PRIOR PRINTER'S NOS. 1501, 1826 PRINTER'S NO. 1946
No. 1205 Session of 1997
INTRODUCED BY GREENLEAF AND BELL, NOVEMBER 24, 1997
AS AMENDED ON THIRD CONSIDERATION, APRIL 27, 1998
AN ACT
1 Amending Title 20 (Decedents, Estates and Fiduciaries) of the
2 Pennsylvania Consolidated Statutes, imposing limits on the
3 exercise of certain trustee powers and the ability of
4 beneficiaries to appoint trustees under certain
5 circumstances; AND FURTHER PROVIDING FOR PERSONS WHO MAY <--
6 EXECUTE ANATOMICAL GIFTS.
7 The General Assembly of the Commonwealth of Pennsylvania
8 hereby enacts as follows:
9 Section 1. Title 20 of the Pennsylvania Consolidated
10 Statutes is amended by adding a chapter to read:
11 CHAPTER 75
12 LIMITATIONS ON EXERCISE OF TRUSTEE POWERS
13 AND POWERS OF BENEFICIARIES TO APPOINT TRUSTEES
14 Sec.
15 7501. Legislative intent.
16 7502. Definitions.
17 7503. Application of chapter.
18 7504. Certain trustee powers not exercisable.
19 7505. Joint powers and appointment of nondisqualified
1 substituted trustees.
2 7506. Certain powers of beneficiaries not exercisable.
3 § 7501. Legislative intent.
4 This chapter is enacted to codify, clarify and confirm
5 certain existing common law principles of fiduciary and trust
6 law relating to conflicts of interest on the part of trustees.
7 § 7502. Definitions.
8 The following words and phrases when used in this chapter
9 shall have the meanings given to them in this section unless the
10 context clearly indicates otherwise:
11 "Interested party." Each trustee then serving and each
12 person having an interest in income or principal whom it would
13 be necessary to join as a party in a proceeding for the judicial
14 settlement of a trustee's account. The term "interested party"
15 does not include a person who has not attained majority or is
16 otherwise incapacitated, unless a court has appointed a guardian
17 for the person for some purpose other than acting under section
18 7503 (relating to application of chapter) or an agent has been
19 appointed under a durable power of attorney that is sufficient
20 to grant authority to act under section 7503.
21 § 7503. Application of chapter.
22 (a) General rule.--This chapter shall apply to:
23 (1) Any trust created under a governing instrument
24 executed on or after (the Legislative Reference Bureau shall
25 insert here the date that is 90 days after the effective date
26 of this act), unless the governing instrument expressly
27 provides that this chapter does not apply.
28 (2) Any trust created under a governing instrument
29 executed before (the Legislative Reference Bureau shall
30 insert here the date that is 90 days after the effective date
19970S1205B1946 - 2 -
1 of this act), unless all interested parties affirmatively
2 elect on or before (the Legislative Reference Bureau shall
3 insert here the date that is the third anniversary of the
4 effective date of this act) by a written declaration signed
5 by or on behalf of each interested party and delivered to the
6 trustee, not to be subject to the application of this
7 chapter. In the case of a testamentary trust, the
8 declarations shall be filed with the register in the county
9 in which the will was admitted to probate.
10 (b) Exclusion.--This chapter shall not apply to:
11 (1) Any trust during the time that the trust is
12 revocable or amendable by its settlor.
13 (2) A spouse of a decedent or settlor where the spouse
14 is the trustee of a testamentary or inter vivos trust for
15 which a marital deduction has been allowed.
16 (3) A trustee who possesses in his individual capacity
17 an unlimited right to withdraw the entire principal of the
18 trust or has a general testamentary power of appointment over
19 the entire principal of the trust.
20 (4) A trust under a governing instrument that by
21 specific reference expressly rejects the application of this
22 chapter.
23 (5) A trust created under a governing instrument
24 executed on or before (the Legislative Reference Bureau shall
25 insert here the date that is 90 days after the effective date
26 of this act) if no part of the principal of the trust would
27 be included in the gross estate of the trustee for Federal
28 estate tax purposes if the trustee had died on (the
29 Legislative Reference Bureau shall insert here the date that
30 is 90 days after the effective date of this act) without
19970S1205B1946 - 3 -
1 having exercised the power under the governing instrument to
2 make discretionary distributions of principal or income to or
3 for the benefit of the trustee, the trustee's estate or the
4 creditors of either.
5 § 7504. Certain trustee powers not exercisable.
6 (a) General rule.--The following powers conferred by a
7 governing instrument upon a trustee in his or her capacity as a
8 trustee shall not be exercised by that trustee:
9 (1) The power to make discretionary distributions of
10 either principal or income to or for the benefit of the
11 trustee, the trustee's estate or the creditors of either,
12 unless the power is either:
13 (i) limited by an ascertainable standard relating to
14 the trustee's health, education, support or maintenance
15 within the meaning of 26 U.S.C. §§ 2041 (relating to
16 powers of appointment) and 2514 (relating to powers of
17 appointment); or
18 (ii) exercisable by the trustee only in conjunction
19 with another person having a substantial interest in the
20 property subject to the power which is adverse to the
21 interest of the trustee within the meaning of 26 U.S.C. §
22 2041(b)(1)(C)(ii).
23 (2) The power to make discretionary distributions of
24 either principal or income to satisfy any of the trustee's
25 personal legal obligations for support or other purposes.
