Scroll to History Page
Scroll to Previous Versions Links List
Scroll to Full Text
Download This Bill in Microsoft Word format
Current Status Bill Number:View additional legislative information at the LPITS web site.659 Type of Legislation:General Bill GB Introducing Body:Senate Introduced Date:20010501 Primary Sponsor:Hayes All Sponsors:Hayes Drafted Document Number:l:\council\bills\dka\4197mm01.doc Companion Bill Number:4044 Residing Body:Senate Current Committee:Judiciary Committee 11 SJ Subject:Trusts, Estates, and Probate Reform Act; Uniform Transfers to Minors Act, Principal and Income, Prudent Investor, Banks History Body Date Action Description Com Leg Involved ______ ________ ______________________________________ _______ ____________ ------ 20010501 Companion Bill No. 4044 Senate 20010501 Introduced, read first time, 11 SJ referred to Committee Versions of This Bill
TO ENACT THE SOUTH CAROLINA TRUSTS, ESTATES, AND PROBATE REFORM ACT; TO AMEND SUBARTICLE 5, ARTICLE 3, CHAPTER 7, TITLE 20, CODE OF LAWS OF SOUTH CAROLINA, 1976, RELATING TO THE UNIFORM GIFTS TO MINORS ACT, SO AS TO DESIGNATE SUBARTICLE 5 AS THE "UNIFORM TRANSFERS TO MINORS ACT", TO CHANGE THE AGE OF DISTRIBUTION TO TWENTY-ONE YEARS, INCLUDE BOTH GRATUITOUS TRANSFERS AND TRANSFERS FOR CONSIDERATION TRANSFERS AND BOTH LIFETIME TRANSFERS AND TRANSFERS FROM TRUSTS, ESTATES, AND GUARDIANSHIPS, AND LIMIT THE MINOR'S LIABILITY TO THIRD PARTIES TO CASES OF PERSONAL FAULTY; TO AMEND SECTION 62-7-302, AS AMENDED, RELATING TO A TRUSTEE'S STANDARD OF CARE, SO AS TO DESIGNATE THE SECTION AS THE "UNIFORM PRUDENT INVESTOR ACT", TO RECOGNIZE THE PRUDENT INVESTOR RULE AND THE TOTAL RETURN THEORY OF INVESTMENT MANAGEMENT; TO AMEND PART 4, ARTICLE 7, CHAPTER 7, TITLE 62, RELATING TO THE UNIFORM PRINCIPAL AND INCOME ACT, SO AS TO DESIGNATE PART 4 AS THE "UNIFORM PRINCIPAL AND INCOME ACT OF 1997"; TO PERMIT THE ALLOCATION OF BENEFICIARY RECEIPTS BY A TRUSTEE TO INCOME INSTEAD OF TO PRINCIPAL UNDER CERTAIN SPECIFIED CIRCUMSTANCES AND IN RECOGNITION OF TOTAL RETURN THEORY OF INVESTMENT; TO AMEND SECTION 62-5-501, AS AMENDED, RELATING TO THE DURABLE POWER OF ATTORNEY, SO AS TO PROVIDE FOR REASONABLE COMPENSATION FOR AN ATTORNEY-IN-FACT ACTING PURSUANT TO A DURABLE POWER OF ATTORNEY, AND TO PROVIDE FOR PROTECTION OF THIRD PARTIES RELYING ON THE ACTS OF AN INDIVIDUAL ACTING PURSUANT TO A DURABLE POWER OF ATTORNEY; TO AMEND ARTICLE 2, CHAPTER 2, TITLE 62, RELATING TO INTESTACY, SUCCESSION AND WILLS, SO AS TO CHANGE THE TITLE OF THE ARTICLE TO "INTESTACY, WILLS, AND DONATIVE TRANSFERS; TO AMEND PART 7, ARTICLE 2, CHAPTER 2, TITLE 62, RELATING TO CONTRACTUAL ARRANGEMENTS RELATING TO DEATH, SO AS TO REPLACE PART 7 WITH RULES FOR CONSTRUCTION OF WILLS AND OTHER INSTRUMENTS GOVERNING TRANSFERS; TO AMEND SECTION 62-2-803, RELATING TO THE EFFECT OF HOMICIDE ON INTESTATE SUCCESSION, WILLS, JOINT ASSETS, LIFE INSURANCE, AND BENEFICIARY DESIGNATIONS, SO AS TO PROVIDE FOR A JUDICIAL DETERMINATION OF CRIMINAL ACCOUNTABILITY, USING THE PREPONDERANCE OF THE EVIDENCE STANDARD, IN THE ABSENCE OF A CRIMINAL CONVICTION; TO AMEND PART 8, ARTICLE 2, CHAPTER 2, TITLE 62, RELATING TO GENERAL PROVISIONS AS TO INTESTATE SUCCESSION, BY ADDING SECTION 62-2-805 SO AS TO PROVIDE FOR REVOCATION OF PROBATE AND NONPROBATE TRANSFERS BY DIVORCE AND ANNULMENT; TO AMEND SECTION 34-19-120, RELATING TO ACCESS TO A LOCKBOX TO OBTAIN A POWER OF ATTORNEY, SO AS TO FACILITATE ACCESS CONDITIONED ON A VERIFIED DOCUMENT; AND TO AMEND SECTION 27-7-40, RELATING TO THE CREATION AND SEVERANCE OF A JOINT TENANCY, SO AS TO CLARIFY THAT A JOINT TENANCY WITH A RIGHT OF SURVIVORSHIP IN REAL ESTATE MAY TRANSFER HIS INTEREST WITHOUT JOINDER OF THE OTHER JOINT TENANTS.
Be it enacted by the General Assembly of the State of South Carolina:
