Bill Text: PA SB53 | 2009-2010 | Regular Session | Amended

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Bill Title: In intestate succession, further providing for forfeiture; in wills, further providing for modification of wills; providing for formula clauses for Federal tax purposes; in grant of letters, further providing for advertisement of grant of letters; in administration and personal representatives, further providing for duty of personal representative; in apportionment of death taxes, further providing for enforcement of contribution or exoneration of Federal estate tax; in powers of attorney, further providing for implementation of power of attorney; in estates, further providing for applicability of rule against perpetuities and for modification of conveyance by divorce and for effect of divorce on designation of beneficiaries; in trusts, further providing for notice of representation, for creditor's claim against settlor, for actions contesting validity of revocable trusts, for claims and distribution after settlor's death, for removal of trustee, for trustee's duty to inform and report, for illustrative powers of trustee and for limitation of action against trustee; in principal and income, further providing for power to convert to unitrust and for retirement benefits, individual retirement accounts, deferred compensation, annuities and similar payments; and making conforming amendments.

Spectrum: Slight Partisan Bill (Democrat 5-3)

Status: (Passed) 2010-10-27 - Act No. 85 [SB53 Detail]

Download: Pennsylvania-2009-SB53-Amended.html

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HOUSE AMENDED
PRIOR PRINTER'S NOS. 38, 190, 195, 1663, 2140 PRINTER'S NO. 2228
THE GENERAL ASSEMBLY OF PENNSYLVANIA
SENATE BILL
No. 53 Session of2009
INTRODUCED BY GREENLEAF, TARTAGLIONE, RAFFERTY, FERLO, BROWNE, COSTA, O'PAKE AND KITCHEN, JANUARY 20, 2009
AS REPORTED FROM COMMITTEE ON JUDICIARY, HOUSE OF REPRESENTATIVES, AS AMENDED, SEPTEMBER 28, 2010
AN ACT
Amending Titles 15 (Corporations and Unincorporated
Associations) and 20 (Decedents, Estates and Fiduciaries) of
the Pennsylvania Consolidated Statutes, in intestate
succession, further providing for forfeiture; in wills,
further providing for modification of wills; providing for
formula clauses for Federal tax purposes; in dispositions <--
independent of letters, family exemption, probate of wills
and grant of letters, further providing for payments to
family and funeral directors; in grant of letters, further
providing for advertisement of grant of letters; in
administration and personal representatives, further
providing for duty of personal representative; in
apportionment of death taxes, further providing for
enforcement of contribution or exoneration of Federal estate
tax; in powers of attorney, further providing for
implementation of power of attorney; in estates, further
providing for applicability of rule against perpetuities and
for modification of conveyance by divorce and for effect of
divorce on designation of beneficiaries; in trusts, further
providing for notice of representation, for creditor's claim
against settlor, for actions contesting validity of revocable
trusts, for claims and distribution after settlor's death,
for removal of trustee, for trustee's duty to inform and
report, for illustrative powers of trustee and for limitation
of action against trustee; in principal and income, further
providing for power to convert to unitrust and for retirement
benefits, individual retirement accounts, deferred
compensation, annuities and similar payments; and making
conforming amendments.
The General Assembly of the Commonwealth of Pennsylvania
hereby enacts as follows:
Section 1. Sections 5547(b) and 5548(b) of Title 15 of the
Pennsylvania Consolidated Statutes are amended to read:
§ 5547. Authority to take and hold trust property.
* * *
(b) Nondiversion of certain property.--Property committed to
charitable purposes shall not, by any proceeding under Chapter
59 (relating to fundamental changes) or otherwise, be diverted
from the objects to which it was donated, granted or devised,
unless and until the board of directors or other body obtains
from the court an order under 20 Pa.C.S. [Ch. 61 (relating to
estates)] Ch. 77 Subch. D (relating to creation, validity,
modification and termination of trust) specifying the
disposition of the property.
§ 5548. Investment of trust funds.
* * *
(b) Use and management.--Except as otherwise permitted under
20 Pa.C.S. [Ch. 61 (relating to estates)] Ch. 77 Subch. D
(relating to creation, validity, modification and termination of
trust), the board of directors or other body shall apply all
assets thus received to the purposes specified in the trust
instrument. The directors or other body shall keep accurate
accounts of all trust funds, separate and apart from the
accounts of other assets of the corporation.
* * *
Section 2. Sections 2106(a) and 2507(2) of Title 20 are
amended to read:
§ 2106. Forfeiture.
(a) Spouse's share.--
(1) A spouse who, for one year or upwards previous to
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the death of the other spouse, has willfully neglected or
refused to perform the duty to support the other spouse, or
who for one year or upwards has willfully and maliciously
deserted the other spouse, shall have no right or interest
under this chapter in the real or personal estate of the
other spouse.
(2) A spouse shall have no right or interest under this
chapter in the real or personal estate of the other spouse
if:
(i) the other spouse dies domiciled in this
Commonwealth during the course of divorce proceedings;
(ii) no decree of divorce has been entered pursuant
to 23 Pa.C.S. § 3323 (relating to decree of court); and
(iii) grounds have been established as provided in
23 Pa.C.S. § 3323(g).
* * *
§ 2507. Modification by circumstances.
