Session of 2023
HOUSE BILL No. 2172
By Committee on Judiciary
1-25
AN ACT concerning trusts; enacting the uniform trust decanting act;
relating to the power of an authorized fiduciary to distribute property of
a first trust to one or more second trusts or to modify the terms of the
first trust.
Be it enacted by the Legislature of the State of Kansas:
Section 1. Sections 1 through 30, and amendments thereto, shall be
known and may be cited as the uniform trust decanting act.
Sec. 2. As used in the uniform trust decanting act:
(a) "Appointive property" means the property or property interest
subject to a power of appointment.
(b) "Ascertainable standard" means a standard relating to an
individual's health, education, support or maintenance within the meaning
of 26 U.S.C. § 2041(b)(1)(A) or 26 U.S.C. § 2514(c)(1) and any applicable
regulations.
(c) "Authorized fiduciary" means a:
(1) Trustee or other fiduciary, other than a settlor, that has discretion
to distribute or direct a trustee to distribute part or all of the principal of
the first trust to one or more current beneficiaries;
(2) special fiduciary appointed under section 9, and amendments
thereto; or
(3) special-needs fiduciary under section 13, and amendments thereto.
(d) "Beneficiary" means a person that:
(1) Has a present or future, vested or contingent, beneficial interest in
a trust;
(2) holds a power of appointment over trust property; or
(3) is an identified charitable organization that will or may receive
distributions under the terms of the trust.
(e) "Charitable interest" means an interest in a trust that:
(1) Is held by an identified charitable organization and makes the
organization a qualified beneficiary;
(2) benefits only charitable organizations and, if the interest were
held by an identified charitable organization, would make the organization
a qualified beneficiary; or
(3) is held solely for charitable purposes and, if the interest were held
by an identified charitable organization, would make the organization a
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qualified beneficiary.
(f) "Charitable organization" means a:
(1) Person, other than an individual, organized and operated
exclusively for charitable purposes; or
(2) government or governmental subdivision, agency or
instrumentality, to the extent it holds funds exclusively for a charitable
purpose.
(g) "Charitable purpose" means the relief of poverty, the advancement
of education or religion, the promotion of health, a municipal or other
governmental purpose or another purpose the achievement of which is
beneficial to the community.
(h) "Court" means the district court.
(i) "Current beneficiary" means a beneficiary that, on the date the
beneficiary's qualification is determined, is a distributee or permissible
distributee of trust income or principal. The term includes the holder of a
presently exercisable general power of appointment but does not include a
person that is a beneficiary only because the person holds any other power
of appointment.
(j) "Decanting power" or "the decanting power" means the power of
an authorized fiduciary under the uniform trust decanting act to distribute
property of a first trust to one or more second trusts or to modify the terms
of the first trust.
(k) "Expanded distributive discretion" means a discretionary power of
distribution that is not limited to an ascertainable standard or a reasonably
definite standard.
(l) "First trust" means a trust over which an authorized fiduciary may
exercise the decanting power.
(m) "First-trust instrument" means the trust instrument for a first
trust.
(n) "General power of appointment" means a power of appointment
exercisable in favor of a powerholder, the powerholder's estate, a creditor
of the powerholder or a creditor of the powerholder's estate.
(o) "Jurisdiction," with respect to a geographic area, includes a state
or country.
(p) "Person" means an individual, estate, business or nonprofit entity,
public corporation, government or governmental subdivision, agency or
instrumentality or other legal entity.
(q) "Power of appointment" means a power that enables a
powerholder acting in a nonfiduciary capacity to designate a recipient of
an ownership interest in or another power of appointment over the
appointive property. The term does not include a power of attorney.
(r) "Powerholder" means a person in which a donor creates a power
of appointment.
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(s) "Presently exercisable power of appointment" means a power of
appointment exercisable by the powerholder at the relevant time. The
term:
(1) Includes a power of appointment exercisable only after the
occurrence of a specified event, the satisfaction of an ascertainable
standard or the passage of a specified time only after the:
(A) Occurrence of the specified event;
(B) satisfaction of the ascertainable standard; or
(C) passage of the specified time; and
(2) does not include a power exercisable only at the powerholder's
death.
(t) "Qualified beneficiary" means a beneficiary that, on the date the
beneficiary's qualification is determined:
(1) Is a distributee or permissible distributee of trust income or
principal;
(2) would be a distributee or permissible distributee of trust income
or principal if the interests of the distributees described in paragraph (1)
terminated on that date without causing the trust to terminate; or
(3) would be a distributee or permissible distributee of trust income
or principal if the trust terminated on that date.
(u) "Reasonably definite standard" means a clearly measurable
standard under which a holder of a power of distribution is legally
accountable within the meaning of 26 U.S.C. § 674(b)(5)(A) and any
applicable regulations.
