CHAPTER 243
SB 50 – FINAL VERSION
03/30/11 1183s
4May2011… 1533h
1June2011… 1999h
06/22/11 2376CofC
06/22/11 2530EBA
2011 SESSION
08/05
SENATE BILL 50
AN ACT making various changes to laws regulating trusts and trust companies.
SPONSORS: Sen. D’Allesandro, Dist 20; Sen. Bradley, Dist 3; Sen. Odell, Dist 8; Sen. Gallus, Dist 1; Sen. Houde, Dist 5; Rep. Hunt, Ches 7
This bill makes various changes to laws regulating trusts and trust companies.
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Explanation: Matter added to current law appears in bold italics.
Matter removed from current law appears [in brackets and struckthrough.]
Matter which is either (a) all new or (b) repealed and reenacted appears in regular type.
03/30/11 1183s
4May2011… 1533h
1June2011… 1999h
06/22/11 2376CofC
06/22/11 2530EBA
11-1049 08/05
STATE OF NEW HAMPSHIRE
In the Year of Our Lord Two Thousand Eleven
AN ACT making various changes to laws regulating trusts and trust companies.
Be it Enacted by the Senate and House of Representatives in General Court convened:
243:1 Purpose. The general court finds:
I. The market for trusts and fiduciary services across the nation is a rapidly growing sector of the nation’s economy.
II. New Hampshire is uniquely positioned to provide the most attractive legal and financial environment for individuals and families seeking to establish and locate their trusts and investment assets.
III. This act will serve to continue New Hampshire’s firm commitment to be the best and most attractive legal environment in the nation for trusts and fiduciary services, an environment that will continue to attract to our state good-paying jobs for trust and investment management, legal and accounting professionals, and other professionals to provide the support and infrastructure required to service this growing sector of the nation’s economy.
243:2 New Section; Wills; Enforcement of No-Contest Provision. Amend RSA 551 by inserting after section 21 the following new section:
551:22 Enforcement of No-Contest Provision.
I. For the purposes of this section, a “no-contest provision” means a provision of a will that, if given effect, would reduce or eliminate the interest of any beneficiary of such will who, directly or indirectly, initiates or otherwise pursues:
(a) Any action to contest the admission or validity of such will;
(b) Any action to set aside or vary the terms of such will;
(c) Any action to challenge the acts of the executor of such will or other fiduciary of such will in the performance of such executor’s or other fiduciary’s duties as described in such will; or
(d) Any other act or proceedings to frustrate or defeat the testator’s intent as expressed in the terms of such will.
II. A no-contest provision shall be enforceable according to the express terms of the no-contest provision without regard to the presence or absence of probable cause for, or the beneficiary’s good or bad faith in, taking the action that would justify the complete or partial forfeiture of the beneficiary’s interest in the will under the terms of the no-contest provision. A no-contest provision shall be unenforceable to the extent that the will is invalid because of fraud, duress, undue influence, lack of testamentary capacity, or any other reason. In the case of an action solely to challenge the acts of the executor or other fiduciary of the will, a no-contest provision shall be unenforceable to the extent that the executor or other fiduciary has committed a breach of fiduciary duties or breach of trust.
III. Paragraph II of this section shall not apply to:
(a) Any action brought by the executor or other fiduciary of a will that incorporates a no-contest provision, unless the executor or other fiduciary is a beneficiary against whom the no-contest provision is otherwise enforceable;
(b) Any agreement among the beneficiaries and any other interested persons in settlement of a dispute or resolution of any other matter relating to such will;
(c) Any action to determine whether a proposed or pending motion, petition, or other proceeding constitutes a contest within the meaning of a no-contest provision;
(d) Any action brought by a beneficiary under a will or on behalf of any such beneficiary for a construction or interpretation of the will; or
(e) Any action brought by the attorney general for a construction or interpretation of a will containing a charitable trust or charitable bequests or if a provision exists in a will or trust purporting to penalize a charity or charitable interest for contesting the will or trust or instituting other proceedings relating to the estate or trust if probable cause exists for instituting proceedings.