SECTION 1. This act may be cited as the South Carolina Trusts, Estates, and Probate Reform Act of 2001.
SECTION 2. Subarticle 5, Article 3, Chapter 7, Title 20 of the 1976 Code is amended to read:
Section 20-7-140. This subarticle may be cited as the 'South Carolina Uniform Gifts Transfers to Minors Act'.
Section 20-7-150. In this subarticle, unless the context otherwise requires:
(1) 'Adult' is a person who has attained the age of eighteen years.
(2) 'Bank' is any bank, trust company, national banking association or industrial bank.
(3) 'Broker' is a person lawfully engaged in the business of effecting transactions in securities for the account of others. The term includes a bank which effects such transactions. The term also includes a person lawfully engaged in buying and selling securities for his own account through a broker or otherwise as a part of a regular business.
(4) 'Court' means the court or branch having jurisdiction.
(5) 'Custodial property' includes:
(a) All securities, life insurance policies, annuity contracts, real estate, tangible personal property and money and any other type of property under the supervision of the same custodian for the same minor as a consequence of a gift made to the minor in a manner prescribed in this subarticle.
(b) The income from the custodial property.
(c) The proceeds, immediate and remote, from the sale, exchange, conversion, investment, reinvestment, surrender or other disposition of such securities, money, life insurance policies, annuity contracts, real estate, tangible personal property and other property.
(6) 'Custodian' is a person so designated in manner prescribed in this chapter and the term includes a successor custodian.
(7) 'Guardian' of a minor means the general guardian, guardian, tutor or curator of his property or estate, appointed or qualified by a court of this State or another state.
(8) 'Issuer' is a person who places or authorizes the placing of his name on a security, other than as a transfer agent, to evidence that it represents a share, participation or other interest in his property or in an enterprise, or to evidence his duty or undertaking to perform an obligation evidenced by the security or who becomes responsible for in place of any such person.
(9) 'Legal representative' of a person in his executor or the administrator, general guardian, guardian, committee, conservator, tutor or curator of his property or estate.
(10) 'Member of a minor's family' means any of the minor's parents, grandparents, brothers, sisters, uncles and aunts, whether of the whole blood or the half blood, or by or through legal adoption.
(11) 'Minor' is a person who has not attained the age of eighteen years, excluding a person under the age of eighteen who is married or emancipated as decreed by the family court.
(12) 'Savings and loan association' is a state-chartered savings and loan association or building and loan association or a federally-chartered savings and loan association.
(13) 'Security' includes any note, stock, treasury stock, bond, debenture, evidence of indebtedness, certificate of interest or participation in an oil, gas or mining title or lease or in payments out of production under such a title or lease, collateral trust certificate, transferable share, voting -trust certificate or, in general, any interest or instrument commonly known as a security, any certificate of interest or participation in any temporary or interim certificate, receipt or certificate of deposit for or any warrant or right to subscribe to or purchase any of the foregoing. The term does not include a security of which the donor is the issuer. A security is in 'registered form' when it specifies a person entitled to it or to the rights it evidences and its transfer may be registered upon books maintained for that purpose by or on behalf of the issuer.