(v) "Record" means information that is inscribed on a tangible
medium or that is stored in an electronic or other medium and is
retrievable in perceivable form.
(w) "Second trust" means a:
(1) First trust after modification under the uniform trust decanting act;
or
(2) trust to which a distribution of property from a first trust is or may
be made under the uniform trust decanting act.
(x) "Second-trust instrument" means the trust instrument for a second
trust.
(y) "Settlor," except as otherwise provided in section 25, and
amendments thereto, means a person, including a testator, that creates or
contributes property to a trust. If more than one person creates or
contributes property to a trust, each person is a "settlor" of the portion of
the trust property attributable to the person's contribution except to the
extent another person has power to revoke or withdraw that portion.
(z) "Sign" means, with present intent to authenticate or adopt a
record:
(1) To execute or adopt a tangible symbol; or
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(2) to attach to or logically associate with the record an electronic
symbol, sound or process.
(aa) "State" means a state of the United States, the District of
Columbia, Puerto Rico, the United States Virgin Islands or any territory or
insular possession subject to the jurisdiction of the United States.
(bb) "Terms of the trust" means:
(1) Except as otherwise provided in paragraph (2), the manifestation
of the settlor's intent regarding a trust's provisions as:
(A) Expressed in the trust instrument; or
(B) established by other evidence that would be admissible in a
judicial proceeding;
(2) the trust's provisions as established, determined or amended by a:
(A) Trustee or other person in accordance with applicable law;
(B) court order; or
(C) nonjudicial settlement agreement under K.S.A. 58a-111, and
amendments thereto.
(cc) "Trust instrument" means a record executed by the settlor to
create a trust or by any person to create a second trust that contains some
or all of the terms of the trust, including any amendments.
Sec. 3. (a) Except as otherwise provided in subsections (b) and (c),
the uniform trust decanting act applies to an express trust that is
irrevocable or revocable by the settlor only with the consent of the trustee
or a person holding an adverse interest.
(b) The uniform trust decanting act does not apply to a trust held
solely for charitable purposes.
(c) Subject to section 15, and amendments thereto, a trust instrument
may restrict or prohibit exercise of the decanting power.
(d) The uniform trust decanting act does not limit the power of a
trustee, powerholder or other person to distribute or appoint property in
further trust or to modify a trust under the trust instrument, law of this state
other than the act, common law, a court order or a nonjudicial settlement
agreement.
(e) The uniform trust decanting act does not affect the ability of a
settlor to provide in a trust instrument for the distribution of the trust
property or appointment in further trust of the trust property or for
modification of the trust instrument.
Sec. 4. (a) In exercising the decanting power, an authorized fiduciary
shall act in accordance with its fiduciary duties, including the duty to act in
accordance with the purposes of the first trust.
(b) The uniform trust decanting act does not create or imply a duty to
exercise the decanting power or to inform beneficiaries about the
applicability of the act.
(c) Except as otherwise provided in a first-trust instrument, for
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purposes of the uniform trust decanting act and K.S.A. 58a-801 and 58a-
802(a), and amendments thereto, the terms of the first trust are deemed to
include the decanting power.
Sec. 5. The uniform trust decanting act applies to a trust created
before, on, or after July 1, 2023, that:
(a) Has its principal place of administration in this state, including a
trust whose principal place of administration has been changed to this
state; or
(b) provides by its trust instrument that it is governed by the law of
this state or is governed by the law of this state for the purpose of:
(1) Administration, including administration of a trust whose
governing law for purposes of administration has been changed to the law
of this state;
(2) construction of terms of the trust; or
(3) determining the meaning or effect of terms of the trust.
Sec. 6. A trustee or other person that reasonably relies on the validity
of a distribution of part or all of the property of a trust to another trust, or a
modification of a trust, under the uniform trust decanting act, law of this
state other than the act or the law of another jurisdiction is not liable to any
person for any action or failure to act as a result of the reliance.
Sec. 7. (a) In this section, a notice period begins on the day notice is
given under subsection (c) and ends 59 days after the day notice is given.
(b) Except as otherwise provided in the uniform trust decanting act,
an authorized fiduciary may exercise the decanting power without the
consent of any person and without court approval.
(c) Except as otherwise provided in subsection (f), an authorized
fiduciary shall give notice in a record of the intended exercise of the
decanting power not later than 60 days before the exercise to:
(1) Each settlor of the first trust, if living or then in existence;
(2) each qualified beneficiary of the first trust;
(3) each holder of a presently exercisable power of appointment over
any part or all of the first trust;
(4) each person that currently has the right to remove or replace the
authorized fiduciary;
(5) each other fiduciary of the first trust;
(6) each fiduciary of the second trust;
(7) each person acting as an advisor or protector of the first trust; and
(8) the attorney general, if section 14(b), and amendments thereto,
applies.
