TO ALPHABETIZE DEFINITIONS; AMENDING SECTION 15-7-501, IDAHO CODE, TO
4 AMEND TRUST PROTECTOR PROVISIONS; REPEALING SECTION 15-7-502, IDAHO CODE,
5 RELATING TO RESTRICTIONS ON TRANSFERS IN TRUST; AMENDING PART 5, CHAPTER
6 7, TITLE 15, IDAHO CODE, BY THE ADDITION OF A NEW SECTION 15-7-502, IDAHO
7 CODE, TO SET FORTH PROVISIONS APPLICABLE TO SPENDTHRIFT TRUSTS; AND AMEND-
8 ING SECTION 55-905, IDAHO CODE, TO REVISE PROVISIONS APPLICABLE TO FRAUDU-
9 LENT TRANSFERS OF PERSONALTY.
10 Be It Enacted by the Legislature of the State of Idaho:
11 SECTION 1. That Section 15-1-201, Idaho Code, be, and the same is hereby
12 amended to read as follows:
13 15-1-201. GENERAL DEFINITIONS. Subject to additional definitions con-
14 tained in the subsequent chapters which are applicable to specific chapters or
15 parts, and unless the context otherwise requires, in this code:
16 (1) "Application" means a written request to the registrar for an order
17 of informal probate or appointment under part 3 of chapter 3 of this code.
18 (2) "Augmented estate" means the estate described in section 15-2-202,
19 Idaho Code.
20 (3) "Beneficiary," as it relates to trust beneficiaries, includes a per-
21 son who has any present or future interest, vested or contingent, and also
22 includes the owner of an interest by assignment or other transfer and as it
23 relates to a charitable trust, includes any person entitled to enforce the
24 trust.
25 (4) "Child" includes any individual entitled to take as a child under
26 this code by intestate succession from the parent whose relationship is
27 involved and excludes any person who is only a stepchild, a foster child, a
28 grandchild or any more remote descendant.
29 (5) "Claims," in respect to estates of decedents and protected persons,
30 includes liabilities of the decedent or protected person whether arising in
31 contract, in tort or otherwise, and liabilities of the estate which arise at
32 or after the death of the decedent or after the appointment of a conservator,
33 including funeral expenses and expenses of administration. The term does not
34 include estate or inheritance taxes, other tax obligations arising from activ-
35 ities or transactions of the estate, demands or disputes regarding title of a
36 decedent or protected person to specific assets alleged to be included in the
37 estate.
38 (6) "Community property" is as defined in section 32-906, Idaho Code.
39 (7) "Conservator" means a person who is appointed by a court to manage
40 the estate of a protected person and includes limited conservators as
41 described by section 15-5-420, Idaho Code.
42 (8) "Court" means the court or branch having jurisdiction in matters
43 relating to the affairs of decedents, minors, incapacitated and disabled per-
2
1 sons. This court in this state is known as the district court.
2 (7) "Conservator" means a person who is appointed by a court to manage
3 the estate of a protected person and includes limited conservators as
4 described by section 15-5-420, Idaho Code.
5 (89) "Determination of heirship of community property" shall mean that
6 determination required by the provisions of section 15-3-303, Idaho Code, upon
7 an application for informal probate not accompanied by presentation of a will.
8 (910) "Determination of heirship" shall mean that determination of heir-
9 ship required by section 15-3-409, Idaho Code, upon a finding of intestacy.
10 (101) "Devise," when used as a noun, means a testamentary disposition of
11 real or personal property and when used as a verb, means to dispose of real or
12 personal property by will.
13 (112) "Devisee" means any person designated in a will to receive a devise.
14 In the case of a devise to an existing trust or trustee, or to a trustee or
15 trust described by will, the trust or trustee is the devisee and the benefi-
16 ciaries are not devisees.
17 (123) "Disability," with respect to an individual, means any mental or
18 physical impairment which substantially limits one (1) or more major life
19 activities of the individual including, but not limited to, self-care, manual
20 tasks, walking, seeing, hearing, speaking, learning, or working, or a record
21 of such an impairment, or being regarded as having such an impairment. Dis-
22 ability shall not include transvestism, transsexualism, pedophilia,
23 exhibitionism, voyeurism, other sexual behavior disorders, or substance use
24 disorders, compulsive gambling, kleptomania, or pyromania. Sexual preference
25 or orientation is not considered an impairment or disability. Whether an
26 impairment substantially limits a major life activity shall be determined
27 without consideration of the effect of corrective or mitigating measures used
28 to reduce the effects of the impairment.