(14) 'Transfer agent' is a person who acts as authenticating trustee, transfer agent, registrar or other agent for an issuer in the registration of transfers of its securities or in the issue of new securities in the cancellation of surrendered securities.
(15) 'Trust company' is a bank, corporation or other legal entity authorized to exercise trust powers in this State.
(16) 'Financial institution' is a bank, a federal savings and loan association, a savings institution chartered and supervised as a savings and loan or similar institution under federal law or the laws of a state, a federal credit union or a credit union chartered and supervised under the laws of a state; a 'domestic financial institution' is one chartered and supervised under the laws of this State or chartered and supervised under federal law and having its principal office in this State; an 'insured financial institution' is one in which deposits (including a savings, share, certificate or deposit account) are, in whole or in part, insured by the Federal Deposit Insurance Corporation, by the Federal Savings and Loan Insurance Corporation or by a deposit insurance fund approved by this State.
(17) 'Life insurance policy or annuity contract' means a life insurance policy or annuity contract issued by an insurance company on the life of a minor to whom a gift of the policy or contract is made in the manner prescribed in this subarticle or on the life of a member of the minor's family.
Section 20-7-160. (1) An adult person may, during his lifetime, make a gift of security, a life insurance policy or annuity contract or money or real estate, tangible personal property or any other property to a person who is a minor on the date of the gift:
(a) If the subject of the gift is a security in registered form, by registering it in the name of the donor, another adult person or a trust company followed in substance by the words: 'As custodian for __________ (name of minor) __________ under the Uniform Gifts to Minors Act'.
(b) If the subject of the gift is a security not in registered form, by delivering it to an adult other than the donor, a guardian of the minor or a trust company, accompanied by a statement of gift in the following form, in substance, signed by the donor and the person designated as custodian:
'GIFT UNDER THE SOUTH CAROLINA UNIFORM GIFTS TO MINORS ACT
__________(name of donor) __________ hereby delivers to __________ (name of custodian) __________ as custodian for __________ (name of minor) __________ under the South Carolina Uniform Gifts to Minors Act the following security: (insert an appropriate description of the security delivered sufficient to identify it)
(signature of donor)
__________ (name of custodian) __________ hereby acknowledges receipt of the above-described security as custodian for the above minor under the Uniform Gifts to Minors Act.
Dated: __________
(Signature of custodian)'
(c) If the subject of the gift is money, by paying or delivering it to a broker or a domestic financial institution for credit to an account in the name of the donor, another adult or a trust company followed in substance by the words: 'as custodian for __________ (name of minor) __________ under the Uniform Gifts to Minors Act'.
(d) If the subject of the gift is a life insurance policy or annuity contract, by causing the ownership of the policy or contract to be registered with the issuing insurance company in the name of the donor, another adult or a trust company followed in substance by the words 'as custodian for __________ (name of minor) __________ under the Uniform Gifts to Minors Act'.
(e) If the subject of the gift is an interest in real estate, by executing and delivering in the appropriate manner a deed, assignment or similar instrument in the name of the donor, another adult or guardian of the minor or a trust company followed in substance by the words: 'as custodian for __________ (name of minor) __________ under the Uniform Gifts to Minors Act'.
(f) If the subject of the gift is an interest in any property not described in items (a) through (e) above, by causing the ownership of the property to be transferred by any written document in the name of the donor, another adult, a guardian or the minor or a trust company followed in substance by the words: 'as custodian for __________ (name of minor) __________ under the Uniform Gifts to Minors Act'.
(g) If the gift is by will, by stating in the will that the bequest or devise is made under the South Carolina Uniform Gifts to Minors Act. Unless the testator in his will designates the custodian, who shall be an adult, a guardian of the minor or a trust company, his personal representative shall, subject to any limitations contained within the will, have the power to name as the custodian an adult, a guardian of the minor or a trust company and shall distribute the subject of the gift by transferring it in the manner and form provided in the preceding items of this subsection.
