Bill Text: AZ SB1204 | 2018 | Fifty-third Legislature 2nd Regular | Chaptered
Bill Title: Trusts and estates
Spectrum: Bipartisan Bill
Status: (Passed) 2018-03-29 - Chapter 102 [SB1204 Detail]
Download: Arizona-2018-SB1204-Chaptered.html
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Senate Engrossed |
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State of Arizona Senate Fifty-third Legislature Second Regular Session 2018
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CHAPTER 102
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SENATE BILL 1204 |
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AN ACT
amending sections 14‑1304, 14‑2517, 14‑3306, 14‑3403 and 14‑10105, Arizona Revised Statutes; amending title 14, chapter 11, article 1, Arizona Revised Statutes, by adding section 14‑10113; amending sections 14‑10506, 14‑10813, 14‑10819 and 14‑11013, Arizona Revised Statutes; relating to trusts and estates.
(TEXT OF BILL BEGINS ON NEXT PAGE)
Be it enacted by the Legislature of the State of Arizona:
Section 1. Section 14-1304, Arizona Revised Statutes, is amended to read:
14-1304. Practice in court
Unless specifically provided to the contrary in this title or unless inconsistent with its provisions, the rules of civil probate procedure including the rules concerning vacation of orders and appellate review govern formal proceedings under this title.
Sec. 2. Section 14-2517, Arizona Revised Statutes, is amended to read:
14-2517. Penalty clause for contest; restriction
A provision in a will purporting to penalize an interested person for contesting the will or instituting other proceedings or actions relating to the estate is unenforceable if probable cause exists for that action the contest, proceedings or actions.
Sec. 3. Section 14-3306, Arizona Revised Statutes, is amended to read:
14-3306. Informal probate; notice requirements
A. The applicant must give notice as described by section 14‑1401 of the applicant's application for informal probate:
1. To any person demanding it pursuant to section 14‑3204.
2. To any personal representative of the decedent whose appointment has not been terminated. No other notice need be given prior to before issuance of a statement of informal probate by the registrar.
B. On issuance of a statement of informal probate, the applicant must within thirty days give written information to all heirs and devisees of the admission of the will to probate, together with a copy of the will. The information shall describe the court where papers relating to the estate are on file and state that an heir or devisee has four months from receipt of the information within which to commence a formal testacy proceeding if the heir or devisee wishes to contest the probate. If a personal representative has been appointed, the information given pursuant to this section may be combined with the information required by section 14‑3705 and may in that case be given by either the applicant or the personal representative on behalf of both. This information shall be delivered or sent by mail to each of the heirs and devisees whose address is reasonably available to the applicant. An heir or devisee to whom the information is given is barred from commencing a formal testacy proceeding to contest the probate of the will after four months have elapsed from receipt of the information, but an heir or devisee is not barred from commencing a formal testacy proceeding to probate a later discovered will. An heir or devisee to whom the information is not given may contest the informal probate within the time limit specified in section 14‑3108. The applicant shall be liable to any heir or devisee damaged by failure to comply with this subsection. An applicant's failure to give information as required by this section is a breach of the applicant's duty to the heirs and devisees but does not affect the validity of the probate.
Sec. 4. Section 14-3403, Arizona Revised Statutes, is amended to read:
14-3403. Formal testacy proceeding; notice of hearing on petition
A. Upon On commencement of a formal testacy proceeding, the clerk shall fix a time and place of hearing. Notice shall be given in the manner prescribed by section 14‑1401 by the petitioner to the persons specified in this section and to any additional person who has filed a demand for notice under section 14‑3204. Notice shall be given to the following persons: the surviving spouse, children and other heirs of the decedent, the devisees and executors named in any will that is being, or has been, probated, or offered for informal or formal probate in the county, or that is known by the petitioner to have been probated, or offered for informal or formal probate in another jurisdiction, and any personal representative of the decedent whose appointment has not been terminated. Notice may be given to other persons. In addition To the extent that the petitioner is not otherwise required by section 14‑1401 to give notice by publication, the petitioner shall give notice by publication one time at least fourteen days before the hearing in the manner prescribed by section 14‑1401, subsection A, paragraph 3 to all unknown persons and to all known persons whose addresses are unknown who have any interest in the matter being litigated.
B. If it appears by the petition or otherwise that the fact of the death of the alleged decedent may be in doubt, or on the written demand of any interested person, a copy of the notice of the hearing on the petition shall be sent by registered mail to the alleged decedent at his the decedent's last known address. The court shall direct the petitioner to report the results of, or make and report back concerning, a reasonably diligent search for the alleged decedent in any manner that may seem advisable, including any or all of the following methods:
1. By inserting in one or more suitable periodicals a notice requesting information from any person having knowledge of the whereabouts of the alleged decedent.
2. By notifying law enforcement officials and public welfare agencies in appropriate locations of the disappearance of the alleged decedent.
3. By engaging the services of an investigator. The costs of any search so directed shall be paid by the petitioner if there is no administration or by the estate of the decedent in case there is administration.