29 (134) "Distributee" means any person who has received property of a dece-
30 dent from his personal representative other than as a creditor or purchaser. A
31 testamentary trustee is a distributee only to the extent of distributed assets
32 or increment thereto remaining in his hands. A beneficiary of a testamentary
33 trust to whom the trustee has distributed property received from a personal
34 representative is a distributee of the personal representative. For the pur-
35 pose of this provision "testamentary trustee" includes a trustee to whom
36 assets are transferred by will, to the extent of the devised assets.
37 (145) "Emancipated minor" shall mean any male or female who has been mar-
38 ried.
39 (156) "Estate" means all property of the decedent, including community
40 property of the surviving spouse subject to administration, property of
41 trusts, and property of any other person whose affairs are subject to this
42 code as it exists from time to time during administration.
43 (167) "Exempt property" means that property of a decedent's estate which
44 is described in section 15-2-403, Idaho Code.
45 (178) "Fiduciary" includes personal representative, guardian, conservator
46 and trustee.
47 (189) "Foreign personal representative" means a personal representative of
48 another jurisdiction.
49 (1920) "Formal proceedings" means those conducted before a judge with
50 notice to interested persons.
51 (201) "Guardian" means a person who has qualified as a guardian of a minor
52 or incapacitated person pursuant to testamentary or court appointment and
53 includes limited guardians as described by section 15-5-304, Idaho Code, but
54 excludes one who is merely a guardian ad litem.
55 (212) "Heirs" means those persons, including the surviving spouse, who are
3
1 entitled under the statutes of intestate succession to the property of a dece-
2 dent.
3 (223) "Incapacitated person" is as defined in section 15-5-101, Idaho
4 Code.
5 (234) "Informal proceedings" means those conducted without notice to
6 interested persons by an officer of the court acting as a registrar for pro-
7 bate of a will or appointment of a personal representative.
8 (245) "Interested person" includes heirs, devisees, children, spouses,
9 creditors, beneficiaries and any others having a property right in or claim
10 against a trust estate or the estate of a decedent, ward or protected person
11 which may be affected by the proceeding. It also includes persons having pri-
12 ority for appointment as personal representative, and other fiduciaries repre-
13 senting interested persons. The meaning as it relates to particular persons
14 may vary from time to time and must be determined according to the particular
15 purposes of, and matter involved in, any proceeding. In a guardianship or con-
16 servatorship proceeding, it also includes any governmental agency paying or
17 planning to pay monetary benefits to the ward or protected person and any pub-
18 lic or charitable agency that regularly concerns itself with methods for pre-
19 venting unnecessary or overly intrusive court intervention in the affairs of
20 persons for whom protective orders may be sought and that seeks to participate
21 in the proceedings.
22 (256) "Issue" of a person means all his lineal descendants of all genera-
23 tions, with the relationship of parent and child at each generation being
24 determined by the definitions of child and parent contained in this code.
25 (267) "Lease" includes an oil, gas, or other mineral lease.
26 (278) "Letters" includes letters testamentary, letters of guardianship,
27 letters of administration, and letters of conservatorship.
28 (289) "Minor" means a male under eighteen (18) years of age or a female
29 under eighteen (18) years of age.
30 (2930) "Mortgage" means any conveyance, agreement or arrangement in which
31 property is used as security.
32 (301) "Nonresident decedent" means a decedent who was domiciled in another
33 jurisdiction at the time of his death.
34 (312) "Organization" includes a corporation, government or governmental
35 subdivision or agency, business trust, estate, trust, partnership or associa-
36 tion, two (2) or more persons having a joint or common interest, or any other
37 legal entity.
38 (323) "Parent" includes any person entitled to take, or who would be enti-
39 tled to take if the child died without a will, as a parent under this code by
40 intestate succession from the child whose relationship is in question and
41 excludes any person who is only a stepparent, foster parent, or grandparent.
42 (334) "Person" means an individual, a corporation, business trust, estate,
43 trust, partnership, limited liability company, association, joint venture,
44 public corporation, government, governmental subdivision, agency, or instru-
45 mentality, or any other legal or commercial entity.
46 (345) "Personal representative" includes executor, administrator, succes-
47 sor personal representative, special administrator, and persons who perform
48 substantially the same function under the law governing their status. "General
49 personal representative" excludes special administrator.