(d) An authorized fiduciary is not required to give notice under
subsection (c) to a person that is not known to the fiduciary or is known to
the fiduciary but cannot be located by the fiduciary after reasonable
diligence.
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(e) A notice under subsection (c) shall:
(1) Specify the manner in which the authorized fiduciary intends to
exercise the decanting power, which shall include a statement as to the
authorized fiduciary's reason for the proposed decanting and an
explanation as to the differences between the first trust and the second trust
or trusts;
(2) specify the proposed effective date for exercise of the power;
(3) include a copy of the first-trust instrument;
(4) include a copy of all second-trust instruments;
(5) include a statement indicating the capacity in which the intended
recipient is being given notice; and
(6) include a statement that any application under section 9, and
amendments thereto, shall be filed within six months from the day notice
is given.
(f) The decanting power may be exercised before expiration of the
notice period under subsection (a) if all persons entitled to receive notice
waive the period in a signed record.
(g) The receipt of notice, waiver of the notice period or expiration of
the notice period does not affect the right of a person to file an application
under section 9, and amendments thereto, except as provided in that
section.
(h) An exercise of the decanting power is not ineffective because of
the failure to give notice to one or more persons under subsection (c) if the
authorized fiduciary acted with reasonable care to comply with subsection
(c).
Sec. 8. (a) Notice to a person with authority to represent and bind
another person under a first-trust instrument or the Kansas uniform trust
code, K.S.A. 58a-101 et seq., and amendments thereto, has the same effect
as notice given directly to the person represented.
(b) Consent of or waiver by a person with authority to represent and
bind another person under a first-trust instrument or the Kansas uniform
trust code, K.S.A. 58a-101 et seq., and amendments thereto, is binding on
the person represented unless the person represented objects to the
representation before the consent or waiver otherwise would become
effective.
(c) A person with authority to represent and bind another person
under a first-trust instrument or the Kansas uniform trust code, K.S.A. 58a-
101 et seq., and amendments thereto, may file an application under section
9, and amendments thereto, on behalf of the person represented.
(d) A settlor shall not represent or bind a beneficiary under the
uniform trust decanting act.
Sec. 9. (a) On application of an authorized fiduciary, a person entitled
to notice under section 7(c), and amendments thereto, a beneficiary, or
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with respect to a charitable interest, the attorney general or other person
that has standing to enforce the charitable interest, the court may:
(1) Provide instructions to the authorized fiduciary regarding whether
a proposed exercise of the decanting power is permitted under the uniform
trust decanting act and consistent with the fiduciary duties of the
authorized fiduciary;
(2) appoint a special fiduciary and authorize the special fiduciary to
determine whether the decanting power should be exercised under the
uniform trust decanting act and to exercise the decanting power;
(3) approve an exercise of the decanting power;
(4) subject to the limitation set forth in subsection (c), determine that
a proposed or attempted exercise of the decanting power is ineffective
because:
(A) After applying section 22, and amendments thereto, the proposed
or attempted exercise does not or did not comply with the uniform trust
decanting act; or
(B) the proposed or attempted exercise would be or was an abuse of
the fiduciary's discretion or a breach of fiduciary duty;
(5) determine the extent to which section 22, and amendments
thereto, applies to a prior exercise of the decanting power;
(6) provide instructions to the trustee regarding the application of
section 22, and amendments thereto, to a prior exercise of the decanting
power; or
(7) order other relief to carry out the purposes of the uniform trust
decanting act.
(b) On application of an authorized fiduciary, the court may approve:
(1) An increase in the fiduciary's compensation under section 16, and
amendments thereto; or
(2) a modification under section 18, and amendments thereto, of a
provision granting a person the right to remove or replace the fiduciary.
(c) A proceeding under subsection (a)(4) shall not be commenced by
a person entitled to notice under section 7(c), and amendments thereto, or
by a beneficiary unless such proceeding is commenced within six months
from the day notice is given under section 7(a), and amendments thereto.
Failure to receive notice shall not extend the time by which such
proceeding must be commenced if the authorized fiduciary acted with
reasonable diligence to comply with the requirements of section 7(c), and
amendments thereto.
(d) In a judicial proceeding involving the decanting of a trust, the
court, as justice and equity may require, may award costs and expenses,
including reasonable attorney fees, to any party, to be paid by another
party or from the trust that is the subject of the controversy.
Sec. 10. An exercise of the decanting power shall be made in a record
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signed by an authorized fiduciary. The signed record shall, directly or by
reference to the notice required by section 7, and amendments thereto,
identify the first trust and the second trust or trusts and state the property
of the first trust being distributed to each second trust and the property, if
any, that remains in the first trust.
