Bill Text: IA SSB1016 | 2021-2022 | 89th General Assembly | Introduced


Bill Title: A bill for an act relating to the creation, administration, and termination of custodial trusts.(See SF 240.)

Spectrum: Committee Bill

Status: (Introduced) 2021-02-02 - Committee report approving bill, renumbered as SF 240. [SSB1016 Detail]

Download: Iowa-2021-SSB1016-Introduced.html
Senate Study Bill 1016 - Introduced SENATE FILE _____ BY (PROPOSED COMMITTEE ON JUDICIARY BILL BY CHAIRPERSON ZAUN) A BILL FOR An Act relating to the creation, administration, and 1 termination of custodial trusts. 2 BE IT ENACTED BY THE GENERAL ASSEMBLY OF THE STATE OF IOWA: 3 TLSB 1241XC (3) 89 cm/jh
S.F. _____ DIVISION I 1 IOWA UNIFORM CUSTODIAL TRUST ACT 2 Section 1. NEW SECTION . 633F.1 Definitions. 3 For purposes of this chapter: 4 1. “Adult” means an individual who is at least eighteen 5 years of age. 6 2. “Beneficiary” means an individual for whom property has 7 been transferred to or held under a declaration of trust by a 8 custodial trustee for the individual’s use and benefit under 9 this chapter. 10 3. “Consent” means affirmation given by a person who is 11 not incapacitated; or if a person is incapacitated and there 12 is no conflict of interest between the representer and the 13 incapacitated person with respect to the fiduciary manner, 14 the following may consent on behalf of the incapacitated 15 individual: 16 a. A conservator may represent and bind the person whose 17 estate the conservator controls. 18 b. A trustee may represent and bind the beneficiary of a 19 trust. 20 c. A personal representative may represent and bind the 21 persons interested in the decedent’s estate. 22 d. If no conservator has been appointed, a parent may 23 represent and bind a minor child. 24 4. “Conservator” means a person appointed or qualified by a 25 court to manage the estate of an individual or a person legally 26 authorized to perform substantially the same functions. 27 5. “Court” means the probate court of this state. 28 6. “Custodial trust property” means an interest in property 29 transferred to or held under a declaration of trust by a 30 custodial trustee under this chapter and the income from and 31 proceeds of that interest. 32 7. “Custodial trustee” means a person designated as trustee 33 of a custodial trust under this chapter or a substitute or 34 successor to the person designated. 35 -1- LSB 1241XC (3) 89 cm/jh 1/ 33
S.F. _____ 8. “Guardian” means a person appointed or qualified by 1 a court as a guardian of an individual, including a limited 2 guardian, but not a person who is only a court visitor. 3 9. “Incapacitated” means the inability of an individual to 4 manage property or business affairs because the individual is 5 any of the following: 6 a. An individual whose decision-making is so impaired that 7 the individual is unable to make, communicate, or carry out 8 important decisions concerning the individual’s financial 9 affairs. 10 b. Detailed or incarcerated in a penal system. 11 c. Outside the United States and unable to return. 12 d. A minor. 13 10. “Legal representative” means a living person’s 14 agent acting under a durable financial power of attorney or 15 conservator, a living or deceased person’s trustee acting 16 under a revocable trust created by such person, or a deceased 17 person’s personal representative. 18 11. “Member of the beneficiary’s family” means the following 19 persons who are competent adults at the time of acting 20 hereunder, with such action to be taken in the following order 21 of priority: 22 a. The surviving spouse, if not legally separated from the 23 beneficiary, whose whereabouts are reasonably ascertainable. 24 b. The surviving child of the beneficiary, or, if there 25 is more than one, a majority of the surviving children whose 26 whereabouts are reasonably ascertainable. 27 c. The surviving parents of the beneficiary whose 28 whereabouts are reasonably ascertainable. 29 d. A surviving grandchild of the beneficiary, or if there is 30 more than one, a majority of the surviving grandchildren whose 31 whereabouts are reasonably ascertainable. 32 e. A surviving sibling of the beneficiary, or if there 33 is more than one, a majority of the surviving siblings whose 34 whereabouts are reasonably ascertainable. 35 -2- LSB 1241XC (3) 89 cm/jh 2/ 33
S.F. _____ f. A surviving grandparent of the beneficiary, or if there 1 is more than one, a majority of the surviving grandparents 2 whose whereabouts are reasonably ascertainable. 3 g. A person in the next degree of kinship to the beneficiary 4 in the order named by law who would inherit the estate of 5 the beneficiary under the rules of inheritance for intestate 6 succession, or if there is more than one, a majority of 7 such surviving persons whose whereabouts are reasonably 8 ascertainable. 9 12. “Person” means an individual, corporation, business 10 trust, estate, trust, partnership, joint venture, association, 11 or any other legal or commercial entity. 12 13. “Personal representative” means an executor, 13 administrator, or special administrator of a decedent’s estate, 14 a person legally authorized to perform substantially the same 15 functions, or a successor to any of them as defined in section 16 633.3. 17 14. “State” means a state, territory, or possession of the 18 United States, the District of Columbia, or the Commonwealth 19 of Puerto Rico. 20 15. “Transferor” means a person who creates a custodial 21 trust by transfer or declaration. 22 16. “Trust company” means a financial institution, 23 corporation, or other legal entity, authorized to exercise 24 general trust powers. 25 Sec. 2. NEW SECTION . 633F.2 Custodial trust —— general. 26 1. A person may create a custodial trust of property by a 27 written transfer of the property to another person, evidenced 28 by registration or by other instrument of transfer, executed in 29 any lawful manner, naming as beneficiary, an individual who may 30 be the transferor, in which the transferee is designated, in 31 substance, as custodial trustee under this chapter. 32 2. A person may create a custodial trust of property by a 33 written declaration, evidenced by registration of the property 34 or by other instrument of declaration executed in any lawful 35 -3- LSB 1241XC (3) 89 cm/jh 3/ 33
S.F. _____ manner, describing the property and naming as beneficiary an 1 individual other than the declarant, in which the declarant as 2 titleholder is designated, in substance, as custodial trustee 3 under this chapter. A registration or other declaration of 4 trust for the sole benefit of the declarant is not a custodial 5 trust under this chapter. 6 3. Title to custodial trust property is in the custodial 7 trustee and the beneficial interest is in the beneficiary. 8 4. Except as provided in subsection 5, a transferor shall 9 not terminate a custodial trust. 10 5. The beneficiary, if not incapacitated, or the legal 11 representative of an incapacitated beneficiary, may terminate 12 a custodial trust by delivering to the custodial trustee a 13 writing signed by the beneficiary or legal representative 14 declaring the termination. If not previously terminated, the 15 custodial trust terminates on the death of the beneficiary. 16 6. Any person may augment existing custodial trust property 17 by the addition of other property pursuant to this chapter, 18 only upon receipt and acceptance by the custodial trustee. 19 7. The transferor may designate, or authorize the 20 designation of, a successor custodial trustee in the trust 21 instrument. 22 8. This chapter does not displace or restrict other means 23 of creating trusts. A trust whose terms do not conform to this 24 chapter may be enforceable according to its terms under other 25 law. 26 Sec. 3. NEW SECTION . 633F.4 Custodial trustee for future 27 payment or transfer. 28 1. A person having the right to designate the recipient of 29 property payable or transferable upon a future event may create 30 a custodial trust upon the occurrence of the future event by 31 designating in writing the recipient, followed in substance 32 by: “as custodial trustee for __________________ (name of 33 beneficiary) under the Iowa Uniform Custodial Trust Act”. 34 2. Persons may be designated as substitute or successor 35 -4- LSB 1241XC (3) 89 cm/jh 4/ 33
