1976 South Carolina Code of Laws
Updated through the end of the 2000 Session
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Title 62 - South Carolina Probate Code
PART 1. TRUST ESTATES
SECTION 62-7-101. Declarations or creations of trusts in land shall be in writing.
All declarations or creations of trusts or confidences of any lands, tenements, or hereditaments shall be manifested and proved by some writing, signed by the party who is by law enabled to declare such uses or trust or by his last will in writing, or else they shall be utterly void and of no effect.
SECTION 62-7-102. Grants and assignments of trusts shall be in writing.
All grants and assignments of any trust or confidence shall be in writing, signed by the party granting or assigning them or shall be made by last will or else shall be utterly void and of no effect.
SECTION 62-7-103. Trusts of land arising, transferred, or extinguished by implication of law.
When any conveyance shall be made of any lands or tenements by which a trust or confidence shall or may arise or result by the implication or construction of law or be transferred or extinguished by act or operation of law, such trust or confidence shall be of like force and effect as it would have been without the two previous sections of this Code.
SECTION 62-7-104. Word "writing" shall include typewriting.
The word "writing" used in this part shall be construed to include typewriting.
SECTION 62-7-105. Religious, educational, charitable, or benevolent trusts shall not be void because of discretion vested in trustee or establishment of perpetuities.
No gift, grant, bequest, or devise, whether in trust or otherwise, to religious, educational, charitable, or benevolent uses or for the purpose of providing for the care or maintenance of any part of any public cemetery shall be invalid because the instrument confers upon the trustee discretionary power in the selection and designation of the objects or beneficiaries of such trust or in carrying out the purposes thereof or by reason of contravening any statute or rule against perpetuities.
SECTION 62-7-106. Religious, educational, or charitable trusts created by nonresidents shall be valid.
Every such religious, educational, or charitable trust created by any person domiciled in another state, which shall be valid under the laws of the state of the domicile of such creator or donor, shall be held in all respects valid under the laws of this State, even though one or more of the trustees named in the instrument creating the trust shall be domiciled in another state or one or more of the beneficiaries named in the trust shall reside or be located in a foreign state. This section shall apply to all trusts heretofore or hereafter created in which one or more of the beneficiaries or objects of such trust shall reside or be located in this State.
SECTION 62-7-107. Estate and possession of trust estates shall be in beneficiaries thereof.
When any person shall be seized of any lands, tenements, rents, reversions, remainders, or other hereditaments to the use, confidence, or trust of any other person or of any body politic by reason of any bargain, sale, feoffment, covenant, contract, agreement, will, or otherwise, the person or body politic that shall have such use, confidence, or trust, in fee simple, fee tail, for term of life or for years or otherwise or any use, confidence, or trust in remainder or reversion, shall be deemed and adjudged in lawful seizin, estate and possession of and in such lands, tenements, rents, reversions, remainders, and hereditaments, with their appurtenances, to all intents, constructions, and purposes in law of and in such like estates as they shall have in use, trust, or confidence of or in them.
SECTION 62-7-108. Several seized jointly to use of one or more of them.
When several persons shall be jointly seized of any lands, tenements, rents, reversions, remainders, or other hereditaments to the use, confidence, or trust of any of them that be so jointly seized, such person or persons who shall have any such use, confidence, or trust in any such lands, tenements, rents, reversions, remainders, or hereditaments shall have such estate, possession, and seizing of and in such lands, tenements, rents, reversions, remainders, and other hereditaments only to him or them that shall have any such use, confidence, or trust, in like nature, manner, form, condition, and course as he or they had before in the use, confidence, or trust of such lands, tenements, or hereditaments, saving and reserving to all and singular persons and bodies politic, their heirs and successors, other than such person or persons who are seized of such lands, tenements, or hereditaments to any use, confidence, or trust, all such right, title, entry, interest, possession, rents, and action as they or any of them had or might have had without this section and also saving to all and singular those persons and their heirs who are seized to any use all such former right, title, entry, interest, possession, rents, customs, services, and action as they or any of them might have had to his or their own proper use in or to any lands, tenements, rents, or hereditaments whereof they are seized to any other use, anything contained in this chapter to the contrary notwithstanding.
SECTION 62-7-109. Beneficiaries' title to rent out of trust shall be same as conveyed by grant.
When several persons are seized of and in any lands, tenements, or hereditaments, in fee simple or otherwise, to the use and intent that some other person shall have and receive yearly to him and to his heirs one annual rent out of such lands and tenements and some other person one other annual rent, to him and his assigns for a term of life or years or for some other special time, according to such intent and use as has been before declared, limited, and made thereof, the persons, their heirs and assigns, that have such use and interest to have and receive any such annual rents out of any lands, tenements, or hereditaments, and every one of them, their heirs and assigns, shall be deemed to be in the possession and seizin of such rent, of and in such like estate as they had in the title, interest, or use of such rent or profit, and as if a sufficient grant, or other lawful conveyance had been made and executed to them by such as were seized to the use or intent of any such rent to be had, made, or paid, according to the trust and intent thereof. All such persons as have or shall have any title, use, and interest in or to any such rent or profit shall have all suits, entries, and remedies for such rents, according to such conditions, pains or other things, limited and appointed, upon the trust and intent or payment or surety of such rent.
SECTION 62-7-110. Trusts shall be assets in the hands of heirs.
If any cestui que trust shall die leaving a trust in fee simple to descend to his heir such trust shall be deemed and taken, and is hereby declared to be, assets by descent and the heir shall be liable to and chargeable with the obligation of his ancestors for and by reason of such assets as fully and amply as he might or ought to have been if the estate in law had descended to him in possession in like manner as the trust descended, any law, custom, or usage to the contrary in any wise notwithstanding.
SECTION 62-7-111. Heir shall not be chargeable out of his own estate for debts of his ancestor.
No heir that shall become chargeable by reason of any estate or trust made assets in his hand by Section 62-7-110 shall, by reason of any kind of plea or confession of the action, suffering judgment by default or any other matter, be chargeable to pay the condemnation out of his own estate but execution shall be sued of the whole estate so made assets in his hands by descent in whosesoever hands it shall come after the commencement of the action.
SECTION 62-7-112. Revocable inter vivos trust; creation; effect.
A revocable inter vivos trust may be created either by declaration of trust or by a transfer of property and is not rendered invalid because the trust creator retains substantial control over the trust including, but not limited to, (1) a right of revocation, (2) substantial beneficial interests in the trust, or (3) the power to control investments or reinvestments. Nothing herein, however, shall prevent a finding that a revocable inter vivos trust, enforceable for other purposes, is illusory for purposes of determining a spouse's elective share rights under Section 62-2-201 et seq. A finding that a revocable inter vivos trust is illusory and thus invalid for purposes of determining a spouse's elective share rights under Section 62-2-201 et seq. shall not render that revocable inter vivos trust invalid, but would allow inclusion of the trust assets as part of the probate estate of the trust creator only for the purpose of calculating the elective share and would make available the trust assets for satisfaction of the elective share only to the extent necessary under Section 62-2-207.
PART 2. JURISDICTION OF COURTS CONCERNING TRUSTS
SECTION 62-7-201. Court; exclusive jurisdiction of trusts.