(h) If the gift is preceded by a gift in trust to some other person, by stating in the will or inter vivos trust instrument that it is made under the South Carolina Uniform Gifts to Minors Act. Unless the custodian, who shall be an adult, a guardian of the minor or a trust company, is designated in the will or inter vivos trust instrument, the trustee shall, subject to any limitations contained within the will or inter vivos trust instrument, have the power to name as custodian an adult, a guardian of the minor or a trust company, and shall distribute the subject of the gift by transferring it in the manner and form provided in the preceding items of this subsection.
(2) Any gift made in a manner prescribed in subsection (1) may be made to only one minor and only one person may be the custodian.
(3) A donor who makes a gift to a minor in the manner prescribed in subsection (1) shall promptly do all things within his power to put the subject of the gift in the possession and control of the custodian but the donor's failure to comply with this subsection, his designation of an ineligible person as custodian, or renunciation by the person designated as custodian shall not affect the consummation of the gift.
(4) Whether or not a gift of the ownership of a life insurance policy or annuity contract has been made, the owner of such a policy or contract may designate a custodian (or a successor custodian) as the beneficiary of any such policy or contract. When the custodian receives any proceeds of such policy or contract, the proceeds shall at that time become custodian property.
Section 20-7-170. (1) A gift made in a manner prescribed in this subarticle is irrevocable and conveys to the minor indefeasibly vested legal title to the security, life insurance policy, annuity contract, money, real estate or any other property given, but no guardian of the minor has any right, power, duty or authority with respect to the custodial property except as provided in this subarticle.
(2) By making a gift in a manner prescribed in this subarticle, the donor incorporates in his gift, inter vivos trust instrument or will all provisions of this subarticle and grants to the custodian and to any issuer, transfer agent, bank, life insurance company, broker or third person, dealing with a person designated as custodian the respective powers, rights and immunities provided in this subarticle.
Section 20-7-180. (1) The custodian shall collect, hold, manage, invest and reinvest the custodial property.
(2) The custodian shall pay over to the minor for expenditure by him, or expend for the minor's benefit, so much of or all the custodial property as the custodian deems advisable for the support, maintenance, education and benefit of the minor in the manner, at the same time or times, and to the extent that the custodian in his discretion deems suitable and proper, with or without court order, with or without regard to the duty of himself or of any other person to support the minor or his ability to do so, and with or without regard to any other income or property of the minor which may be applicable or available for any such purpose.
(3) The court, on the petition of a parent or guardian of the minor or of the minor, if he has attained the age of fourteen years, may order the custodian to pay over to the minor for expenditure by him or to expend so much of or all of the custodial property as is necessary for the minor's support, maintenance or education.
(4) To the extent that the custodial property is not so expended, the custodian shall deliver or pay it over to the minor on his attaining the age of eighteen years or, if the minor dies before attaining the age of eighteen years, he shall thereupon deliver or pay it over to the estate of the minor.
(5) The custodian, notwithstanding statutes restricting investments by fiduciaries, shall invest and reinvest the custodial property as would a prudent man of discretion and intelligence who is seeking a reasonable income and the preservation of his capital, except that he may, in his discretion and without liability to the minor or his estate, retain custodial property given to the minor in a manner prescribed in this subarticle or hold money so given in an account in the financial institution to which it was paid or delivered by the donor.
(6) The custodian may sell, exchange, convert, surrender or otherwise dispose of custodial property in the manner, at the time or times, for the price or prices and upon the terms he deems advisable. He may vote in person or by general or limited proxy a security which is custodial property. He may consent, directly or through a committee or other agent, to the reorganization, consolidation, merger, dissolution or liquidation of an issuer, a security of which is custodial property, and to the sale, lease, pledge or mortgage of any property by or to such an issuer, and to any other action by such an issuer. He may execute and deliver any and all instruments in writing which he deems advisable to carry out any of his powers as custodian. With respect to any interest in real estate, he may perform the same acts that any unmarried adult could perform, including, but not limited to, the power to buy, sell, assign, transfer, convey, dedicate, partition, exchange, mortgage, create or redeem ground rents, deeds, grant or exercise options, effect and keep in force fire, rent, liability, casualty, and other insurance; make, execute, acknowledge, and deliver deeds, conveyances, mortgages, releases, leases, including leases for ninety-nine years renewable forever, and leases extending beyond the minority of the minor; collect rents; improve, subdivide, or develop property; construct, alter, demolish or repair property; settle boundary lines and easements; pay taxes; and protect assessments.