Sec. 11. (a) As used in this section:
(1) "Noncontingent right" means a right that is not subject to the
exercise of discretion or the occurrence of a specified event that is not
certain to occur. The term does not include a right held by a beneficiary if
any person has discretion to distribute property subject to the right to any
person other than the beneficiary or the beneficiary's estate.
(2) "Presumptive remainder beneficiary" means a qualified
beneficiary other than a current beneficiary.
(3) "Successor beneficiary" means a beneficiary that is not a qualified
beneficiary on the date the beneficiary's qualification is determined.
"Successor beneficiary" does not include a person that is a beneficiary
only because the person holds a nongeneral power of appointment.
(4) "Vested interest" means a:
(A) Right to a mandatory distribution that is a noncontingent right as
of the date of the exercise of the decanting power;
(B) current and noncontingent right, annually or more frequently, to a
mandatory distribution of income, a specified dollar amount, or a
percentage of value of some or all of the trust property;
(C) current and noncontingent right, annually or more frequently, to
withdraw income, a specified dollar amount, or a percentage of value of
some or all of the trust property;
(D) presently exercisable general power of appointment; or
(E) right to receive an ascertainable part of the trust property on the
trust's termination that is not subject to the exercise of discretion or to the
occurrence of a specified event that is not certain to occur.
(b) Subject to subsection (c) and section 14, and amendments thereto,
an authorized fiduciary that has expanded distributive discretion over the
principal of a first trust for the benefit of one or more current beneficiaries
may exercise the decanting power over the principal of the first trust.
(c) Subject to section 13, and amendments thereto, in an exercise of
the decanting power under this section, a second trust shall not:
(1) Include as a current beneficiary a person that is not a current
beneficiary of the first trust, except as otherwise provided in subsection
(d);
(2) include as a presumptive remainder beneficiary or successor
beneficiary a person that is not a current beneficiary, presumptive
remainder beneficiary or successor beneficiary of the first trust, except as
otherwise provided in subsection (d); or
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(3) reduce or eliminate a vested interest.
(d) Subject to subsection (c)(3) and section 14, and amendments
thereto, in an exercise of the decanting power under this section, a second
trust may be a trust created or administered under the law of any
jurisdiction and may:
(1) Retain a power of appointment granted in the first trust;
(2) omit a power of appointment granted in the first trust, other than a
presently exercisable general power of appointment;
(3) create or modify a power of appointment if the powerholder is a
current beneficiary of the first trust and the authorized fiduciary has
expanded distributive discretion to distribute principal to the beneficiary;
and
(4) create or modify a power of appointment if the powerholder is a
presumptive remainder beneficiary or successor beneficiary of the first
trust, but the exercise of the power may take effect only after the
powerholder becomes, or would have become if then living, a current
beneficiary.
(e) A power of appointment described in subsection (d) may be
general or nongeneral. The class of permissible appointees in favor of
which the power may be exercised may be broader than or different from
the beneficiaries of the first trust.
(f) If an authorized fiduciary has expanded distributive discretion
over part but not all of the principal of a first trust, the fiduciary may
exercise the decanting power under this section over that part of the
principal over which the authorized fiduciary has expanded distributive
discretion.
Sec. 12. (a) As used in this section, "limited distributive discretion"
means a discretionary power of distribution that is limited to an
ascertainable standard or a reasonably definite standard.
(b) An authorized fiduciary that has limited distributive discretion
over the principal of the first trust for benefit of one or more current
beneficiaries may exercise the decanting power over the principal of the
first trust.
(c) Under this section and subject to section 14, and amendments
thereto, a second trust may be created or administered under the law of any
jurisdiction. Under this section, the second trusts, in the aggregate, shall
grant each beneficiary of the first trust beneficial interests that are
substantially similar to the beneficial interests of the beneficiary in the first
trust.
(d) A power to make a distribution under a second trust for the benefit
of a beneficiary who is an individual is substantially similar to a power
under the first trust to make a distribution directly to the beneficiary. A
distribution is for the benefit of a beneficiary if the:
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(1) Distribution is applied for the benefit of the beneficiary;
(2) beneficiary is under a legal disability or the trustee reasonably
believes the beneficiary is incapacitated, and the distribution is made as
permitted under the Kansas uniform trust code, K.S.A. 58a-101 et seq.,
and amendments thereto; or
(3) distribution is made as permitted under the terms of the first-trust
instrument and the second-trust instrument for the benefit of the
beneficiary.