Sec. 5. Section 14-10105, Arizona Revised Statutes, is amended to read:
14-10105. Default and mandatory rules
A. Except as otherwise provided in the terms of the trust, this chapter governs:
1. The duties, powers, exercise of powers, resignation, and appointment of a trustee.
2. Conflicts of interest of a trustee.
3. Relations among trustees.
4. Mergers or divisions of trusts.
5. The rights and interests of a beneficiary.
B. The terms of a trust prevail over any provision of this chapter except:
1. The requirements for creating a trust.
2. The duty of a trustee to act in good faith and in accordance with the purposes of the trust.
3. The requirement that a trust and its terms be for the benefit of its beneficiaries and that the trust have a purpose that is lawful, not contrary to public policy and possible to achieve.
4. The power of the court to modify or terminate a trust under sections 14‑10410, 14‑10411, 14‑10412, 14‑10413, 14‑10414, 14‑10415 and 14‑10416.
5. The effect of a spendthrift provision and the rights of certain creditors and assignees to reach a trust as provided in article 5 of this chapter.
6. The power of the court under section 14‑10702 to require, dispense with, modify or terminate a bond.
7. The power of the court under section 14‑10708, subsection B to adjust a trustee's compensation specified in the terms of the trust that is unreasonably low or high.
8. The duty to respond to the request of a qualified beneficiary of an irrevocable trust for trustee's reports and other information reasonably related to the administration of a trust.
9. The effect of an exculpatory term under section 14‑11008.
10. The rights under sections 14‑11010, 14‑11011, 14‑11012 and 14‑11013 of a person other than a trustee or beneficiary.
11. Periods of limitation for commencing a judicial proceeding.
12. The power of the court to take action consistent with the settlor's intent and exercise jurisdiction as may be necessary in the interests of justice.
13. The subject matter jurisdiction of the court and venue for commencing a proceeding as provided in sections 14‑10203 and 14‑10204.
14. The notice provisions of section 14‑10110, subsection B.
15. The enforceability of a penalty clause under section 14‑10113.
Sec. 6. Title 14, chapter 11, article 1, Arizona Revised Statutes, is amended by adding section 14-10113, to read:
14-10113. Penalty clause for contest; restriction
A provision in a trust instrument that purports to penalize an interested person for contesting the trust instrument or instituting other proceedings or actions relating to the trust property is unenforceable if probable cause exists for the contest, proceedings or actions.
Sec. 7. Section 14-10506, Arizona Revised Statutes, is amended to read:
14-10506. Overdue distribution; definition
A. Whether or not a trust contains a spendthrift provision, a creditor or assignee of a beneficiary may reach a mandatory distribution of income or principal, including a distribution on termination of the trust, if the trustee has not made the distribution to the beneficiary within a reasonable period after the mandated distribution date unless the terms of the trust expressly authorize the trustee to delay the distribution to protect the beneficiary's interest in the distribution.
B. For the purposes of this section, "mandatory distribution" means a distribution of income or principal that the trustee is required to make to a beneficiary under the terms of the trust, including a distribution amount for a stated age, a distribution to be made pursuant to the exercise of a power of withdrawal and a distribution on termination of the trust. Mandatory distribution does not include a distribution that is subject to the exercise of the trustee's discretion even if:
1. The discretion is expressed in the form of a standard of distribution.
2. The terms of the trust authorizing a distribution couple language of discretion with language of direction.
Sec. 8. Section 14-10813, Arizona Revised Statutes, is amended to read:
14-10813. Duty to inform and report
A. Unless the trust instrument provides otherwise, a trustee shall keep the qualified beneficiaries of the trust reasonably informed about the administration of the trust and of the material facts necessary for them to protect their interests. Unless the trustee determines that it is unreasonable under the circumstances to do so, a trustee shall promptly respond to a beneficiary's request for information related to the administration of the trust.
B. A trustee:
1. On request of a beneficiary, shall promptly furnish to the beneficiary a copy of the portions of the trust instrument that are necessary to describe the beneficiary's interest.
2. Within sixty days after accepting a trusteeship, shall notify the qualified beneficiaries of the acceptance and of the trustee's name, address and telephone number.
3. Within sixty days after the date the trustee acquires knowledge of the creation of an irrevocable trust or the date the trustee acquires knowledge that a formerly revocable trust has become irrevocable, whether by the death of the settlor or otherwise, shall notify the qualified beneficiaries of the trust's existence, of the identity of the settlor or settlors, of the trustee's name, address and telephone number, of the right to request a copy of the relevant portions of the trust instrument and of the right to a trustee's report as provided in subsection C of this section.
4. Shall notify the qualified beneficiaries at least thirty days in advance of any change in the method or rate of the trustee's compensation.
C. A trustee shall send to the distributees or permissible distributees of trust income or principal and to other beneficiaries who request it, at least annually and at the termination of the trust, a report of the trust property, liabilities, receipts and disbursements, including the source and amount of the trustee's compensation, a listing of the trust assets and, if feasible, their respective market values. On a vacancy in a trusteeship, unless a cotrustee remains in office, a report must be sent to the qualified beneficiaries by the former trustee. A personal representative, conservator or guardian may send the qualified beneficiaries a report on behalf of a deceased or incapacitated trustee.