(7) The custodian shall register each security which is custodial property and in registered form in the name of the custodian followed in substance by the words: 'as custodian for __________ (name of minor) __________ under the Uniform Gifts to Minors Act'. The custodian shall hold all money which is custodial property in an account with a broker or in an insured financial institution in the name of the custodian followed in substance by the words: 'as custodian for __________ (name of minor) __________ under the Uniform Gifts to Minors Act'. The custodian shall keep all other custodial property separate and distinct from his own property in a manner to identify it clearly as custodial property.
(8) The custodian shall keep records of all transactions with respect to the custodial property and make them available for inspection at reasonable intervals by a parent or legal representative of the minor or by the minor, if he has attained the age of fourteen years.
(9) A custodian has, with respect to the custodial property, in addition to the rights and powers provided in this subarticle, all the rights and powers which a guardian has with respect to property not held as custodial property.
(10) If the subject of the gift is a life insurance policy or annuity contract, the custodian:
(a) In his capacity as custodian, has all the incidents of ownership in the policy or contract to the same extent as if he were the owner, except that the designated beneficiary of any policy or contract on the life of the minor shall be the minor's estate and the designated beneficiary of any policy or contract on the life of a person other than the minor shall be the custodian as custodian for the minor for whom he is acting;
(b) May pay premiums on the policy or contract out of the custodial property.
Section 20-7-190. (1) A custodian is entitled to reimbursement from the custodial property for his reasonable expenses incurred in the performance of his duties.
(2) A custodian may act without compensation for his services.
(3) Unless he is a donor, a custodian may receive from the custodial property reasonable compensation for his services determined by one of the following standards in the order stated:
(a) A direction by the donor when the gift is made;
(b) A statute of this State applicable to custodians;
(c) The statute of this State applicable to guardians;
(d) An order of the court.
(4) Except as otherwise provided in this subarticle, a custodian shall not be required to give a bond for the performance of his duties.
(5) A custodian not compensated for his services is not liable for losses to the custodial property unless they result from his bad faith, intentional wrongdoing or gross negligence or from his failure to maintain the standard of prudence in investing the custodial property provided in this subarticle.
Section 20-7-200. No issuer, transfer agent, bank, life insurance company, broker or other person or financial institution acting on the instructions of or otherwise dealing with any person purporting to act as a donor or in the capacity of a custodian is responsible for determining whether the person designated as custodian by the purported donor or by the custodian or purporting to act as a custodian has been duly designated or whether any purchase, sale or transfer to or by or any other act of any person purporting to act in the capacity of custodian is in accordance with or authorized by this subarticle, or is obliged to inquire into the validity or propriety under this subarticle of any instrument or instructions executed or given by a person purporting to act as a donor or in the capacity of a custodian, or is bound to see to the application by any person purporting to act in the capacity of a custodian of any money or other property paid or delivered to him. No issuer, transfer agent, bank, life insurance company, broker or other person or financial institution acting on any instrument of designation of a successor custodian, executed as provided in subsection (1) of Section 20-7-210 by a minor to whom a gift has been made in a manner prescribed in this subarticle and who has attained the age of fourteen years, is responsible for determining whether the person designated by the minor as successor custodian has been duly designated, or is obliged to inquire into the validity or propriety under this subarticle of the instrument of designation.
Section 20-7-210. (1) Only an adult member of the minor's family, a guardian of the minor or a trust company is eligible to become successor custodian. A custodian may designate his successor by executing and dating an instrument of designation before a subscribing witness other than the successor, the instrument of designation may, but need not, contain the resignation of the custodian. If the custodian does not so designate his successor before he dies or becomes legally incapacitated, and the minor has attained the age of fourteen years, the minor may designate a successor custodian by executing an instrument of designation before a subscribing witness other than the successor. A successor custodian has all the rights, powers, duties and immunities of a custodian designated in a manner prescribed by this subarticle.