(a) Subject to the provisions of Section 62-1-302(c), the probate court has exclusive jurisdiction of proceedings initiated by interested parties concerning the internal affairs of trusts. Proceedings which may be maintained under this section are those concerning the administration and distribution of trusts, the declaration of rights, and the determination of other matters involving trustees and beneficiaries of trusts. These include, but are not limited to, proceedings to:
(1) appoint or remove a trustee;
(2) review trustees' fees and to review and settle interim or final accounts;
(3) ascertain beneficiaries, determine any question arising in the administration or distribution of any trust including questions of construction of trust instruments, to instruct trustees, and determine the existence or nonexistence of any immunity, power, privilege, duty, or right.
(b) A proceeding under this section does not result in continuing supervisory proceedings. The management and distribution of a trust estate, submission of accounts and reports to beneficiaries, payment of trustee's fees and other obligations of a trust, acceptance and change of trusteeship, and other aspects of the administration of a trust shall proceed expeditiously consistent with the terms of the trust, free of judicial intervention and without order, approval, or other action of any court, subject to the jurisdiction of the court as invoked by interested parties or as otherwise exercised as provided by law.
SECTION 62-7-202. Trust proceedings; venue.
Venue for proceedings under Section 62-7-201 involving trusts is in the place in which the trust has its principal place of administration. Unless otherwise designated in the trust instrument, the principal place of administration of a trust is the trustee's usual place of business where the records pertaining to the trust are kept, or at the trustee's residence if he has no such place of business. In the case of co-trustees, the principal place of administration, if not otherwise designated in the trust instrument, is (1) the usual place of business of the corporate trustee if there is but one corporate co-trustee, or (2) the usual place of business or residence of the individual trustee who is a professional fiduciary if there is but one such person and no corporate co-trustee, and otherwise (3) the usual place of business or residence of any of the co-trustees as agreed upon by them.
SECTION 62-7-203. Trust proceedings; dismissal of matters relating to foreign trusts.
The court will not, over the objection of a party, entertain proceedings under Section 62-7-201 involving a trust registered or having its principal place of administration in another state, unless (1) when all appropriate parties could not be bound by litigation in the courts of the state where the trust is registered or has its principal place of administration or (2) when the interests of justice otherwise would seriously be impaired. The court may condition a stay or dismissal of a proceeding under this section on the consent of any party to jurisdiction of the state in which the trust is registered or has its principal place of business, or the court may grant a continuance or enter any other appropriate order.
SECTION 62-7-204. Court; concurrent jurisdiction of litigation involving trusts and third parties.
The probate court has concurrent jurisdiction with the circuit courts of this State of actions and proceedings to determine the existence or nonexistence of trusts created other than by will, of actions by or against creditors or debtors of trusts, and of other actions and proceedings involving trustees and third parties. Venue is determined by the rules generally applicable to civil actions.
SECTION 62-7-205. Proceedings for review of employment of agents and review of compensation of trustee and employees of trust.
On petition of an interested person, after notice to all interested persons, the court may review the propriety of employment of any person by a trustee including any attorney, auditor, investment advisor or other specialized agent or assistant, and the reasonableness of the compensation of any person so employed, and the reasonableness of the compensation determined by the trustee for his own services. Any person who has received excessive compensation from a trust may be ordered to make appropriate refunds. The provisions of this section do not apply to the extent there is a contract providing for the compensation to be paid for the trustee's services or if the trust directs otherwise.
SECTION 62-7-206. Trust proceedings; initiation by notice; necessary parties.
Proceedings under Section 62-7-201 are initiated by filing a petition in the court and giving notice pursuant to Section 62-1-401 to interested parties. The court may order notification of additional persons. A decree is valid as to all who are given notice of the proceeding though fewer than all interested parties are notified.
SECTION 62-7-207. Trustees; eligibility of nonresident corporations and individuals.
(a) No corporation created by another state of the United States or by any foreign state, kingdom, or government, and no corporation created under the laws of the United States and not having a place of business in the State of South Carolina shall be eligible or entitled to qualify, serve, or hold title to property in this State as testamentary trustee of an estate of any person domiciled in this State at the time of his death, whether the decedent shall die testate or intestate, except, however, such foreign corporations may act as testamentary trustee in this State if:
(1) it has a bona fide capital of at least two hundred fifty thousand dollars actually paid in;
(2) it is authorized to act as testamentary trustee in the state in which it is incorporated or if such foreign corporation be a national banking association in the state in which it has its principal place of business; and
(3) any bank or other corporation organized under the laws of this State or a national banking association having its principal place of business in this State is permitted by law to act as testamentary trustee in the state in which such foreign corporation seeking to act in this State is organized or in which it has its principal place of business if it is a national banking association without further showing or qualification other than that it is authorized to act in such fiduciary capacity in this State and upon compliance with the laws of such other state, if any, concerning service of process on nonresident fiduciaries. No officer, employee, or agent of any such foreign corporation shall be eligible or entitled to serve as testamentary trustee in this State whether such officer, employee, or agent is a resident or a nonresident of this State if such officer, employee, or agent is acting as testamentary trustee on behalf of any such foreign corporation except when such foreign corporation itself shall be eligible to so serve.
(b) No letters of appointment of a trustee shall be granted or issued to any nonresident individual by the court unless such applicant for such appointment as trustee shall first file with the court where such application for appointment is made, his consent in writing that service of all claims, demands, debts, dues, summons, and any other process of pleadings, in suits or actions, relating to the administration of the estate in his charge in this State, may be made by service upon such resident of such county as may be appointed in such written instrument and, in the event of the death, removal, resignation, absence from the State, or any other inability to obtain service upon such agent named in such written instrument or any successor named by similar instrument filed with the court upon the probate judge of such county. Nothing herein contained shall require a nonresident trustee named as such trustee under a will executed at the time when such trustee is a nonresident to make reports to the court in this State or shall prevent an executor in administering an estate from paying any legacy so directed under the will to such foreign trustee.
SECTION 62-7-208. When conveyance from infant trustee or mortgagee is permissible.
Any person under the age of eighteen years, having estates in lands, tenements, or hereditaments only in trust for others or by way of mortgage, may by the direction of the court, signified by an order made upon hearing all parties concerned, on the petition of the person for whom such infant shall be seized or possessed in trust or of the mortgagor or guardian of such infant or person entitled to the monies secured by or upon any such lands, tenements, or hereditaments whereof such infant is or shall be seized or possessed by way of mortgage, or of the person entitled to the redemption thereof, convey and assure to any other person any such lands, tenements, or hereditaments in such manner as the court shall by such order so to be obtained direct.
SECTION 62-7-209. Effect of such conveyance.
Such conveyance or assurance, to be had and made as stated in Section 62-7-208, is as effectual in law, to all intents and purposes, as if the infant was, at the time making such conveyance or assurance, of the full age of eighteen years.
SECTION 62-7-210. Infant trustee or mortgagee may be compelled to make conveyance.
Every such infant, being only trustee or mortgagee as stated in Section 62-7-208, may be compelled by any such order, so as herein stated to be obtained, to make such conveyance or assurance, as stated herein, in like manner as trustees or mortgagees of full age are compellable to convey or assign trust estates or mortgages.
SECTION 62-7-211. Division or consolidation of trusts; application of section.
Upon petition by a trustee, beneficiary, or any interested party for good cause shown, the court, after a hearing on notice to all interested parties, in that manner as the court may direct, may divide a trust into two or more single trusts or consolidate two or more trusts into a single trust, upon those terms and conditions as it considers appropriate, provided the consolidation or division satisfies the court that:
(1) consolidation or division is not inconsistent with the intent of the trustor with regard to any trust to be consolidated or divided;
(2) consolidation or division would facilitate administration of the trusts; and
(3) consolidation or division would be in the best interests of all beneficiaries and not materially impair their respective interests.