D. A beneficiary may waive the right to a trustee's report or other information otherwise required to be furnished under this section. A beneficiary, with respect to future reports and other information, may withdraw a waiver previously given.
E. Subsection B, paragraphs 2 and 3 of this section apply only to a trustee who accepts a trusteeship on or after January 1, 2009, to an irrevocable trust created on or after January 1, 2009 and to a revocable trust that becomes irrevocable on or after January 1, 2009.
F. Except for the notice requirement in subsection B, paragraph 2 of this section, for the purposes of this section, a person is not a qualified beneficiary, distributee or other beneficiary who requests a report pursuant to subsection C of this section solely because the person is or would be entitled under the terms of the trust instrument to one or more specific distributions of property that already have been made to the person or have otherwise been satisfied.
Sec. 9. Section 14-10819, Arizona Revised Statutes, is amended to read:
14-10819. Trustee's special power to appoint to other trust
A. Unless the terms of the trust instrument expressly provide otherwise, a trustee who has the discretion under the terms of a testamentary instrument or irrevocable inter vivos agreement to make distributions, regardless of whether a standard is provided in the trust instrument to or agreement, for the benefit of a beneficiary of the trust, may exercise without prior court approval the trustee's discretion by appointing part or all of the estate trust property in favor of a trustee of another trust if the exercise of this discretion:
1. Does not reduce any fixed nondiscretionary income payment to a beneficiary.
2. Does not alter any nondiscretionary annuity or unitrust payment to a beneficiary.
3. Is in favor of the beneficiaries of the trust.
4. Results in any ascertainable standard applicable for distributions from the trust being the same or more restrictive standard applicable for distributions from the recipient trust when the trustee exercising the power to appoint trust property described in this subsection is a possible beneficiary under the standard.
5. Does not adversely affect the tax treatment of the trust, the trustee, the settlor or the beneficiaries.
6. Does not violate the limitations on validity under sections 14‑2901 and 14‑2905.
B. This section applies to a trust governed by the laws of this state, including a trust whose governing jurisdiction is transferred to this state.
C. The exercise of the trustee's power to invade the principal of a appoint trust property under subsection A of this section is considered to be the exercise of a special power of appointment.
D. The trustee, in the trustee's sole discretion, before or after the exercise of the trustee's discretion power to appoint trust property under subsection A of this section, may request the court to approve the exercise.
E. The trustee may exercise the discretion power to appoint all of the trust estate property pursuant to subsection A of this section by restating the trust instrument.
Sec. 10. Section 14-11013, Arizona Revised Statutes, is amended to read:
14-11013. Certification of trust
A. Instead of furnishing a copy of the trust instrument to a person other than a beneficiary, the trustee may furnish to the person a certification of trust containing the following information:
1. That the trust exists and the date the trust instrument was executed.
2. The identity of the settlor.
3. The identity and address of the currently acting trustee.
4. The powers of the trustee.
5. The revocability or irrevocability of the trust and the identity of any person holding a power to revoke the trust.
6. The authority of cotrustees to sign or otherwise authenticate and whether all or less than all are required in order to exercise powers of the trustee.
7. The manner of taking title to trust property.
B. A certification of trust may be signed or otherwise authenticated by any trustee.
C. A certification of trust must state that the trust has not been revoked, modified or amended in any manner that would cause the representations contained in the certification of trust to be incorrect.
D. A certification of trust need not contain the dispositive terms of a trust.
E. A recipient of a certification of trust, acting in good faith, may require the trustee to furnish copies of those excerpts from the original trust instrument and later amendments that designate the trustee and confer on the trustee the power to act in the pending transaction. A person may not require the trustee to furnish copies of excerpts from the trust instrument that contain dispositive terms of the trust or provisions on named successor trustees unless the person first provides the trustee with a verified statement that states a reasonable basis for the request.
F. A person who acts in reliance on a certification of trust without actual knowledge that the representations contained in the certification of trust are incorrect is not liable to any person for so acting and may assume without inquiry the existence of the facts contained in the certification of trust. Actual knowledge of the terms of the trust may shall not be inferred solely from the fact that a copy of all or part of the trust instrument is held by the person relying on the certification of trust or by the employees of the person relying on the certification of trust if the person is an entity or organization that conducts activities through employees.
G. A person who in good faith enters into a transaction in reliance on a certification of trust may enforce the transaction against the trust property as if the representations contained in the certification were correct.
H. A person making a demand for the trust instrument or excerpts from the trust instrument in addition to a certification of trust or excerpts is liable for damages, costs, expenses and attorney fees if the court determines that the person did not act in good faith or did not otherwise comply with subsection E of this section in demanding the trust instrument.
I. This section does not limit the right of a person to obtain a copy of the trust instrument in a judicial proceeding concerning the trust instrument or excerpts from the trust instrument.
APPROVED BY THE GOVERNOR MARCH 29, 2018.
FILED IN THE OFFICE OF THE SECRETARY OF STATE MARCH 29, 2018.