Wills shall be modified upon the occurrence of any of the
following circumstances, among others:
* * *
(2) Divorce or pending divorce.--[If the testator is
divorced from the bonds of matrimony after making a will,
any] Any provision in [the] a testator's will in favor of or
relating to [his] the testator's spouse [so divorced] shall
[thereby] become ineffective for all purposes unless it
appears from the will that the provision was intended to
survive [the divorce.] a divorce, if the testator:
(i) is divorced from such spouse after making the
will; or
(ii) dies domiciled in this Commonwealth during the
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course of divorce proceedings, no decree of divorce has
been entered pursuant to 23 Pa.C.S. § 3323 (relating to
decree of court) and grounds have been established as
provided in 23 Pa.C.S. § 3323(g).
* * *
Section 3. Title 20 is amended by adding a chapter to read:
CHAPTER 28
FORMULA CLAUSES FOR FEDERAL TAX PURPOSES
Sec.
2801. Definitions.
2802. Interpretation of formula clauses.
2803. Judicial proceeding.
§ 2801. Definitions.
The following words and phrases when used in this chapter
shall have the meanings given to them in this section unless the
context clearly indicates otherwise:
"Formula clause." A clause that has any of the following
characteristics:
(1) Refers to the unified credit, estate tax exemption,
applicable exemption amount, applicable credit amount,
applicable exclusion amount, generation-skipping transfer tax
exemption, GST exemption, marital deduction, maximum marital
deduction, unlimited marital deduction or charitable
deduction, or other words relating to Federal tax exemptions,
exclusions, deductions or credits where the meaning of the
words is dependent on the current state of the Federal tax
laws.
(2) Measures a share of an estate or trust based on the
amount that can pass free of Federal estate taxes or affects
the inclusion ratio for generation-skipping transfer tax
20090SB0053PN2228 - 4 -
purposes.
(3) Is based on a similar provision of Federal estate
tax or generation-skipping transfer tax law.
"Other dispositive instrument." Includes the following:
(1) A beneficiary designation pertaining to insurance or
retirement assets.
(2) An instrument that exercises a power of appointment
held by the decedent at death.
(3) A similar instrument that:
(i) expresses a decedent's intent regarding assets
over which the decedent had dispositive authority at
death; or
(ii) otherwise disposes of assets as a result of the
decedent's death.
§ 2802. Interpretation of formula clauses.
(a) General rule.--Except as provided in subsection (b), and
subject to section 2803 (relating to judicial proceeding), a
will, trust or other dispositive instrument of a decedent who
dies after December 31, 2009, and before January 1, 2011, that
contains a formula clause shall be rebuttably presumed to be
interpreted pursuant to the Federal estate tax and generation-
skipping transfer tax laws applicable to estates of decedents
dying on December 31, 2009.
(b) Exception.--
(1) Subsection (a) shall not apply with respect to a
will, trust or other dispositive instrument that:
(i) is executed or amended after December 31, 2009;
or
(ii) manifests an intent that a contrary rule shall
apply if the decedent dies on a date on which there is no
20090SB0053PN2228 - 5 -
applicable Federal estate tax or generation-skipping
transfer tax in effect.
(2) If the Federal estate tax or generation-skipping
transfer tax applies to an estate of a decedent dying or
generation-skipping transfer occurring before January 1,
2011, then with respect to each such Federal tax, the initial
reference to January 1, 2011, in this section shall refer
instead to the first date after December 31, 2009, on which
such tax applies to decedents' estates or generation-skipping
transfers.
§ 2803. Judicial proceeding.
(a) Standing.--The decedent's personal representative,
trustee or any affected beneficiary under the will, trust or
other dispositive instrument may bring a proceeding to interpret
a formula clause.
(b) Commencement.--A proceeding under this section must be
commenced within 12 months following the death of the decedent.
(c) Considerations.--In a proceeding under this section, the
court shall consider all of the following:
(1) The provisions and purposes of the will, trust or
other dispositive instrument.
(2) The facts surrounding the creation of the will,
trust or other dispositive instrument.
(3) The decedent's known or probable intent, based on
all the facts and circumstances surrounding the creation of
the will, trust or other dispositive instrument. In
determining this intent, the court may consider evidence that
contradicts the plain meaning of the will, trust or other
dispositive instrument.
(4) The identity and interests of beneficiaries of
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different shares resulting from the application of the
formula clause.
(d) Modifications.--The court shall have the power to modify
a provision of a will, trust or other dispositive instrument in
a manner that is not contrary to the decedent's probable
intention in order to achieve the decedent's tax and other
objectives.
(e) Effective date of interpretation or modification.--The
court may provide that an interpretation or modification
pursuant to this chapter shall be effective as of the decedent's
date of death.
Section 4. Sections 3101(b), 3162, 3301(c), 3706, 5603(p) <--
and (q), 6107.1, 6111.1, 6111.2, 7725 and 7745 of Title 20 are
amended to read:
§ 3101. Payments to family and funeral directors. <--
* * *
(b) Deposit account.--Any bank, savings association, savings
and loan association, building and loan association, credit
union or other savings organization, at any time after the death
of a depositor, member or certificate holder, may pay the amount
on deposit or represented by the certificate, when the total
standing to the credit of the decedent in that institution does
not exceed [$3,500] $7,500, to the spouse, any child, the father
or mother or any sister or brother (preference being given in
the order named) of the deceased depositor, member or
certificate holder, provided that a receipted funeral bill or an
affidavit, executed by a licensed funeral director which sets
forth that satisfactory arrangements for payment of funeral
services have been made, is presented. Any bank, association,
union or other savings organization making such a payment shall
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be released to the same extent as if payment had been made to a
duly appointed personal representative of the decedent and it
shall not be required to see to the application thereof. Any
person to whom payment is made shall be answerable therefor to
anyone prejudiced by an improper distribution.