(2) The designation of a successor custodian as provided in subsection (1) takes effect as to each item of the custodial property when the custodian resigns, dies or becomes legally incapacitated, and the custodian or his legal representative:
(a) Causes the item, if it is a security in registered form, or a life insurance policy or annuity contract, to be registered with the issuing insurance company in the case of a life insurance policy or annuity contract, or an interest in real property in the name of the successor custodian followed in substance by the words: 'as custodian for __________ (name of minor) __________ under the Uniform Gifts to Minors Act';
(b) Delivers or causes to be delivered to the successor custodian any other item of the custodial property, together with the instrument of designation of the successor custodian or a true copy thereof, and any additional instruments required for the transfer thereof to the successor custodian.
(3) A custodian who executes an instrument of designation of his successor containing the custodian's resignation as provided in subsection (1) shall promptly do all things within his power to put each item of the custodial property in the possession and control of the successor custodian named in the instrument. The legal representative of a custodian who dies or becomes legally incapacitated shall promptly do all things within his power to put each item of the custodial property in the possession and control of the successor custodian named in an instrument of designation executed as provided in subsection (1) by the custodian or, if none, by the minor if he has no guardian and has attained the age of fourteen years, or in the possession and control of the guardian of the minor if he has a guardian. If the custodian has executed as provided in subsection (1) more than one instrument of designation, his legal representative shall treat the instrument dated on an earlier date as having been revoked by the instrument dated on a later date.
(4) If a person designated as custodian or as a successor custodian by the custodian as provided in subsection (1) is not eligible, dies or becomes legally incapacitated before the minor attains the age of eighteen years and if the minor has a guardian, the guardian of the minor shall be successor custodian. If the minor has no guardian and if no successor custodian who is eligible and has not died or became legally incapacitated has been designated as provided in subsection (1), a donor, his representative, the legal representative of the custodian or an adult members of the minor's family may petition the court for the designation of a successor custodian. The provisions of this subsection shall not affect the power of a personal representative or trustee to appoint a custodian pursuant to items (g) and (h) of subsection (1) of Section 20-7-160, or the power of an owner of a life insurance policy or annuity contract to appoint a successor custodian pursuant to subsection (4) of Section 20-7-160.
(5) A donor, the legal representative of a donor, a successor custodian, an adult member of the minor's family, a guardian of the minor or the minor, if he has attained the age of fourteen years, may petition the court that, for cause shown in the petition, the custodian be removed and a successor custodian be designated or, in the alternative, that the custodian be required to give bond for the performance of his duties.
(6) Upon the filing of a petition as provided in this section, the court shall grant an order, directed to the persons and returnable on such notice as the court may require, to show cause why the relief prayed for in the petition should not be granted and, in due course, grant such relief as the court finds to be in the best interests of the minor.
Section 20-7-220. (1) The minor, if he has attained the age of fourteen years, or the legal representative of the minor, an adult member of the minor's family or a donor or his legal representative may petition the court for an accounting by the custodian or his legal representative.
(2) The court, in a proceeding under this subarticle or otherwise, may require or permit the custodian or his legal representative to account and, if the custodian is removed, shall so require and order delivery of all custodial property to the successor custodian and the execution of all instruments required for the transfer thereof.
Section 20-7-220. (1) The minor, if he has attained the age of fourteen years, or the legal representative of the minor, an adult member of the minor's family or a donor or his legal representative may petition the court for an accounting by the custodian or his legal representative.
(2) The court, in a proceeding under this subarticle or otherwise, may require or permit the custodian or his legal representative to account and, if the custodian is removed, shall so require and order delivery of all custodial property to the successor custodian and the execution of all instruments required for the transfer thereof.
Section 20-7-230. (1) This subarticle shall be so construed as to effectuate its general purpose to make uniform the law of those states which enact it.
(2) This subarticle shall not be construed as providing an exclusive method for making gifts to minors.
Section 20-7-240. No amendment to this subarticle shall be construed to adversely affect any gift legally made under its provisions in effect prior to the amendment.
Section 20-7-145. In this subarticle, unless the content requires otherwise:
(1) 'Adult' means an individual who has attained the age of twenty-one years.
(2) 'Benefit plan' means an employer's plan for the benefit of an employee or partner.
(3) 'Broker' means a person lawfully engaged in the business of effecting transactions in securities or commodities for the person's own account or for the account of others.
(4) 'Conservator' means a person appointed or qualified by a court to act as conservator of a minor's property pursuant to Section 62-5-401(1) or a person legally authorized to perform substantially the same functions.