IV. It is the intent of this section to enforce the testator’s intentions as reflected in a no-contest provision described in paragraph II of this section to the greatest extent possible. The provisions of this section shall be construed and applied in a manner consistent with such intent.
V. This section shall apply to all judicial proceedings concerning the enforcement or interpretation of a no-contest provision commenced on or after its effective date.
243:3 Testamentary Trusts; Bond and Surety Requirements for Trustees. Amend RSA 564:1 to read as follows:
564:1 Bonds.
I. Every trustee to whom any estate, real or personal, is devised in trust for any person shall give bond to the judge of probate, with sufficient sureties, or without sureties in estates of five thousand dollars or less where the judge finds it in the interest of the estate, in such sum as the judge may order, except as provided in RSA 564:2, conditioned:
[I.] (a) That [he] the trustee will make and file in the probate office a true inventory of the real estate, goods, chattels, rights and credits so devised, at such time as the judge shall order.
[II.] (b) That [he] the trustee will annually render an account to the judge of the annual income and profit thereof, unless excused by the judge of probate as provided by law.
[III.] (c) That at the expiration of the trust [he] the trustee will adjust and settle his or her account with the judge, and pay and deliver over all balances, money, and property with which [he] the trustee has been intrusted.
[IV.] (d) That [he] the trustee will faithfully execute the trust according to the true intent of the devisor.
II. Except as provided in RSA 564:19, IV, this section shall not apply with respect to any trust exempted from the accounting requirements under RSA 564:19, II.
243:4 Testamentary Trusts; Bonds of Banks. Amend RSA 564:5 to read as follows:
564:5 Bond of Banks. Except as otherwise provided in RSA 564:1, such trust company or national bank when appointed trustee shall give a surety company bond in such sum as the judge may order.
243:5 Testamentary Trusts; Filing Accounts. Amend RSA 564:19 to read as follows:
564:19 Filing Account.
I. Except as otherwise provided in paragraph II, every trustee shall file in the probate court an annual account of administration, unless upon petition [he] the trustee is excused by the judge of probate; but in no event shall [he] the trustee be excused for a period longer than [three] 3 years, except that in cases where such filing may be impractical and may work financial hardship to the trust estate the judge of probate upon written approval of the attorney general may extend said period not exceeding in the aggregate [five] 5 years. Such annual account of administration provided for herein may be allowed by the judge of probate without publication unless he or she shall otherwise order. Before giving notice to settle a final account the trustee shall file it in the probate office and shall cause the fact of such filing to appear in the notice and shall at the same time file a statement of the names and residences of the beneficiaries in the trust estate.
II. The following trusts created under a will shall be exempt from the accounting
requirements of paragraph I:
(a) A trust created under a will admitted to probate on or after January 1, 2012, shall be exempt from the accounting requirements of paragraph I if, under the terms of the will, the testator expressly waives the requirement for annual accountings.
(b) A trust created under any will shall be exempt from the accounting requirements of paragraph I if all of the interested persons agree to waive the trustee’s filing of accounts, and the probate court finds that the waiver of filing of accounts does not violate a material purpose of the trust. The interested persons may agree to waive the trustee’s filing of accounts by means of a nonjudicial settlement agreement within the meaning of RSA 564-B:1-111. For purposes of this subparagraph, the trustee’s filing of accounts is not a material purpose of a trust created under a will unless, under the terms of the will, there is a clear and express manifestation of the testator’s intent that the trust shall be subject to full judicial supervision, including a requirement that the trustee file accounts with the court.
(c) If the court grants a petition for the acceptance of jurisdiction over a trust with respect to which a court of another state has released its jurisdiction, and the court releasing jurisdiction did not require the trustee or trustees of the trust to file accounts with that court, or required that the trustee or trustees of the trust file accounts less frequently than annually, then the court accepting jurisdiction over such trust shall not require accountings whatsoever, or shall require accountings less frequently than annually, as the case may be, on the same basis as may have been required by the court releasing jurisdiction.
