Bill Text: NJ A2914 | 2014-2015 | Regular Session | Introduced
Bill Title: Provides for use of directed trust to administer particular assets separate from other assets placed in trust; clarifies duty to inform between co-fiduciaries concerning administration of trusts and other governing instruments.
Spectrum: Slight Partisan Bill (Democrat 2-1)
Status: (Introduced - Dead) 2014-03-13 - Introduced, Referred to Assembly Judiciary Committee [A2914 Detail]
Download: New_Jersey-2014-A2914-Introduced.html
Sponsored by:
Assemblyman JOSEPH A. LAGANA
District 38 (Bergen and Passaic)
SYNOPSIS
Provides for use of directed trust to administer particular assets separate from other assets placed in trust; clarifies duty to inform between co-fiduciaries concerning administration of trusts and other governing instruments.
CURRENT VERSION OF TEXT
As introduced.
An Act concerning the administration of trusts and other governing instruments, and supplementing chapter 3 of Title 3B of the New Jersey Statutes
Be It Enacted by the Senate and General Assembly of the State of New Jersey:
1. a. As used in this section and section 2 of P.L. , c. (C. ) (pending before the Legislature as this bill):
"Advisor" shall include a person assigned the common law responsibilities as a protector under a governing instrument, whose authority pursuant to the terms of the governing instrument may include, but are not limited to:
(1) the authority to appoint and remove trustees, advisors, trust committee members, and other protectors;
(2) the authority to modify or amend the governing instrument to achieve favorable tax status or to facilitate the efficient administration of assets pursuant to that governing instrument; or
(3) the authority to modify, expand, or restrict the terms of a power of appointment granted to a beneficiary by the governing instrument.
"Investment decision" means, with respect to any investment, the retention, purchase, sale, exchange, tender, or other transaction affecting the ownership of, or right to, a non-publicly traded investment, or the valuation thereof.
"Willful misconduct" means an intentional wrongdoing, not mere negligence, gross negligence, or recklessness.
b. (1) Whenever one or more persons are given authority by the terms of a governing instrument to direct, consent to, or disapprove a fiduciary's actual or proposed investment decision, distribution decision, or other decision with respect to one or more assets, each of these persons shall be considered to be an advisor and fiduciary when exercising this authority, unless the governing instrument provides otherwise.
(2) Notwithstanding the provisions of N.J.S.3B:18-25, the compensation of an advisor shall be determined by the governing instrument or, in the absence of terms in the governing instrument, as agreed to between the fiduciary and the advisor.
c. (1) Whenever a governing instrument provides that a fiduciary is required to follow the direction of an advisor with respect to one or more assets, the fiduciary shall not have any duty:
(a) to monitor the conduct of the advisor;
(b) provide advice to or consult with the advisor; or
(c) communicate with or otherwise apprise any beneficiary or third party concerning instances in which the fiduciary would have acted in a manner differently from the manner directed by the advisor.
(2) Absent clear and convincing evidence to the contrary, the actions of a fiduciary pertaining to following the direction of an advisor shall be presumed to be administrative actions taken by the fiduciary solely to allow the fiduciary to perform those duties assigned to the fiduciary under the governing instrument, and these actions shall not be deemed to constitute an act by the fiduciary to monitor the advisor or otherwise participate in the advisor's decision to direct the fiduciary to act in accordance with the governing instrument.
d. Whenever a governing instrument provides that a fiduciary:
(1) is required to follow the direction of an advisor, the fiduciary shall not be liable for any loss resulting directly or indirectly from following the advisor's direction, except in cases of willful misconduct by the fiduciary;
(2) is required to make decisions with the consent of an advisor, the fiduciary shall not be liable for any loss resulting directly or indirectly from any act taken or not taken as a result of the advisor's failure to provide the required consent after having been requested to do so by the fiduciary, except in cases of willful misconduct or gross negligence by the fiduciary.
2. Except as otherwise provided in a governing instrument, whenever more than one fiduciary is established by a governing instrument, each fiduciary, including trustees, advisors, and protectors, has a fiduciary duty upon request to keep all other fiduciaries reasonably informed about the administration of the governing instrument with respect to any specific duty or function being performed by the fiduciary, to the extent that providing this information to the other fiduciaries is reasonably necessary for the other fiduciaries to perform their duties; provided, that a fiduciary requesting and receiving any information from another fiduciary shall not have any duty to: monitor the conduct of any other fiduciary; provide advice to or consult with any other fiduciary; or communicate with or otherwise apprise any beneficiary or third party concerning instances in which the fiduciary would have acted in a manner differently from the manner performed by another fiduciary.
3. This act shall take effect immediately.
STATEMENT
This bill concerns the administration of trusts and other governing instruments. Specifically, the bill: (1) provides for the use of a directed trust to administer particular assets separate from other assets placed in trust, accomplished by having fiduciaries act under the direction of, or in consultation with, advisors as authorized by the governing instrument; and (2) clarifies the duty to inform between co-fiduciaries as to their administrative activities.
Concerning directed trusts, whenever one or more persons are given authority by the terms of a governing instrument to direct, consent to, or disapprove a fiduciary's actual or proposed investment decision, distribution decision, or other decision with respect to one or more assets, each of these persons would be considered to be an advisor and fiduciary when exercising this authority, unless the governing instrument provides otherwise. Any compensation for such an advisor would be determined by the governing instrument or, in the absence of terms in the governing instrument, as agreed to between the fiduciary and the advisor.
Whenever a governing instrument provides that a fiduciary is required to follow the direction of an advisor with respect to one or more assets, the fiduciary would not have any duty: to monitor the conduct of the advisor; provide advice to or consult with the advisor; or communicate with or otherwise apprise any beneficiary or third party concerning instances in which the fiduciary would have acted in a manner differently from the manner directed by the advisor.
Absent clear and convincing evidence to the contrary, the actions of a fiduciary pertaining to following the direction of an advisor would be presumed to be administrative actions taken by the fiduciary solely to allow the fiduciary to perform those duties assigned to the fiduciary under the governing instrument, and these actions would not be deemed to constitute an act by the fiduciary to monitor the advisor or otherwise participate in the advisor's decision to direct the fiduciary to act in accordance with the governing instrument.
Further, whenever a governing instrument provides that a fiduciary is required to follow the direction of an advisor, the fiduciary would not be liable for any loss resulting directly or indirectly from following the advisor's direction, except in cases of willful misconduct by the fiduciary. Whenever a governing instrument provides that the fiduciary is required to make decisions with the consent of an advisor, the fiduciary would not be liable for any loss resulting directly or indirectly from any act taken or not taken as a result of the advisor's failure to provide the required consent after having been requested to do so by the fiduciary, except in cases of willful misconduct or gross negligence by the fiduciary.
On the duty to inform between co-fiduciaries, the bill provides that except as otherwise provided in a governing instrument, whenever more than one fiduciary is established by a governing instrument, each fiduciary, including trustees, advisors, and protectors, would have a fiduciary duty upon request to keep all other fiduciaries reasonably informed about the administration of the governing instrument with respect to any specific duty or function being performed by the fiduciary, to the extent that providing this information to the other fiduciaries would be reasonably necessary for the other fiduciaries to perform their duties. However, as provided in the bill, a fiduciary requesting and receiving any information from another fiduciary would not have any duty to: monitor the conduct of any other fiduciary; provide advice to or consult with any other fiduciary; or communicate with or otherwise apprise any beneficiary or third party concerning instances in which the fiduciary would have acted in a manner differently from the manner performed by another fiduciary.