* * *
§ 3162. Advertisement of grant of letters.
(a) Notice generally.--The personal representative,
immediately after the grant of letters, shall cause notice
thereof to be given in one newspaper of general circulation
published at or near the place where the decedent resided or, in
the case of a nonresident decedent, at or near the place where
the letters were granted, and in the legal periodical, if any,
designated by rule of court for the publication of legal
notices, once a week for three successive weeks, together with
his name and address; and in every such notice, he shall request
all persons having claims against the estate of the decedent to
make known the same to him or his attorney, and all persons
indebted to the decedent to make payment to him without delay.
(b) Proofs of advertisement to trustee.--A personal
representative who has advertised the grant of letters and
received the notice required by section 7780.3(c) (relating to
duty to inform and report) shall promptly send copies of the
proofs of that advertisement to the trustee.
§ 3301. Duty of personal representative.
* * *
(c) Time for filing.--The personal representative shall file
his inventory no later than the date he files his account or the
due date, including any extension, for the filing of the
inheritance tax return for the estate, whichever is earlier. Any
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party in interest in the estate may request the filing of an
inventory at an earlier date by writing delivered to the
personal representative or his attorney in which event an
inventory shall be filed within three months after the
appointment of the personal representative or within 30 days
after the request, whichever is later. The court[, upon cause
shown,] may direct the [filing of] personal representative to
file an inventory of estate assets at any time.
§ 3706. Enforcement of contribution or exoneration of Federal
estate tax.
(a) Duty to pay.--Parties liable for apportionment of the
Federal estate tax, whether residents or nonresidents of this
Commonwealth, shall pay the amounts apportioned against them
[respectively.] at the time the Federal estate tax is due,
without regard to any extension of time for paying such tax.
(b) [Duty] Power of fiduciary.--The fiduciary charged with
the duty to pay the Federal estate tax may recover from parties
liable to apportionment the amounts of Federal estate tax
[apportionable] apportioned to them [respectively]. If the
fiduciary pays the tax apportioned against another party, the
fiduciary may recover from the other party the tax payment so
advanced, together with interest of 5% per annum from the date
of payment.
(c) Suspending distribution.--Distribution or delivery of
property to any party, other than a fiduciary charged with a
duty to pay the Federal estate tax, shall not be required of any
fiduciary until [the Federal estate tax apportionable with
respect thereto is paid or, if the Federal estate tax has not
been determined and apportionment made, until adequate security
for payment is furnished to the fiduciary making the
20090SB0053PN2228 - 9 -
distribution or delivery.] that party pays the Federal estate
tax apportioned to that party.
(d) Court decrees.--[The] Notwithstanding subsections (a)
and (b), the court, upon petition or at an accounting or in any
appropriate action or proceeding, shall make such decrees or
orders as it shall deem advisable apportioning the Federal
estate tax. The court may direct a fiduciary to collect the
apportioned amounts from the property or interests in his
possession of any parties against whom apportionment has been
made and may direct all other parties against whom the Federal
estate tax has been or may be apportioned or from whom any part
of the Federal estate tax may be recovered to make payment of
the apportioned amounts to the fiduciary. When a fiduciary holds
property of a party liable to apportionment insufficient to
satisfy the apportioned Federal estate tax, the court may direct
that the balance of the apportioned amount of Federal estate tax
shall be paid to the fiduciary by the party liable. Should an
overpayment of the Federal estate tax be made by any party or on
his behalf, the court may direct an appropriate reimbursement
for the overpayment. If the court apportions any part of the
Federal estate tax against any party interested in
nontestamentary property or among the respective interests
created by any nontestamentary instrument, the court, in its
discretion, may assess against those properties or interests an
equitable share of the expenses incurred in connection with the
determination and apportionment of the Federal estate tax. If
the fiduciary cannot recover the Federal estate tax apportioned
against a party benefited, the unrecovered amount shall be
charged in such manner as the court may determine.
§ 5603. Implementation of power of attorney.
20090SB0053PN2228 - 10 -
* * *
(p) Power to engage in insurance transactions.--A power to
"engage in insurance transactions" shall mean that the agent
may:
(1) Purchase, continue, renew, convert or terminate any
type of insurance (including, but not limited to, life,
accident, health, disability or liability insurance) and pay
premiums and collect benefits and proceeds under insurance
policies.
(2) Exercise nonforfeiture provisions under insurance
policies.
(3) In general, exercise all powers with respect to
insurance that the principal could if present; however, the
agent cannot designate himself beneficiary of a life
insurance policy unless the agent is the spouse, child,
grandchild, parent, brother or sister of the principal. An
agent and a beneficiary of a life insurance policy shall be
liable as equity and justice may require to the extent that,
as determined by the court, a beneficiary designation made by
the agent is inconsistent with the known or probable intent
of the principal.
