Bill Text: HI HB1300 | 2013 | Regular Session | Introduced
Bill Title: Directed Trusts; Standard of Care and Performance for Fiduciary Actions under an Advisor
Spectrum: Partisan Bill (Democrat 1-0)
Status: (Introduced - Dead) 2013-01-28 - Referred to JUD, referral sheet 7 [HB1300 Detail]
Download: Hawaii-2013-HB1300-Introduced.html
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HOUSE OF REPRESENTATIVES |
H.B. NO. |
1300 |
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TWENTY-SEVENTH LEGISLATURE, 2013 |
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STATE OF HAWAII |
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A BILL FOR AN ACT
relating to A fiduciary's standard of care and performance.
BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF HAWAII:
SECTION 1. The legislature finds that states such as Alaska, Delaware, and South Dakota have been aggressively pursuing legislation to encourage the establishment of trusts within their jurisdictions. Hawaii residents are creating trusts in these states or moving the location of existing trusts outside of Hawaii. In addition to the State losing business, Hawaii residents who presently are unable to establish directed trusts (generally, a trust where the trust administration duties and the investment management duties are separated) in the absence of a Hawaii statute that clearly allows them to do so, are forced to endure additional costs and inconveniences when forming the trust elsewhere. Thirty-four states currently have laws in place that allow for directed trusts. Although Hawaii law arguably allows for directed trusts, until they are clearly authorized, estate planners and advisors continue to recommend that their clients establish or move their trusts to other, more "progressive" states such as Alaska and South Dakota.
This Act authorizes the settlor of a trust to designate and allocate, at the outset, the investment function of a trust entirely to an investment advisor and the administrative function to the administrative trustee. In addition, this Act updates Hawaii law to more accurately reflect the current reality of trust administration and investments, where settlors prefer to divide trustee functions among two or more fiduciaries. This Act also limits the liability of an administrative trustee for trust investments over which the trustee does not exercise responsibility. This Act will help protect and grow Hawaii's trust industry and allow Hawaii residents the opportunity to create cutting-edge trust arrangements without having to move ownership and administration of the trust property outside of the State.
The purpose of this Act is to promote the local economy and accommodate the formation of directed trusts by specifying standards of care and performance for fiduciary actions subject to an advisor's authority under the terms of the trust.
SECTION 2. Section 560:7-302, Hawaii Revised Statutes, is amended to read as follows:
"§560:7-302 Trustee's standard of care
and performance[.]; standards for fiduciary actions under an
advisor's authority. (a) Except as otherwise provided by the
terms of the trust, the trustee shall observe the standards in dealing with the
trust assets that would be observed by a prudent person dealing with the
property of another, and if the trustee has special skills or is named trustee
on the basis of representations of special skills or expertise, the trustee is
under a duty to use those skills.
(b) The standard of care and performance for fiduciary actions that are within the scope of an advisor's authority under the terms of a trust shall be as follows:
(1) Where one or more persons are given authority by the terms of a trust to direct, consent to, or disapprove a fiduciary's actual or proposed investment decisions, distribution decisions, or any other decision of the fiduciary, those persons shall be considered to be advisors and fiduciaries when exercising the given authority unless the trust provides otherwise;
(2) Whenever a trust provides that a fiduciary is to follow the direction of an advisor with respect to investment decisions, distribution decisions, or any other decision of the fiduciary, then except to the extent that the terms of the trust provides otherwise, the fiduciary shall have no duty to:
(A) Monitor the conduct of the advisor;
(B) Provide advice to the advisor or consult with the advisor; or
(C) Communicate with or warn or apprise any beneficiary or third party concerning instances in which the fiduciary would or might have exercised the fiduciary's own discretion in a manner different from the manner directed by the advisor.
Absent clear and convincing evidence to the contrary, the actions of the fiduciary pertaining to matters within the scope of the advisor's authority, such as confirming that the advisor's directions have been carried out and recording and reporting actions taken at the advisor's direction, shall be presumed to be administrative actions taken by the fiduciary solely to allow the fiduciary to perform the duties assigned to the fiduciary under the trust, and the administrative actions shall not be deemed to constitute an undertaking by the fiduciary to monitor the advisor or otherwise participate in actions within the scope of the advisor's authority;
(3) If a trust provides that a fiduciary is to follow the direction of an advisor, and the fiduciary acts in accordance with the advisor's direction, then except in cases of wilful misconduct on the part of the fiduciary so directed, the fiduciary shall not be liable for any loss resulting directly or indirectly from any such act; and
(4) If a trust provides that a fiduciary is to make decisions with the consent of an advisor, then except in cases of wilful misconduct on the part of the fiduciary, the fiduciary shall not be liable for any loss resulting directly or indirectly from any act taken or omitted as a result of the advisor's failure to provide consent after having been requested to do so by the fiduciary.
(c) The provisions of subsection (b) shall apply if the settlor incorporates the provisions into the trust instrument by specific reference. The provisions of subsection (b) shall also apply if:
(1) The provisions are incorporated into an irrevocable trust by a person who is already authorized by the terms of the trust to modify the trust; or
(2) All interested persons agree in writing, without the necessity of any court order, to modify the trust by incorporating the provisions of subsection (b) into the trust, but only to the extent that all interested persons agree that incorporation of the provisions does not violate a material purpose of the trust and would otherwise be approved by the court under this chapter or other applicable law; provided that any interested person who is a minor, unborn, or unascertainable beneficiary shall be bound by other interested persons having a substantially identical interest in the trust modification.
(d) For purposes of this section:
"Advisor" means a person who is given the authority by the terms of a trust to direct, consent to, or disapprove of a fiduciary’s actual or proposed investment decisions, distribution decisions, or any other decision of the fiduciary. The term includes a protector that has been granted powers and authority by the terms of a trust, including:
(1) The power to remove and appoint trustees, advisors, trust committee members, and other protectors;
(2) The power to modify or amend the trust to achieve favorable tax status or to facilitate the efficient administration of the trust; and
(3) The power to modify, expand, or restrict the terms of a power of appointment granted to a beneficiary by the trust.
"Interested persons" means the trustee and beneficiaries whose consent would be required to achieve a binding settlement, were the settlement to be approved by the court, but does not include contingent or more remote beneficiaries or creditors.
"Investment decision" means the retention, purchase, sale, exchange, tender, or other transaction affecting the ownership of or rights in any investment, or the valuation of non-publicly traded investments.
"Wilful misconduct" means intentional wrongdoing and does not include mere negligence, gross negligence, or recklessness."
SECTION 3. Statutory material to be repealed is bracketed and stricken. New statutory material is underscored.
SECTION 4. This Act shall take effect upon its approval.
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INTRODUCED BY: |
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Report Title:
Directed Trusts; Standard of Care and Performance for Fiduciary Actions under an Advisor
Description:
Accommodates the formation of directed trusts by specifying standards of care and performance for fiduciary actions subject to an advisor's authority under the terms of the trust.
The summary description of legislation appearing on this page is for informational purposes only and is not legislation or evidence of legislative intent.
