Oklahoma 2022 Regular Session

Oklahoma Senate Bill SB162 Compare Versions

Version 1 (Old)

Version 2 (New)

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3	28
4		-	An Act
5		-	ENROLLED SENATE
	29	+	HOUSE OF REPRESENTATIVES - FLOOR VERSION
	30	+
	31	+	STATE OF OKLAHOMA
	32	+
	33	+	1st Session of the 58th Legislature (2021)
	34	+
	35	+	ENGROSSED SENATE
6	36		BILL NO. 162 By: Howard of the Senate
7	37
8	38		and
9	39
10	40		McEntire of the House
11		-
12		-
13	41
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17	45		An Act relating to trusts; creating the Oklahoma
18	46		Decanting Act; providing short title; clarifying
19	47		applicability of act; defining terms; establishing
20	48		requirements for distributions by a trustee with full
21	49		discretion; authorizing grant of power of
22	50		appointment; establishing requirements for
23	51		distributions by a trustee with limited discretion;
24	52		defining terms; stating powers of special -needs
25	53		fiduciary under certain circumstances; requiring
26	54		notice to beneficiaries before certain distributions;
27	55		establishing requirements for certain notice;
28	56		providing exceptions to certain no tice requirement;
29	57		specifying required contents of certain notice;
30	58		requiring written instrument for certain
31	59		distributions; clarifying certain reference;
32	60		clarifying status of certain settlor; establishing
33	61		procedures for court -ordered distributions; providing
34	62		for distributions from trustees with divided
35	63		discretion; providing for distribution of
36	64		subsequently discovered assets; construing
37	65		provisions; authorizing certain distributions
38	66		regardless of need; clarifying that provisions create
39	67		no duty; prohibiting cert ain distributions; providing
40	68		exceptions; prohibiting certain distributions
41	69		resulting in reduced tax benefits; establishing
42	70		requirements for certain compensation; providing for
43	71		codification; and providing an effective date .
44	72
45	73
46	74
47	75
48		-	ENR. S. B. NO. 162 Page 2
49	76
50		-
51		-	SUBJECT: Oklahoma Decanting Act
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52	102
53	103		BE IT ENACTED BY THE PEOPLE O F THE STATE OF OKLAHOMA:
54		-
55	104		SECTION 1. NEW LAW A new section of law to be codified
56	105		in the Oklahoma Statutes as Section 175.701 of Title 60, unless
57	106		there is created a duplication in numbering, reads as follows:
58		-
59	107		SHORT TITLE
60		-
61	108		This act shall be known and may be cited as the “Oklahoma
62	109		Decanting Act” and shall apply to any trust administered under the
63	110		laws of this state including a trust whose governing jurisdiction is
64	111		transferred to this state.
65		-
66	112		SECTION 2. NEW LAW A new section of law to be codified
67	113		in the Oklahoma Statutes as Section 175.702 of Title 60, unless
68	114		there is created a duplication in numbering, reads as follows:
69		-
70	115		DEFINITIONS
71		-
72	116		As used in this act, unless the context or subject matter
73	117		otherwise requires:
74		-
75	118		1. “Authorized trustee” means a person, other than the settlor,
76	119		who has authority under the terms of a first trust to distribute the
77	120		principal or income of the trust to or for the benefit of one or
78	121		more current beneficiaries or a special needs fiduciary under
79	122		Section 5 of this act;
80		-
81	123		2. “Charity” means a charitable organization or a charitable
82	124		trust, as those terms are defined by Section 301.3 of Title 60 of
83	125		the Oklahoma Statutes or Section 552.2 of Title 18 of the Oklahoma
84	126		Statutes;
85	127
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86	154		3. “Current beneficiary” with respect to a particular date,
87	155		means a person who is receiving or is eligible to receive a
88	156		distribution of income or principal from a trust on that date;
89		-
90		-
91		-	ENR. S. B. NO. 162 Page 3
92	157		4. “First trust” means an existing irrevocable inter vivos or
93	158		testamentary trust all or part of the pr incipal of which is
94	159		distributed in further trust under Section 3 or 4 of this act;
95		-
96	160		5. “Full discretion” means a power to distribute principal or
97	161		income to or for the benefit of one or more of the beneficiaries of
98	162		a trust that is not a trust with limited d iscretion;
99		-
100	163		6. “Limited discretion” means:
101		-
102	164		a. a power to distribute principal or income according to
103	165		mandatory distribution provisions under which the
104	166		trustee has no discretion, or
105		-
106	167		b. a power to distribute principal or income to or for