(q) Power to engage in retirement plan transactions.--A
power to "engage in retirement plan transactions" shall mean
that the agent may contribute to, withdraw from and deposit
funds in any type of retirement plan (including, but not limited
to, any tax qualified or nonqualified pension, profit sharing,
stock bonus, employee savings and retirement plan, deferred
compensation plan or individual retirement account), select and
change payment options for the principal, make roll-over
contributions from any retirement plan to other retirement plans
20090SB0053PN2228 - 11 -
and, in general, exercise all powers with respect to retirement
plans that the principal could if present. However, the agent
cannot designate himself beneficiary of a retirement plan unless
the agent is the spouse, child, grandchild, parent, brother or
sister of the principal. An agent and a beneficiary of a
retirement plan shall be liable as equity and justice may
require to the extent that, as determined by the court, a
beneficiary designation made by the agent is inconsistent with
the known or probable intent of the principal.
* * *
§ 6107.1. Applicability of rule against perpetuities.
(a) Traditional rule.--Sections 6104 (relating to rule
against perpetuities), 6105 (relating to rule against
perpetuities; disposition when invalidity occurs), 6106
(relating to income accumulations; when valid) and 6107
(relating to income accumulations; disposition when invalidity
occurs):
(1) shall apply to every interest created before January
1, 2007; but
(2) shall not apply to any interest created after
December 31, 2006.
(b) Modern rule.--All of the following apply to every
interest created after December 31, 2006:
(1) [No] Except as provided in paragraph (3), no
interest shall be void as a perpetuity.
(2) No direction or authorization to [accumulated]
accumulate income shall be void as a perpetuity.
(3) If a power of appointment is exercised to create a
new power of appointment, any interest created by the
exercise of the new power of appointment is invalid if it
20090SB0053PN2228 - 12 -
does not vest within 360 years of the creation of the
original power of appointment, unless the exercise of the new
power of appointment expressly states that this provision
shall not apply to the interests created by the exercise.
(4) Void interests shall be disposed of in the manner
provided in section 6105.
§ 6111.1. Modification by divorce or pending divorce.
[If the conveyor is divorced from the bonds of matrimony
after making a conveyance, any] Any provision in [the] a
conveyance which was revocable by [him] a conveyor at the time
of [his] the conveyor's death and which was to take effect at or
after [his] the conveyor's death in favor of or relating to [his
spouse so divorced shall thereby] the conveyor's spouse shall
become ineffective for all purposes unless it appears in the
governing instrument that the provision was intended to survive
[the divorce.] a divorce, if the conveyor:
(1) is divorced from such spouse after making the
conveyance; or
(2) dies domiciled in this Commonwealth during the
course of divorce proceedings, no decree of divorce has been
entered pursuant to 23 Pa.C.S. § 3323 (relating to decree of
court) and grounds have been established as provided in 23
Pa.C.S. § 3323(g).
§ 6111.2. Effect of divorce or pending divorce on designation
of beneficiaries.
[If a person domiciled in this Commonwealth at the time of
his death is divorced from the bonds of matrimony after
designating his spouse as beneficiary of a life insurance
policy, annuity contract, pension or profit-sharing plan or
other contractual arrangement providing for payments to his
20090SB0053PN2228 - 13 -
spouse, any designation in favor of his former spouse which was
revocable by him after the divorce shall become ineffective for
all purposes and shall be construed as if such former spouse had
predeceased him unless it appears from the wording of the
designation, a court order or a written contract between the
person and such former spouse that the designation was intended
to survive the divorce.]
(a) Applicability.--This section is applicable if an
individual:
(1) is domiciled in this Commonwealth;
(2) designates the individual's spouse as beneficiary of
the individual's life insurance policy, annuity contract,
pension or profit-sharing plan or other contractual
arrangement providing for payments to the spouse; and
(3) either:
(i) at the time of the individual's death is
divorced from the spouse; or
(ii) dies during the course of divorce proceedings,
no decree of divorce has been entered pursuant to 23
Pa.C.S. § 3323 (relating to decree of court) and grounds
have been established as provided in 23 Pa.C.S. §
3323(g).
(b) General rule.--Any designation described in subsection
(a)(2) in favor of the individual's spouse or former spouse that
was revocable by the individual at the individual's death shall
become ineffective for all purposes and shall be construed as if
the spouse or former spouse had predeceased the individual,
unless it appears the designation was intended to survive the
divorce based on:
(1) the wording of the designation;
20090SB0053PN2228 - 14 -
(2) a court order;
(3) a written contract between the individual and the
spouse or former spouse; or
(4) a designation of a former spouse as a beneficiary
after the divorce decree has been issued.
(c) Liability.--
(1) Unless restrained by court order, no insurance
company, pension or profit-sharing plan trustee or other
obligor shall be liable for making payments to a spouse or
former spouse which would have been proper in the absence of
this section.
(2) Any spouse or former spouse to whom payment is made
shall be answerable to anyone prejudiced by the payment.
§ 7725. Notice of representation.
A person representing another must be given written notice by
the trustee that the person is representing the other person.
[The person to whom the notice is given may decline the
representation by a writing that is given to the trustee no
later than 60 days after receipt of the trustee's notice.] A
person to whom the notice is given is presumed to accept the
representation unless the person declines the representation in
a writing delivered to the trustee no later than 30 days after
receipt of the notice.
§ 7745. Creditor's claim against settlor - UTC 505(a).
Whether or not a trust instrument contains a spendthrift
provision and notwithstanding section 7744 (relating to
discretionary trusts; effect of standard - UTC 504):
(1) During the lifetime of the settlor, the property of
a revocable trust is subject to claims of the settlor's
creditors.