50 (356) "Petition" means a written request to the court for an order after
51 notice.
52 (367) "Proceeding" includes action at law and suit in equity.
53 (378) "Property" includes both real and personal property or any interest
54 therein and means anything that may be the subject of ownership.
55 (389) "Protected person" is as defined in section 15-5-101, Idaho Code.
4
1 (3940) "Protective proceeding" is as defined in section 15-5-101, Idaho
2 Code.
3 (401) "Quasi-community property" is the property defined by section
4 15-2-201, Idaho Code.
5 (412) "Registrar" refers to magistrates or judges of the district court
6 who shall perform the functions of registrar as provided in section 15-1-307,
7 Idaho Code.
8 (423) "Security" includes any note, stock, treasury stock, bond, deben-
9 ture, evidence of indebtedness, certificate of interest or participation in an
10 oil, gas or mining title or lease or in payments out of production under such
11 a title or lease, collateral trust certificate, transferable share, voting
12 trust certificate or, in general, any interest or instrument commonly known as
13 a security, or any certificate of interest or participation, any temporary or
14 interim certificate, receipt or certificate of deposit for, or any warrant or
15 right to subscribe to or purchase, any of the foregoing.
16 (434) "Separate property" is as defined in section 32-903, Idaho Code.
17 (45) "Settlement," in reference to a decedent's estate, includes the full
18 process of administration, distribution and closing.
19 (46) "Settlor" includes grantor, trustor, and words of similar import.
20 (447) "Special administrator" means a personal representative as described
21 by sections 15-3-614 through 15-3-618, Idaho Code.
22 (458) "State" includes any state of the United States, the District of
23 Columbia, the Commonwealth of Puerto Rico, and any territory or possession
24 subject to the legislative authority of the United States.
25 (469) "Successor personal representative" means a personal representative,
26 other than a special administrator, who is appointed to succeed a previously
27 appointed personal representative.
28 (4750) "Successors" means those persons, other than creditors, who are
29 entitled to property of a decedent under his will or this code.
30 (4851) "Supervised administration" refers to the proceedings described in
31 part 5, chapter 3, of this code.
32 (4952) "Testacy proceeding" means a proceeding to establish a will or
33 determine intestacy.
34 (503) "Trust" includes any express trust, private or charitable, with
35 additions thereto, wherever and however created. It also includes a trust cre-
36 ated or determined by judgment or decree under which the trust is to be admin-
37 istered in the manner of an express trust. "Trust" excludes other constructive
38 trusts, and it excludes resulting trusts, conservatorships, personal represen-
39 tatives, trust accounts as defined in chapter 6 of this code, custodial
40 arrangements pursuant to chapter 8, title 68, Idaho Code, business trusts pro-
41 viding for certificates to be issued to beneficiaries, common trust funds,
42 voting trusts, security arrangements, liquidation trusts, and trusts for the
43 primary purpose of paying debts, dividends, interest, salaries, wages, prof-
44 its, pensions, or employee benefits of any kind, and any arrangement under
45 which a person is nominee or escrowee for another.
46 (514) "Trustee" includes an original, additional, or successor trustee,
47 whether or not appointed or confirmed by court.
48 (525) "Ward" is as defined in section 15-5-101, Idaho Code.
49 (536) "Will" is a testamentary instrument and includes codicil and any
50 testamentary instrument which merely appoints an executor or revokes or
51 revises another will.
52 (54) "Separate property" is as defined in section 32-903, Idaho Code.
53 (55) "Community property" is as defined in section 32-906, Idaho Code.
54 SECTION 2. That Section 15-7-501, Idaho Code, be, and the same is hereby
5
1 amended to read as follows:
2 15-7-501. TRUST PROTECTOR. (1) Definition of terms:
3 (a) "Distribution trust advisor" means a person given authority by the
4 trust instrument to exercise all or any portions of the powers and
5 discretions set forth in subsection (11) of this section.
6 (b) "Excluded fiduciary" means any fiduciary excluded from exercising
7 certain powers under the instrument, which powers may be exercised by the
8 grantor or a trust advisor or a trust protector.
9 (bc) "Fiduciary" means a trustee under any testamentary or other trust,
10 an executor, administrator, or personal representative of a decedent's
11 estate, or any other party, including a trust advisor or a trust protec-
12 tor, who is acting in a fiduciary capacity for any person, trust or
13 estate.
14 (cd) "Instrument" means any revocable or irrevocable trust document
15 whether created inter vivos or testamentary.