107	168		the benefit of one o r more beneficiaries of a trust
108	169		that is limited by an ascertainable standard,
109	170		including the health, education, support or
110	171		maintenance of the beneficiary;
111		-
112	172		7. “Presumptive remainder beneficiary, ” with respect to a
113	173		particular date, means a beneficiary of a t rust on that date who, in
114	174		the absence of notice to the trustee of the exercise of the power of
115	175		appointment and assuming that any other powers of appointment under
116	176		the trust are not exercised, would be eligible to receive a
117	177		distribution from the trust if:
118	178
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119	205		a. the trust terminated on that date, or
120		-
121	206		b. the interests of all current beneficiaries ended on
122	207		that date without causing the trust to terminate;
123		-
124	208		8. “Principal” means property held in trust for distribution
125	209		including accumulated income, that, at the time of the exercise of a
126	210		power of distribution under Section 3 or 4 of this act, is not
127	211		currently required to be distributed;
128		-
129	212		9. “Second trust” means any irrevocable trust to which
130	213		principal is distributed under Section 3 or 4 of this act; and
131		-
132	214		10. “Successor beneficiary” means a beneficiary other than a
133	215		current or presumptive remainder beneficiary. The term does not
134		-
135		-	ENR. S. B. NO. 162 Page 4
136	216		include a potential appointee under a power of appointment held by a
137	217		beneficiary.
138		-
139	218		SECTION 3. NEW LAW A new section of law to be codified
140	219		in the Oklahoma Statutes as Section 175.703 of Title 60, unless
141	220		there is created a duplication in numbering, reads as follows:
142		-
143	221		DISTRIBUTION TO SECOND TRUST: TRUSTEE WITH FULL DISCRETION
144		-
145	222		A. An authorized trustee who has the full discretion to
146	223		distribute the principal or income of a trust may distribute all or
147	224		part of the principal of that trust in favor of a trustee of a
148		-	second trust for the benefit of one, more than one or all of the
	225	+	second trust for the benefit of one, more than one, or all of the
149	226		current beneficiaries of the first trust and for the be nefit of one,
150		-	more than one or all of the successor or presumptive remainder
	227	+	more than one, or all of the successor or presumptive remainder
151	228		beneficiaries of the first trust.
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152	255
153	256		B. The authorized trustee may, in connection with the exercise
154	257		of a power of distribution under this section, grant a power of
155	258		appointment including a currently exercisable power of appointment,
156	259		in the second trust to one or more of the current beneficiaries of
157	260		the first trust who, at the time the power of appointment is
158	261		granted, is eligible to receive a distribution of principal under
159	262		the terms of the first trust.
160		-
161	263		C. If the authorized trustee grants a power of appointment to a
162	264		beneficiary under subsection B of this section, the class of
163	265		permissible appointees in whose favor the beneficiary may appoint
164	266		under that power may be broader or different than the current,
165	267		successor, and presumptive remainder beneficiaries of the first
166	268		trust.
167		-
168	269		D. If the beneficiaries of the first trust are described as a
169	270		class of persons, the beneficiaries of the second trust may include
170	271		one or more persons who become memb ers of that class after the
171	272		distribution to the second trust.
172		-
173	273		E. The authorized trustee shall exercise a power to distribute
174	274		under this section in good faith, in accordance with the terms and
175	275		purposes of the trust, and in the interests of the beneficiarie s.
176		-
177		-
178		-	ENR. S. B. NO. 162 Page 5
179	276		SECTION 4. NEW LAW A new section of law to be codified
180	277		in the Oklahoma Statutes as Section 175.704 of Title 60, unless
181	278		there is created a duplication in numbering, reads as follows:
	279	+	DISTRIBUTION TO SECOND TRUST: TRUSTEE WITH LIMITED DISCRETION
182	280
183		-	DISTRIBUTION TO SECOND TRUST: TRUSTEE WITH LIMITED DISCRETION
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184	306
185	307		A. An authorized trustee who has limited discretion to
186	308		distribute the principal of a trust may distribute all or part of
187	309		the principal of that trust in favor of a trustee of a second trust
188	310		as provided by this section.