S.F. _____ custodial trustees to whom the property must be paid or 1 transferred in the order named if the first designated 2 custodial trustee is unable or unwilling to serve. 3 3. A designation under this section may be made in a will, 4 a trust, a multiple-party account, an insurance policy, an 5 instrument exercising a power of appointment, or a writing 6 designating a beneficiary of contractual rights. Otherwise, 7 to be effective, the designation must be registered with or 8 delivered to the fiduciary, payor, issuer, or obligor of the 9 future right. 10 Sec. 4. NEW SECTION . 633F.4 Form and effect of receipt and 11 acceptance by custodial trustee —— jurisdiction. 12 1. Obligations of a custodial trustee, including the 13 obligation to follow directions of the beneficiary, arise under 14 this chapter upon the custodial trustee’s acceptance, express 15 or implied, of the custodial trust property. 16 2. The custodial trustee’s acceptance may be evidenced by a 17 writing stating in substance: 18 CUSTODIAL TRUSTEE’S RECEIPT AND ACCEPTANCE 19 I, _______ (name of custodial trustee) acknowledge receipt 20 of the custodial trust property described below or in the 21 attached instrument and accept the custodial trust as custodial 22 trustee for __________________ (name of beneficiary) under the 23 Iowa Uniform Custodial Trust Act. I undertake to administer 24 and distribute the custodial trust property pursuant to the 25 Iowa Uniform Custodial Trust Act. My obligations as custodial 26 trustee are subject to the directions of the beneficiary 27 unless the beneficiary is designated as, is, or becomes 28 incapacitated. The custodial trust property consists of 29 _____________________________. 30 Dated: _____________________________ 31 (Signature of Custodial Trustee) 32 3. Upon accepting custodial trust property, a person 33 designated as custodial trustee under this chapter is subject 34 to personal jurisdiction of the court with respect to any 35 -5- LSB 1241XC (3) 89 cm/jh 5/ 33
S.F. _____ matter relating to the custodial trust. 1 Sec. 5. NEW SECTION . 633F.5 Transfer to custodial trustee 2 by fiduciary or obligor —— facility of payment. 3 1. Unless otherwise directed by an instrument designating 4 a custodial trustee pursuant to section 633F.3, a person, 5 including a fiduciary other than a custodial trustee, who holds 6 property of or owes a debt to an incapacitated individual may 7 make a transfer to a beneficiary’s legal representative and 8 if none, to a member of the beneficiary’s family, or a trust 9 company, as custodial trustee for the use and benefit of the 10 incapacitated individual. If the value of the property or 11 the debt exceeds fifty thousand dollars, the transfer is not 12 effective unless authorized by the court. 13 2. A written acknowledgment of delivery, signed by a 14 custodial trustee, is a sufficient receipt and discharge for 15 property transferred to the custodial trustee pursuant to this 16 section. 17 Sec. 6. NEW SECTION . 633F.6 Single beneficiaries —— 18 separate trust accounts. 19 1. Beneficial interests in a custodial trust shall not be 20 created for multiple beneficiaries. 21 2. All custodial trust property held under this chapter by 22 the same custodial trustee for the use and benefit of a single 23 beneficiary may be administered as a single custodial trust. 24 Sec. 7. NEW SECTION . 633F.7 General duties of custodial 25 trustee. 26 1. If appropriate, a custodial trustee shall register 27 or record the instrument vesting title to custodial trust 28 property. 29 2. If the beneficiary is not incapacitated, a custodial 30 trustee shall follow the directions of the beneficiary in the 31 management, control, investment, or retention of the custodial 32 trust property. In the absence of effective contrary direction 33 by the beneficiary while not incapacitated, the custodial 34 trustee shall observe the prudent investment standards set 35 -6- LSB 1241XC (3) 89 cm/jh 6/ 33
S.F. _____ forth in section 633.123. However, a custodial trustee, in the 1 custodial trustee’s discretion, may retain any custodial trust 2 property received from the transferor. If a custodial trustee 3 has a special skill or expertise or is named custodial trustee 4 on the basis of representation of a special skill or expertise, 5 the custodial trustee shall use that skill or expertise. 6 3. Subject to subsection 2, a custodial trustee shall take 7 control of and collect, hold, manage, invest, and reinvest 8 custodial trust property. 9 4. A custodial trustee at all times shall keep custodial 10 trust property of which the custodial trustee has control, 11 separate from all other property in a manner sufficient 12 to identify it clearly as custodial trust property of the 13 beneficiary. Custodial trust property, the title to which is 14 subject to recordation, is so identified if an appropriate 15 instrument so identifying the property is recorded, and 16 custodial trust property subject to registration is so 17 identified if it is registered, or held in an account in the 18 name of the custodial trustee, designated in substance: “as 19 custodial trustee for __________________ (name of beneficiary) 20 under the Iowa Uniform Custodial Trust Act”. 21 5. A custodial trustee shall keep records of all 22 transactions with respect to custodial trust property, 23 including information necessary for the preparation of tax 24 returns, and shall make the records and information available 25 at reasonable times to the beneficiary or legal representative 26 of the beneficiary. 27 6. The exercise of a durable power of attorney for an 28 incapacitated beneficiary is not effective to terminate or 29 direct the administration or distribution of a custodial trust. 30 Sec. 8. NEW SECTION . 633F.8 General powers of custodial 31 trustee. 32 1. A custodial trustee, acting in a fiduciary capacity, has 33 all the rights and powers over custodial trust property which 34 an unmarried adult owner has over individually owned property, 35 -7- LSB 1241XC (3) 89 cm/jh 7/ 33
S.F. _____ but a custodial trustee may exercise those rights and powers 1 in a fiduciary capacity only. 2 2. This section does not relieve a custodial trustee from 3 liability for a violation of section 633F.7. 4 Sec. 9. NEW SECTION . 633F.9 Use of custodial trust 5 property. 6 1. A custodial trustee shall pay to the beneficiary or 7 expend for the beneficiary’s use and benefit so much or all 8 of the custodial trust property as the beneficiary while not 9 incapacitated may direct from time to time. 10 2. If the beneficiary is incapacitated, the custodial 11 trustee shall expend so much or all of the custodial trust 12 property as the custodial trustee considers advisable for the 13 use and benefit of the beneficiary and individuals who are 14 legally entitled to support by the beneficiary. Expenditures 15 may be made in the manner, when, and to the extent that the 16 custodial trustee determines suitable and proper, without court 17 order and without regard to other support, income, or property 18 of the beneficiary. 19 3. To facilitate distributions to the beneficiary, a 20 custodial trustee may establish checking, savings, or other 21 similar accounts of reasonable amounts under which either 22 the custodial trustee or the beneficiary, if authorized, may 23 withdraw funds from, or draw checks against, the accounts in 24 amounts authorized by the custodian. Funds withdrawn from, 25 or checks written against, the account by the beneficiary are 26 distributions of custodial trust property by the custodial 27 trustee to the beneficiary. 28 Sec. 10. NEW SECTION . 633F.10 Determination of incapacity 29 —— effect. 30 1. The custodial trustee shall administer the custodial 31 trust as for an incapacitated beneficiary in any of the 32 following circumstances: 33 a. The custodial trust was created under section 633F.5. 34 b. The transferor has so directed in the instrument creating 35 -8- LSB 1241XC (3) 89 cm/jh 8/ 33