(5) 'Court' means the Probate Court.
(6) 'Custodial property' means:
(a) any interest in property transferred to a custodian pursuant to this subarticle; and
(b) the income from and proceeds of that interest in property.
(7) 'Custodian' means a person or the successor or substitute designated pursuant to Sections 20-7-165 and 20-7-200.
(8) 'Financial institution' means a bank, trust company, savings institution, or credit union that is chartered and supervised pursuant to state or federal law.
(9) 'Legal representative' means an individual's personal representative or conservator.
(10) 'Member of the minor's family' means the minor's parent, stepparent, spouse, grandparent, brother, sister, uncle, or aunt, whether of the whole or half blood or by adoption.
(11) 'Minor' means an individual who has not attained the age of twenty-one years.
(12) 'Person' means an individual, corporation, organization, or other legal entity.
(13) 'Personal representative' means an executor, administrator, successor personal representative, or special administrator of a decedent's estate, or a person legally authorized to perform substantially the same functions.
(14) 'State' includes a state of the United States, the District of Columbia, the Commonwealth of Puerto Rico, and a territory or possession subject to the legislative authority of the United States.
(15) 'Transfer' means a transaction that creates custodial property pursuant to Section 20-7-165.
(16) 'Transferor' means a person who makes a transfer under this pursuant to this subarticle.
(17) 'Trust company' means a financial institution, corporation, or other legal entity, authorized to exercise general trust powers.
Section 20-7-150. (A) This subarticle applies to a transfer as provided in Section 20-7-165 by which the transfer is made if at the time of the transfer, the transferor, the minor, or the custodian is a resident of this State or the custodial property is located in this State. The custodianship created remains subject to this subarticle even if there is subsequent change in residence of a transferor, the minor, or the custodian, or the removal of custodial property from this State.
(B) A person designated as custodian pursuant to this subarticle is subject to personal jurisdiction in this State with respect to any matter relating to the custodianship.
(C) A transfer that purports to be made, and which is valid, under the Uniform Transfers to Minors Act, the Uniform Gifts to Minors Act, or a substantially similar act of another state is governed by the law of that state and may be executed and is enforceable in this State if, at the time of the transfer, the transferor, the minor, or the custodian is a resident of the designated state or the custodial property is located in the designated state.
(D) This subarticle is not the exclusive procedure for transferring a property interest to a minor and another procedure for transferring a property interest to a minor authorized by the law of this State, and, not specifically repealed, continues in effect.
Section 20-7-155. (A) A person having the right to designate the recipient of property transferable upon the occurrence of a future event may revocably nominate a custodian to receive the property for a minor beneficiary upon the occurrence of the event by naming the custodian followed in substance by the words: 'as custodian for ____________________ (name of minor) under the South Carolina Uniform Transfers to Minors Act'. The nomination may name one or more persons as substitute custodians to whom the property must be transferred, in the order named, if the first nominated custodian dies before the transfer or is unable, declines, or is ineligible to serve. The nomination may be made in a will, a trust, a deed, an instrument exercising a power of appointment, or in a writing designating a beneficiary of contractual rights which is registered with or delivered to the payor, issuer, or other obligor of the contractual rights.
(B) A custodian nominated pursuant to this section must be a person to whom a transfer of property of that kind may be made pursuant to Section 20-7-165.
(C) The nomination of a custodian provided by this section does not create custodial property until the nominating instrument becomes irrevocable or a transfer to the nominated custodian is completed pursuant to Section 20-7-165. Unless the nomination of a custodian has been revoked, the custodianship becomes effective upon the occurrence of the future event and the custodian shall enforce a transfer of the custodial property pursuant to Section 20-7-165.
Section 20-7-160. (A) A person may make a transfer by irrevocable gift to, or the irrevocable exercise of a power of appointment in favor of, a custodian for the benefit of a minor pursuant to Section 20-7-165.
(B)(1) A personal representative or trustee may make an irrevocable transfer pursuant to Section 20-7-165 to a custodian for the benefit of a minor as authorized in the governing will or trust.
(2) If the testator or settlor has nominated a custodian pursuant to Section 20-7-155 to receive the custodial property, the transfer must be made to that person.