189		-
190	311		B. The current benef iciaries of the second trust shall be
191	312		substantially the same as the current beneficiaries of the first
192	313		trust, and the successor and presumptive remainder beneficiaries of
193	314		the second trust shall be substantially the same as the successor
194	315		and presumptive remainder beneficiaries of the first trust , as
195	316		determined in the reasonable discretion of the authorized trustee .
196		-
197	317		C. If the beneficiaries of the first trust are described as a
198	318		class of persons, the beneficiaries of the second trust shall
199	319		include substantiall y the same persons who become members of that
200	320		class after the distribution to the second trust , as determined in
201	321		the reasonable discretion of the authorized trustee .
202		-
203	322		D. If the first trust grants a power of appointment to a
204	323		beneficiary of the trust, the se cond trust shall grant the power of
205	324		appointment to the beneficiary in the second trust, and the class of
206	325		permissible appointees under that power shall be the same as the
207	326		class of permissible appointees under the power granted by the first
208	327		trust.
209		-
210	328		E. The exercise of a power of distribution under this section
211	329		shall be made by the authorized trustee in good faith, in accordance
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212	357		with the terms and purposes of the trust, and in the interests of
213	358		the beneficiaries.
214		-
215	359		SECTION 5. NEW LAW A new section of law to be codified
216	360		in the Oklahoma Statutes as Section 175.705 of Title 60, unless
217	361		there is created a duplication in numbering, reads as follows:
218		-
219	362		TRUST FOR BENEFICIARY WITH DISABILITY
220		-
221		-
222		-	ENR. S. B. NO. 162 Page 6
223	363		A. As used in this act:
224		-
225	364		1. “Beneficiary with a disability ” means a beneficiary of a
226	365		first trust who the special -needs fiduciary believes may qualify for
227	366		governmental benefits based on disability, whether or not the
228	367		beneficiary currently receives those benefits or is an individual
229	368		who has been adjudicated incompete nt;
230		-
231	369		2. “Governmental benefits ” means financial aid or services from
232		-	a state, federal or other public agency;
233		-
	370	+	a state, federal, or other public agency;
234	371		3. “Special-needs fiduciary” means, with respect to a trust
235	372		that has a beneficiary with a disability:
236		-
237	373		a. a trustee or other fiduciary, other tha n a settlor,
238	374		that has discretion to distribute part or all of the
239	375		principal of a first trust to one or more current
240	376		beneficiaries,
241		-
242	377		b. if no trustee or fiduciary has discretion under
243	378		subparagraph a of this section, a trustee or other
244	379		fiduciary, other than a settlor, that has discretion
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245	407		to distribute part or all of the income of the first
246	408		trust to one or more current beneficiaries, or
247		-
248	409		c. if no trustee or fiduciary has discretion under
249	410		subparagraphs a and b of this section, a trustee or
250	411		other fiduciary, other than a settlor, that is
251	412		required to distribute part or all of the income or
252	413		principal of the first trust to one or more current
253	414		beneficiaries; and
254		-
255	415		4. “Special-needs trust” means a trust the trustee believes
256	416		would not be considered a resource for purposes of determining
257	417		whether a beneficiary with a disability is eligible for governmental
258	418		benefits.
259		-
260	419		B. A special-needs fiduciary may exercise the decanting power
261	420		under Section 3 of this act over the principal of a first trust as
262	421		if the fiduciary had authority t o distribute principal to a
263	422		beneficiary with a disability subject to expanded distributive
264	423		discretion if:
265		-
266		-	ENR. S. B. NO. 162 Page 7
267		-
268	424		1. A second trust is a special -needs trust that benefits the
269	425		beneficiary with a disability; and
270		-
271	426		2. The special-needs fiduciary determines that exerc ise of the
272	427		decanting power will further the purposes of the first trust.