S.F. _____ the custodial trust. 1 c. The custodial trustee has determined that the beneficiary 2 is incapacitated. 3 2. A custodial trustee may determine that the beneficiary is 4 incapacitated in reliance upon any of the following: 5 a. Previous direction or authority given by the beneficiary 6 while not incapacitated, including direction or authority 7 pursuant to a durable power of attorney. 8 b. Written documentation from the beneficiary’s physician. 9 c. Other persuasive evidence. 10 3. If a custodial trustee for an incapacitated beneficiary 11 reasonably concludes that the beneficiary’s incapacity has 12 ceased, or that circumstances concerning the beneficiary’s 13 ability to manage property and business affairs have 14 changed since the creation of a custodial trust directing 15 administration as for an incapacitated beneficiary, the 16 custodial trustee may administer the trust as for a beneficiary 17 who is not incapacitated. 18 4. On petition of the beneficiary, the custodial trustee, or 19 other person interested in the custodial trust property or the 20 welfare of the beneficiary, the court shall determine whether 21 the beneficiary is incapacitated. 22 5. Absent determination of incapacity of the beneficiary 23 under subsection 2 or 4, a custodial trustee who has reason to 24 believe that the beneficiary is incapacitated shall administer 25 the custodial trust in accordance with the provisions of this 26 chapter applicable to an incapacitated beneficiary. 27 6. Incapacity of a beneficiary does not terminate the 28 custodial trust, any designation of a successor custodial 29 trustee, rights or powers of the custodial trustee, or any 30 immunities of third persons acting on instructions of the 31 custodial trustee. 32 Sec. 11. NEW SECTION . 633F.11 Exemption of third person 33 from liability. 34 1. A third person in good faith and without a court order 35 -9- LSB 1241XC (3) 89 cm/jh 9/ 33
S.F. _____ may act on instructions of, or otherwise deal with, a person 1 purporting to make a transfer as, or purporting to act in the 2 capacity of, a custodial trustee. 3 2. A third person who receives instructions from the 4 purported custodial trustee may require such custodial trustee 5 to provide proof of their identity and a certification of trust 6 or copies of those excerpts from the original trust instrument 7 and amendments to the original trust instrument which designate 8 the currently acting custodial trustee and confer upon the 9 custodial trustee the power to act in the pending transaction. 10 3. If a certification of trust is provided, it must do all 11 of the following: 12 a. State the names of all the currently acting trustees. 13 b. If there is more than one currently acting trustee, 14 state whether the trustees may act individually or must act by 15 majority decision or must act by unanimous decision. 16 c. State that the trust has not been revoked, modified, or 17 amended in any manner that would cause the representations in 18 the certification of trust to be incorrect. 19 d. Be signed by a currently acting trustee or the attorney 20 of a currently acting trustee. 21 e. Be dated and certified under penalty of perjury and 22 pursuant to the laws of the state of Iowa that it is true and 23 correct, or subscribed and sworn to under penalty of perjury 24 before a notary public as provided in chapter 9B. 25 f. A third person who acts in reliance upon the information 26 provided by the custodial trustee, after taking reasonable 27 steps to verify the identity of the custodial trustee and 28 without knowledge that the representations contained in the 29 certification are incorrect, is not liable to any person 30 for so acting and may assume without inquiry the existence 31 of the facts contained in the certification. The period of 32 time to verify the identity of the trustee shall not exceed 33 ten business days from the date the third person received 34 the requested information. Knowledge shall not be inferred 35 -10- LSB 1241XC (3) 89 cm/jh 10/ 33
S.F. _____ solely from the fact that a copy of all or part of the trust 1 instrument is held by the third person relying upon the 2 trust certification. A transaction, and a lien created by a 3 transaction, entered into by the custodial trustee and a person 4 acting in reliance upon a certification of trust is enforceable 5 against the trust assets. 6 4. A third person who makes a demand for information from 7 the custodial trustee beyond that set forth in subsection 8 2 shall be liable for damages, including attorney fees, 9 incurred as a result of the refusal to accept the information 10 provided, if the court determines that the third person acted 11 unreasonably in requesting such additional information. 12 5. If a custodial trustee has provided the information set 13 forth in subsection 2, and the third person refuses to follow 14 the instructions provided by the custodial trustee within the 15 time period set forth in subsection 4, the custodial trustee 16 may bring an action under this subsection and the court may 17 award any or all of the following to the custodial trustee: 18 a. Any damages sustained by the trust. 19 b. The costs of the action. 20 c. A penalty in an amount of not less than five hundred 21 dollars and not more than ten thousand dollars. 22 d. Reasonable attorney fees, based on the value of the time 23 reasonably expended by the attorney and not on the amount of 24 the recovery on behalf of the custodial trustee. 25 6. An action shall not be brought under this subsection more 26 than one year after the date of the occurrence of the alleged 27 violation. 28 Sec. 12. NEW SECTION . 633F.12 Liability to third person. 29 1. A claim based on a contract entered into by a custodial 30 trustee acting in a fiduciary capacity, an obligation arising 31 from the ownership or control of custodial trust property, or 32 a tort committed in the course of administering the custodial 33 trust, may be asserted by a third person against the custodial 34 trust property by proceeding against the custodial trustee in a 35 -11- LSB 1241XC (3) 89 cm/jh 11/ 33
S.F. _____ fiduciary capacity, whether or not the custodial trustee or the 1 beneficiary is personally liable. 2 2. A custodial trustee is not personally liable to a third 3 person for any of the following: 4 a. On a contract properly entered into in a fiduciary 5 capacity unless the custodial trustee fails to reveal that 6 capacity or to identify the custodial trust in the contract. 7 b. For an obligation arising from control of custodial 8 trust property or for a tort committed in the course of the 9 administration of the custodial trust unless the custodial 10 trustee is personally at fault. 11 3. A beneficiary is not personally liable to a third 12 person for an obligation arising from beneficial ownership of 13 custodial trust property or for a tort committed in the course 14 of administration of the custodial trust unless the beneficiary 15 is personally in possession of the custodial trust property 16 giving rise to the liability or is personally at fault. 17 4. Subsections 2 and 3 do not preclude actions or 18 proceedings to establish liability of the custodial trustee or 19 beneficiary to the extent the person sued is protected as the 20 insured by liability insurance. 21 Sec. 13. NEW SECTION . 633F.13 Declination, resignation, 22 incapacity, death, or removal of custodial trustee —— designation 23 of successor custodial trustee. 24 1. Before accepting the custodial trust property, a person 25 designated as custodial trustee may decline to serve by 26 notifying the person who made the designation, the transferor, 27 or the transferor’s legal representative. If an event giving 28 rise to a transfer has not occurred, the substitute custodial 29 trustee designated under section 633F.3 becomes the custodial 30 trustee, or, if a substitute custodial trustee has not been 31 designated, the person who made the designation may designate 32 a substitute custodial trustee pursuant to section 633F.3. 33 In other cases, the transferor or the transferor’s legal 34 representative may designate a substitute custodial trustee. 35 -12- LSB 1241XC (3) 89 cm/jh 12/ 33