This section applies to all trusts whenever created, whether inter vivos or testamentary, created by the same or different instruments, by the same or different persons and regardless of where created or administered.
This section does not limit the right of a trustee acting in accordance with the applicable provisions of the governing instrument to divide or consolidate trusts.
PART 3. DUTIES AND LIABILITIES OF TRUSTEES
SECTION 62-7-301. General Duties Not Limited.
Except as specifically provided, the general duty of the trustee to administer a trust expeditiously for the benefit of the beneficiaries is not altered by this Code.
SECTION 62-7-302. Trustee's standard of care.
(a) Except as otherwise provided by the terms or limitations set forth in any will, agreement, court order, or other instrument creating or defining the fiduciary's duties and powers (the terms "legal investment" or "authorized investment" or words of similar import, as used in any such instrument being taken, however, to mean any investment which is permitted by the terms of this section), in acquiring, investing, reinvesting, exchanging, retaining, selling, and managing property for the benefit of another, a fiduciary shall exercise the judgment and care under the circumstances then prevailing, that a prudent person acting in a like capacity and familiar with such matters would use to attain the purposes of the fiduciary account. In making investment decisions, a fiduciary may consider the general economic conditions, the anticipated tax consequences of the investment, the anticipated duration of the fiduciary account, the needs and objectives of its beneficiaries, and other prevailing circumstances. Within the limitations of the foregoing standard and considering individual investments as part of an overall investment strategy, a fiduciary is authorized to:
(1) acquire and retain every kind of property and every kind of investment, specifically including, but not by way of limitation, bonds, debentures, and other corporate obligations, and stocks, preferred or common, and securities of any open-end or closed-end management-type investment company or investment trust registered under the Federal Investment Company Act of 1940, as amended;
(2) retain property properly acquired, without limitation as to time and without regard to its suitability for original purchase;
(3) retain the property received by such fiduciary on the creation of the estate, guardianship, trust, or other fiduciary account (including, in the case of a corporate fiduciary, stock or other securities of its own issue or of its parent corporation's issue) without regard to its suitability for original purchase;
(4) retain the securities into which corporate securities owned by the fiduciary may be converted or which may be derived therefrom as a result of merger, consolidation, stock dividends, splits, liquidations, and similar procedures (and may exercise by purchase or otherwise any rights, warrants, or conversion features attaching to any such securities);
(5) purchase or otherwise acquire and retain any security underwritten by a syndicate, even if the fiduciary or its affiliate (defined as any entity which owns or is owned by, in whole or in part, the fiduciary or is owned by the same entity that owns the fiduciary) participates or has participated as a member of the syndicate, provided the fiduciary does not purchase the security from itself, its affiliate, or from another member of the underwriting syndicate or its affiliate pursuant to an implied or express reciprocal agreement between the fiduciary or its affiliate, and such other member or its affiliate, to purchase all or part of each other's underwriting participation commitment within the syndicate. The propriety of an investment decision is to be determined by what the fiduciary knew or should have known at the time of the decision about the inherent nature and expected performance of the investment, the attributes of the portfolio, the general economic conditions, the anticipated tax consequences of the investment, the anticipated duration of the fiduciary account, the needs and objectives of the beneficiaries of the account, and other pertinent circumstances as they existed at the time of the decision. Any determination of liability for investment performance shall consider not only the performance of a particular investment but also the performance of the portfolio as a whole. Any fiduciary acting under a governing instrument shall not be liable to anyone whose interests arise from that instrument for the fiduciary's good faith reliance on the express provisions of such instrument. The standards set forth in this section may be expanded, restricted, or eliminated by express provisions in a governing instrument; and
(6) invest and reinvest in the securities of an open-end or closed-end management investment company or of an investment trust registered under the Investment Company Act of 1940, as amended. A bank or trust company may invest in these securities even if the bank or trust company, or an affiliate of the bank or trust company, provides services to the investment company or investment trust such as that of an investment advisor, custodian, transfer agent, registrar, sponsor, distributor, manager, or otherwise, and receives reasonable remuneration for those services.
(b) The provisions of this section shall not be construed as restricting the power of a court of proper jurisdiction to permit a fiduciary to deviate from the terms of any will, agreement, or other instrument relating to the acquisition, investment, reinvestment, exchange, retention, sale, or management of fiduciary property.
(c) When a fiduciary shall invest the property in his charge in whole or in part in the manner authorized by this section such fiduciary shall not be chargeable in his account at a greater rate of interest, as to such property so invested, than such property shall have so earned.
(d) Whenever a trust instrument reserves unto the trustor, or vests in an advisory or investment committee or in any other person or persons, including a co-trustee, to the exclusion of the trustee or to the exclusion of one or more of several trustees, authority to direct the making or retention of investments or of any investment, the excluded trustee or co-trustee shall be liable, if at all, only as a ministerial agent and shall not be liable as trustee or co-trustee for any loss resulting from the making or retention of any investment pursuant to such authorized direction.
(e) Notwithstanding subsections (a) through (d), the duties of a trustee with respect to acquiring or retaining a contract of insurance upon the life of the trustor, or upon the lives of the trustor and the trustor's spouse, children, or parents do not include a duty to:
(i) determine whether any such contract is or remains a proper investment;
(ii) exercise policy options available under any such contract; or
(iii) diversify any such contract.
The trustee is not liable to the beneficiaries under the instrument or to any other party for any loss arising from the absence of this duty upon the trustee. Except as specifically provided in the trust instrument, the provisions of this subsection apply to any trust established before or after the effective date of this subsection and to any life insurance policy acquired by the trustee before or after the effective date of this subsection.
SECTION 62-7-303. Duty to inform and account to beneficiaries.
From the time at which a trust becomes irrevocable, the trustee shall keep the beneficiaries of the trust reasonably informed of the trust and its administration and, in addition:
(a) within thirty days after his acceptance of the trust, the trustee shall inform in writing the current beneficiaries and if possible one or more persons who under Section 62-1-403 may represent beneficiaries with future interest of his name and address;
(b) upon reasonable request, the trustee shall provide the beneficiary with a copy of the terms of the trust which describe or affect his interest and with relevant information about the assets of the trust and the particulars relating to the administration;
(c) upon reasonable request, a beneficiary is entitled to a statement of the accounts of the trust annually and on termination of the trust or change of the trustee.
SECTION 62-7-304. Duty to provide bond.
A trustee need not provide bond to secure performance of his duties unless required by the terms of the trust, or requested by a beneficiary and found by the court to be necessary to protect the interests of the beneficiaries who are not able to protect themselves and whose interests otherwise are not adequately represented. On petition of the trustee or other interested person the court may excuse a resubstitution of another bond with the same or different sureties. If bond is required, it shall be filed in the court in the place in which the trust has its principal place of administration in amounts and with sureties and liabilities as provided in Sections 62-3-604 and 62-3-606 relating to bonds of personal representatives.
SECTION 62-7-305. Trustee's duties; appropriate place of administration, deviation.
A trustee is under a continuing duty to administer the trust according to the objectives of the trustor at a place appropriate to the purposes of the trust and to its sound, efficient management. If the principal place of administration becomes inappropriate for any reason, the court may enter any order furthering efficient administration and the interests of beneficiaries, including, if appropriate, removal of the trustee and appointment of a trustee in another state. Trust provisions relating to the place of administration and to changes in the place of administration or of trustee control unless compliance would be contrary to efficient administration or the purposes of the trust. Views of adult beneficiaries shall be given weight in determining the suitability of the trustee and the place of administration.