20090SB0053PN2228 - 15 -
(2) A judgment creditor or assignee of the settlor of an
irrevocable trust may reach the maximum amount that can be
distributed to or for the settlor's benefit. If a trust has
more than one settlor, the creditor or assignee of a
particular settlor may reach the portion of the trust
attributable to that settlor's contribution. However, the
assets of an irrevocable trust are not subject to the claims
of a creditor of the settlor solely because of the existence
of the trustee's discretionary power to pay directly to the
taxing authorities or to reimburse the settlor for any income
tax payable by the settlor attributable to trust income or
principal.
(3) After the death of the settlor and subject to the
settlor's right to direct the source from which liabilities
will be paid, the property of a revocable trust is subject to
claims of the settlor's creditors, costs of administration of
the settlor's estate, the expenses of the settlor's funeral
and disposal of remains and the family exemption to the
extent the settlor's probate estate is inadequate to satisfy
those claims, costs, expenses and exemption and no other
statute specifically exempts the property from those claims.
Section 5. Section 7754 of Title 20 is amended by adding a
subsection to read:
§ 7754. Actions contesting validity of revocable trust.
* * *
(d) Competency of witnesses.--The competency of a witness in
an action contesting the validity of a revocable trust shall be
governed by the same rules that apply in actions contesting the
validity of a will.
Section 6. Section 7755(c) of Title 20 is amended to read:
20090SB0053PN2228 - 16 -
§ 7755. Claims and distribution after settlor's death.
* * *
(c) [No personal representative.--If no personal
representative is appointed within 90 days after the settlor's
death, the trustee shall advertise the trust's existence and the
name and address of the trustee in the manner set forth in
section 3162 (relating to advertisement of grant of letters).]
Trustee's duty to advertise.--
(1) A trustee of a revocable trust:
(i) May advertise at any time after the settlor's
death.
(ii) Shall advertise if the first advertisement of
the grant of letters by the settlor's personal
representative does not occur within 90 days after the
settlor's death.
(2) Advertisements by the trustee under this subsection
shall be in the manner set forth in section 3162 (relating to
advertisement of grant of letters), shall be done in the
jurisdiction of the deceased settlor's domicile and shall
include:
(i) The fact of the trust's existence.
(ii) The trustee's name and address.
(3) The personal representative of the settlor of a
revocable trust shall send to the trustee copies of the proof
of publication of the advertisement of the grant of letters.
* * *
Section 7. Section 7766(b) of Title 20 is amended and the
section is amended by adding a subsection to read:
§ 7766. Removal of trustee - UTC 706.
* * *
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(b) When court may remove trustee.--The court may remove a
trustee if it finds that removal of the trustee best serves the
interests of the beneficiaries of the trust and is not
inconsistent with a material purpose of the trust, a suitable
cotrustee or successor trustee is available and:
(1) the trustee has committed a serious breach of trust;
(2) lack of cooperation among cotrustees substantially
impairs the administration of the trust;
(3) the trustee has not effectively administered the
trust because of the trustee's unfitness, unwillingness or
persistent failures; or
(4) there has been a substantial change of
circumstances. A corporate reorganization of an institutional
trustee, including a plan of merger or consolidation, is not
itself a substantial change of circumstances.
* * *
(e) Cross reference.--See section 1608 of the act of
November 30, 1965 (P.L.847, No.356), known as the Banking Code
of 1965.
Section 8. Sections 7780.3(a), (f), (g), (i), (k) and (l),
7780.6(a), 7785, 8105(d) and (e) and 8149(c) of Title 20 are
amended to read:
§ 7780.3. Duty to inform and report.
(a) Duty to respond to requests.--A trustee shall promptly
respond to a [beneficiary's] reasonable request by the settlor
of a trust or by a beneficiary of an irrevocable trust for
information related to the trust's administration. A trustee
shall promptly respond to the Department of Public Welfare's
reasonable request for information related to the trust's
administration when a settlor or beneficiary is a resident in a
20090SB0053PN2228 - 18 -
State-owned facility or an applicant for or recipient of cash or
medical assistance from the Commonwealth and the department
certifies in writing that it has obtained a currently valid
consent for the disclosure of such information from the settlor
or beneficiary of the trust. A trustee may rely upon the
department's certification without investigating its accuracy.
* * *
(f) Notice to current beneficiaries.--No later than 30 days
after the date on which the trustee of an irrevocable trust
learns that a person who did not previously receive the notice
described in subsection (i) is a current beneficiary of the
trust, the trustee shall send the notice described in subsection
(i) to the current beneficiary if, at that time, the trustee
knows that the settlor is then deceased or has been adjudicated
incapacitated. With respect to a testamentary trust, the time
specified in this subsection commences to run when the trust is
first funded, whether or not the trust is completely funded on
that date.
(g) Change in trusteeship.--[Apart from the other
requirements of this section, the trustee shall send the notice
described in subsection (i) to the current beneficiaries each
time there is a change in trusteeship.]
(1) Each time there is a change in trusteeship of any
trust, the trustee shall notify the settlor in writing of the
change.
(2) Each time there is a change in trusteeship of any
trust whose settlor is deceased or of an irrevocable trust
whose settlor has been adjudicated incapacitated, the trustee
shall notify the current beneficiaries in writing of the
change.