273		-
274	428		C. In an exercise of the decanting power under this section,
275	429		the following rules apply:
276	430
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277	457		1. Notwithstanding Section 3 of this act, the interest in the
278	458		second trust of a beneficiary w ith a disability may:
279		-
280	459		a. be a pooled trust as defined by Medicaid law for the
281	460		benefit of the beneficiary with a disability under 42
282	461		U.S.C., Section 1396p(d)(4)(C), as amended, or
283		-
284	462		b. contain payback provisions complying with
285	463		reimbursement requirements of Me dicaid law under 42
286	464		U.S.C., Section 1396p(d)(4)(A), as amended; and
287		-
288	465		2. Except as affected by any change to the interests of the
289	466		beneficiary with a disability, the second trust, or if there are two
290	467		or more second trusts, the second trusts in the aggregate, shall
291	468		comply with Section 3 or 4 of this act with respect to the interest
292	469		or interests of each other current beneficiary, presumptive
293		-	remainder beneficiary or successor beneficiary.
294		-
	470	+	remainder beneficiary, or successor beneficiary.
295	471		SECTION 6. NEW LAW A new section of law to be codified
296	472		in the Oklahoma Statutes as Section 175.706 of Title 60, unless
297	473		there is created a duplication in numbering, reads as follows:
298		-
299	474		NOTICE REQUIRED
300		-
301	475		A. An authorized trustee may exercise a power of distribution
302	476		under Section 3 or 4 of this act without the consent of the settlor
303	477		or beneficiaries of the first trust and without court approval if
304	478		the trustee provides to all of the current beneficiaries and
305	479		presumptive remainder beneficiaries written notice of the trustee ’s
306	480		decision to exercise the power.
307	481
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309		-	ENR. S. B. NO. 162 Page 8
310	508		B. For the purpose of determining who is a current beneficiary
311	509		or presumptive remainder beneficiary entitled to the notice, a
312	510		beneficiary is determined as of the date the notice is sent. A
313	511		beneficiary includes a person entitled to receive property under th e
314	512		terms of the first trust.
315		-
316	513		C. Except as provided by paragraph 5 of subsection E of this
317	514		section, in addition to the notice required under subsection A of
318	515		this section, the authorized trustee shall give written notice of
319	516		the trustee’s decision to the atto rney general if:
320		-
321	517		1. A charity is entitled to notice;
322		-
323	518		2. A charity entitled to notice is no longer in existence;
324		-
325	519		3. The trustee has the authority to distribute trust assets to
326	520		one or more charities that are not named in the trust instrument; or
327		-
328	521		4. The trustee has the authority to make distributions for a
329	522		charitable purpose described in the trust instrument, but no charity
330	523		is named as a beneficiary for that purpose.
331		-
332	524		D. If the beneficiary has a court -appointed guardian or
333	525		conservator, the notice required to be given by this section shall
334	526		be given to that guardian or conservator. If the beneficiary is a
335	527		minor for whom no guardian or conservator has been appointed, the
336	528		notice required to be given by this section shall be given to a
337	529		parent of the minor. For purposes of paragraph 3 of subsection E of
338	530		this section, a beneficiary is considered to have waived the
339	531		requirement that notice be given under this section if a person to
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340	559		whom notice is required to be given with respect to that beneficiary
341	560		under this subsection waives the requirement that notice be given
342	561		under this section.
343		-
344	562		E. The authorized trustee is not required to provide notice:
345		-
346	563		1. To a beneficiary who is known to the trustee and cannot be
347	564		located by the trustee after reasonable diligence;
348		-
349	565		2. To a beneficiary who is not known to the trustee;
350		-
351		-
352		-	ENR. S. B. NO. 162 Page 9
353	566		3. To a beneficiary who waives the requirement of the notice
354	567		under this section;
355		-
356	568		4. To a beneficiary who is a descendant of a beneficiary to
357	569		whom the trustee has given notice if the beneficiary and the
358	570		beneficiary’s ancestor have similar interests in the trust and no
359	571		apparent conflict of interest exists between them; or
360		-
361	572		5. To the attorney general under subsection C of this section
362	573		if the attorney general waives that requirement in writing.