S.F. _____ 2. A custodial trustee who has accepted the custodial trust 1 property may resign by doing all of the following: 2 a. Delivering written notice to a successor custodial 3 trustee, if any, the beneficiary and, if the beneficiary is 4 incapacitated, to the beneficiary’s legal representative, if 5 any. 6 b. Transferring or registering, or recording an appropriate 7 instrument relating to, the custodial trust property, in the 8 name of, and delivering the records to, the successor custodial 9 trustee identified under subsection 3. 10 3. If a custodial trustee or successor custodial trustee 11 is ineligible, resigns, dies, or becomes incapacitated, the 12 successor designated under section 633F.2, subsection 7, or 13 section 633F.3 becomes custodial trustee. If there is no 14 effective provision for a successor, the beneficiary if not 15 incapacitated, or the legal representative of an incapacitated 16 beneficiary, may designate a successor custodial trustee. If 17 the beneficiary is not incapacitated, but fails to act within 18 ninety days after the ineligibility, resignation, death, or 19 incapacity of the custodial trustee, or if the beneficiary 20 is incapacitated and the beneficiary’s legal representative 21 fails to act within ninety days after the ineligibility, 22 resignation, death, or incapacity of the custodial trustee, 23 then the beneficiary’s legal representative becomes successor 24 custodial trustee. If the beneficiary does not have a legal 25 representative or the legal representative fails to act, the 26 resigning custodial trustee may designate a successor custodial 27 trustee. 28 4. If a successor custodial trustee is not designated 29 pursuant to subsection 3, the transferor, the legal 30 representative of the transferor or of the custodial trustee, 31 a beneficiary’s legal representative and if none, a member of 32 the beneficiary’s family, a person interested in the custodial 33 trust property may petition the court to designate a successor 34 custodial trustee. 35 -13- LSB 1241XC (3) 89 cm/jh 13/ 33
S.F. _____ 5. A custodial trustee who declines to serve or resigns, 1 or the legal representative of a deceased or incapacitated 2 custodial trustee, as soon as practicable, shall put the 3 custodial trust property and records in the possession and 4 control of the successor custodial trustee. The successor 5 custodial trustee may enforce the obligation to deliver 6 custodial trust property and records and becomes responsible 7 for each item as received. 8 6. A substitute custodial trustee designated under section 9 633F.3, the beneficiary, the beneficiary’s legal representative 10 and if none, a member of the beneficiary’s family, a person 11 interested in the custodial trust property, may petition the 12 court to remove the custodial trustee for cause and designate 13 a successor custodial trustee, to require the custodial 14 trustee to furnish a bond or other security for the faithful 15 performance of fiduciary duties, or for other appropriate 16 relief. 17 Sec. 14. NEW SECTION . 633F.14 Expenses, compensation, and 18 bond of custodial trustee. 19 Except as otherwise provided in the instrument creating the 20 custodial trust, in an agreement with the beneficiary, or by 21 court order, all of the following are true: 22 a. A custodial trustee is entitled to reimbursement from 23 custodial trust property for reasonable expenses incurred in 24 the performance of fiduciary services. 25 b. A custodial trustee has a noncumulative election, to be 26 made no later than six months after the end of each calendar 27 year, to charge a reasonable compensation for fiduciary 28 services performed during that year. 29 c. A custodial trustee need not furnish a bond or other 30 security for the faithful performance of fiduciary duties. 31 Sec. 15. NEW SECTION . 633F.15 Reporting and accounting 32 by custodial trustee —— determination of liability of custodial 33 trustee. 34 1. Upon the acceptance of custodial trust property, the 35 -14- LSB 1241XC (3) 89 cm/jh 14/ 33
S.F. _____ custodial trustee shall provide a written statement describing 1 the custodial trust property and shall thereafter provide a 2 written statement of the administration of the custodial trust 3 property as follows: 4 a. Once each year. 5 b. Upon request at reasonable times, but not more than 6 quarterly during any calendar year, by the beneficiary or the 7 beneficiary’s legal representative. 8 c. Upon resignation or removal of the custodial trustee. 9 d. Upon termination of the custodial trust. 10 2. The statements must be provided to the beneficiary 11 or to the beneficiary’s legal representative, if any. Upon 12 termination of the beneficiary’s interest, the custodial 13 trustee shall furnish a current statement to the person to whom 14 the custodial trust property is to be delivered. 15 3. A substitute or successor custodial trustee designated 16 under section 633F.3, a beneficiary, the beneficiary’s legal 17 representative, a member of the beneficiary’s family, or a 18 person interested in the custodial trust property may petition 19 the court for an accounting by the custodial trustee or the 20 custodial trustee’s legal representative. 21 4. A successor custodial trustee may petition the court for 22 an accounting by a predecessor custodial trustee. 23 5. In an action or proceeding under this chapter or in any 24 other proceeding, the court may require or permit the custodial 25 trustee or the custodial trustee’s legal representative to 26 account. The custodial trustee or the custodial trustee’s 27 legal representative may petition the court for approval of 28 final accounts. 29 6. If a custodial trustee is removed, the court shall 30 require an accounting and order delivery of the custodial trust 31 property and records to the successor custodial trustee and 32 the execution of all instruments required for transfer of the 33 custodial trust property. 34 7. On petition of the custodial trustee or any person who 35 -15- LSB 1241XC (3) 89 cm/jh 15/ 33
S.F. _____ could petition for an accounting, the court, after notice to 1 interested persons, may issue instructions to the custodial 2 trustee or review the propriety of the acts of a custodial 3 trustee or the reasonableness of compensation determined by the 4 custodial trustee for the services of the custodial trustee or 5 others. 6 Sec. 16. NEW SECTION . 633F.16 Limitations of action against 7 custodial trustee. 8 1. Except as provided in subsection 3, unless previously 9 barred by adjudication, consent, or limitation, a claim for 10 relief against a custodial trustee for accounting or breach of 11 duty is barred as to a beneficiary, a person to whom custodial 12 trust property is to be paid or delivered, or the legal 13 representative of an incapacitated or deceased beneficiary or 14 payee who either: 15 a. Has received an accounting or other statement adequately 16 disclosing the matter unless an action or proceeding to assert 17 the claim is commenced within one year after receipt of such 18 accounting or statement. 19 b. Has not received an accounting or other statement 20 adequately disclosing the matter unless an action or proceeding 21 to assert the claim is commenced within three years after the 22 termination of the custodial trust. 23 2. For the purpose of subsection 1, a beneficiary or a 24 person to whom custodial trust property is to be paid or 25 delivered, is deemed to have received an accounting or other 26 statement, in the following instances: 27 a. In the case of an adult who is reasonably capable of 28 understanding the accounting or other statement if it is 29 personally received by such person. 30 b. In the case of an adult who is not reasonably capable 31 of understanding the accounting or other statement, if it is 32 received by such adult person’s legal representative, and if 33 none, then if received by a guardian ad litem, court visitor, 34 or other person appointed for this purpose. 35 -16- LSB 1241XC (3) 89 cm/jh 16/ 33