20090SB0053PN2228 - 19 -
(3) Notice under this subsection shall include the
trustee's name, address and telephone number.
* * *
(i) Contents of notice.--[Any] Except as provided in
subsection (g), any notice under this section shall be written
and convey the following information:
(1) The fact of the trust's existence.
(2) The identity of the settlor.
(3) The trustee's name, address and telephone number.
(4) The recipient's right to receive upon request a copy
of the trust instrument.
(5) [The recipient's] Each current beneficiary's right
to receive, at least annually, [a written report of the
trust's assets and their market values if feasible, the
trust's liabilities and the trust's receipts and
disbursements since the date of the last such report] upon
request, periodic written financial reports concerning the
trust.
* * *
(k) Notice to settlor's appointee.--The settlor of a trust
may in the trust instrument appoint one or more persons or a
succession of persons to receive, on behalf of one or more named
current beneficiaries of the trust, the notices required by this
section. The trustee giving the notice required by this section
to that appointee satisfies the trustee's duty to give to the
named current beneficiary the notice required by this section
if:
(1) the trustee notifies the appointee that the notice
is being given to the appointee as representing the named
current beneficiary; and
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(2) the appointee does not decline to receive the notice
in a writing [that is given] delivered to the trustee no
later than [60] 30 days after receipt of the trustee's
notice.
(l) Applicability.--
(1) If the death or adjudication of incapacity described
in subsection (b), (c), (d) or (e) occurs on or after
November 6, 2006, the time limit for notice set forth in that
subsection shall apply.
(2) If the death or adjudication of incapacity described
in subsection (b), [(c),] (d) or (e) has occurred before
November 6, 2006, the time limit for notice set forth in that
subsection shall be November 6, 2008.
(3) The notice under subsection (f) shall not be
required to be completed until two years after November 6,
2006.
§ 7780.6. Illustrative powers of trustee.
(a) Listing.--The powers which a trustee may exercise
pursuant to section 7780.5 (relating to powers of trustees - UTC
815) include the following powers:
(1) To accept, hold, invest in and retain investments as
provided in Chapter 72 (relating to prudent investor rule).
(2) To pay or contest a claim; settle a claim by or
against the trust by compromise, arbitration or otherwise;
and release, in whole or in part, any claim belonging to the
trust.
(3) To resolve a dispute regarding the interpretation of
the trust or the administration of the trust by mediation,
arbitration or other alternative dispute resolution
procedures.
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(4) To prosecute or defend actions, claims or
proceedings for the protection of trust assets and of the
trustee in the performance of the trustee's duties.
(5) To abandon or decline to administer any property
which is of little or no value, transfer title to abandoned
property and decline to accept title to and administer
property which has or may have environmental or other
liability attached to it.
(6) To insure the assets of the trust against damage or
loss and, at the expense of the trust, protect the trustee,
the trustee's agents and the beneficiaries from liability to
third persons arising from the administration of the trust.
(7) To advance money for the protection of the trust and
for all expenses, losses and liability sustained in the
administration of the trust or because of the holding or
ownership of any trust assets. The trustee has a lien on the
trust assets as against the beneficiary for an advance under
this paragraph, including interest on the advance.
(8) To pay taxes, assessments, compensation of the
trustee and employees and agents of the trustee and other
expenses incurred in the administration of the trust.
(9) To receive additions to the assets of the trust.
(10) To sell or exchange any real or personal property
at public or private sale, without obligation to repudiate an
otherwise binding agreement in favor of better offers. If the
trustee has been required to give bond, no proceeds of the
sale of real estate, including proceeds arising by the reason
of involuntary conversion, shall be paid to the trustee
until:
(i) the court has made an order excusing the trustee
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from entering additional security; or
(ii) the court has made an order requiring
additional security and the trustee has entered the
additional security.
(11) To enter for any purpose into a lease as lessor or
lessee with or without option to purchase or renew for a term
within or extending beyond the term of the trust.
(12) To grant options for sales or leases of a trust
asset and acquire options for the acquisition of assets,
including options exercisable after the trust terminates.
(13) To join in any reorganization, consolidation,
merger, dissolution, liquidation, voting trust plan or other
concerted action of securityholders and to delegate
discretionary duties with respect thereto.
(14) To vote a security, in person or by general or
limited proxy, with or without power of substitution.
(15) To borrow funds and mortgage or pledge trust assets
as security for repayment of the funds borrowed, including
repayments after the trust terminates.
(16) To make loans to and buy property from the personal
representatives of the settlor and the settlor's spouse.
Loans under this paragraph shall be adequately secured, and
the purchases under this paragraph shall be for fair market
value.
(17) To partition, subdivide, repair, improve or develop
real estate; enter into agreements concerning the partition,
subdivision, repair, improvement, development, zoning or
management of real estate; impose or extinguish restrictions
on real estate; dedicate land and easements to public use;
adjust boundaries; and do anything else regarding real estate
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which is commercially reasonable or customary under the
circumstances.
(18) With respect to possible liability for violation of
environmental law:
(i) to inspect or investigate property the trustee
holds or has been asked to hold or property owned or
operated by an organization in which the trustee holds or
has been asked to hold an interest, for the purpose of
determining the application of environmental law with
respect to the property;
(ii) to take action to prevent, abate or otherwise
remedy any actual or potential violation of environmental
law affecting property held directly or indirectly by the
trustee, whether taken before or after the assertion of a
claim or the initiation of governmental enforcement;
(iii) to decline to accept property into trust or
disclaim a power with respect to property that is or may
be burdened with liability for violation of environmental
law;
(iv) to compromise claims against the trust which
may be asserted for an alleged violation of environmental
law; and
(v) to pay the expense of inspection, review,
abatement or remedial action to comply with environmental
law.