SECTION 62-7-306. Personal liability of trustee to third parties.
(a) Unless otherwise provided in the contract, a trustee is not personally liable on contracts properly entered into in his fiduciary capacity in the course of administration of the trust estate unless he fails to reveal his representative capacity or identify the trust estate in the contract.
(b) A trustee is personally liable for obligations arising from ownership or control of property of the trust estate or for torts committed in the course of administration of the trust estate only if he is personally at fault.
(c) Claims based on contracts entered into by a trustee in his fiduciary capacity, on obligations arising from ownership or control of the trust estate, or on torts committed in the course of trust administration may be asserted against the trust estate by proceeding against the trustee in his fiduciary capacity, whether or not the trustee is personally liable therefor.
(d) The question of liability as between the trust estate and the trustee individually may be determined in a proceeding for accounting, surcharge, or indemnification or other appropriate proceeding.
SECTION 62-7-307. Limitations on proceedings against trustees after final account.
Unless previously barred by adjudication, consent, or limitation, any claim against a trustee for breach of trust is barred as to any beneficiary who has received a final account or other statement fully disclosing the matter and showing termination of the trust relationship between the trustee and the beneficiary unless a proceeding to assert the claim is commenced within one year after receipt of the final account or statement. In any event and notwithstanding lack of full disclosure a trustee who has issued a final account or statement received by the beneficiary and has informed the beneficiary of the location and availability of records for his examination is protected after three years. A beneficiary is deemed to have received a final account or statement if, being an adult, it is received by him personally or if, being a minor or disabled person, it is received by his representative as described in Section 62-1-403(1) and (2).
PART 4. REVISED UNIFORM PRINCIPAL AND INCOME ACT
SECTION 62-7-401. Short title.
This part [Sections 62-7-401 et seq.] may be cited as the Revised Uniform Principal and Income Act.
SECTION 62-7-402. Definitions.
As used in this part:
(1) "Income beneficiary" means the person to whom income is presently payable or for whom it is accumulated for distribution as income.
(2) "Inventory value" means the cost of property purchased by the trustee and the market value of other property at the time it was made subject to the trust, but in the case of a testamentary trust the trustee may use any value finally determined for the purposes of an estate or inheritance tax.
(3) "Remainderman" means the person entitled to principal, including income which has been accumulated and added to principal. and
(4) "Trustee" means an original trustee and any succeeding or added trustee.
SECTION 62-7-403. Application of Part.
Except as specifically provided in the trust instrument or the will or in this part [Sections 62-7-401 et seq.], this part shall apply to any receipt or expense received or incurred by any trust or decedent's estate whether established before or after June 3, 1963, and whether the asset involved was acquired by the trustee before or after June 3, 1963; provided, however, it shall not be applied to upset apportionments or allocations of corporate distributions declared by the corporation or heretofore made in fact by trustees or to disturb any rights heretofore vested in the life beneficiary.
SECTION 62-7-404. Allocation of receipts and expenditures of trust between income and principal.
(a) A trust shall be administered with due regard to the respective interests of income beneficiaries and remaindermen. A trust is so administered with respect to the allocation of receipts and expenditures if a receipt is credited or an expenditure is charged to income or principal or partly to each:
(1) in accordance with the terms of the trust instrument, notwithstanding contrary provisions of this part [Sections 62-7-401 et seq.];
(2) in the absence of any contrary terms of the trust instrument, in accordance with the provisions of this part [Sections 62-7-401 et seq.]; or
(3) if neither of the preceding rules of administration is applicable, in accordance with what is reasonable and equitable in view of the interests of those entitled to income as well as of those entitled to principal, and in view of the manner in which men of ordinary prudence, discretion, and judgment would act in the management of their own affairs.
(b) If the trust instrument gives the trustee discretion in crediting a receipt or charging an expenditure to income or principal or partly to each, no inference of imprudence or partiality arises from the fact that the trustee has made an allocation contrary to the provisions of this part [Sections 62-7-401 et seq.].
SECTION 62-7-405. Income generally.
Income is the return in money or property derived from the use of principal, including return received as:
(1) rent of real or personal property, including sums received for cancellation or renewal of a lease;
(2) interest on money lent, including sums received as consideration for the privilege of prepayment of principal except as provided in Section 62-7-410 on bond premium and bond discount;
(3) income earned during administration of a decedent's estate as provided in Sections 62-7-408 and 62-7-419;
(4) corporate distributions as provided in Section 62-7-409;
(5) accrued increment on bonds or other obligations issued at discount as provided in Section 62-7-410;
(6) receipts from principal used in business and farming as provided in Section 62-7-411;
(7) receipts from disposition of natural resources as provided in Sections 62-7-412 and 62-7-413;
(8) receipts from other principal subject to depletion as provided in Section 62-7-414; or
(9) receipts from disposition of underproductive property as provided in Section 62-7-415.
SECTION 62-7-406. Principal generally.
Principal is the property which has been set aside by the owner or the person legally empowered so that it is held in trust eventually to be delivered to a remainderman while the return or use of the principal is in the meantime taken or received by or held for accumulation for an income beneficiary. Principal includes:
(1) consideration received by the trustee on the sale or other transfer of principal or on repayment of a loan or as a refund or replacement or change in the form of principal;
(2) proceeds of property taken on eminent domain proceedings;
(3) proceeds of insurance upon property forming part of the principal except proceeds of insurance upon a separate interest of an income beneficiary;
(4) stock dividends, receipts on liquidation of a corporation, and other corporate distributions as provided in Section 62-7-409;
(5) receipts from the disposition of corporate securities as provided in Section 62-7-410;
(6) royalties and other receipts from disposition of natural resources as provided in Sections 62-7-412 and 62-7-413;
(7) receipts from other principal subject to depletion as provided in Section 62-7-414;
(8) any profit resulting from any change in the form of principal except as provided in Section 62-7-415 on underproductive property;
(9) receipts from disposition of underproductive property as provided in Section 62-7-415; or
(10) any allowances for depreciation established under Sections 62-7-411 and 62-7-417(2).
SECTION 62-7-407. Time when income beneficiary becomes entitled to income; allocation of income receipts; termination of income interest.
(a) An income beneficiary is entitled to income from the date specified in the trust instrument, or, if none is specified, from the date an asset becomes subject to the trust. In the case of an asset becoming subject to a trust by reason of a will, it becomes subject to the trust as of the date of the death of the testator even though there is an intervening period of administration of the testator's estate.
(b) In the administration of a decedent's estate or a testamentary trust or in the case of an asset received under a will by a trustee:
(1) receipts due but not paid at the date of death of the testator are principal;
(2) receipts in the form of periodic payments (other than corporate distributions to stockholders), such as rent, interest, or annuities, not due at the date of the death of the testator shall be treated as accruing from day to day. That portion of such a receipt accruing before the date of death is principal and the balance is income.
(c) In all other cases, any receipt from an income producing asset is income even though the receipt was earned or accrued in whole or in part before the date when the asset became subject to the trust.
(d) On termination of an income interest, the income beneficiary whose interest is terminated, or his estate, is entitled to:
(1) income undistributed on the date of termination;
(2) income due but not paid to the trustee on the date of termination; or
(3) income in the form of periodic payments (other than corporate distributions to stockholders), such as rent, interest, or annuities, not due on the date of termination, accrued from day to day.
(e) Corporate distributions to stockholders shall be treated as due on the day fixed by the corporation for determination of stockholders of record entitled to distribution or, if no date is fixed, on the date of declaration of the distribution by the corporation.