16 (de) "Investment tTrust advisor" means a person given authority by the
17 grantor of an trust instrument, or other fiduciaries, in which any power,
18 including the power and authority to direct the acquisition, disposition,
19 or retention of any investment, or the power to authorize any act that an
20 excluded fiduciary may propose, is reserved to the exclusion of another
21 fiduciary also acting under the instrument. "Trust advisor" also includes
22 any party accepting the delegation of a fiduciary's power to direct the
23 acquisition, disposition or retention of any investment to exercise all or
24 any portions of the powers and discretions set forth in subsection (10) of
25 this section.
26 (f) "Trust advisor" means a distribution trust advisor or an investment
27 advisor.
28 (eg) "Trust protector" means any disinterested third party whose appoint-
29 ment is provided for in the trust instrument.
30 (2) Liability limits of excluded fiduciary. An excluded fiduciary is not
31 liable, either individually or as a fiduciary, for either of the following:
32 (a) Any loss that results from compliance with a direction of the trust
33 advisor;
34 (b) Any loss that results from a failure to take any action proposed by
35 an excluded fiduciary that requires a prior authorization of the trust
36 advisor if that excluded fiduciary timely sought but failed to obtain that
37 authorization.
38 Any excluded fiduciary is also relieved from any obligation to perform invest-
39 ment reviews and make recommendations with respect to any investments to the
40 extent the trust advisor had authority to direct the acquisition, disposition
41 or retention of any such investment.
42 (3) Death of grantor. An excluded fiduciary may continue to follow the
43 direction of the trust advisor upon the incapacity or death of the grantor if
44 the instrument so allows.
45 (4) When trust advisor considered as fiduciary. If one (1) or more trust
46 advisors are given authority by the terms of a governing instrument to direct,
47 consent to, or disapprove a fiduciary's investment decisions, or proposed
48 investment decisions, such trust advisors shall be considered to be fiducia-
49 ries when exercising such authority unless the governing instrument provides
50 otherwise.
51 (5) Excluded fiduciary's liability for loss if trust protector appointed.
52 If an instrument appoints a trust protector, the excluded fiduciary is not
53 liable for any loss resulting from any action taken upon such trust
54 protector's direction.
6
1 (6) Powers and discretions of trust protector. The powers and discretions
2 of a trust protector shall be as provided in the governing instrument and may,
3 in the best interests of the trust, be exercised or not exercised in the sole
4 and absolute discretion of the trust protector and shall be binding on all
5 other persons. Such powers and discretion may include the following:
6 (a) To modify or amend the trust instrument to achieve favorable tax sta-
7 tus or because of changes in the Internal Revenue Code, state law, or the
8 rulings and regulations thereunder;
9 (b) To increase or decrease the interests of any beneficiaries to the
10 trust; and
11 (c) To modify the terms of any power of appointment granted by the trust.
12 However, a modification or amendment may not grant a beneficial interest
13 to any individual or class of individuals not specifically provided for
14 under the trust instrument;
15 (d) To terminate the trust;
16 (e) To veto or direct trust distributions;
17 (f) To change situs or governing law of the trust, or both;
18 (g) To appoint a successor trust protector;
19 (h) To interpret terms of the trust instrument at the request of the
20 trustee;
21 (i) To advise the trustee on matters concerning a beneficiary; and
22 (j) To amend or modify the trust instrument to take advantage of laws
23 governing restraints on alienation, distribution of trust property, or the
24 administration of the trust.
25 (7) Submission to court jurisdiction -- Effect on trust advisor or trust
26 protector. By accepting an appointment to serve as a trust advisor or trust
27 protector of a trust that is subject to the laws of this state, the trust
28 advisor or the trust protector submits to the jurisdiction of the courts of
29 Idaho even if investment advisory agreements or other related agreements pro-
30 vide otherwise, and the trust advisor or trust protector may be made a party
31 to any action or proceeding if issues relate to a decision or action of the
32 trust advisor or trust protector.
33 (8) Powers of trust protector incorporated by reference in will or trust
34 instrument. Any of the powers enumerated in subsection (6) of this section, as
35 they exist at the time of the signing of a will by a testator or testatrix or
36 at the time of the signing of a trust instrument by a trustor may be, by
37 appropriate reference made thereto, incorporated in whole or in part in such
38 will or trust instrument by a clearly expressed intention of a testator or
39 testatrix of a will or trustor of a trust instrument.