(19) To operate, repair, maintain, equip and improve any
farm or farm operation; to purchase and sell livestock,
crops, feed and other property that is normally perishable;
and to purchase, use and dispose of farm equipment and employ
one or more farm managers and others in connection with farm
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equipment and pay them reasonable compensation.
(20) To make ordinary or extraordinary repairs or
alterations in buildings or other structures; demolish
improvements; and raze existing or erect new party walls or
buildings.
(21) To enter into a lease or arrangements for
exploration and removal of minerals or other natural
resources or enter into a pooling or utilization agreement.
(22) To exercise all rights and incidents of ownership
of life insurance policies held by the trust, including
borrowing on policies, entering into and terminating split-
dollar plans, exercising conversion privileges and rights to
acquire additional insurance and selecting settlement
options.
(23) To employ a custodian; hold property unregistered
or in the name of a nominee, including the nominee of any
institution employed as custodian, without disclosing the
fiduciary relationship and without retaining possession and
control of securities or other property so held or
registered; and pay reasonable compensation to the custodian.
(24) To apply funds distributable to a beneficiary who
is, in the trustee's opinion, disabled by illness or other
cause and unable properly to manage the funds directly for
the beneficiary's benefit or to pay such funds for
expenditure on the beneficiary's behalf to:
(i) the beneficiary;
(ii) a guardian of the beneficiary's estate;
(iii) an agent acting under a general power of
attorney for the beneficiary; or
(iv) if there is no agent or guardian, a relative or
20090SB0053PN2228 - 25 -
other person having legal or physical custody or care of
the beneficiary.
(25) To pay funds distributable to a minor beneficiary
to the minor or to a guardian of the minor's estate or to
apply the funds directly for the minor's benefit.
(26) To do any of the following:
(i) Pay any funds distributable to a beneficiary who
is not 21 years of age or older to:
(A) the beneficiary;
(B) an existing custodian for the beneficiary
under Chapter 53 (relating to Pennsylvania Uniform
Transfers to Minors Act) or under any other state's
version of the Uniform Transfers to Minors Act;
(C) an existing custodian for the beneficiary
under the former Pennsylvania Uniform Gifts to Minors
Act or under any other state's version of the Uniform
Gifts to Minors Act; or
(D) a custodian for the beneficiary appointed by
the trustee under Chapter 53.
(ii) Apply the funds for the beneficiary.
(27) To pay calls, assessments and other sums chargeable
or accruing against or on account of securities.
(28) To sell or exercise stock subscription or
conversion rights.
(29) To continue or participate in the operation of any
business or other enterprise and to effect incorporation,
merger, consolidation, dissolution or other change in the
form of the organization of the business or enterprise.
(30) To select a mode of payment under a qualified
employee benefit plan or a retirement plan payable to the
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trustee and exercise rights under the plan.
(31) To distribute in cash or in kind or partly in each
and allocate particular assets in proportionate or
disproportionate shares.
(32) To appoint a trustee to act in another jurisdiction
with respect to trust property located in the other
jurisdiction, confer upon the appointed trustee all the
powers and duties of the appointing trustee, require that the
appointed trustee furnish security and remove the appointed
trustee.
(33) To exercise elections with respect to Federal,
State and local taxes.
[(33)] (34) To execute and deliver instruments which
will accomplish or facilitate the exercise of the trustee's
powers.
* * *
§ 7785. Limitation of action against trustee.
(a) Imposed by trustee's written reports.--
(1) A beneficiary [may not challenge a transaction or
assert] is barred from challenging a transaction or asserting
a claim against a trustee for breach of trust [on the basis
of a transaction] if:
(i) the trustee provided the beneficiary [with a
written report of the trust's assets and their market
values if feasible, the trust's liabilities and the
trust's receipts and disbursements for the year in which
the transaction occurred and for each of the four
subsequent calendar years] at least annually with
periodic written financial reports concerning the trust;
(ii) the transaction was disclosed [in the first of
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the five reports] in a report to which subparagraph (i)
refers or such report provided sufficient information so
that the beneficiary knew or should have known of the
potential claim or should have inquired into its
existence;
(iii) [the beneficiary did not notify the trustee in
writing within six months after receiving the fifth
annual report that the beneficiary objects to the
transaction and provide the basis in writing for that
objection] in the 30 months after a report to which
subparagraph (ii) refers was sent by the trustee to the
beneficiary, the beneficiary did not notify the trustee
in writing that the beneficiary challenges the
transaction or asserts a claim and provides in writing
the basis for that challenge or assertion; and
(iv) all reports were accompanied by a conspicuous
written statement describing the effect of this
paragraph.
(2) A claim not barred by paragraph (1) may nevertheless
be barred by subsection (b).
(b) Five-year absolute bar.--If not previously barred by
subsection (a) or section 7798 (relating to failure to present
claim at audit):
(1) Except as provided in paragraph (1.1), (2) or (3), a
claim by a beneficiary against a trustee, including a claim
preserved by the beneficiary notifying the trustee in the
manner described in subsection (a), shall be barred five
years after the first to occur of the following events:
(i) the date after the removal, resignation or death
of the trustee on which the beneficiary was given the
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notice required by section 7780.3(g) (relating to duty to
inform and report);
(ii) the termination of the beneficiary's interest
in the trust; or
(iii) the termination of the trust.