SECTION 62-7-408. Determination and distribution of income after testator's death.
Unless the will otherwise provides, income from the assets of a decedent's estate after the death of the testator and before distribution, including income from property used to discharge liabilities, shall be determined in accordance with the rules applicable to a trustee under this Part [Sections 62-7-401 et seq.,] and distributed as follows:
(1) to specific legatees and devisees, the income from the property bequeathed or devised to them respectively, less taxes, ordinary repairs, and other expenses of management and operation of the property, and an appropriate portion of interest accrued since the death of the testator and of taxes imposed on income (excluding taxes on capital gains) which accrue during the period of administration;
(2)(i) for one year after the first appointment of a personal representative, to all other legatees and devisees, except legatees of pecuniary bequests not in trust, the balance of the income, less the balance of taxes, ordinary repairs, and other expenses of management and operation of all property from which the State is entitled to income, interest accrued since the death of the testator, and taxes imposed on income (excluding taxes on capital gains) which accrue during the period of administration, in proportion to their respective interests in the undistributed assets of the estate computed at times of distribution on the basis of inventory value. Income received by a trustee under this section shall be treated as income of the trust.
(ii) beginning one year after the first appointment of a personal representative, to all other legatees and devisees, the balance of the income less the balance of taxes, ordinary repairs, and other expenses of management and operation of all property from which the State is entitled to income, interest accrued since the death of the testator, and taxes imposed on income (excluding taxes on capital gains) which accrue during the period of administration, in proportion to their respective interests in the undistributed assets of the estate computed at times of distribution on the basis of inventory value. Income received by a trustee under this section shall be treated as income of the trust.
SECTION 62-7-409. Allocation of distributions by corporations; regulated investment company and certain trusts.
(a) Corporate distributions of shares of the distributing corporation, including distributions in the form of a stock split or stock dividend, are principal. A right to subscribe to shares or other securities issued by the distributing corporation accruing to stockholders on account of their stock ownership and the proceeds of any sale of the right are principal.
(b) Except to the extent that the corporation indicates that some part of a corporate distribution is a settlement of preferred to guaranteed dividends accrued since the trustee became a stockholder or is in lieu of an ordinary cash dividend, a corporate distribution is principal if the distribution is pursuant to:
(1) a call of shares;
(2) a merger, consolidation, reorganization, or other plan by which assets of the corporation are acquired by another corporation; or
(3) a total or partial liquidation of the corporation. For the purposes of this section, a distribution is pursuant to a liquidation if the corporation so indicates, or if the corporation is making a distribution of assets, other than cash, pursuant to a court decree or final administrative order by a government agency ordering distribution of the particular assets.
(c) Distributions made from ordinary income by a regulated investment company or by a trust qualifying and electing to be taxed as a real estate investment trust under federal law are income. All other distributions made by such a company or trust, including distributions from capital gains, depreciation, or depletion, whether in the form of cash or an option to take new stock or cash or an option to purchase additional shares, are principal.
(d) Except as provided in subsections (a), (b), and (c), all corporate distributions are income, including cash dividends, distributions of, or rights to, subscribe to shares or securities or obligations of corporations other than the distributing corporation, and the proceeds of such rights or property distributions. Except as provided in subsections (b) and (c), if the distributing corporation gives a stockholder an option to receive a distribution either in cash or in its own shares, the distribution chosen is income.
(e) The trustee may rely upon any statement of the distributing corporation as to any fact relevant under any provision of this part [Sections 62-7-401 et seq.] concerning the source or character of dividends or distributions of corporate assets.
SECTION 62-7-410. Bonds and other obligations for payment of money.
(a) Bonds or other obligations for the payment of money are principal at their inventory value, except as provided in subsection (b) for discount bonds. No provision shall be made for amortization of bond premiums or for accumulation for discount. The proceeds of sale, redemption, or other disposition of the bonds or obligations are principal.
(b) The increment in value of a bond or other obligation for the payment of money payable at a future time in accordance with a fixed schedule of appreciation in excess of the price at which it was issued, and the amount of the accretion of a bond or other obligation for the payment of money bearing no stated interest but redeemable at maturity or at a future time in an amount in excess of the amount in consideration for which it was issued, is distributable as income. The increment in value is distributable to the beneficiary who was the income beneficiary at the time of increment from the first principal cash available or, if none is available, when realized by sale, redemption, or other disposition. Whenever unrealized increment is distributed as income but out of principal, the principal shall be reimbursed for the increment when realized.
SECTION 62-7-411. Allocation of profits and losses from settlor's business continued; accounting principles applicable to agricultural operations.
(a) If a trustee uses any part of the principal in the continuance of a business of which the settlor was a sole proprietor or a partner, the net profits of the business, computed in accordance with generally accepted accounting principles for a comparable business, are income. If a loss results in any fiscal or calendar year, the loss falls on principal and shall not be carried into any other fiscal or calendar year for the purposes of calculating net income.
(b) Generally accepted accounting principles shall be used to determine income from an agricultural or farming operation, including the raising of animals or the operation of a nursery.
SECTION 62-7-412. Allocation of receipts from royalties, production payments, or the taking of natural resources.
(a) If any part of the principal consists of a right to receive royalties, overriding or limited royalties, working interests, production payments, net profit interests, or other interests in minerals or other natural resources in, on, or under land, the receipts from taking the natural resources from the land shall be allocated as follows:
(1) If received as rent on a lease or extension payments on a lease, the receipts are income.
(2) If received from a production payment, the receipts are income to the extent of any factor for interest or its equivalent provided in the governing instrument. There shall be allocated to principal the fraction of the balance of the receipts which the unrecovered cost of the production payment bears to the balance owed on the production payment, exclusive of any factor for interest or its equivalent. The receipts not allocated to principal are income.
(3) If received as a royalty, overriding or limited royalty, or as a bonus, or from a working interest or net profit, or from any other interest in minerals or other natural resources, receipts not provided for in the preceding paragraphs of this section shall be apportioned on a yearly basis in accordance with this paragraph whether or not any natural resource was being taken from the land at the time the trust was established. Twenty-seven and one-half percent of the gross receipts (but not to exceed fifty percent of the net receipts remaining after payment of all expenses, direct and indirect, computed without allowance for depletion) shall be added to principal as an allowance for depletion. The balance of the gross receipts, after payment therefrom of all expenses, direct and indirect, is income.
(b) If a trustee, on June 3, 1963, held an item of depletable property of a type specified in this section, he shall allocate receipts from the property in the manner used before June 3, 1963, but as to all depletable property acquired after June 3, 1963, by an existing or new trust, the method of allocation provided herein shall be used.
(c) This section does not apply to timber, water, soil, sod, dirt, turf, or mosses.
SECTION 62-7-413. Allocation of receipts from timber.
If any part of the principal consists of land from which merchantable timber may be removed, the receipts from taking the timber from the land shall be allocated in accordance with paragraph (3) of Section 62-7-404.
SECTION 62-7-414. Allocation of receipts from property subject to depletion.
Except as provided in Sections 62-7-412 and 62-7-413, if the principal consists of property subject to depletion, including leaseholds, patents, copyrights, royalty rights, and rights to receive payments on a contract for deferred compensation, the receipts from the property not in excess of five percent per year of its inventory value are income and the balance is principal.
SECTION 62-7-415. Allocation of receipts from sale of underproductive property; delayed income.