(e) If an authorized fiduciary has limited distributive discretion over
part but not all of the principal of a first trust, the fiduciary may exercise
the decanting power under this section over that part of the principal over
which the authorized fiduciary has limited distributive discretion.
Sec. 13. (a) As used in this section:
(1) "Beneficiary with a disability" means a beneficiary of a first trust
who the special-needs fiduciary reasonably believes may qualify for
governmental benefits based on disability, whether or not the beneficiary
currently receives those benefits or is an individual who has been
adjudicated as incapacitated.
(2) "Governmental benefits" means financial aid or services from a
state, federal or other public agency.
(3) "Special-needs fiduciary" means, with respect to a trust that has a
beneficiary with a disability:
(A) A trustee or other fiduciary, other than a settlor, that has
discretion to distribute part or all of the principal of a first trust to one or
more current beneficiaries;
(B) if no trustee or fiduciary has discretion under subparagraph (A), a
trustee or other fiduciary, other than a settlor, that has discretion to
distribute part or all of the income of the first trust to one or more current
beneficiaries; or
(C) if no trustee or fiduciary has discretion under subparagraphs (A)
and (B), a trustee or other fiduciary, other than a settlor, that is required to
distribute part or all of the income or principal of the first trust to one or
more current beneficiaries.
(4) "Special-needs trust" means a trust the trustee believes would not
be considered a resource for purposes of determining whether a
beneficiary with a disability is eligible for governmental benefits.
(b) A special-needs fiduciary may exercise the decanting power under
section 11, and amendments thereto, over the principal of a first trust as if
the fiduciary had authority to distribute principal to a beneficiary with a
disability subject to expanded distributive discretion if:
(1) A second trust is a special-needs trust that benefits the beneficiary
with a disability; and
(2) the special-needs fiduciary determines that exercise of the
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decanting power will not be inconsistent with a material purpose of the
first trust.
(c) In an exercise of the decanting power under this section, the
following rules apply:
(1) Notwithstanding section 11(c)(2), and amendments thereto, the
interest in the second trust of a beneficiary with a disability may:
(A) Be a pooled trust as defined by medicaid law for the benefit of
the beneficiary with a disability under 42 U.S.C. § 1396p(d)(4)(C); or
(B) contain payback provisions complying with reimbursement
requirements of medicaid law under 42 U.S.C. § 1396p(d)(4)(A).
(2) Section 11(c)(3), and amendments thereto, does not apply to the
interests of the beneficiary with a disability.
(3) Except as affected by any change to the interests of the
beneficiary with a disability, the second trust, or if there are two or more
second trusts, the second trusts in the aggregate, shall grant each other
beneficiary of the first trust beneficial interests in the second trusts that are
substantially similar to the beneficiary's beneficial interests in the first
trust.
Sec. 14. (a) As used in this section:
(1) "Determinable charitable interest" means a charitable interest that
is a right to a mandatory distribution currently, periodically, on the
occurrence of a specified event or after the passage of a specified time and
is unconditional or will be held solely for charitable purposes.
(2) "Unconditional" means not subject to the occurrence of a
specified event that is not certain to occur, other than a requirement in a
trust instrument that a charitable organization be in existence or qualify
under a particular provision of the United States internal revenue code of
1986 on the date of the distribution, if the charitable organization meets
the requirement on the date of determination.
(b) If a first trust contains a determinable charitable interest, the
attorney general has the rights of a qualified beneficiary and may represent
and bind the charitable interest.
(c) If a first trust contains a charitable interest, the second trust or
trusts shall not:
(1) Diminish the charitable interest;
(2) diminish the interest of an identified charitable organization that
holds the charitable interest;
(3) alter any charitable purpose stated in the first-trust instrument; or
(4) alter any condition or restriction related to the charitable interest.
(d) If there are two or more second trusts, the second trusts shall be
treated as one trust for purposes of determining whether the exercise of the
decanting power diminishes the charitable interest or diminishes the
interest of an identified charitable organization for purposes of subsection
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(c).
(e) If a first trust contains a determinable charitable interest, the
second trust or trusts that include a charitable interest pursuant to
subsection (c) shall be administered under the law of this state unless the:
(1) Attorney general, after receiving notice under section 7, and
amendments thereto, fails to object in a signed record delivered to the
authorized fiduciary within the notice period;
(2) attorney general consents in a signed record to the second trust or
trusts being administered under the law of another jurisdiction; or
(3) court approves the exercise of the decanting power.
(f) The uniform trust decanting act does not limit the powers and
duties of the attorney general under law of this state other than the act.
Sec. 15. (a) An authorized fiduciary shall not exercise the decanting
power to the extent the first-trust instrument expressly prohibits exercise
of:
(1) The decanting power; or
(2) a power granted by state law to the fiduciary to distribute part or
all of the principal of the trust to another trust or to modify the trust.