S.F. _____ c. In the case of a minor, if it is received by a person who 1 has authority to consent on the minor’s behalf, and if none, 2 then if received by a guardian ad litem, court visitor, or 3 other person appointed for this purpose. 4 3. Except as provided in subsection 4, a claim for relief to 5 recover from a custodial trustee for fraud, misrepresentation, 6 or concealment related to the final settlement of the custodial 7 trust or concealment of the existence of the custodial trust, 8 is barred unless an action or proceeding to assert the claim 9 is commenced within five years after the termination of the 10 custodial trust. 11 4. Unless an accounting or other statement adequately 12 disclosing the matter was provided as set forth above, a claim 13 for relief is not barred by this section if the claimant is or 14 was any of the following: 15 a. A minor, until the earlier of one year after the claimant 16 becomes an adult or dies; an incapacitated adult, until the 17 earliest of one year after the following: 18 (1) The appointment of a legal representative. 19 (2) The removal of the incapacity. 20 (3) The death of the claimant. 21 b. An adult, now deceased, who was not incapacitated, until 22 one year after the claimant’s death. 23 Sec. 17. NEW SECTION . 633F.17 Distribution on termination. 24 1. Upon termination of a custodial trust, the custodial 25 trustee shall transfer the unexpended custodial trust property: 26 a. To the beneficiary, if not incapacitated or deceased. 27 b. To the beneficiary’s legal representative or other 28 recipient designated by the court for an incapacitated 29 beneficiary. 30 c. Upon the beneficiary’s death, in the following order: 31 (1) As last directed in a writing signed by the deceased 32 beneficiary while not incapacitated and received by the 33 custodial trustee during the life of the deceased. 34 (2) As designated in the instrument creating the custodial 35 -17- LSB 1241XC (3) 89 cm/jh 17/ 33
S.F. _____ trust. 1 (3) To the estate of the deceased beneficiary. 2 2. The direction to the custodial trustee by a beneficiary 3 who is not incapacitated, for distribution on termination 4 of the custodial trust may be in any written form clearly 5 identifying the distributee and may be substantially similar 6 to the following: 7 I, ________________ (name of beneficiary) hereby direct 8 _____________________ (name of custodial trustee) as custodial 9 trustee, to transfer and pay the unexpended balance of 10 the custodial trust property of which I am beneficiary to 11 __________________ as distributee on the termination of the 12 trust at my death. In the event of the prior death of _________ 13 above named as distributee, I designate ________________ as 14 distributee of the custodial trust property. 15 Signed ______________________ (signature of beneficiary). 16 Date ____________________ 17 Receipt Acknowledged: ____________________(signature of 18 Custodial Trustee) 19 Date ___________________ 20 3. If, when the custodial trust would otherwise terminate, 21 the distributee is incapacitated, the custodial trust continues 22 for the use and benefit of the distributee as beneficiary until 23 the incapacity is removed or the custodial trust is otherwise 24 terminated. 25 4. Death of a beneficiary does not terminate the power of 26 the custodial trustee to discharge obligations of the custodial 27 trustee or beneficiary incurred before the termination of the 28 custodial trust. 29 Sec. 18. NEW SECTION . 633F.18 Methods and forms for 30 creating custodial trusts. 31 1. If a transaction, including a declaration with respect 32 to or a transfer of specific property, otherwise satisfies 33 applicable law, the criteria of section 633F.2 are satisfied 34 by any of the following: 35 -18- LSB 1241XC (3) 89 cm/jh 18/ 33
S.F. _____ a. The execution and either delivery to the custodial 1 trustee or recording of an instrument in substantially the 2 following form: 3 TRANSFER UNDER THE IOWA UNIFORM CUSTODIAL TRUST ACT 4 I, __________ (name of transferor or name and representative 5 capacity if a fiduciary), transfer to __________ (name of 6 trustee other than transferor), as custodial trustee for 7 __________ (name of beneficiary) as beneficiary and __________ 8 as distributee on termination of the trust in absence of 9 direction by the beneficiary under the Iowa Uniform Custodial 10 Trust Act, the following: 11 __________ (Insert a description of the custodial trust 12 property legally sufficient to identify and transfer each item 13 of property). 14 If __________ (name of trustee other than transferor) 15 declines to serve or ceases to serve as custodial trustee for 16 any reason, then I designate __________ (name of substitute 17 or successor custodial trustee) as substitute or successor 18 custodial trustee. 19 Dated:_______________ 20 Signature: _____________________ 21 b. The execution and the recording or giving notice of its 22 execution to the beneficiary of an instrument in substantially 23 the following form: 24 DECLARATION OF TRUST UNDER IOWA UNIFORM CUSTODIAL TRUST ACT 25 I, __________ (name of owner of property), declare that 26 henceforth I hold as custodial trustee for __________ (name of 27 beneficiary other than transferor) as beneficiary and ________ 28 as distributee on termination of the trust in absence of 29 direction by the beneficiary under the Iowa Uniform Custodial 30 Trust Act, the following: __________ (Insert a description of 31 the custodial trust property legally sufficient to identify 32 and transfer each item of property). If I cease to serve as 33 custodial trustee for any reason, then I designate __________ 34 (name of substitute or successor custodial trustee) as 35 -19- LSB 1241XC (3) 89 cm/jh 19/ 33
S.F. _____ successor custodial trustee. 1 Dated: ____________________ 2 Signature: ___________________________ 3 2. Customary methods of transferring or evidencing 4 ownership of property may be used to create a custodial trust, 5 including any of the following: 6 a. Registration of a security in the name of a trust 7 company, an adult other than the transferor, or the transferor 8 if the beneficiary is other than the transferor, designated in 9 substance “as custodial trustee for ________________ (name of 10 beneficiary) under the Iowa Uniform Custodial Trust Act”. 11 b. Delivery of a certificated security, or a document 12 necessary for the transfer of an uncertificated security, 13 together with any necessary endorsement, to an adult other than 14 the transferor or to a trust company as custodial trustee, 15 accompanied by an instrument in substantially the form 16 prescribed in subsection 1, paragraph “a” . 17 c. Payment of money or transfer of a security held in the 18 name of a broker or a financial institution or its nominee to a 19 broker or financial institution for credit to an account in the 20 name of a trust company, an adult other than the transferor, 21 or the transferor if the beneficiary is other than the 22 transferor, designated in substance: “as custodial trustee for 23 ________________ (name of beneficiary) under the Iowa Uniform 24 Custodial Trust Act”. 25 d. Registration of ownership of a life or endowment 26 insurance policy or annuity contract with the issuer in the 27 name of a trust company, an adult other than the transferor, 28 or the transferor if the beneficiary is other than the 29 transferor, designated in substance: “as custodial trustee for 30 ________________ (name of beneficiary) under the Iowa Uniform 31 Custodial Trust Act”. 32 e. Delivery of a written assignment to an adult other 33 than the transferor or to a trust company whose name in the 34 assignment is designated in substance by the words: “as 35 -20- LSB 1241XC (3) 89 cm/jh 20/ 33
S.F. _____ custodial trustee for ________________ (name of beneficiary) 1 under the Iowa Uniform Custodial Trust Act”. 2 f. Irrevocable exercise of a power of appointment, pursuant 3 to its terms, in favor of a trust company, an adult other than 4 the donee of the power, or the donee who holds the power if 5 the beneficiary is other than the donee, whose name in the 6 appointment is designated in substance: “as custodial trustee 7 for (name of beneficiary) under the Iowa Uniform Custodial 8 Trust Act”. 9 g. Delivery of a written notification or assignment of a 10 right to future payment under a contract to an obligor which 11 transfers the right under the contract to a trust company, 12 an adult other than the transferor, or the transferor if the 13 beneficiary is other than the transferor, whose name in the 14 notification or assignment is designated in substance: “as 15 custodial trustee for ________________ (name of beneficiary) 16 under the Iowa Uniform Custodial Trust Act”. 17 h. Execution, delivery, and recordation of a conveyance of 18 an interest in real property in the name of a trust company, 19 an adult other than the transferor, or the transferor if 20 the beneficiary is other than the transferor, designated in 21 substance: “as custodial trustee for ________________ (name of 22 beneficiary) under the Iowa Uniform Custodial Trust Act”. 23 i. Issuance of a certificate of title by an agency of a 24 state or of the United States which evidences title to tangible 25 personal property: 26 (1) Issued in the name of a trust company, an adult other 27 than the transferor, or the transferor if the beneficiary 28 is other than the transferor, designated in substance: “as 29 custodial trustee for ________________ (name of beneficiary) 30 under the Iowa Uniform Custodial Trust Act”. 31 (2) Delivered to a trust company or an adult other 32 than the transferor or endorsed by the transferor to that 33 person, designated in substance: “as custodial trustee for 34 ________________ (name of beneficiary) under the Iowa Uniform 35 -21- LSB 1241XC (3) 89 cm/jh 21/ 33