40 (9) Investment trust advisor or distribution trust advisor provided for
41 in trust instrument. A trust instrument governed by the laws of Idaho may pro-
42 vide for a person to act as an investment trust advisor or a distribution
43 trust advisor, respectively, with regard to investment decisions or discre-
44 tionary distributions.
45 (10) Powers and discretions of investment trust advisor. The powers and
46 discretions of an investment trust advisor shall be provided in the trust
47 instrument and may be exercised or not exercised, in the best interests of the
48 trust, in the sole and absolute discretion of the investment trust advisor and
49 are binding on any other person and any other interested party, fiduciary, and
50 excluded fiduciary. Unless the terms of the document provide otherwise, the
51 investment trust advisor has the power to perform the following:
52 (a) Direct the trustee with respect to the retention, purchase, sale or
53 encumbrance of trust property and the investment and reinvestment of prin-
54 cipal and income of the trust;
55 (b) Vote proxies for securities held in trust; and
7
1 (c) Select one (1) or more investment advisors, managers or counselors,
2 including the trustee, and delegate to them any of its powers.
3 (11) Powers and discretions of distribution trust advisor. The powers and
4 discretions of a distribution trust advisor shall be provided in the trust
5 instrument and may be exercised or not exercised, in the best interests of the
6 trust, in the sole and absolute discretion of the distribution trust advisor
7 and are binding on any other person and any other interested party, fiduciary,
8 and excluded fiduciary. Unless the terms of the document provide otherwise,
9 the distribution trust advisor shall direct the trustee with regard to all
10 discretionary distributions to beneficiaries.
11 SECTION 3. That Section 15-7-502, Idaho Code, be, and the same is hereby
12 repealed.
13 SECTION 4. That Part 5, Chapter 7, Title 15, Idaho Code, be, and the same
14 is hereby amended by the addition thereto of a NEW SECTION, to be known and
15 designated as Section 15-7-502, Idaho Code, and to read as follows:
16 15-7-502. SPENDTHRIFT TRUSTS. (1) A settlor may provide in the terms of
17 the trust that the interest of a beneficiary in the income or in the principal
18 or in both may not be voluntarily or involuntarily transferred before payment
19 or delivery of the interest to the beneficiary by the trustee.
20 (2) A declaration in a trust instrument that the interest of a benefi-
21 ciary shall be held subject to a "spendthrift trust" is sufficient to restrain
22 voluntary or involuntary alienation of the interest by a beneficiary to the
23 maximum extent permitted under this section.
24 (3) Validity of a restraint on transfer in a trust document shall not
25 require specific reference to or identical verbiage set forth in subsection
26 (1) or (2) of this section.
27 (4) If a person is both a settlor and beneficiary of the same trust, a
28 provision restraining the voluntary or involuntary transfer of the settlor's
29 beneficial interest in such trust does not prevent the settlor's creditors
30 from satisfying claims from the settlor's interest in the trust estate that
31 relates to the portion of the trust that was contributed by the settlor. For
32 the purposes of this subsection (4), however, a settlor shall not be consid-
33 ered to be a beneficiary of an irrevocable trust created by the settlor and
34 taxed for federal income tax purposes pursuant to the grantor trust rules of
35 the Internal Revenue Code, sections 671 through 679, inclusive, if the
36 settlor's only beneficial interest in such trust consists of the right to
37 receive a distribution from such trust in an amount equal to or less than the
38 amount of the federal and state income tax liability incurred by the settlor
39 as a result of such trust being characterized as a grantor trust pursuant to
40 the aforementioned grantor trust rules.
41 (5) A beneficiary of a trust shall not be considered a settlor of a trust
42 merely because of a lapse, waiver or release of:
43 (a) A power described in subsection (6) of this section; or
44 (b) The beneficiary's right to withdraw a part of the trust property to
45 the extent that the value of the property affected by the lapse, waiver or
46 release in any calendar year does not exceed the greater of the amount
47 specified in:
48 (i) Section 2041(b)(2) or 2514(e) of the Internal Revenue Code of
49 1986, as amended; or
50 (ii) Section 2503(b) of the Internal Revenue Code of 1986, as
51 amended.