(a) Except as otherwise provided in this section, a portion of the net proceeds of sale of any part of principal which has not produced an average net income of at least one percent per year of its inventory value for more than a year (including as income the value of any beneficial use of the property by the income beneficiary) shall be treated as delayed income to which the income beneficiary is entitled as provided in this section. The net proceeds of sale are the gross proceeds received, including the value of any property received in substitution for the property disposed of, less the expenses, including capital gains tax, if any, incurred in disposition and less any carrying charges which have been paid while the property was underproductive.
(b) The sum allocated as delayed income is the difference between the net proceeds and the amount which, had it been invested at simple interest at four percent per year while the property was underproductive, would have produced the net proceeds. This sum plus any carrying charges and expenses previously charged against income while the property was underproductive, less any income received by the income beneficiary from the property and less the value of any beneficial use of the property by the income beneficiary, is income, and the balance is principal.
(c) An income beneficiary or his estate is entitled to delayed income under this section as if it accrued from day to day during the time he was a beneficiary.
(d) If principal subject to this section is disposed of by conversion into property which cannot be apportioned easily, including land or mortgages (for example, realty acquired by or in lieu of foreclosure), the income beneficiary is entitled to the net income from any form of property or obligation into which the original principal was converted while the property or obligation is held. If within five years after the conversion the property into which the underproductive property is converted has not been further converted into easily apportionable property, no allocation as provided in this section shall be made.
SECTION 62-7-416. Expenses and other charges which shall be charged to income or principal.
After determining income and principal in accordance with the terms of the trust instrument or of this part, the trustee shall charge to income or principal expenses and other charges as provided in Sections 62-7-417, 62-7-418, and 62-7-420.
SECTION 62-7-417. Charges which shall be made against income.
(a) The following charges shall be made against income:
(1) ordinary expenses incurred in connection with the administration, management, and preservation of the trust property, including regularly recurring taxes assessed against any portion of the principal, water rates, premiums on insurance taken upon the interests of the income beneficiary, remainderman or trustee, interest paid by the trustee, and ordinary repairs;
(2) a reasonable allowance for depreciation on property subject to depreciation under generally accepted accounting principles, but no allowance shall be made for depreciation of that portion of any real property used by a beneficiary as a residence; nor for depreciation of any property held by the trustee on June 3, 1963, (except as to subsequent expenses incurred for extraordinary repairs or capital improvements to such property), for which the trustee was not then making an allowance for depreciation;
(3) one-half of court costs, attorney's fees, and other fees on periodic judicial accounting, unless the court directs otherwise;
(4) court costs, attorney's fees, and other fees on other accountings or judicial proceedings if the matter primarily concerns the income interest, unless the court directs otherwise;
(5) one-half of the trustee's regular compensation, whether based on a percentage of principal or income, and all expenses reasonably incurred for current management of principal and application of income;
(6) any tax levied upon receipts defined as income under this part [Sections 62-7-401 et seq.] or the trust instrument and payable by the trustee.
(b) If charges against income are of unusual amount, the trustee may by means of reserves or other reasonable means charge them over a reasonable period of time and withhold from distribution sufficient sums to regularize distributions.
SECTION 62-7-418. Charges which shall be made against principal.
The following charges shall be made against principal:
(1) trustee's compensation not chargeable to income under subsection (a), items (4) and (5) of Section 62-7-417, including special compensation of trustees and expenses reasonably incurred in connection with the principal, court costs, and attorney's fees concerning matters of principal, and trustee's compensation computed on principal as an acceptance, distribution, or termination fee;
(2) charges not provided for in Section 62-7-417(a) including the cost of investing and reinvesting principal, the payments on principal of an indebtedness (including a mortgage amortized by periodic payments of principal), expenses for preparation of property for rental or sale, and, unless the court directs otherwise, expenses incurred in maintaining or defending any action to protect or construe the trust or the property or assure the title of any trust property;
(3) extraordinary repairs or expenses incurred in making a capital improvement of principal, including special assessments, but, to the extent permitted by Section 62-7-411 and subsection (a), item (2), of Section 62-7-417 a trustee may establish an allowance for depreciation out of income;
(4) any tax levied upon profit, gain, or other receipts allocated to principal notwithstanding denomination of the tax as an income tax by the taxing authority;
(5) if an estate or inheritance tax is levied in respect of a trust in which both an income beneficiary and a remainderman have an interest, any amount apportioned to the trust, including interest and penalties, even though the income beneficiary also has rights in the principal.
SECTION 62-7-419. Expenses incurred in settlement of decedent's estate shall be charged against principal.
Unless the will otherwise provides and subject to Section 62-7-408, all expenses incurred in connection with the settlement of a decedent's estate, including debts, funeral expenses, estate taxes, interest and penalties concerning taxes, family allowances, fees of attorneys and personal representatives, and court costs shall be charged against the principal of the estate.
SECTION 62-7-420. Apportionment of regularly recurring charges.
Regularly recurring charges payable from income shall be apportioned to the same extent and in the same manner that income is apportioned under Section 62-7-407.
SECTION 62-7-421. Construction.
This part [Sections 62-7-401 et seq.] shall be so construed as to effectuate its general purpose to make uniform the law of those states which enact it.
PART 5. CHARITABLE TRUSTS
SECTION 62-7-501. Trustees shall file copy of trust instrument with Attorney General.
The trustees of charitable trusts in existence on July 1, 1953, or thereafter created, under the laws of this State, shall file a certified copy of the trust instrument with the Attorney General within ninety days after such date or within sixty days after the creation of the trust, whichever is later.
SECTION 62-7-502. Trustees shall file annual reports with Attorney General.
Trustees of Charitable trusts shall submit an annual report to the Attorney General, which shall include a complete financial statement relating to the trust property during the preceding year, a summary of the acts of the trustees in their capacity as such, the name and address of each trustee, and, if a trustee is a corporation, the name and address of each director and officer thereof. The first report submitted shall include an itemized statement of the property which passed into the hands of the trustees upon the creation of the trust, and every report shall include a statement of the trust property in the hands of the trustee both at the beginning and the end of the year for which the report is made.
SECTION 62-7-503. Action by Attorney General to compel compliance.
Upon the failure of the trustees to discharge their duties under this part, or when it appears that the trustees are not properly discharging the duties imposed upon them by the trust, the Attorney General shall bring an action to compel their compliance with this part or to compel them to discharge the duties imposed upon them by trust, as the case may be.
SECTION 62-7-504. Rules and regulations of Attorney General.
The Attorney General may make such rules and regulations, relating to the time for submission of, and the information to be contained in, the reports required by this part [Sections 62-7-501 et seq.].
SECTION 62-7-505. Exemptions.
This part [Sections 62-7-501 et seq.] shall not apply to trusts or trustees of the following: Churches, cemeteries, orphanages operated in conjunction with churches, hospitals, colleges, or universities, or school districts, nor shall it apply to banking institutions which act as trustees under the supervision of the State Board of Financial Institutions or under the supervision of federal banking agencies.
SECTION 62-7-506. Trustees shall not subject trust to certain federal taxes on private foundations.
All trustees of any trust governed by the laws of this State whose governing instrument does not expressly provide that this section shall not apply to such trust are required to act or to refrain from acting so as not to subject the trust to the taxes imposed by Sections Sections 4941, 4942, 4943, 4944, or 4945 of the Internal Revenue Code of 1954, or corresponding provisions of any subsequent United States internal revenue law.
SECTION 62-7-507. Provisions not to cause forfeiture or reversion of trust property.