S.F. _____ Custodial Trust Act”. 1 j. Execution and delivery of an instrument of gift to a 2 trust company or an adult other than the transferor, designated 3 in substance: “as custodial trustee for ________________ (name 4 of beneficiary) under the Iowa Uniform Custodial Trust Act”. 5 Sec. 19. NEW SECTION . 633F.19 Applicable law. 6 1. This chapter applies to a transfer or declaration 7 creating a custodial trust that refers to this chapter if, 8 at the time of the transfer or declaration, the transferor, 9 beneficiary, or custodial trustee is a resident of or has its 10 principal place of business in this state or custodial trust 11 property is located in this state. The custodial trust remains 12 subject to this chapter despite a later change in residence or 13 principal place of business of the transferor, beneficiary, or 14 custodial trustee, or removal of the custodial trust property 15 from this state. 16 2. A transfer made pursuant to an act of another state 17 substantially similar to this chapter is governed by the law of 18 that state and may be enforced in this State. 19 Sec. 20. NEW SECTION . 633F.20 Uniformity of application 20 and construction. 21 This chapter shall be applied and construed to effectuate 22 its general purpose to make uniform the law with respect to the 23 subject of this chapter among states enacting it. 24 Sec. 21. NEW SECTION . 633F.21 Short title. 25 This chapter shall be known and may be cited as the “Iowa 26 Uniform Custodial Trust Act” . 27 DIVISION II 28 CONFORMING CHANGES 29 Sec. 22. Section 232D.503, Code 2021, is amended by adding 30 the following new subsection: 31 NEW SUBSECTION . 6. If the court orders termination of a 32 guardianship established under this chapter and the guardian 33 has custody of any assets of a protected person who is a minor 34 or was a minor at the time of the minor’s death, the court 35 -22- LSB 1241XC (3) 89 cm/jh 22/ 33
S.F. _____ shall order delivery of the minors assets to the minor or to a 1 fiduciary acting under one or more of the following: 2 a. A conservatorship established for the minor. 3 b. A personal representative appointed as a result of the 4 minor’s death. 5 c. A uniform transfer to minor account established for the 6 minor pursuant to chapter 565B or the laws of any other state. 7 d. A uniform custodial trust account established for the 8 minor pursuant to chapter 633F or the laws of any other state. 9 e. A college savings plan account established for the minor 10 pursuant to Internal Revenue Code section 529 or Chapter 12D 11 or the laws of any other state. 12 f. An ABLE account established for the minor with 13 disabilities pursuant to Internal Revenue Code section 529A or 14 chapter 12I or the laws of any other state. 15 Sec. 23. Section 565B.6, subsection 3, paragraph c, Code 16 2021, is amended to read as follows: 17 c. The transfer is authorized by the court if all transfers, 18 including the transfer to be made and prior transfers, exceed 19 twenty-five fifty thousand dollars in value. Transfers by a 20 personal representative, trustee, or conservator shall not 21 be aggregated, but each personal representative, trustee, or 22 conservator shall be treated separately. 23 Sec. 24. Section 633.108, Code 2021, is amended to read as 24 follows: 25 633.108 Small distributions to minors —— payment . 26 1. Whenever a minor person becomes entitled under the terms 27 of a will to a bequest or legacy, or to a share of the estate of 28 an intestate, and the value of the bequest, legacy, or share 29 does not exceed the sum of twenty-five fifty thousand dollars, 30 the personal representative may pay the bequest, legacy, or 31 share to a custodian under any uniform transfers to minors 32 Act interest to a fiduciary acting under one or more of the 33 accounts referenced in subsection 2 . 34 2. Receipt by the custodian, when presented to the court or 35 -23- LSB 1241XC (3) 89 cm/jh 23/ 33
S.F. _____ filed with the report of distribution of the fiduciary, shall 1 have the same force and effect as though the payment had been 2 made to a duly appointed and qualified conservator for the 3 minor. person entitled to them: 4 a. A uniform transfer to minor account established for the 5 minor pursuant to chapter 565B or the laws of any other state. 6 b. A uniform custodial trust account established for the 7 minor pursuant to chapter 633F or the laws of any other state. 8 c. A college savings plan account established for the minor 9 pursuant to Internal Revenue Code section 529 or chapter 12D. 10 d. An ABLE account established for the minor with 11 disabilities pursuant to Internal Revenue Code section 529A or 12 chapter 12I. 13 Sec. 25. Section 633.675, Code 2021, is amended by adding 14 the following new subsection: 15 NEW SUBSECTION . 3A. The court shall terminate a 16 conservatorship if it finds by clear and convincing evidence 17 all of the following: 18 a. The value of the protected person’s property is 19 insufficient to justify the cost of administration. 20 b. That continued administration of the conservatorship is 21 not in the best interest of the protected person. 22 c. That a reasonable alternative exists under section 23 633.678 for managing the protected person’s assets. 24 Sec. 26. Section 633.678, Code 2021, is amended to read as 25 follows: 26 633.678 Delivery of assets. 27 1. Upon the termination of a conservatorship, all assets of 28 the conservatorship shall be delivered , under direction of the 29 court, to as ordered by the court to any of the following: 30 a. To the person or persons entitled to them. 31 b. To a custodian under a uniform transfers to minor account 32 established for the protected person pursuant to chapter 565B 33 or the laws of any other state. 34 c. To a custodial trustee under a uniform custodial trust 35 -24- LSB 1241XC (3) 89 cm/jh 24/ 33
S.F. _____ account established for the protected person pursuant to 1 chapter 633F or the laws of any other state. 2 d. To an account owner or participant under a college 3 savings plan account established for the protected person 4 pursuant to Internal Revenue Code section 529 or chapter 12D 5 or the laws of any other state. 6 e. To the account owner under an ABLE account established 7 for the protected person with disabilities pursuant to Internal 8 Revenue Code section 529A or chapter 12I or the laws of any 9 other state. 10 2. Delivery of the assets of an adult protected person under 11 subsection 1, paragraphs “b” through “e” , shall have the same 12 force and effect as if delivery had been made directly to the 13 person or persons entitled to them. Delivery of the assets of 14 a minor protected person under subsection 1, paragraphs “b” 15 through “e” , shall have the same force and effect as if delivery 16 had been made to the protected person after attaining majority. 17 Sec. 27. Section 633.681, Code 2021, is amended to read as 18 follows: 19 633.681 Assets of minor ward exhausted Exhausted or minimal 20 assets of minor protected person . 21 1. When the assets of a minor ward’s protected person’s 22 conservatorship are exhausted or consist of personal property 23 only of an aggregate value not in excess of twenty-five fifty 24 thousand dollars, the court, upon application or upon its 25 own motion, may terminate the conservatorship. The order 26 for termination shall direct the conservator to deliver any 27 property remaining after the payment of allowed claims and 28 expenses of administration to a custodian under any uniform 29 transfers to minors Act. fiduciary acting under one or more of 30 the following accounts: 31 a. A uniform transfer to minor account established for the 32 minor pursuant to chapter 565B or the laws of any other state. 33 b. A uniform custodial trust account established for the 34 minor pursuant to chapter 633F or the laws of any other state. 35 -25- LSB 1241XC (3) 89 cm/jh 25/ 33