363		-
364	574		F. The notice requi red under subsection A of this section
365	575		shall:
366		-
367	576		1. Include a statement that:
368		-
369	577		a. the authorized trustee intends to exercise the power
370	578		of distribution,
371		-
372	579		b. the beneficiary has the right to object to the
373	580		exercise of the power, and
374	581
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375	608		c. the beneficiary may petitio n a court to approve,
376		-	modify or deny the exercise of the trustee’s power to
	609	+	modify, or deny the exercise of the trustee ’s power to
377	610		make a distribution under this act;
378		-
379	611		2. Describe the manner in which the trustee intends to exercise
380	612		the power;
381		-
382	613		3. Specify the date the trustee proposes to distribute the
383	614		first trust to the second trust;
384		-
385	615		4. Include the name and mailing address of the trustee;
386		-
387	616		5. Include copies of the agreements of the first trust and the
388	617		proposed second trust;
389		-
390	618		6. Be given not later than the ninetieth day before the
391	619		proposed date of distribution to the second trust; and
392		-
393		-
394		-	ENR. S. B. NO. 162 Page 10
395	620		7. Be sent by registered or certified mail, return receipt
396	621		requested, or delivered in person, unless the notice is waived in
397	622		writing by the person to whom notice is required to be given.
398		-
399	623		SECTION 7. NEW LAW A new section of law to be codified
400	624		in the Oklahoma Statutes as Section 175.707 of Title 60, unless
401	625		there is created a duplication in numbering, reads as follows:
402		-
403	626		WRITTEN INSTRUMENT REQUIRED
404		-
405	627		A distribution under Section 3 or 4 of this act shall be made by
406	628		a written instrument that is signed and acknowledged by the
407	629		authorized trustee and filed with the records of the first trust and
408	630		the second trust.
409	631
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410	658		SECTION 8. NEW LAW A new section of law to be codified
411	659		in the Oklahoma Statutes as Section 175.708 of Title 60, unless
412	660		there is created a duplication in numbering, reads as follows:
413		-
414	661		REFERENCE TO TRUST TERMS
415		-
416	662		A reference to the governing instrument or terms of the
417	663		governing instrument of a trust includes the terms of a second trust
418	664		to which that trust’s principal was distributed under this act.
419		-
420	665		SECTION 9. NEW LAW A new section of law to be codified
421	666		in the Oklahoma Statutes as Section 175.709 of Title 60, unless
422	667		there is created a duplication in numbering, reads as follows:
423		-
424	668		SETTLOR OF SECOND TRUST
425		-
426	669		A. Except as provided by subsection B of this section, the
427	670		settlor of a first trust is considered to be the settlor of a second
428	671		trust established under this act.
429		-
430	672		B. If a settlor of a first trust is not also the settlor o f a
431	673		second trust into which principal of that first trust is
432	674		distributed, the settlor of the first trust is considered the
433	675		settlor of the portion of the second trust distributed to the second
434	676		trust from that first trust under this act.
435		-
436		-
437		-	ENR. S. B. NO. 162 Page 11
438	677		SECTION 10. NEW LAW A new section of law to be codified
439	678		in the Oklahoma Statutes as Section 175.710 of Title 60, unless
440	679		there is created a duplication in numbering, reads as follows:
	680	+	COURT-ORDERED DISTRIBUTION
441	681
442		-	COURT-ORDERED DISTRIBUTION
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443	707
444	708		A. An authorized trustee may petition a co urt to order a
445	709		distribution under this act.
446		-
447	710		B. If the authorized trustee receives a written objection to a
448	711		distribution under this act from a beneficiary before the proposed
449	712		effective date of the distribution specified in the notice provided
450	713		to the beneficiary under Section 6 of this act, the trustee or the
451		-	beneficiary may petition a court to approve, modify or deny the
	714	+	beneficiary may petition a court to approve, modify, or deny the
452	715		exercise of the trustee ’s power to make a distribution under this
453	716		act.
454		-
455	717		C. If the authorized trustee receives a written objection to
456	718		the distribution from the attorney general not later than the
457	719		thirtieth day after the date the notice required by Section 6 of
458	720		this act was received by the attorney general, the trustee shall not
459	721		make a distribution under Section 3 or 4 of this act without
460	722		petitioning a court to approve or modify the exercise of the
461	723		trustee’s power to make a distribution under this act.
462		-
463	724		D. In a judicial proceeding under this section, the authorized
464	725		trustee may present the trustee ’s reasons for supporting or opposing
465	726		a proposed distribution, including whether the trustee believes the
466	727		distribution would enable the trustee to better carry out the
467	728		purposes of the trust.