(b) Exercise of the decanting power is subject to any restriction in the
first-trust instrument that expressly applies to exercise of:
(1) The decanting power; or
(2) a power granted by state law to a fiduciary to distribute part or all
of the principal of the trust to another trust or to modify the trust.
(c) A general prohibition of the amendment or revocation of a first
trust, a spendthrift clause or a clause restraining the voluntary or
involuntary transfer of a beneficiary's interest does not preclude exercise
of the decanting power.
(d) Subject to subsections (a) and (b), an authorized fiduciary may
exercise the decanting power under the uniform trust decanting act even if
the first-trust instrument permits the authorized fiduciary or another person
to modify the first-trust instrument or to distribute part or all of the
principal of the first trust to another trust.
(e) To the extent the creation of a second-trust instrument is
permitted, if a first-trust instrument contains an express prohibition
described in subsection (a) or an express restriction described in
subsection (b), the provision shall be included in the second-trust
instrument.
Sec. 16. (a) If a first-trust instrument specifies an authorized
fiduciary's compensation, the fiduciary shall not exercise the decanting
power to increase the fiduciary's compensation above the specified
compensation unless:
(1) All qualified beneficiaries of the second trust consent to the
increase in a signed record; or
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(2) the increase is approved by the court.
(b) If a first-trust instrument does not specify an authorized
fiduciary's compensation, the fiduciary shall not exercise the decanting
power to increase the fiduciary's compensation above the compensation
permitted by the Kansas uniform trust code, K.S.A. 58a-101 et seq., and
amendments thereto, unless:
(1) All qualified beneficiaries of the second trust consent to the
increase in a signed record; or
(2) the increase is approved by the court.
(c) A change in an authorized fiduciary's compensation that is
incidental to other changes made by the exercise of the decanting power is
not an increase in the fiduciary's compensation for purposes of subsections
(a) and (b).
Sec. 17. (a) Except as otherwise provided in this section, a second-
trust instrument shall not relieve an authorized fiduciary from liability for
breach of trust to a greater extent than the first-trust instrument.
(b) A second-trust instrument may provide for indemnification of an
authorized fiduciary of the first trust or another person acting in a fiduciary
capacity under the first trust for any liability or claim that would have been
payable from the first trust if the decanting power had not been exercised.
(c) A second-trust instrument shall not reduce fiduciary liability in the
aggregate.
(d) Subject to subsection (c), a second-trust instrument may divide
and reallocate fiduciary powers among fiduciaries, including one or more
trustees, distribution advisors, investment advisors, trust protectors or
other persons, and relieve a fiduciary from liability for an act or failure to
act of another fiduciary as permitted by law of this state other than the
uniform trust decanting act.
Sec. 18. An authorized fiduciary shall not exercise the decanting
power to modify a provision in a first-trust instrument granting another
person power to remove or replace the fiduciary unless the:
(a) Person holding the power consents to the modification in a signed
record and the modification applies only to the person;
(b) person holding the power and the qualified beneficiaries of the
second trust consent to the modification in a signed record and the
modification grants a substantially similar power to another person; or
(c) court approves the modification and the modification grants a
substantially similar power to another person.
Sec. 19. (a) As used in this section:
(1) "Grantor trust" means a trust as to which a settlor of a first trust is
considered the owner under 26 U.S.C. §§ 671 through 677 or 26 U.S.C. §
679.
(2) "Internal revenue code" means the United States internal revenue
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code of 1986.
(3) "Nongrantor trust" means a trust that is not a grantor trust.
(4) "Qualified benefits property" means property subject to the
minimum distribution requirements of 26 U.S.C. § 401(a)(9), and any
applicable regulations, or to any similar requirements that refer to 26
U.S.C. § 401(a)(9) or the regulations.
(b) An exercise of the decanting power is subject to the following
limitations:
(1) If a first trust contains property that qualified, or would have
qualified but for provisions of the uniform trust decanting act other than
this section, for a marital deduction for purposes of the gift or estate tax
under the internal revenue code or a state gift, estate or inheritance tax, the
second-trust instrument shall not include or omit any term that, if included
in or omitted from the trust instrument for the trust to which the property
was transferred, would have prevented the transfer from qualifying for the
deduction, or would have reduced the amount of the deduction, under the
same provisions of the internal revenue code or state law under which the
transfer qualified.
(2) If the first trust contains property that qualified, or would have
qualified but for provisions of the uniform trust decanting act other than
this section, for a charitable deduction for purposes of the income, gift or
estate tax under the internal revenue code or a state income, gift, estate or
inheritance tax, the second-trust instrument shall not include or omit any
term that, if included in or omitted from the trust instrument for the trust to
which the property was transferred, would have prevented the transfer
from qualifying for the deduction, or would have reduced the amount of
the deduction, under the same provisions of the internal revenue code or
state law under which the transfer qualified.