III. A trust created under a will described in paragraph II, with respect to which no judicial accountings will be required, shall in all respects be subject to the beneficiary reporting and information requirements of RSA 564-B, the Uniform Trust Code, and all other pertinent provisions of such code, except to the extent that a contrary provision appears in the will under which the trust was created, provided that such contrary provision does not violate any of the mandatory rules of RSA 564-B:1-105. For these purposes, the pertinent terms of the will shall have the same meaning as “terms of a trust” and the “will creating the trust” shall have the same meaning as “trust instrument,” as defined in RSA 564-B:1-103(19) and (20), respectively.
IV. Nothing in this section shall be interpreted to modify or limit the jurisdiction or authority of the probate court to require any trustee of a trust created under a will to make a judicial accounting or to give bond, either upon a motion of an interested person, or on the probate court’s own action.
V. For purposes of this section, an “interested person” means any person who has standing to petition the court to order the trustee to account, including the director of charitable trusts if, with respect to the trust, the director has the rights of a qualified beneficiary under RSA 564-B:1-110(c).
VI. Nothing in this section shall limit the authority of the director of charitable trusts or the department of health and human services otherwise provided by common law or other statute.
243:6 New Section; Uniform Trust Code; Application to Testamentary Trusts. Amend RSA 564 by inserting after section 24 the following new section:
564:25 Application of the Uniform Trust Code. The provisions of RSA 564-B, the Uniform Trust Code, shall apply to all trusts under a will governed by this chapter, except to the extent that any
provisions of the Uniform Trust Code conflict with the express provisions of this chapter, in which case the provisions of this chapter shall control.
243:7 Uniform Trust Code; Clarifying Terms of Trust Instrument Control. Amend RSA 564-B:1-105(b)(3) to read as follows:
(3) the requirement that a trust and its terms be for the benefit of its beneficiaries as their interests are defined under the terms of the trust, and that the trust have a purpose that is lawful, not contrary to public policy, and possible to achieve;
243:8 Uniform Trust Code; Rules of Construction. Amend RSA 564-B:1-112 to read as follows:
564-B:1-112 Rules of Construction. The rules of construction that apply in this state to the interpretation of and disposition of property by will also apply as appropriate to the interpretation of the terms of a trust and the disposition of the trust property. For the purposes of determining the benefit of the beneficiaries, the settlor’s intent as expressed in the terms of the trust shall be paramount.
243:9 Uniform Trust Code; Application of Judicial Supervision of Trusts. Amend RSA 564-B:2-201(b) to read as follows:
(b) A trust, other than a trust created by a will[, is not] subject to the provisions of RSA 564:19, shall not be subject to continuing judicial supervision unless ordered by the court.
243:10 Uniform Trust Code; Trust Purposes. Amend RSA 564-B:4-404
to read as follows:
564-B:4-404 Trust Purposes. A trust may be created only to the extent its purposes are lawful, not contrary to public policy, and possible to achieve. A trust and its terms must be for the benefit of its beneficiaries, as their interests are defined under the terms of the trust.
243:11 Uniform Trust Code; Limitation of Action Against Trustee. Amend RSA 564-B:10-1005 to read as follows:
564-B:10-1005 Limitation of Action Against a Trustee by a Beneficiary.
(a) A beneficiary may not commence a proceeding against a trustee for breach of trust more than one year after the date the beneficiary or a representative of the beneficiary was sent a report that adequately disclosed the existence of a potential claim for breach of trust and informed the beneficiary of the time allowed for commencing a proceeding.
(b) A report adequately discloses the existence of a potential claim for breach of trust if it provides sufficient information so that the beneficiary or representative knows of the potential claim or should have inquired into its existence.
(c) If subsection (a) does not apply, a judicial proceeding by a beneficiary against a trustee for breach of trust must be commenced within 3 years after the first to occur of:
(1) The removal, resignation, or death of the trustee;
(2) The termination of the beneficiary’s interest in the trust; [or]
(3) The termination of the trust[.]; or
(4) The date on which the beneficiary or a representative of the beneficiary was sent a report that adequately disclosed the existence of a potential claim for breach of trust.
(d) The periods of limitation under this section shall not be tolled for any reason, except by a written agreement of the trustees and qualified beneficiaries or a court order. Without limiting the circumstances under which a court may issue an order tolling the period of limitations, a court may issue an order tolling the period of limitations under this section during the pendency of any action described in RSA 564-B:10-1014(c)(3).