468		-
469	729		E. The authorized trustee has the burden of proving that the
470	730		proposed distribution furthers the purposes of the trust, is not
	731	+
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471	758		expressly prohibited by the terms of the trust, and is in the
472	759		interests generally of the beneficiaries.
473		-
474	760		F. This section does not limit a beneficiary ’s right to bring
475	761		an action against a trustee for a breach of trust.
476		-
477	762		SECTION 11. NEW LAW A new section of law to be codified
478	763		in the Oklahoma Statutes as Section 175.711 of Title 60, unless
479	764		there is created a duplication in numbering, reads as follows:
480		-
481		-	ENR. S. B. NO. 162 Page 12
482		-
483	765		DIVIDED DISCRETION
484		-
485	766		If an authorized trustee has full discretion to distrib ute the
486	767		principal of a trust and another trustee has limited discretion to
487	768		distribute principal under the trust instrument, the authorized
488	769		trustee having full discretion may exercise the power to distribute
489	770		the trust’s principal under Section 3 of this act .
490		-
491	771		SECTION 12. NEW LAW A new section of law to be codified
492	772		in the Oklahoma Statutes as Section 175.712 of Title 60, unless
493	773		there is created a duplication in numbering, reads as follows:
494		-
495	774		LATER DISCOVERED ASSETS
496		-
497	775		To the extent the author ized trustee does not provide otherwise:
498		-
499	776		1. The distribution of all of the principal of a first trust to
500	777		a second trust includes subsequently discovered assets otherwise
501	778		belonging to the first trust and principal paid to or acquired by
502	779		the first trust after the distribution of the first trust ’s
503	780		principal to the second trust; and
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504	807
505	808		2. The distribution of part of the principal of a first trust
506	809		to a second trust does not include subsequently discovered assets
507	810		belonging to the first trust or principal paid to o r acquired by the
508	811		first trust after the distribution of principal from the first trust
509	812		to the second trust, and those assets or that principal remain the
510	813		assets or principal of the first trust.
511		-
512	814		SECTION 13. NEW LAW A new section of la w to be codified
513	815		in the Oklahoma Statutes as Section 175.713 of Title 60, unless
514	816		there is created a duplication in numbering, reads as follows:
515		-
516	817		OTHER AUTHORITY TO DISTRIBUTE IN FURTHER TRUST NOT LIMITED
517		-
518	818		This act shall not be construed to limit the power of an
519	819		authorized trustee to distribute property in further trust under the
520	820		terms of the governing instrument of a trust, other law, or a court
521	821		order.
522		-
523		-
524		-	ENR. S. B. NO. 162 Page 13
525	822		SECTION 14. NEW LAW A new section of law to be codified
526	823		in the Oklahoma Statutes as S ection 175.714 of Title 60, unless
527	824		there is created a duplication in numbering, reads as follows:
528		-
529	825		NEED FOR DISTRIBUTION NOT REQUIRED
530		-
531	826		An authorized trustee may exercise the power to distribute
532	827		principal to a second trust under Section 3 or 4 of this act
533	828		regardless of whether there is a current need to distribute
534	829		principal under the terms of the first trust.
535	830
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536	857		SECTION 15. NEW LAW A new section of law to be codified
537	858		in the Oklahoma Statutes as Section 175.715 of Title 60, unless
538	859		there is created a duplication in numbering, reads as follows:
539		-
540	860		DUTIES NOT CREATED
541		-
542	861		A. This act does not create or imply a duty for an authorized
543	862		trustee to exercise a power to distribute principal, and impropriety
544	863		shall not be inferred as a result of the trustee not exercising a
545	864		power conferred by Section 3 or 4 of this act.
546		-
547	865		B. An authorized trustee does not have a duty to inform
548	866		beneficiaries about the availability of the authority provided by
549	867		this act or a duty to review the trust to determine whether any
550	868		action should be taken under this act.
551		-
552	869		SECTION 16. NEW LAW A new section of law to be codified
553	870		in the Oklahoma Statutes as Section 175.716 of Title 60, unless
554	871		there is created a duplication in numbering, reads as follows:
555		-
556	872		CERTAIN DISTRIBUTIONS PROHIBITED
557		-
558	873		A. Except as provided by subsection B of this section, an
559	874		authorized trustee shall not exercise a power to distribute
560	875		principal of a trust otherwise provided by Section 3 or 4 of this
561	876		act if the distribution is expressly prohibited by the te rms of the
562	877		governing instrument of the trust.