Nothing contained in Sections 33-31-150, 33-31-151, and 62-7-506 may be construed to cause a forfeiture or reversion of any of the property of a trust which is subject to such sections, or to make the purposes of the trust impossible of accomplishment.
PART 6. POWERS OF FIDUCIARIES
SECTION 62-7-601. Sale of notes and other evidences of indebtedness.
All fiduciaries may sell to the highest bidder, as other personalty is sold, all notes, accounts, and other evidences of indebtedness coming into their hands as such when such evidences of indebtedness are appraised as or have become doubtful or worthless.
SECTION 62-7-602. Deposit of securities in clearing corporation by fiduciary or custodian.
(a) Notwithstanding any other provision of law, any fiduciary holding securities in its fiduciary capacity, any bank, trust company, or private banker holding securities as a custodian or managing agent, and any bank, trust company, or private banker holding securities as custodian for a fiduciary, is authorized to deposit or arrange for the deposit of such securities in a clearing corporation (as defined in Article 8 of the Uniform Commercial Code). When such securities are so deposited, certificates representing securities of the same class of the same issuer may be merged and held in bulk in the name of the nominee of such clearing corporation with any other such securities deposited in such clearing corporation by any person regardless of the ownership of such securities, and certificates of small denomination may be merged into one or more certificates of larger denomination. The records of such fiduciary and the records of such bank, trust company, or private banker acting as custodian, as managing agent or as custodian for a fiduciary shall at all times show the name of the party for whose account the securities are so deposited. Ownership of, and other interests in, such securities may be transferred by bookkeeping entry on the books of such clearing corporation without physical delivery of certificates representing such securities. A bank, trust company, or private banker so depositing securities pursuant to this section shall be subject to such regulations as in the case of state-chartered institutions, the Board of Financial Institutions, and, in the case of national banking associations, The Comptroller of the Currency may from time to time issue. A bank, trust company, or private banker acting as custodian for a fiduciary shall, on demand by the fiduciary, certify in writing to the fiduciary the securities so deposited by such bank, trust company, or private banker in such clearing corporation for the account of such fiduciary. A fiduciary shall, on demand by any party to a judicial proceeding for the settlement of such fiduciary's account or on demand by the attorney for such party, certify in writing to such party the securities deposited by such fiduciary in such clearing corporation for its account as such fiduciary.
(b) This section shall apply to any fiduciary holding securities in its fiduciary capacity, and to any bank, trust company, or private banker holding securities as a custodian, managing agent, or custodian for a fiduciary, acting on April 17, 1973, or who thereafter may act regardless of the date of the agreement, instrument, or court order by which it is appointed and regardless of whether or not such fiduciary, custodian, managing agent, or custodian for a fiduciary owns capital stock of such clearing corporation.
SECTION 62-7-603. Limits on powers of fiduciary; merger of legal and equitable title to property; application of section.
(A) Unless application of this section is clearly and convincingly negated in the will, the trust document or a written instrument appointing a fiduciary, the following provisions apply to any fiduciary, whether acting as a sole fiduciary or as a co-fiduciary:
(1) Any power conferred upon the fiduciary, in his capacity as a fiduciary (and not including any power conferred upon him in his capacity as a beneficiary), which would, except for this section, constitute, in whole or in part, a general power of appointment cannot be exercised by him in favor of himself, his estate, his creditors, or the creditors of his estate.
(a) The fiduciary can, however, exercise the power in favor of someone other than himself, his estate, his creditors and the creditors of his estate.
(b) If a power comes within item (1) and the power is conferred upon two or more fiduciaries, it can be exercised by the fiduciary or the fiduciaries who are not disqualified from exercising the power as if they were the only fiduciary or fiduciaries.
(c) If all of the serving fiduciaries are disqualified from exercising a power, the court that would have jurisdiction to appoint a fiduciary under the instrument, if there were no fiduciary currently serving, shall exercise, or shall appoint a special fiduciary whose only power is to exercise, the power that cannot be exercised by the other fiduciaries by reason of item (1).
(d) For purposes of this section, "Internal Revenue Code" has the same meaning as in Section 12-7-20(11).
(2) Any power conferred upon the fiduciary in his capacity as a fiduciary to allocate receipts and expenses as between income and principal in his own favor, must be exercised in accordance with the provisions of the Revised Uniform Principal and Income Act, as contained in this South Carolina Probate Code.
(3) If a person holds legal title to property in a fiduciary capacity and also has an equitable or beneficial title in the same property, either by transfer, by declaration, or by operation of law, no merger of the legal and the equitable titles shall occur unless:
(a) the fiduciary is the sole fiduciary and is also the sole current and future beneficiary; and
(b) the legal title and the equitable title are of the same quality and duration. If either one of these conditions is not met, no merger may occur and the fiduciary relationship does not terminate.
(B) Items (1) and (2) of subsection (A) of this section do not apply to revocable trusts in which the fiduciary of the trust is also the creator of the trust and is living.
(C) This section applies to all fiduciary relationships in existence on the effective date of this section and to all other fiduciary relationships that come into existence after the effective date of this section. The provisions of subsection (A) of this section are declaratory of existing common law and neither modify nor amend existing fiduciary relationships.
SECTION 62-7-604. Reduction of proportionate value or share of investment.
No fiduciary is required to reduce the proportionate value or share of any single investment as it relates to the entire value, share, or kind of the estate solely for the purpose of reducing the investment risk that may be associated with the estate, if the value or share of the single investment, considered alone, is of prudent investment quality as provided in Section 62-7-302.
PART 7. UNIFORM TRUSTEES' POWERS ACT
SECTION 62-7-701. Short title; citation.
This Part may be cited as the Uniform Trustees' Powers Act.
SECTION 62-7-702. Definitions.
As used in this Part:
(1) "trust" means an express trust created by a trust instrument, including a will, whereby a trustee has the duty to administer a trust asset for the benefit of a named or otherwise described income or principal beneficiary, or both; "trust" does not include a resulting or constructive trust, a business trust which provides for certificates to be issued to the beneficiary, an investment trust, a voting trust, a security instrument, a trust created by the judgment or decree of a court, a liquidation trust, or a trust for the primary purpose of paying dividends, interests, interest coupons, salaries, wages, pensions or profits, or employee benefits of any kind, an instrument wherein a person is nominee or escrowee for another, a trust created in deposits in any financial institutions, or other trust the nature of which does not admit of general trust administration;
(2) "prudent man" means a trustee whose exercise of judgment and care complies with the requirements of Section 62-7-302.
SECTION 62-7-703. Powers of trustees, generally; incorporation of provisions by non-trust instruments.
(a) The trustee has all powers conferred upon him by the provisions of this Part unless limited in the trust instrument.
(b) An instrument which is not a trust under Section 62-7-702(1) may incorporate any provision of this Part by reference.
SECTION 62-7-704. Powers of trustees conferred by this Part.
(a) From time of creation of the trust until final distribution of the assets of the trust, a trustee has the power to perform, without court authorization, every act which a prudent man would perform for the purposes of the trust including, but not limited to, the powers specified in subsection (c).
(b) In the exercise of his powers including the powers granted by this Part, a trustee has a duty to act with due regard to his obligation as a fiduciary and is subject to the standards provided in Section 62-7-302, including a duty to give consideration to available tax exemptions, deductions, or credits for tax purposes. "Tax" includes, but is not limited to, any federal, state, or local income, gift, estate, inheritance, generation-skipping transfer, or other wealth transfer tax.