(3) If the first trust contains property that qualified, or would have
qualified but for provisions of the uniform trust decanting act other than
this section, for the exclusion from the gift tax described in 26 U.S.C. §
2503(b), the second-trust instrument shall not include or omit a term that,
if included in or omitted from the trust instrument for the trust to which the
property was transferred, would have prevented the transfer from
qualifying under 26 U.S.C. § 2503(b). If the first trust contains property
that qualified, or would have qualified but for provisions of the uniform
trust decanting act other than this section, for the exclusion from the gift
tax described in 26 U.S.C. § 2503(b) by application of 26 U.S.C. §
2503(c), the second-trust instrument shall not include or omit a term that,
if included or omitted from the trust instrument for the trust to which the
property was transferred, would have prevented the transfer from
qualifying under 26 U.S.C. § 2503(c).
(4) If the property of the first trust includes shares of stock in an S
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corporation as defined in 26 U.S.C. § 1361 and the first trust is, or but for
provisions of the uniform trust decanting act other than this section would
be, a permitted shareholder under any provision of 26 U.S.C. § 1361, an
authorized fiduciary may exercise the power with respect to part or all of
the S-corporation stock only if any second trust receiving the stock is a
permitted shareholder under 26 U.S.C. § 1361(c)(2). If the property of the
first trust includes shares of stock in an S corporation and the first trust is,
or but for provisions of the uniform trust decanting act other than this
section would be, a qualified subchapter-S trust within the meaning of 26
U.S.C. § 1361(d), the second-trust instrument shall not include or omit a
term that prevents the second trust from qualifying as a qualified
subchapter-S trust.
(5) If the first trust contains property that qualified, or would have
qualified but for provisions of the uniform trust decanting act other than
this section, for a zero inclusion ratio for purposes of the generation-
skipping transfer tax under 26 U.S.C. § 2642(c), the second-trust
instrument shall not include or omit a term that, if included in or omitted
from the first-trust instrument, would have prevented the transfer to the
first trust from qualifying for a zero inclusion ratio under 26 U.S.C. §
2642(c).
(6) If the first trust is directly or indirectly the beneficiary of qualified
benefits property, the second-trust instrument shall not include or omit any
term that, if included in or omitted from the first-trust instrument, would
have increased the minimum distributions required with respect to the
qualified benefits property under 26 U.S.C. § 401(a)(9) and any applicable
regulations, or any similar requirements that refer to 26 U.S.C. § 401(a)(9)
or the regulations. If an attempted exercise of the decanting power violates
the preceding sentence, the trustee is deemed to have held the qualified
benefits property and any reinvested distributions of the property as a
separate share from the date of the exercise of the power and section 22,
and amendments thereto, applies to the separate share.
(7) If the first trust qualifies as a grantor trust because of the
application of 26 U.S.C. § 672(f)(2)(A), the second trust shall not include
or omit a term that, if included in or omitted from the first-trust instrument,
would have prevented the first trust from qualifying under 26 U.S.C. §
672(f)(2)(A).
(8) As used in this paragraph, "tax benefit" means a federal or state
tax deduction, exemption, exclusion, or other benefit not otherwise listed
in this section, except for a benefit arising from being a grantor trust.
Subject to paragraph (9), a second-trust instrument shall not include or
omit a term that, if included in or omitted from the first-trust instrument,
would have prevented qualification for a tax benefit if the:
(A) First-trust instrument expressly indicates an intent to qualify for
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the benefit or the first-trust instrument clearly is designed to enable the
first trust to qualify for the benefit; and
(B) transfer of property held by the first trust or the first trust
qualified, or but for provisions of the uniform trust decanting act other
than this section, would have qualified for the tax benefit.
(9) Subject to paragraph (4):
(A) Except as otherwise provided in paragraph (7), the second trust
may be a nongrantor trust, even if the first trust is a grantor trust; and
(B) except as otherwise provided in paragraph (10), the second trust
may be a grantor trust, even if the first trust is a nongrantor trust.
(10) An authorized fiduciary shall not exercise the decanting power if
a settlor objects in a signed record delivered to the fiduciary within the
notice period and:
(A) The first trust and a second trust are both grantor trusts, in whole
or in part, the first trust grants the settlor or another person the power to
cause the first trust to cease to be a grantor trust, and the second trust does
not grant an equivalent power to the settlor or other person; or
(B) the first trust is a nongrantor trust and a second trust is a grantor
trust, in whole or in part, with respect to the settlor, unless the:
(i) Settlor has the power at all times to cause the second trust to cease
to be a grantor trust; or
(ii) first-trust instrument contains a provision granting the settlor or
another person a power that would cause the first trust to cease to be a
grantor trust and the second-trust instrument contains the same provision.