S.F. _____ c. A college savings plan account established for the minor 1 pursuant to Internal Revenue Code section 529 or chapter 12D 2 or the laws of any other state. 3 d. An ABLE account established for the minor with 4 disabilities pursuant to Internal Revenue Code section 529A or 5 chapter 12I or the laws of any other state. 6 2. Such delivery shall have the same force and effect as 7 if delivery had been made to the ward protected person after 8 attaining majority. 9 EXPLANATION 10 The inclusion of this explanation does not constitute agreement with 11 the explanation’s substance by the members of the general assembly. 12 This bill establishes the Iowa uniform custodial trust Act 13 and provides definitions. The Iowa uniform custodial trust 14 Act is a statutory standby inter vivos trust for individuals 15 represented by attorneys engaged in general rather than 16 specialized probate practice. 17 The bill allows persons, competent to transfer property, 18 to create custodial trusts for the benefit of themselves 19 or others, with the beneficial interest in custodial trust 20 property in the beneficiary and not in the custodial trustee. 21 The bill allows any kind of property, real or personal, 22 tangible or intangible, to be made the subject of a transfer 23 to a custodial trustee for the benefit of a beneficiary. A 24 person may create a custodial trust by a written transfer of 25 the property to another person, evidenced by registration 26 or by other instrument of transfer executed and naming as 27 beneficiary an individual who may be the transferor, in 28 which the transferee is designated as custodial trustee, or a 29 person may create a custodial trust of property by a written 30 declaration, evidenced by registration of the property or by 31 other instrument of declaration executed and describing the 32 property and naming as beneficiary an individual other than the 33 declarant, in which the declarant as titleholder is designated, 34 in substance, as custodial trustee. The bill provides that a 35 -26- LSB 1241XC (3) 89 cm/jh 26/ 33
S.F. _____ registration or other declaration of trust for the sole benefit 1 of the declarant is not a valid custodial trust. Title is 2 given to the custodial trustee and the beneficial interest 3 is given to the beneficiary. A nonincapacitated beneficiary 4 or legal representative of an incapacitated beneficiary may 5 terminate a custodial trust by delivering the custodial trustee 6 a written notice declaring termination. A successor custodial 7 trustee may be designated in the trust document and any 8 person may augment the trust property by the addition of other 9 property. 10 The bill provides how the custodial trustee may make future 11 payment or transfer the position of custodial trustee. A 12 person who is able to designate the recipient of property 13 payable or transferable upon a future event may create a 14 custodial trust by designating in writing the recipient. A 15 designation of successor trustee may be made in a will, a 16 trust, a multiple-party account, an insurance policy, an 17 instrument exercising a power of appointment, or a writing 18 designating a beneficiary of contractual rights. The 19 designation can also be delivered or registered to the 20 fiduciary, payor, insurer, or obligor of the future right. 21 The bill provides a form and effect of receipt and acceptance 22 by custodial trustee. The form provides the name of the 23 custodial trustee, the name of the beneficiary, the property 24 the trust consists of, and date and signature of the custodial 25 trustee. It also provides that upon accepting custodial trust 26 property, the custodial trustee is subjected to personal 27 jurisdiction of the court with respect to any matter relating 28 to the custodial trust. 29 The bill provides that unless otherwise directed by an 30 instrument designating a custodial trustee, a person, who holds 31 property of or owes a debt to an incapacitated individual, may 32 make a transfer to a beneficiary’s legal representative and 33 if none, to a member of the beneficiary’s family, or a trust 34 company, as custodial trustee for the use and benefit of the 35 -27- LSB 1241XC (3) 89 cm/jh 27/ 33
S.F. _____ incapacitated individual. If the value of the property or the 1 debt exceeds $50,000, the transfer is not effective unless 2 authorized by the court. A signed written acknowledgment of 3 delivery by a custodial trustee is a sufficient receipt and 4 discharge for property transferred to the custodial trustee. 5 The bill provides that a custodial trust cannot create 6 beneficial interests for multiple beneficiaries. The bill 7 provides that all custodial property held by the same custodial 8 trustee for a single beneficiary may be administered as a 9 single custodial trust. 10 The bill provides general duties of a custodial trustee 11 which include: registering or recording the instrument vesting 12 title to custodial trust property, if appropriate; following 13 the directions of the nonincapacitated beneficiary in the 14 management, control, investment, or retention of the custodial 15 trust property; observing the prudent investment standards set 16 forth in Code section 633.123 if there is not clear directives 17 from the beneficiary prior to being incapacitated; retaining 18 any custodial trust property received from the transferor; and 19 controlling, collecting, holding, managing, investing, and 20 reinvesting custodial trust property. The bill provides that 21 if a custodial trustee has a special skill or expertise or is 22 named custodial trustee on the basis of representation of a 23 special skill or expertise, the custodial trustee shall use 24 that skill or expertise in making decisions for the custodial 25 trust property. The bill provides that a custodial trustee 26 at all times shall keep custodial trust property of which the 27 custodial trustee has control separate from all other property 28 in a manner sufficient to identify it clearly as custodial 29 trust property of the beneficiary. The bill provides that a 30 custodial trustee shall keep records of all transactions with 31 respect to custodial trust property, including information 32 necessary for the preparation of tax returns, and shall make 33 the records and information available at reasonable times to 34 the beneficiary or legal representative of the beneficiary. 35 -28- LSB 1241XC (3) 89 cm/jh 28/ 33
S.F. _____ Furthermore, the exercise of a durable power of attorney for 1 an incapacitated beneficiary is not effective to terminate or 2 direct the administration or distribution of a custodial trust. 3 The bill provides that the custodial trustee has all the 4 rights and powers over custodial trust property which a 5 person has over individually owned property which may only be 6 exercised in a fiduciary capacity. 7 The bill provides how the custodial trust may be used. If 8 the beneficiary is not incapacitated, the custodial trustee 9 shall pay or expend for the beneficiary’s use or benefit the 10 amount of the custodial trust property at the beneficiary’s 11 directive. If the beneficiary is incapacitated, the custodial 12 trustee shall be allowed to distribute the amount of the 13 custodial trust property as deemed advisable for the use and 14 benefit of the beneficiary and individuals who are entitled 15 to support by the beneficiary. The custodial trustee has 16 discretion in determining the manner, when, and to the 17 extent that the expenditures are made without court order and 18 without regard to other support, income, or property of the 19 beneficiary. 20 The bill provides that a custodial trustee may determine 21 a beneficiary incapacitated relying upon previous direction 22 or authority given by the beneficiary while not incapacitated 23 including direction or authority pursuant to a durable power 24 of attorney; written documentation from the beneficiary’s 25 physician; on the petition of the beneficiary, the custodial 26 trustee, or other interested person in the custodial trust 27 property, the court may determine whether the beneficiary is 28 incapacitated; or other persuasive evidence. The bill also 29 provides that if a custodial trustee deems that a beneficiary’s 30 incapacity has ceased or that the circumstances concerning 31 the beneficiary’s ability to manage the property and business 32 affairs have changed, the custodial trustee may administer 33 the trust as for a beneficiary who is not incapacitated. The 34 bill provides when a determination of incapacity has not been 35 -29- LSB 1241XC (3) 89 cm/jh 29/ 33