563		-
564	878		B. A general prohibition of the amendment or revocation of a
565	879		trust or a provision that constitutes a spendthrift clause shall not
566	880
567		-	ENR. S. B. NO. 162 Page 14
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	906	+
568	907		preclude the exercise of a power to distribute principal of a trust
569	908		under Section 3 or 4 of this act.
570		-
571	909		SECTION 17. NEW LAW A new section of law to be codified
572	910		in the Oklahoma Statutes as Section 175.717 of Title 60, unless
573	911		there is created a duplication in numbering, reads as follows:
574		-
575	912		EXCEPTIONS TO POWER OF DIST RIBUTION
576		-
577	913		An authorized trustee shall not exercise a power to distribute
578	914		principal of a trust under Section 3 or 4 of this act to:
579		-
580		-	1. Reduce, limit or modify a beneficiary’s current, vested
	915	+	1. Reduce, limit, or modify a beneficiary ’s current, vested
581	916		right to:
582		-
583	917		a. receive a mandatory distribution of income or
584	918		principal,
585		-
586	919		b. receive a mandatory annuity or unitrust interest,
587		-
588	920		c. withdraw a percentage of the value of the trust, or
589		-
590	921		d. withdraw a specified dollar amount from the trust;
591		-
592	922		2. Materially limit a trustee ’s fiduciary duty:
593		-
594	923		a. under the terms of the trust, or
595		-
596	924		b. in a manner that would be prohibited by the Oklahoma
597	925		Trust Act, Section 175.1 et seq. of Title 60 of the
598	926		Oklahoma Statutes, the Oklahoma Prudent Investor Act,
599	927		Section 175.60 et seq. of Title 60 of the Oklahoma
600	928		Statutes, the Oklahoma Principal and Income Act ,
601	929		Section 175.101 et seq. of Title 60 of the Oklahoma
602		-	Statutes or the Oklahoma Charitable Fiduciary Act,
	930	+	Statutes, or the Oklahoma Charitable Fiduciary Act,
	931	+
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	957	+
603	958		Section 301.1 et seq. of Title 60 of the Oklahoma
604	959		Statutes;
605		-
606	960		3. Decrease or indemnify against a trustee ’s liability or
607	961		exonerate a trustee from liabil ity;
608		-
609		-
610		-	ENR. S. B. NO. 162 Page 15
611	962		4. Add a provision exonerating a trustee for failure to
612		-	exercise reasonable care, diligence and prudence;
613		-
	963	+	exercise reasonable care, diligence, and prudence;
614	964		5. Eliminate a provision granting another person the right to
615	965		remove or replace the authorized trustee exercising the distribution
616	966		power under Section 3 or 4 of this act; or
617		-
618		-	6. Reduce, limit or modify in the second tru st a perpetuities
	967	+	6. Reduce, limit, or modify in the second trust a perpetuities
619	968		provision included in the first trust, unless expressly permitted by
620	969		the terms of the first trust.
621		-
622	970		SECTION 18. NEW LAW A new section of l aw to be codified
623	971		in the Oklahoma Statutes as Section 175.718 of Title 60, unless
624	972		there is created a duplication in numbering, reads as follows:
625		-
626	973		TAX-RELATED LIMITATIONS
627		-
628	974		A. The authorized trustee shall not distribute the principal of
629	975		a trust under Section 3 or 4 of this act in a manner that would
630	976		prevent a contribution to that trust from qualifying for or that
631		-	would reduce the exclusion, deduction or other federal tax benefit
	977	+	would reduce the exclusion, deduction, or other federal tax benefit
632	978		that was originally claimed for that contribution, including:
633		-
634	979		1. The annual exclusion under Section 2503(b) of the Internal
635	980		Revenue Code of 1986, as amended;
636	981
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	1007	+
637	1008		2. A marital deduction under Section 2056(a) or 2523(a) of the
638	1009		Internal Revenue Code of 1986, as amended;
639		-
640	1010		3. The charitable deduction under Section 170(a), 642(c),
641	1011		2055(a), or 2522(a) of the Internal Revenue Code of 1986, as
642	1012		amended;
643		-
644	1013		4. Direct skip treatment under Section 2642(c) of the Internal
645	1014		Revenue Code of 1986, as amended; or
646		-
647	1015		5. Any other tax benefit for income, gift, estate, or
648	1016		generation-skipping transfer tax purposes under the Internal Revenue
649	1017		Code of 1986, as amended.
