HOUSE AMENDED
PRIOR PRINTER'S NOS. 1501, 1826, PRINTER'S NO. 2258
1946
No. 1205 Session of 1997
INTRODUCED BY GREENLEAF AND BELL, NOVEMBER 24, 1997
AS REPORTED FROM COMMITTEE ON JUDICIARY, HOUSE OF
REPRESENTATIVES, AS AMENDED, NOVEMBER 9, 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. CIRCUMSTANCES. <--
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.
1 7505. Joint powers and appointment of nondisqualified
2 substituted trustees.
3 7506. Certain powers of beneficiaries not exercisable.
4 § 7501. Legislative intent.
5 This chapter is enacted to codify, clarify and confirm
6 certain existing common law principles of fiduciary and trust
7 law relating to conflicts of interest on the part of trustees.
8 § 7502. Definitions.
9 The following words and phrases when used in this chapter
10 shall have the meanings given to them in this section unless the
11 context clearly indicates otherwise:
12 "Interested party." Each trustee then serving and each
13 person having an interest in income or principal whom it would
14 be necessary to join as a party in a proceeding for the judicial
15 settlement of a trustee's account. The term "interested party"
16 does not include a person who has not attained majority or is
17 otherwise incapacitated, unless a court has appointed a guardian
18 for the person for some purpose other than acting under section
19 7503 (relating to application of chapter) or an agent has been
20 appointed under a durable power of attorney that is sufficient
21 to grant authority to act under section 7503.
22 § 7503. Application of chapter.
23 (a) General rule.--This chapter shall apply to:
24 (1) Any trust created under a governing instrument
25 executed on or after (the Legislative Reference Bureau shall
26 insert here the date that is 90 days after the effective date
27 of this act), unless the governing instrument expressly
28 provides that this chapter does not apply.
29 (2) Any trust created under a governing instrument
30 executed before (the Legislative Reference Bureau shall
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1 insert here the date that is 90 days after the effective date
2 of this act), unless all interested parties affirmatively
3 elect on or before (the Legislative Reference Bureau shall
4 insert here the date that is the third anniversary of the
5 effective date of this act) by a written declaration signed
6 by or on behalf of each interested party and delivered to the
7 trustee, not to be subject to the application of this
8 chapter. In the case of a testamentary trust, the
9 declarations shall be filed with the register in the county
10 in which the will was admitted to probate.
11 (b) Exclusion.--This chapter shall not apply to:
12 (1) Any trust during the time that the trust is
13 revocable or amendable by its settlor.
14 (2) A spouse of a decedent or settlor where the spouse
15 is the trustee of a testamentary or inter vivos trust for
16 which a marital deduction has been allowed.
17 (3) A trustee who possesses in his individual capacity
18 an unlimited right to withdraw the entire principal of the
19 trust or has a general testamentary power of appointment over
20 the entire principal of the trust.
21 (4) A trust under a governing instrument that by
22 specific reference expressly rejects the application of this
23 chapter.
24 (5) A trust created under a governing instrument
25 executed on or before (the Legislative Reference Bureau shall
26 insert here the date that is 90 days after the effective date
27 of this act) if no part of the principal of the trust would
28 be included in the gross estate of the trustee for Federal
29 estate tax purposes if the trustee had died on (the
30 Legislative Reference Bureau shall insert here the date that
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1 is 90 days after the effective date of this act) without
2 having exercised the power under the governing instrument to
3 make discretionary distributions of principal or income to or
4 for the benefit of the trustee, the trustee's estate or the
5 creditors of either.
6 § 7504. Certain trustee powers not exercisable.
7 (a) General rule.--The following powers conferred by a
8 governing instrument upon a trustee in his or her capacity as a
9 trustee shall not be exercised by that trustee:
10 (1) The power to make discretionary distributions of
11 either principal or income to or for the benefit of the
12 trustee, the trustee's estate or the creditors of either,
13 unless the power is either:
14 (i) limited by an ascertainable standard relating to
15 the trustee's health, education, support or maintenance
16 within the meaning of 26 U.S.C. §§ 2041 (relating to
17 powers of appointment) and 2514 (relating to powers of
18 appointment); or
19 (ii) exercisable by the trustee only in conjunction
20 with another person having a substantial interest in the
21 property subject to the power which is adverse to the
22 interest of the trustee within the meaning of 26 U.S.C. §
23 2041(b)(1)(C)(ii).
