Delaware House Bill 164 (Prior Session Legislation)

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Completed Legislative Action
Spectrum: Slight Partisan Bill (Democrat 8-3)
Status: Passed on August 7 2015 - 100% progression
Action: 2015-08-07 - Signed by Governor
Text: Latest bill text (Draft #1) [HTML]

Section 1 of the Act clarifies section 4915 of title 10. Current section 4915 expressly provides that IRAs described in Internal Revenue Code 408 and Roth IRAs described in Internal Revenue Code 408A are exempt from certain creditor claims. The Act clarifies that the section 4915 exemption for IRAs and Roth IRAs applies even if the IRA or Roth IRA was inherited by the owner. The clarification is deemed advisable in light of the U.S. Supreme Court’s decision in Clark v. Rameker holding that a similar exemption in the federal bankruptcy laws did not apply to an inherited IRA. Section 2 of the Act (i) creates a procedure, similar to the procedure in place in several other states including Alaska, Arkansas, New Hampshire, North Dakota and Ohio, for validating a will, while the testator is still living, against challenges predicated upon undue influence, mistake, incapacity or other grounds; and (ii) creates a similar procedure for validating the exercise of a power of appointment by an instrument other than a will. Section 3546 of title 12 provides a similar procedure for validating trusts including revocable trusts that often in effect serve as will substitutes. The public policy considerations implicated by such a statute are described in a recent article: Glen R. Kazlow et al., Ante-Mortem Probate: Why Wait Until It’s Too Late, 214 N.J.L.J. 1051 (2013);. Section 3 of the Act (i) modifies section 3312(c) (which provides generally that, when a trustee invests in an affiliated investment, the trustee must disclose the affiliated investment to the trust’s beneficiaries in order to assure that the trustee’s fees will not be reduced on account of the investment) to provide that a trustee investing in an affiliated investment at the direction of an investment adviser need not provide the disclosure generally required by section 3312(c) given that the trustee in such a case is not responsible for the investment decision; (ii) revises section 3313 to clarify the circumstances in which the statute applies and to expand the definition of “investment decisions” to encompass various actions commonly understood to be within the ambit of the term; (iii) revises section 3325(19) to clarify that provision and revises section 3325(29) (which empowers trustees to merge trusts in cases where the merger does not alter beneficial interests in either merged trust) to provide expressly that the trustee merger power is available in cases where a new trust is created for the purpose of participating in the merger, as is commonly done to in effect revise the administrative provisions of a trust; (iv) modifies section 3332 to (1) codify and expand upon the Delaware Supreme Court’s recent decision in the Peierls cases regarding when the law of Delaware governs the administration of a trust transferred to Delaware from another jurisdiction, and (2) address fiduciary liability in the context of ambiguity regarding the law governing the administration of a trust; (v) revises section 3333 to (1) provide that the attorney-client privilege is deemed to protect communications between a fiduciary and counsel in cases where counsel is retained by the fiduciary and paid by the fiduciary from the fiduciary’s own funds, and (2) clarify that the fiduciary exception to the attorney-client privilege does not apply in cases where a fiduciary retains counsel in connection with a claim against the fiduciary or in connection with a matter that might reasonably be believed to be a matter that will lead to such a claim, even if the privileged communications have the effect of guiding the fiduciary in the performance of fiduciary duties; (vi) modifies section 3338 to clarify that the interested persons, referenced in the statute, whose consents are required in order to effect a binding nonjudicial settlement agreement, are those persons whose consents or non-objections would, pursuant to Chancery Court Rule 101, be required in a Chancery Court consent proceeding; (vii) adds a new section 3340 providing a safe harbor regarding certain circumstances, among others not enumerated in the statute, in which a trust will be treated as having its place of administration in Delaware for purposes of the various statutes in title 12 applicable by their terms to such trusts; and (viii) adds a new section 3342 addressing some of the consequences of trust mergers and other similar transactions, such as so called “decanting” transactions, in which one trust succeeds to the property and rights of another trust. Section 4 of the Act (i) addresses the rules regarding court accountings for trusts under wills probated on or after April 5, 1909 in cases where the testator died on or before July 31, 2005, as the provisions of prior law regarding the topic were inadvertently omitted from a recent bill reorganizing and modifying the general rules regarding court accountings for trusts; (ii) corrects a cross-reference in section 3526 of title 12; (iii) revises Delaware’s so called decanting statute (12 Del. C. 3528) to (1) reword the statute for clarity without making any substantive change on account of the revised wording, (2) permit a trustee to appoint trust income in further trust to the same extent and subject to the same limitations as trust principal may be appointed under current law, and (3) clarify that a trustee’s statutory power to appoint trust principal and income in further trust, which can only be exercised when the trust is irrevocable, can be exercised in cases where the trust by its terms is revocable but in fact is irrevocable on account of the settlor’s incapacity; (iv) modifies section 3542 (which currently permits corporate trustees to terminate small trusts in certain circumstances) to permit trustees who are not corporations to exercise the same power subject to restrictions intended to avoid potential adverse tax consequences; (v) clarifies the notice requirement for section 3546 in a manner similar to new sections 1311 and 1312 added to the Delaware Code by Section 2 of the Act; (vi) deletes an obsolete reference to the Office of Thrift Supervision appearing in section 3570 and further revises section 3570 to permit a transferor, seeking to make a qualified disposition within the meaning of the statute, to retain a substitution power described in section 675(4)(C) of the Internal Revenue Code; and (vii) revises section 3582 to clarify that the statute is intended to address only monetary damages that a court may award for breach of trust because section 3581 deals generally with the other remedies available for breach of trust. Section 5 of the Act provides an effective date.