(1.1) A beneficiary who has challenged a transaction or
asserted a claim as provided in subsection (a)(1)(iii) may
not challenge the transaction or assert the claim against the
trustee in a court or an arbitration proceeding commenced
more than five years after the date the trustee sent the
beneficiary the report described in subsection (a)(1)(i) and
(ii).
(2) Except as set forth in paragraph (3), if the first
to occur of the events set forth in paragraph (1) occurred
before November 6, 2006, a claim described in paragraph (1)
shall be barred five years after November 6, 2006.
(3) A claim described in paragraph (1) or (1.1) is not
barred if, prior to the respective date set forth in either
paragraph (1) or (2), the trustee has filed an account with
the court or the beneficiary has petitioned the court to
compel the trustee to file an account.
§ 8105. Power to convert to unitrust.
* * *
(d) Post conversion.--After a trust is converted to a
unitrust, all of the following apply:
(1) The trustee shall follow an investment policy
seeking a total return for the investments held by the trust,
whether the return is to be derived:
(i) from appreciation of capital;
(ii) from earnings and distributions from capital;
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or
(iii) from both.
(2) The trustee shall make regular distributions in
accordance with the governing instrument construed in
accordance with the provisions of this section.
(3) The term "income" in the governing instrument shall
mean an annual distribution (the unitrust distribution) equal
to 4% (the payout percentage) of the net fair market value of
the trust's assets, whether such assets would be considered
income or principal under other provisions of this chapter,
averaged over the lesser of:
(i) the [three] preceding years in the smoothing
period selected by the trustee; or
(ii) the period during which the trust has been in
existence.
(e) Discretion of trustee.--The trustee may, in the
trustee's discretion from time to time, determine all of the
following:
(1) The effective date of a conversion to a unitrust.
(2) The provisions for prorating a unitrust distribution
for a short year in which a beneficiary's right to payments
commences or ceases.
(3) The frequency of unitrust distributions during the
year.
(4) The effect of other payments from or contributions
to the trust on the trust's valuation.
(5) Whether to value the trust's assets annually or more
frequently.
(5.1) Whether to average the net assets of the trust
over a smoothing period of three, four or five years.
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(6) What valuation dates to use.
(7) How frequently to value nonliquid assets and whether
to estimate their value.
(8) Whether to omit from the calculations trust property
occupied or possessed by a beneficiary.
(9) Any other matters necessary for the proper
functioning of the unitrust.
* * *
§ 8149. Retirement benefits, individual retirement accounts,
deferred compensation, annuities and similar
payments.
* * *
(c) Allocation when internal net income of fund is readily
ascertained.--
(1) If no portion of a payment from a separate fund held
exclusively for the benefit of the trust is allocable to
income under subsections (a) and (b) but the internal net
income of the fund determined as if the fund were a separate
trust subject to Subchapters [B (relating to decedent's
estate or terminating income interest) through] A (relating
to preliminary provisions; power to adjust; power to convert
to unitrust), B (relating to decedent's estate or terminating
income interest), C (relating to apportionment at beginning
and end of income interest), D (relating to allocation of
receipts during administration of trust) and E (relating to
allocation of disbursements during administration of trust)
is readily ascertainable by the trustee, the internal net
income of the fund shall be considered to be the income
earned by the fund, and the portion of the payment equal to
the then undistributed net income of the fund realized since
20090SB0053PN2228 - 31 -
the trust acquired its interest in the fund shall be deemed
to be a distribution of such income and shall be allocated to
the trust income account.
(2) The balance of any such payment shall be allocated
to principal.
(3) The power to adjust under section 8104 (relating to
trustee's power to adjust), the power to convert to a
unitrust under section 8105 (relating to power to convert to
unitrust) and the provisions governing express trusts under
section 8107 (relating to express trusts) shall apply to
retirement benefits covered by this subsection which are
payable to a trust. These powers may be exercised separately
and independently by the payee trustee or in the governing
instrument as between the retirement benefits and the trust
as if they were separate trusts subject to this chapter.
* * *
Section 9. This act shall apply as follows:
(1) The addition of 20 Pa.C.S. Ch. 28 shall apply to any
decedent dying after December 31, 2009.
(2) The amendment of 20 Pa.C.S. § 6107.1 shall apply to any
interest created after December 31, 2006.
Section 10. (a) The following provisions shall be
retroactive to November 6, 2006:
(1) The amendment of 20 Pa.C.S. § 7745.
(2) The amendment of 20 Pa.C.S. § 7780.3(l)(2).
(3) The amendment of 20 Pa.C.S. § 7780.6(a).
(b) The amendment of 20 Pa.C.S. § 6107.1 shall be
retroactive to January 1, 2007.
Section 11. This act shall take effect as follows:
(1) The following provisions shall take effect
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immediately:
(i) This section.
(ii) Sections 9 and 10 of this act.
(iii) The addition of 20 Pa.C.S. Ch. 28.
(iv) The amendment of 20 Pa.C.S. §§ 6107.1, 7745,
7780.3(l)(2) and 7780.6(a).
(2) The remainder of this act shall take effect in 60
days.
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