650		-
651	1018		B. Notwithstanding subsection A of this section, an authorized
652	1019		trustee may distribute the principal of a first trust to a second
653		-
654		-	ENR. S. B. NO. 162 Page 16
655	1020		trust regardless of whether the settlor is treated as the owner of
656	1021		either or both trusts under the Internal Revenue Code, 26 U.S.C.,
657	1022		Sections 671 through 679, as amended.
658		-
659	1023		C. If S corporation stock is held in trust, an authorized
660	1024		trustee shall not distribute all or part of that stock under Section
661	1025		3 or 4 of this act to a second trust that is not a permitted
662	1026		shareholder under the Internal Revenue Code, 26 U.S.C., Section
663	1027		1361(c)(2), as amended.
664		-
665	1028		D. If an interest in property that is subject to the minimum
666	1029		distribution rules of the Internal Revenue Code, 26 U.S.C., Section
667	1030		401(a)(9), as amended, is held in trust, an authorized trustee shall
668	1031		not distribute the trust ’s interest in the property to a second
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	1058	+
669	1059		trust under Section 3 or 4 of this act if the distribution would
670	1060		shorten the minimum distribution period applicable to the propert y.
671		-
672	1061		SECTION 19. NEW LAW A new section of law to be codified
673	1062		in the Oklahoma Statutes as Section 175.719 of Title 60, unless
674	1063		there is created a duplication in numbering, reads as follows:
675		-
676	1064		COMPENSATION OF TRUSTEE
677		-
678	1065		A. Except as provided by subsection B of this section and
679	1066		unless a court, on application of the authorized trustee, directs
680	1067		otherwise, the trustee shall not exercise a power under Section 3 or
681	1068		4 of this act solely to change trust provisions regarding the
682	1069		determination of the co mpensation of any trustee.
683		-
684	1070		B. An authorized trustee, in connection with the exercise of a
685	1071		power under Section 3 or 4 of this act for another valid and
686	1072		reasonable purpose, may bring the trustee ’s compensation into
687	1073		conformance with reasonable limits authori zed by state law.
688		-
689	1074		C. The compensation payable to an authorized trustee of the
690	1075		first trust may continue to be paid to the trustee of the second
691	1076		trust during the term of the second trust and may be determined in
692	1077		the same manner as the compensation would hav e been determined in
693	1078		the first trust.
694		-
695		-
696		-	ENR. S. B. NO. 162 Page 17
697	1079		D. An authorized trustee shall not receive a commission or
698	1080		other compensation for the distribution of a particular asset from a
699	1081		first trust to a second trust under Section 3 or 4 of this act.
700	1082
701		-
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702	1108
703	1109		SECTION 20. This act shall become effective November 1, 2021.
704	1110
705		-
706		-	ENR. S. B. NO. 162 Page 18
707		-	Passed the Senate the 2nd day of March, 2021.
708		-
709		-
710		-
711		-	Presiding Officer of the Senate
712		-
713		-
714		-	Passed the House of Representa tives the 21st day of April, 2021.
715		-
716		-
717		-
718		-	Presiding Officer of the House
719		-	of Representatives
720		-
721		-	OFFICE OF THE GOVERNOR
722		-	Received by the Office of the Governor this _______ _____________
723		-	day of _________________ __, 20_______, at _______ o'clock _______ M.
724		-	By: _________________________________
725		-	Approved by the Governor of the State of Oklahoma this _____ ____
726		-	day of _________________ __, 20_______, at _______ o'clock _______ M.
727		-
728		-	_________________________________
729		-	Governor of the State of Oklahoma
730		-
731		-
732		-	OFFICE OF THE SECRETARY OF STATE
733		-	Received by the Office of the Secretary of State this _______ ___
734		-	day of __________________, 20 _______, at _______ o'clock _______ M.
735		-	By: _______________________________ __
	1111	+	COMMITTEE REPORT BY: COMMITTEE ON JUDICIARY - CIVIL, dated
	1112	+	03/30/2021 - DO PASS.