(c) A trustee has the power, subject to subsections (a) and (b):
(1) to collect, hold, and retain trust assets received from a trustor until, in the judgment of the trustee, disposition of the assets should be made; and the assets may be retained even though they include an asset in which the trustee is personally interested;
(2) to receive additions to the assets of the trust;
(3) to continue or participate in the operation of any business or other enterprise, and to effect incorporation, dissolution, or other change in the form of the organization of the business or enterprise;
(4) to acquire an undivided interest in a trust asset in which the trustee, in any trust capacity, or anyone else, holds an undivided interest;
(5) to invest and reinvest trust assets in accordance with the provisions of the trust or as provided by law;
(6) to deposit trust funds in a bank, including a bank operated by the trustee;
(7) to acquire or dispose of an asset, for cash or on credit, at public or private sale; and to manage, develop, improve, exchange, partition, change the character of, or abandon a trust asset or any interest therein; and to encumber, mortgage, or pledge a trust asset for a term within or extending beyond the term of the trust, in connection with the exercise of any power vested in the trustee;
(8) to make ordinary or extraordinary repairs or alterations in buildings or other structures, to demolish any improvements, to raze existing or erect new party walls or buildings;
(9) to subdivide, develop, or dedicate land to public use; or to make or obtain the vacation of plats and adjust boundaries; or to adjust differences in valuation on exchange or partition by giving or receiving consideration; or to dedicate easements to public use without consideration;
(10) to enter for any purpose into a lease as lessor or lessee with or without option to purchase or renew for a term within or extending beyond the term of the trust;
(11) to enter into a lease or arrangement for exploration and removal of minerals or other natural resources or enter into a pooling or unitization agreement;
(12) to grant an option involving disposition of a trust asset, or to take an option for the acquisition of any asset;
(13) to vote a security, in person or by general or limited proxy;
(14) to pay calls, assessments, and any other sums chargeable or accruing against or on account of securities;
(15) to sell or exercise stock subscription or conversion rights; to consent, directly or through a committee or other agent, to the reorganization, consolidation, merger, dissolution, or liquidation of a corporation or other business enterprise;
(16) to hold a security in the name of a nominee or in other form without disclosure of the trust, so that title to the security may pass by delivery, but the trustee is liable for any act of the nominee in connection with the stock so held;
(17) to insure the assets of the trust against damage or loss, and the trustee against liability with respect to third persons;
(18) to borrow money to be repaid from trust assets or otherwise; to advance money for the protection of the trust, and for all expenses, losses, and liability sustained in the administration of the trust or because of the holding or ownership of any trust assets, for which advances with any interest the trustee has a lien on the trust assets as against the beneficiary;
(19) to pay or contest any claim; to settle a claim by or against the trust by compromise, arbitration, or otherwise; and to release, in whole or in part, any claim belonging to the trust to the extent that the claim is uncollectible;
(20) to pay taxes, assessments, compensation of the trustee, and other expenses incurred in the collection, care, administration, and protection of the trust;
(21) to allocate items of income or expense to either trust income or principal, as provided in Part 4 of this article [62-7-401 et seq.,] but without regard to how such items are treated for tax purposes;
(22) to pay any sum distributable to a beneficiary under legal disability, without liability to the trustee, by paying the sum to the beneficiary or by paying the sum for the use of the beneficiary either to a legal representative appointed by the court, or if none, to a relative;
(23) to effect distribution of property and money in divided or undivided interests and to adjust resulting differences in valuation;
(24) to employ persons, including attorneys, auditors, investment advisors, or agents, even if they are associated with the trustee, to advise or assist the trustee in the performance of his administrative duties; to act without independent investigation upon their recommendations; and instead of acting personally, to employ one or more agents to perform any act of administration, whether or not discretionary;
(25) to prosecute or defend actions, claims, or proceedings for the protection of trust assets and of the trustee in the performance of his duties;
(26) to execute and deliver all instruments which will accomplish or facilitate the exercise of the powers vested in the trustee.
SECTION 62-7-705. Trustee's office not transferable unless provided for in instrument; resignation.
Unless otherwise provided in the trust instrument, while continuing to act as a trustee, the trustee may not transfer his office to another or delegate the entire administration of the trust to a co-trustee or another. The trustee may resign if:
(1) the document so provides;
(2) all beneficiaries consent; or
(3) the court approves the resignation.
A beneficiary may consent if the beneficiary is not a minor or incapacitated person or the resignation is consented to by the representative of the minor or incapacitated person as described in Section 61-1-403(1) and (2).
SECTION 62-7-706. Power of court to authorize deviation or transactions involving conflict of interest.
(a) This Part does not affect the power of the court for cause shown and upon petition of the trustee or affected beneficiary and upon appropriate notice to the affected parties to relieve a trustee from any restrictions on his power that would otherwise be placed upon him by the trust or by this Part.
(b) Subject to the provisions of Section 62-7-603, if the duty of the trustee and his individual interest or his interest as trustee of another trust, conflict in the exercise of a trust power, the power may be exercised only by court authorization (except as provided in items (1), (4), (6), (18), and (24) of subsection (c) of Section 62-7-704) upon petition of the trustee or any other interested person, unless directed otherwise by the trust. Under this section, personal profit or advantage to an affiliated or subsidiary company or association is personal profit to any corporate trustee.
SECTION 62-7-707. Exercise of powers by joint trustees; successor trustees; liability.
(a) Any power vested in three or more trustees may be exercised by a majority, but a trustee who has not joined in exercising a power is not liable to the beneficiaries or to others for the consequences of the exercise; and a dissenting trustee is not liable for the consequences of an act in which he joins at the direction of the majority of the trustees, if he expressed his dissent in writing to any of his co-trustees at or before the time of the joinder.
(b) If two or more trustees are appointed to perform a trust, and if any of them is unable or refuses to accept the appointment, or, having accepted, ceases to be a trustee, the surviving or remaining trustees shall perform the trust and succeed to all the powers, duties, and discretionary authority given to the trustees jointly.
(c) Unless directed otherwise by the court or by the trust instrument, a successor trustee appointed by the court or by the trust instrument succeeds to all the powers, duties, and discretionary authority given to the predecessor trustee. Upon reasonable request, a successor trustee is entitled to a statement of the accounts of the trust from a predecessor trustee. A successor trustee may accept the account rendered and shall be under no duty to examine the acts or omissions of the predecessor trustee and shall not be liable for failure to seek redress for any act or omission of the predecessor trustee. The trustee of a testamentary trust may accept the account rendered by a personal representative and shall be under no duty to examine the acts or omissions of the predecessor personal representative and shall not be liable for failure to seek redress for any act or omission of the predecessor personal representative.
(d) This section does not excuse a co-trustee from liability for failure either to participate in the administration of the trust or to attempt to prevent a breach of trust.
SECTION 62-7-708. Third persons protected in dealing with trustee.
With respect to a third person dealing with a trustee or assisting a trustee in the conduct of a transaction, the existence of trust powers and their proper exercise by the trustee may be assumed without inquiry. The third person is not bound to inquire whether the trustee has power to act or is properly exercising the power; and a third person, without actual knowledge that the trustee is exceeding his powers or improperly exercising them, is fully protected in dealing with the trustee as if the trustee possessed and properly exercised the powers he purports to exercise. A third person is not bound to assure the proper application of trust assets paid or delivered to the trustee.
SECTION 62-7-709. Application.
Except as specifically provided in the trust, the provisions of this Part apply to any trust established before or after the effective date of this Part and to any trust asset acquired by the trustee before or after the effective date of this Part.