(e) Nothing in this section shall limit the authority of the director of charitable trusts or the department of health and human services otherwise provided by common law or other statute.
243:12 New Section; Uniform Trust Code; Limitation of Action Against a Trustee by a Trustee, Trust Advisor, or Trust Protector. Amend RSA 564-B by inserting after section 10-1005 the following new section:
564-B:10-1005A Limitation of Action Against a Trustee by a Trustee, Trust Advisor, or Trust Protector.
(a) A trustee shall commence a proceeding against a cotrustee or a former trustee for breach of trust within 3 years after the earlier of the date on which the trustee was sent a report that adequately disclosed the existence of a potential claim for breach of trust or the removal, resignation, or death of the cotrustee or former trustee. A trustee, however, shall not commence a proceeding against a cotrustee or a former trustee if, under RSA 564-B:10-1005, none of the beneficiaries may commence a proceeding against the cotrustee or former trustee for such breach of trust.
(b) A trust advisor or trust protector shall commence a proceeding against a trustee for breach of trust within 3 years after earlier of the date on which the trust advisor or trust protector was sent a report that adequately disclosed the existence of a potential claim for breach of trust or the removal, resignation, or death of the trustee. A trust advisor or trust protector, however, shall not commence a proceeding against a trustee for breach of trust if, under RSA 564-B:10-1005, none of the beneficiaries may commence a proceeding against the trustee for such breach of trust.
(c) A report adequately discloses the existence of a potential claim for breach of trust if it provides sufficient information so that the recipient knows of the potential claim or should have inquired into its existence.
(d) The periods of limitation under subsection (a) shall not be tolled except by either a written agreement of the trustees or, in the case of a possible claim against a former trustee, the trustees and the former trustee or a court order. The periods of limitation under subsection (b) shall not be tolled except by a written agreement of the trust advisors, trust protectors, and trustees or a court order. Without limiting the circumstances under which a court may issue an order tolling the period of limitations, a court may issue an order tolling the period of limitations under this section during the pendency of any action described in RSA 564-B:10-1014(c)(3).
243:13 New Section; Uniform Trust Code; Enforcement of No-Contest Provision. Amend RSA 564-B by inserting after section 10-1013 the following new section:
564-B:10-1014 Enforcement of No-Contest Provision.
(a) For the purposes of this section, a “no-contest provision” of a trust instrument means a provision that, if given effect, would reduce or eliminate the interest of any beneficiary of such trust who, directly or indirectly, initiates or otherwise pursues:
(1) Any action to contest the validity of the trust or the terms of the trust;
(2) Any action to set aside or vary the terms of the trust;
(3) Any action to challenge the acts of the trustee or other fiduciary of the trust in the performance of the trustee’s or other fiduciary’s duties as described in the terms of the trust; or
(4) Any other act or proceedings to frustrate or defeat the settlor’s intent as expressed in the terms of the trust.
(b) A no-contest provision shall be enforceable according to the express terms of the no-contest provision without regard to the presence or absence of probable cause for, or the beneficiary’s good or bad faith in, taking the action that would justify the complete or partial forfeiture of the beneficiary’s interest in the trust under the terms of the no-contest provision. A no-contest provision shall be unenforceable to the extent that the trust is invalid because of fraud, duress, undue influence, lack of testamentary capacity, or any other reason. In the case of an action solely to challenge the acts of the trustee or other fiduciary of the trust, a no-contest provision shall be unenforceable to the extent that the trustee or other fiduciary has committed a breach of fiduciary duties or breach of trust.
(c) Subsection (b) shall not apply to:
(1) Any action brought by the trustee or any other fiduciary serving under the terms of the trust, unless the trustee or other fiduciary is a beneficiary against whom the no-contest provision is otherwise enforceable;
(2) Any agreement among the beneficiaries and any other interested persons in settlement of a dispute or resolution of any other matter relating to the trust, including without limitation any nonjudicial settlement agreement;
(3) Any action to determine whether a proposed or pending motion, petition, or other proceeding constitutes a contest within the meaning of a no-contest provision;
(4) Any action brought by a beneficiary or on behalf of any such beneficiary for a construction or interpretation of the terms of the trust; or
(5) Any action brought by the attorney general for a construction or interpretation of a charitable trust or a trust containing a charitable interest if a provision exists in a trust purporting to penalize a charity or charitable interest for contesting the trust if probable cause exists for instituting proceedings.