24 (2) The power to make discretionary distributions of
25 either principal or income to satisfy any of the trustee's
26 personal legal obligations for support or other purposes.
27 (3) The power to make discretionary allocations in the
28 trustee's personal favor of receipts or expenses as between
29 income and principal, unless the trustee has no power to
30 enlarge or shift any beneficial interest except as an
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1 incidental consequence of the discharge of the trustee's
2 fiduciary duties.
3 (4) The power to exercise any of the powers proscribed
4 in this subsection with regard to an individual other than
5 the trustee to the extent that the individual could exercise
6 a similar prohibited power in connection with a trust that
7 benefits the trustee.
8 (b) Limited exercise of prohibited power.--
9 (1) If a trustee is prohibited by subsection (a)(1) from
10 exercising a power conferred upon the trustee, the trustee
11 nevertheless may exercise that power but shall be limited to
12 distributions for the trustee's health, education, support or
13 maintenance to the extent otherwise permitted by the terms of
14 the trust.
15 (2) Unless otherwise prohibited by the provisions of
16 this section, a trustee may exercise a power described herein
17 in favor of someone other than the trustee, the trustee's
18 estate or the creditors of either.
19 § 7505. Joint powers and appointment of nondisqualified
20 substituted trustees.
21 If a governing instrument contains a power proscribed under
22 section 7504 (relating to certain trustee powers not
23 exercisable), the following shall apply:
24 (1) If the power is conferred on two or more trustees,
25 it may be exercised by the trustee or trustees who are not so
26 prohibited as if they were the only trustee or trustees.
27 (2) If there is no trustee in office who can exercise
28 the power as provided in paragraph (1), the court, upon
29 petition and hearing after such notice as it may direct,
30 shall appoint a trustee who is not disqualified and whose
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1 term in office shall be as the court directs for the sole
2 purpose of exercising the powers that the other trustees
3 cannot exercise.
4 § 7506. Certain powers of beneficiaries not exercisable.
5 (a) General rule.--No beneficiary of a trust in an
6 individual, trustee or other capacity, may appoint or remove and
7 appoint a trustee who is related or subordinate to the
8 beneficiary within the meaning of 26 U.S.C. § 672(c) (relating
9 to definitions and rules) unless:
10 (1) the trustee's discretionary power to make
11 distributions to or for the beneficiary is limited by an
12 ascertainable standard relating to the beneficiary's health,
13 education, support or maintenance within the meaning of 26
14 U.S.C. §§ 2041 (relating to powers of appointment) and 2514
15 (relating to powers of appointment);
16 (2) the trustee's discretionary power may not be
17 exercised to satisfy any of the beneficiary's legal
18 obligations for support or other purposes; and
19 (3) the trustee's discretionary power may not be
20 exercised to grant to the beneficiary a general power to
21 appoint property of the trust to the beneficiary, the
22 beneficiary's estate or the creditors thereof within the
23 meaning of 26 U.S.C. § 2041.
24 (b) Exception.--This section shall not apply if the
25 appointment of the trustee by the beneficiary may be made only
26 in conjunction with another person having a substantial interest
27 in the property of the trust, subject to the power, which is
28 adverse to the exercise of the power in favor of the beneficiary
29 within the meaning of 26 U.S.C. § 2041(b)(1)(C)(ii), or the
30 appointment is in conformity with a procedure governing
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1 appointments approved by the court before (the Legislative
2 Reference Bureau shall insert there the effective date of this
3 act).
4 Section 2. Section 8611(a) of Title 20 is amended to read: <--
5 § 8611. Persons who may execute anatomical gift.
6 (a) General rule.--Any individual of sound mind and 18 years
7 of age or more may give all or any part of his body for any
8 purpose specified in section 8612 (relating to persons who may
9 become donees; purposes for which anatomical gifts may be made),
10 the gift to take effect upon death. Any individual who is a
11 minor and 16 years or age or older may effectuate a gift for any
12 purpose specified in section 8612, provided parental or guardian
13 consent is deemed given. Parental or guardian consent shall be
14 noted on the minor's donor card, application for the donor's
15 learner's permit or driver's license or other document of gift.
16 A gift of the whole body shall be invalid unless made in writing
17 at least 15 days prior to the date of death[.] or consent is
18 obtained from the legal next of kin. Where there are adult
19 children of the deceased who are not children of the surviving
20 spouse, their consent shall also be required for a gift of the
21 whole body for anatomical study.
22 * * *
23 Section 3 2. This act shall take effect immediately. <--
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