Sec. 20. (a) Subject to subsection (b), a second trust may have a
duration that is the same as or different from the duration of the first trust.
(b) To the extent that property of a second trust is attributable to
property of the first trust, the property of the second trust is subject to any
rules governing maximum perpetuity, accumulation or suspension of the
power of alienation that apply to property of the first trust.
Sec. 21. An authorized fiduciary may exercise the decanting power
whether or not under the first trust's discretionary distribution standard the
fiduciary would have made or could have been compelled to make a
discretionary distribution of principal at the time of the exercise.
Sec. 22. (a) If exercise of the decanting power would be effective
under the uniform trust decanting act except that the second-trust
instrument in part does not comply with the act, the exercise of the power
is effective and the following rules apply with respect to the principal of
the second trust attributable to the exercise of the power:
(1) A provision in the second-trust instrument that is not permitted
under the act is void to the extent necessary to comply with this act.
(2) A provision required by the act to be in the second-trust
instrument that is not contained in the instrument is deemed to be included
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in the instrument to the extent necessary to comply with the act.
(b) If a trustee or other fiduciary of a second trust determines that
subsection (a) applies to a prior exercise of the decanting power, the
fiduciary shall take corrective action consistent with the fiduciary's duties.
Sec. 23. (a) As used in this section:
(1) "Animal trust" means a trust or an interest in a trust created to
provide for the care of one or more animals.
(2) "Protector" means a person appointed in an animal trust to enforce
the trust on behalf of the animal or, if no such person is appointed in the
trust, a person appointed by the court for that purpose.
(b) The decanting power may be exercised over an animal trust that
has a protector to the extent the trust could be decanted under the uniform
trust decanting act if each animal that benefits from the trust were an
individual, if the protector consents in a signed record to the exercise of
the power.
(c) A protector for an animal has the rights under the uniform trust
decanting act of a qualified beneficiary.
(d) Notwithstanding any other provision of the uniform trust
decanting act, if a first trust is an animal trust, in an exercise of the
decanting power, the second trust shall provide that trust property may be
applied only to its intended purpose for the period the first trust benefited
the animal.
Sec. 24. A reference in the Kansas uniform trust code, K.S.A. 58a-
101 et seq., and amendments thereto, to a trust instrument or terms of the
trust includes a second-trust instrument and the terms of the second trust.
Sec. 25. (a) For purposes of law of this state other than the uniform
trust decanting act and subject to subsection (b), a settlor of a first trust is
deemed to be the settlor of the second trust with respect to the portion of
the principal of the first trust subject to the exercise of the decanting
power.
(b) In determining settlor intent with respect to a second trust, the
intent of a settlor of the first trust, a settlor of the second trust and the
authorized fiduciary may be considered.
Sec. 26. (a) Except as otherwise provided in subsection (c), if
exercise of the decanting power was intended to distribute all the principal
of the first trust to one or more second trusts, later-discovered property
belonging to the first trust and property paid to or acquired by the first
trust after the exercise of the power is part of the trust estate of the second
trust or trusts.
(b) Except as otherwise provided in subsection (c), if exercise of the
decanting power was intended to distribute less than all the principal of the
first trust to one or more second trusts, later-discovered property belonging
to the first trust or property paid to or acquired by the first trust after
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exercise of the power remains part of the trust estate of the first trust.
(c) An authorized fiduciary may provide in an exercise of the
decanting power or by the terms of a second trust for disposition of later-
discovered property belonging to the first trust or property paid to or
acquired by the first trust after exercise of the power.
Sec. 27. A debt, liability or other obligation enforceable against
property of a first trust is enforceable to the same extent against the
property when held by the second trust after exercise of the decanting
power.
Sec. 28. In applying and construing this uniform act, consideration
shall be given to the need to promote uniformity of the law with respect to
its subject matter among states that enact it.
Sec. 29. The uniform trust decanting act modifies, limits or
supersedes the electronic signatures in global and national commerce act,
15 U.S.C. § 7001 et seq., but does not modify, limit or supersede section
101(c) of that act, 15 U.S.C. § 7001(c), or authorize electronic delivery of
any of the notices described in section 103(b) of that act, 15 U.S.C. §
7003(b).
Sec. 30. If any provision of the uniform trust decanting act or its
application to any person or circumstance is held invalid, the invalidity
does not affect other provisions or applications of the act that can be given
effect without the invalid provision or application, and to this end the
provisions of the act are severable.
Sec. 31. This act shall take effect and be in force from and after its
publication in the statute book.
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