(d) It is the intent of this section to enforce the settlor’s intent as reflected in a no-contest provision to the greatest extent possible. The provisions of this section shall be construed and applied in a manner consistent with such intent.
(e) This section shall apply to all judicial proceedings concerning the enforcement or interpretation of a no-contest provision commenced on or after its effective date.
243:14 New Section; Uniform Trust Code; Limitation of Action Against a Trust Advisor or Trust Protector. Amend RSA 564-B by inserting after section 12-1205 the following new section:
564-B:12-1206 Limitation of Action Against a Trust Advisor or Trust Protector.
(a) A beneficiary shall commence a proceeding against a trust advisor or trust protector for breach of trust within the earlier of:
(1) One year after the date on which the beneficiary or the beneficiary’s representative was sent a report that adequately disclosed the existence of a potential claim for breach of trust and informed the beneficiary of the time allowed for commencing a proceeding; or
(2) Three years after the date on which the beneficiary or the beneficiary’s representative was sent a report that adequately disclosed the existence of a potential claim for breach of trust.
(b) A fiduciary shall commence a proceeding against a trust advisor or trust protector for breach of trust within 3 years after the date on which the fiduciary was sent a report that adequately disclosed the existence of a potential claim for breach of trust; provided, however, that a fiduciary shall not commence a proceeding against a trust advisor or trust protector for breach of trust if, under subsection (a), none of the beneficiaries may commence a proceeding against the trust advisor or trust protector for such breach of trust. For purposes of this section, a “fiduciary” means any trustee, trust advisor, or trust protector.
(c) A report adequately discloses the existence of a potential claim for breach of trust if it provides sufficient information so that the recipient knows of the potential claim or should have inquired into its existence.
(d) The periods of limitation under subsection (a) shall not be tolled for any reason, except by a written agreement of the qualified beneficiaries and each of the trust advisors and trust protectors against whom a beneficiary may commence a proceeding or a court order. The periods of limitation under subsection (b) shall not be tolled for any reason, except by a written agreement of the trustees and each of the trust advisors and trust protectors against whom a fiduciary may commence a proceeding or a court order. Without limiting the circumstances under which a court may issue an order tolling the period of limitations, a court may issue an order tolling the period of limitations under this section during the pendency of any action described in RSA 564-B:10-1014(c)(3).
(e) Nothing in this section shall limit the authority of the director of charitable trusts or the department of health and human services provided by common law or other statute.
243:15 Uniform Principal and Income Act; Conversion to Unitrust. Amend RSA 564-C:1-106(a)-(b) to read as follows:
(a) Unless expressly prohibited by the terms of the trust, a trustee may convert a trust into a unitrust as described in this section if all of the following apply:
(1) The trustee determines that the conversion will enable the trustee to better carry out the intent of the settlor [or testator], as defined in RSA 564-B:1-103(15), and the purposes of the trust.
(2) The trustee gives written notice of the trustee’s intention to convert the trust into a unitrust and of how the unitrust will operate, including what initial decisions the trustee will make under this section, to all the [sui juris] qualified beneficiaries, as defined in RSA 564-B:1-103(12) and including the director of charitable trusts if, with respect to the trust, the director has the right of a “qualified beneficiary” under RSA 564-B:1-110(c). [who:
(A) Are currently eligible to receive income from the trust;
(B) Would be eligible, if a power of appointment were not exercised, to receive income from the trust if the interest of all the beneficiaries eligible to receive income under subparagraph (a)(2)(A) were to terminate immediately before the giving of notice; and
(C) Would receive, if no powers of appointment were exercised, a distribution of principal if the trust were to terminate immediately prior to the giving of notice.
(3) There is at least one sui juris beneficiary under subparagraph (a)(2)(A) and at least one sui juris beneficiary under subparagraph (a)(2)(B).