An Act To Amend Titles 10 And 12 Of The Delaware Code Relating To Decedent's Estates And Fiduciary Relations.

Rep. Bryon Short [D]	Rep. Melanie Smith [D]	Rep. Sean Lynn [D]	Sen. Margaret Henry [D]
Rep. Helene Keeley [D]	Sen. Charles Paradee [D]	Rep. Michael Ramone [R]	Rep. Jeffrey Spiegelman [R]
Sen. Colin Bonini [R]	Sen. Bethany Hall-Long [D]	Sen. Harris McDowell [D]

2015-06-30 - Senate - Senate Third Reading (Y: 20 N: 0 NV: 0 Abs: 1) [PASS]

Date	Chamber	Action
2015-08-07	House	Signed by Governor
2015-06-30	Senate	Passed by Senate. Votes: Passed 20 YES 0 NO 0 NOT VOTING 1 ABSENT 0 VACANT
2015-06-24	Senate	Reported Out of Committee (JUDICIARY) in Senate with 5 On Its Merits
2015-06-18	Senate	Assigned to Judiciary Committee in Senate
2015-06-18	House	Passed by House of Representatives. Votes: Passed 39 YES 0 NO 0 NOT VOTING 2 ABSENT 0 VACANT
2015-06-10	House	Reported Out of Committee (ECONOMIC DEVELOPMENT/BANKING/INSURANCE/COMMERCE) in House with 8 On Its Merits
2015-06-09	House	Re-Assigned to Economic Development/Banking/Insurance/Commerce Committee in House
2015-06-03	House	Introduced and Assigned to Judiciary Committee in House

Type	Source
Summary	http://legis.delaware.gov/LIS/lis148.nsf/2bede841c6272c888025698400433a04/43e0403bc4adcf3885257e570068752d?OpenDocument
Text	http://legis.delaware.gov/LIS/lis148.nsf/vwLegislation/HB+164/$file/legis.html?open
Roll Call	http://legis.delaware.gov/LIS/lis148.nsf/7712cf7cc0e9227a852568470077336f/ed338bb39202d5a985257e750009d526?OpenDocument