52 (6) A beneficiary of a trust shall not be considered a settlor, to have
8
1 made a voluntary or involuntary transfer of the beneficiary's interest in a
2 trust, or to have the power to make a voluntary or involuntary transfer of the
3 beneficiary's interest in the trust, merely because the beneficiary, in any
4 capacity including, but not limited to, as a trustee, holds or exercises:
5 (a) A presently exercisable power to:
6 (i) Consume, invade, appropriate or distribute property to or for
7 the benefit of the beneficiary, if the power is either exercisable
8 only on consent of another person holding an interest adverse to the
9 beneficiary's interest or limited by an ascertainable standing
10 including, but not limited to, health, education, support or mainte-
11 nance of the beneficiary; or
12 (ii) Exercise a limited power of appointment, as defined in the
13 Internal Revenue Code of 1986, as amended, including, but not limited
14 to, the power to appoint any property of the trust to or for the ben-
15 efit of a person other than the beneficiary, a creditor of the bene-
16 ficiary, the beneficiary's estate, or a creditor of the beneficiary's
17 estate;
18 (b) A testamentary power of appointment; or
19 (c) A presently exercisable right described in subsection (5)(b) of this
20 section.
21 SECTION 5. That Section 55-905, Idaho Code, be, and the same is hereby
22 amended to read as follows:
23 55-905. FRAUDULENT TRANSFERS OF PERSONALTY. All deeds of gift, all con-
24 veyances, and all transfers or assignments, verbal oral or written, of goods,
25 chattels, or things in action, made in trust for the use of the person making
26 the same, are void as against the creditors, existing or subsequent, of such
27 person. However, a settlor's retained right to receive distributions from a
28 trust in an amount equal to or less than the federal and state income tax lia-
29 bility incurred by such settlor as a result of such trust being characterized
30 as a grantor trust pursuant to the rules of the Internal Revenue Code of 1986,
31 as amended, sections 671 through 679, inclusive, shall not be considered a
32 deed of gift, conveyance, transfer or assignment that is made in trust for the
33 use of the person making the same.
STATEMENT OF PURPOSE
RS 16715
Section 1 Idaho Code section 15-1-201
The term "settlor" is often used in the probate code and is
not defined. This bill sets forth a definition for such
term.
Section 2 Idaho Code section 15-7-501
Trusts that have bifurcated the fiduciary role among
different trustees are more and more common. These so
called directed trustee trust typically provide that one
fiduciary (a trust advisor which is usually a family member
or person with a business relationship with the grantor of
the trust) can direct the other fiduciary (usually an
institutional trustee) with regard to investment and/or
distribution needs. Also the use of a trust protector is
more common (which is a fiduciary with limited powers to
make sure the trust is functioning as intended). Idaho's
current law does not directly address the authority of a
trust advisor. Idaho's current law also does not allow the
incorporation of the trust protector's powers by reference
to the Idaho code. This bill specifically allows and sets
forth the authority for a trust advisor and expands the
possible, but not mandatory, powers that a Trust Protector
can hold and allows a draftsperson to incorporate the
suggested powers of a Trust Protector into a trust
instrument by reference without having to specifically note
each power in the trust instrument.
Section 4 Idaho Code section 15-7-502
Idaho law is unclear, with regard to spendthrift trusts, as
to a creditor's right to invade the trust corpus in the
situation where: (a) the beneficiary has a so called
"Crummey" withdrawal right; (b) the beneficiary is also the
trustee and there are either (i) ascertainable standards as
to distributions, or (ii) an adverse person must consent to
the distribution; and (c) the grantor of an irrevocable
trust who is not a beneficiary thereof retains the power to
reimbursed for the income taxes the grantor pays on behalf
of the trust due to the trust being a grantor trust for
income taxes. Under each of these scenarios, a creditor of
the beneficiary in situation (a) and (b) and a subsequent
creditor of a grantor in situation (c) do not have the right
to invade the trust corpus. Other states have addressed
these issues also in a similar manner. This bill
specifically provides that a spendthrift trust does, in
fact, encompass the above situations.
Section 5 Idaho Code section 55-905
Due to the proposed changes to Idaho Code section 15-7-502
in section 2 above regarding the reimbursement to a grantor
of an irrevocable trust for the payment of income taxes the
Grantor paid on behalf of the trust due to such trust's
grantor trust status, Idaho Code section 55-905 also needs
clarification so that the two sections are consistent and
not contrary to one another. This bill makes consistent
these two sections.
FISCAL NOTE
This bill will have no fiscal impact.
CONTACT:
Name: Robert L. Aldridge, Trust & Estate Professionals of
Idaho, Inc.
Phone: office: (208) 336-9880 Cell: (208) 631-2481
STATEMENT OF PURPOSE S 1057
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