S.F. _____ made, a custodial trustee who has reason to believe that the 1 beneficiary is incapacitated shall administer the custodial 2 trust in accordance with provisions of the bill applicable 3 to an incapacitated beneficiary. A beneficiary being found 4 to be incapacitated does not terminate the custodial trust, 5 any designation of the successor custodial trustee, rights 6 or powers of the custodial trustee, or any immunities of a 7 third-person action on the instructions of the custodial 8 trustee. 9 The bill provides that a third party acting in good faith 10 has no need to determine the custodial trustee’s authority to 11 bind the beneficiary with respect to property and investment 12 matters. The bill generally limits the claims of third 13 parties to recourse against the custodial property, with the 14 beneficiary insulated against personal liability unless the 15 beneficiary is personally at fault and the custodial trustee is 16 similarly insulated unless the custodial trustee is personally 17 at fault or failed to disclose the custodial capacity when 18 entering into a contract. 19 The bill provides for declination, resignation, incapacity, 20 death, or removal of the custodial trustee. A custodial 21 trustee may decline the appointment by notifying the person 22 who made the designation prior to accepting the custodial 23 trust property. If a substitute custodial trustee has not 24 been appointed, the person who made the initial designation 25 may designate a substitute custodial trustee who becomes 26 the custodial trustee. Otherwise, the transferor’s legal 27 representative may designate a substitute custodial trustee. 28 A custodial trustee, who has accepted the custodial trust 29 property, may resign by delivering written notice to a 30 successor custodial trustee, the beneficiary, and, if the 31 beneficiary is incapacitated, to the beneficiary’s legal 32 representative, and transferring, registering, or recording an 33 appropriate instrument relating to the custodial trust property 34 in the name of, and delivering the records to, the successor 35 -30- LSB 1241XC (3) 89 cm/jh 30/ 33
S.F. _____ custodial trustee. 1 The bill provides that if the custodial trustee or successor 2 custodial trustee dies, resigns, or becomes incapacitated, 3 the successor custodial trustee designated becomes the 4 custodial trustee. If the successor is not identified, 5 the competent beneficiary or the legal representative of an 6 incapacitated beneficiary may designate a successor custodial 7 trustee. If the beneficiary fails to act in 90 days, the 8 legal representative becomes the custodial trustee. If the 9 incapacitated beneficiary does not have a legal representative 10 or the legal representative fails to act, the resigning 11 custodial trustee may designate a successor custodial trustee. 12 The court may also be petitioned to designate a successor 13 custodial trustee if a successor custodial trustee is not 14 designated. 15 The bill provides that a substitute custodial trustee, 16 the beneficiary, the beneficiary’s legal representative, and 17 if none, a member of the beneficiary’s family, or a person 18 interested in the custodial trust property, may petition the 19 court to remove the custodial trustee for cause and designate 20 a successor custodial trustee, to require the custodial 21 trustee to furnish a bond or other security for the faithful 22 performance of fiduciary duties, or for other appropriate 23 relief. 24 The bill provides means of monitoring and enforcing the 25 custodial trust including provisions requiring the custodial 26 trustee to keep the beneficiary informed, requiring accounting 27 by the custodial trustee, providing protection for the 28 custodial trustee by the statutes of limitation on proceedings 29 against the custodial trustee, and relating to the distribution 30 of the assets on termination of the custodial trust. 31 The bill provides that upon termination of the custodial 32 trust, the custodial property shall be transferred to 33 the beneficiary, if not incapacitated or deceased; to 34 the beneficiary’s legal representative or other recipient 35 -31- LSB 1241XC (3) 89 cm/jh 31/ 33
S.F. _____ designated by the court for an incapacitated beneficiary; 1 or upon the death of the beneficiaries as last directed in 2 a writing signed by the beneficiary while not incapacitated 3 and received by the custodial trustee prior to the death, as 4 designated in the instrument that created the custodial trust, 5 or to the estate of the deceased beneficiary. 6 The bill provides the appropriate methods and forms to be 7 used for creating a custodial trust. The bill provides that 8 a custodial trust created under the bill remains subject to 9 the bill despite a subsequent change in the residence of the 10 transferor, the beneficiary, or the custodial trustee or the 11 removal of the custodial trust property from the state of 12 original location. 13 The bill amends the Code section on termination and 14 modification of guardianship (Code section 232D.503) and 15 provides that if the court orders termination of a guardianship 16 and the guardian has custody of the assets, the court must 17 order delivery of the assets to the minor or fiduciary acting 18 under one of the following accounts: uniform transfer to minor 19 account established for the minor; a uniform custodial trust 20 account established for the minor; an educational savings plan 21 trust account; or an ABLE savings plan trust account. 22 The bill amends the amount of money that may be transferred 23 by a fiduciary and the small distribution from $25,000 to 24 $50,000. The bill provides that a person is entitled to 25 the small distributions to any of the following: a uniform 26 transfer to minor account established for the minor; a 27 uniform custodial trust account established for the minor; an 28 educational savings plan trust account; or an ABLE savings plan 29 trust account. 30 The bill amends the cause for termination in a 31 conservatorship by adding the following three conditions: the 32 value of the protected person’s property is insufficient to 33 justify the cost of administration involved; that continued 34 administration of the conservatorship is not in the best 35 -32- LSB 1241XC (3) 89 cm/jh 32/ 33
S.F. _____ interest of the protected person; and that a reasonable 1 alternative exists under Code section 633.678 for managing the 2 protected person’s assets by clear and convincing evidence. 3 Under current law, the court must only find that the basis for 4 appointment provided in Code section 633.553 or 633.554 is not 5 satisfied. 6 The bill amends the Code section regarding the delivery of 7 assets upon termination of a conservatorship by including that 8 the delivery shall be made to the following parties as ordered 9 by the court: to a custodian under a uniform transfers to a 10 minor account; to a custodial trustee; to an account owner or 11 participant under a educational savings plan trust account; or 12 an ABLE savings plan trust account owner. Current Code only 13 provides for the assets to the person or persons entitled to 14 them. 15 The bill provides that the order for termination shall 16 direct the conservator to deliver any property remaining after 17 the payment of allowed claims and expenses of administration 18 to the fiduciary acting under one or more of the following 19 accounts: a uniform transfer to minor account established for 20 the minor; a uniform custodial trust account established for 21 the minor; an educational savings plan trust account; or an 22 ABLE savings plan trust account. The bill also increases the 23 threshold at which a court may terminate a conservatorship for 24 having minimal assets of a minor protected person from $25,000 25 to $50,000. 26 -33- LSB 1241XC (3) 89 cm/jh 33/ 33
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