(4) No sui juris] (3) No qualified beneficiary objects to the conversion to a unitrust in a writing delivered to the trustee within 60 days of the mailing of the notice under subparagraph (a)(2).
(b)(1) The trustee may petition the court to approve the conversion to a unitrust if [any of the following apply:
(A) A beneficiary timely objects to the conversion to a unitrust.
(B) There are no sui juris beneficiaries under subparagraph (a)(2)(A).
(C) There are no sui juris beneficiaries under subparagraph (a)(2)(C).] a qualified beneficiary timely objects to the conversion of the unitrust.
(2) A qualified beneficiary may request a trustee to convert to a unitrust. If the trustee does not convert, the beneficiary may petition the court to order the conversion.
(3) The court shall approve the conversion or direct the requested conversion if the court concludes that the conversion will enable the trustee to better carry out the intent of the settlor [or testator] and the purposes of the trust.
243:16 Uniform Principal and Income Act; Conversion to Unitrust. Amend RSA 564-C:1-106(j)-(l) to read as follows:
(j)(1) If subparagraph (i)(3), (i)(4), or [(i)(5)] (i)(6) applies to a trustee and there is more than one trustee, a cotrustee to whom the provision does not apply may convert the trust, unless the exercise of the power by the remaining trustee or trustees is prohibited by the terms of the trust.
(2) If subparagraph (i)(3), (i)(4), or [(i)(5)] (i)(6) applies to all the trustees, the trustees may petition the court to direct a conversion.
(k) A trustee may permanently release the power conferred by paragraph (a) or may release the power conferred by paragraph (a) for a specified period including a period measured by the life of an individual to convert to a unitrust if any of the following apply:
(1) The trustee is uncertain about whether possessing or exercising the power will cause a result described in subparagraph (i)(3), (i)(4), or (i)(5).
(2) The trustee determines that possessing or exercising the power will or may deprive the trust of a tax benefit or impose a tax burden not described in paragraph (i).
(l) [The provisions of RSA 564-B:3-304 shall apply with respect to beneficiaries other than sui juris beneficiaries] For the purposes of this section, a person may represent and bind another person in accordance with Article 3 of RSA 564-B.
243:17 Uniform Trust Code; Conforming Change. Amend RSA 564-B:3-304 to read as follows:
564-B:3-304 Representation by Person Having Substantially Identical Interest. Unless otherwise represented, a minor, incapacitated, or unborn individual, or a person whose identity or location is unknown and not reasonably ascertainable, may be represented by and bound by another having a substantially identical interest with respect to the particular question or dispute, but only to the extent there is no conflict of interest between the representative and the person represented. [Nothing in this section shall expand or limit the virtual representation of sui juris beneficiaries for purposes of RSA 564-C:1-106.]
243:18 New Paragraph; Uniform Trust Code; Notice for Minors and Incapacitated Persons. Amend RSA 564-B:1-109 by inserting after paragraph (d) the following new paragraph:
(e) Notice to any minor or incapacitated individual shall not be effective unless such notice is sent to a person who represents and can bind such minor or incapacitated individual in accordance with the provisions of Article 3 of this chapter.
243:19 Qualified Dispositions in Trust Act; When Transferor May Serve as Trust Advisor. Amend RSA 564-D:5 to read as follows:
564-D:5 Transferor May Serve as Trust Advisor. Any individual, including the transferor of the qualified disposition, may serve as a trust advisor as described in RSA 564-D:4. However, if such transferor serves as the trust advisor, his or her rights and powers as a trust advisor shall be limited to [the right to disapprove distributions from the trust and the right to consent to a trustee’s action or inaction relating to the investment of trust assets.]:
I. The right to direct, consent to, or veto a fiduciary’s actual or proposed investment decisions; and
II. The rights and powers described in RSA 564-D:2, II excluding any power that would enable the transferor, acting as trust advisor, to direct, consent to, veto, or otherwise participate in a distribution by the trustee to or for the benefit of the transferor, the transferor’s creditors, the transferor’s estate, or the creditors of the transferor’s estate.
243:20 Effective Date. This act shall take effect 60 days after its passage.
Approved: July 13, 2011
Effective Date: September 11, 2011