26 (3) The power to make discretionary allocations in the
27 trustee's personal favor of receipts or expenses as between
28 income and principal, unless the trustee has no power to
29 enlarge or shift any beneficial interest except as an
30 incidental consequence of the discharge of the trustee's
19970S1205B1946 - 4 -
1 fiduciary duties.
2 (4) The power to exercise any of the powers proscribed
3 in this subsection with regard to an individual other than
4 the trustee to the extent that the individual could exercise
5 a similar prohibited power in connection with a trust that
6 benefits the trustee.
7 (b) Limited exercise of prohibited power.--
8 (1) If a trustee is prohibited by subsection (a)(1) from
9 exercising a power conferred upon the trustee, the trustee
10 nevertheless may exercise that power but shall be limited to
11 distributions for the trustee's health, education, support or
12 maintenance to the extent otherwise permitted by the terms of
13 the trust.
14 (2) Unless otherwise prohibited by the provisions of
15 this section, a trustee may exercise a power described herein
16 in favor of someone other than the trustee, the trustee's
17 estate or the creditors of either.
18 § 7505. Joint powers and appointment of nondisqualified
19 substituted trustees.
20 If a governing instrument contains a power proscribed under
21 section 7504 (relating to certain trustee powers not
22 exercisable), the following shall apply:
23 (1) If the power is conferred on two or more trustees,
24 it may be exercised by the trustee or trustees who are not so
25 prohibited as if they were the only trustee or trustees.
26 (2) If there is no trustee in office who can exercise
27 the power as provided in paragraph (1), the court, upon
28 petition and hearing after such notice as it may direct,
29 shall appoint a trustee who is not disqualified and whose
30 term in office shall be as the court directs for the sole
19970S1205B1946 - 5 -
1 purpose of exercising the powers that the other trustees
2 cannot exercise.
3 § 7506. Certain powers of beneficiaries not exercisable.
4 (a) General rule.--No beneficiary of a trust in an
5 individual, trustee or other capacity, may appoint or remove and
6 appoint a trustee who is related or subordinate to the
7 beneficiary within the meaning of 26 U.S.C. § 672(c) (relating
8 to definitions and rules) unless:
9 (1) the trustee's discretionary power to make
10 distributions to or for the beneficiary is limited by an
11 ascertainable standard relating to the beneficiary's health,
12 education, support or maintenance within the meaning of 26
13 U.S.C. §§ 2041 (relating to powers of appointment) and 2514
14 (relating to powers of appointment);
15 (2) the trustee's discretionary power may not be
16 exercised to satisfy any of the beneficiary's legal
17 obligations for support or other purposes; and
18 (3) the trustee's discretionary power may not be
19 exercised to grant to the beneficiary a general power to
20 appoint property of the trust to the beneficiary, the
21 beneficiary's estate or the creditors thereof within the
22 meaning of 26 U.S.C. § 2041.
23 (b) Exception.--This section shall not apply if the
24 appointment of the trustee by the beneficiary may be made only
25 in conjunction with another person having a substantial interest
26 in the property of the trust, subject to the power, which is
27 adverse to the exercise of the power in favor of the beneficiary
28 within the meaning of 26 U.S.C. § 2041(b)(1)(C)(ii), or the
29 appointment is in conformity with a procedure governing
30 appointments approved by the court before (the Legislative
19970S1205B1946 - 6 -
1 Reference Bureau shall insert there the effective date of this
2 act).
3 SECTION 2. SECTION 8611(A) OF TITLE 20 IS AMENDED TO READ: <--
4 § 8611. PERSONS WHO MAY EXECUTE ANATOMICAL GIFT.
5 (A) GENERAL RULE.--ANY INDIVIDUAL OF SOUND MIND AND 18 YEARS
6 OF AGE OR MORE MAY GIVE ALL OR ANY PART OF HIS BODY FOR ANY
7 PURPOSE SPECIFIED IN SECTION 8612 (RELATING TO PERSONS WHO MAY
8 BECOME DONEES; PURPOSES FOR WHICH ANATOMICAL GIFTS MAY BE MADE),
9 THE GIFT TO TAKE EFFECT UPON DEATH. ANY INDIVIDUAL WHO IS A
10 MINOR AND 16 YEARS OR AGE OR OLDER MAY EFFECTUATE A GIFT FOR ANY
11 PURPOSE SPECIFIED IN SECTION 8612, PROVIDED PARENTAL OR GUARDIAN
12 CONSENT IS DEEMED GIVEN. PARENTAL OR GUARDIAN CONSENT SHALL BE
13 NOTED ON THE MINOR'S DONOR CARD, APPLICATION FOR THE DONOR'S
14 LEARNER'S PERMIT OR DRIVER'S LICENSE OR OTHER DOCUMENT OF GIFT.
15 A GIFT OF THE WHOLE BODY SHALL BE INVALID UNLESS MADE IN WRITING
16 AT LEAST 15 DAYS PRIOR TO THE DATE OF DEATH[.] OR CONSENT IS
17 OBTAINED FROM THE LEGAL NEXT OF KIN. WHERE THERE ARE ADULT
18 CHILDREN OF THE DECEASED WHO ARE NOT CHILDREN OF THE SURVIVING
19 SPOUSE, THEIR CONSENT SHALL ALSO BE REQUIRED FOR A GIFT OF THE
20 WHOLE BODY FOR ANATOMICAL STUDY.
21 * * *
22 Section 2 3. This act shall take effect immediately. <--
K14L20JAM/19970S1205B1946 - 7 -