(3) If the testator or settlor has not nominated a custodian pursuant to Section 20-7-155, or if all persons nominated as custodian die before the transfer or are unable, decline, or are ineligible to serve, the personal representative or the trustee shall designate the custodian from among those eligible to serve as custodian for property of that kind pursuant to Section 20-7-176(A).
(C)(1) Subject to item (3), a personal representative or trustee may make an irrevocable transfer to another adult or trust company as custodian for the benefit of a minor pursuant to Section 20-7-165, in the absence of a will or pursuant to a will or trust that does not contain an authorization to do so.
(2) Subject to item (3), a conservator may make an irrevocable transfer to another adult or trust company as custodian for the benefit of the minor pursuant to Section 20-7-165.
(3) A transfer pursuant to item (1) or (2) may be made only if:
(a) the personal representative, trustee, or conservator considers the transfer to be in the best interest of the minor; and
(b) the transfer is not prohibited by or inconsistent with the provisions of the applicable will, trust agreement or other governing instrument.
If the value of the property transferred pursuant to item (1) or (2) totals more than ten thousand dollars, whether in one or more transfers, that transfer must be authorized by the court. If the transfer pursuant to item (1) or (2) is to the transferor then the transfer must be authorized by the court.
(D)(1) Subject to items (2) and (3), a person not covered by subsection (B) or (C) who holds property of or owes a liquidated debt to a minor not having a conservator may make an irrevocable transfer to a custodian for the benefit of the minor pursuant to Section 20-7-165.
(2) If a person having the right to nominate pursuant to Section 20-7-155 has nominated a custodian to receive the custodial property, the transfer must be made to that person.
(3) If a custodian has not been nominated as provided by Section 20-7-155, or all persons nominated as custodian die before the transfer or are unable, decline, or are ineligible to serve, a transfer pursuant to this subsection may be made to an adult member of the minor's family or to a trust company unless the property exceeds ten thousand dollars in value.
(E) A written acknowledgment of delivery by a custodian constitutes a sufficient receipt and discharge for custodial property transferred to the custodian pursuant to this subarticle.
Section 20-7-165. (A) Custodial property is created and a transfer is made when:
(1) an uncertificated security or a certificated security in registered form is either:
(a) registered in the name of the transferor, an adult other than the transferor, or a trust company, followed in substance by the words: 'as custodian for ____________________ (name of minor) under the South Carolina Uniform Transfers to Minors Act'; or
(b) delivered if in certificated form, or if in uncertificated form any document necessary for its transfer is delivered, together with a necessary endorsement to an adult other than the transferor or to a trust company as custodian, accompanied by an instrument in substantially the form provided in subsection (B);
(2) money is paid or delivered, or a security held in the name of a broker, financial institution, or its nominee is transferred, to a broker or financial institution for credit to an account in the name of the transferor, an adult other than the transferor, or a trust company, followed in substance by the words: 'as custodian for ____________________ (name of minor) as provided in the South Carolina Uniform Transfers to Minors Act';
(3) the ownership of a life or endowment insurance policy or annuity contract is either:
(a) registered with the issuer in the name of the transferor, an adult other than the transferor, or a trust company, followed in substance by the words: 'as custodian for ____________________ (name of minor) as provided in the South Carolina Uniform Transfers to Minors Act'; or
(b) assigned in a writing delivered to an adult other than the transferor or to a trust company whose name in the assignment is followed in substance by the words: 'as custodian for ____________________ (name of minor) as provided in the South Carolina Uniform Transfers to Minors Act';
(4) an irrevocable exercise of a power of appointment or an irrevocable present right to future payment under a contract is the subject of a written notification delivered to the payor, issuer, or other obligor that the right is transferred to the transferor, an adult other than the transferor, or a trust company, whose name in the notification is followed in substance by the words: 'as custodian for ____________________ (name of minor) as provided in the South Carolina Uniform Transfers to Minors Act';
(5) an interest in real property is conveyed or devised to the transferor, an adult other than the transferor, or a trust company, followed in substance by the words: 'as custodian for ____________________ (name of minor) as provided in the South Carolina Uniform Transfers to Minors Act';
(6) a certificate of title issued by a department or agency of a state or of the United States which evidences title to tangible personal property is either:
(a) issued in the name of the transferor, an adult other than the transferor, or a trust company, followed in substance by the words: 'as custodian for ____________________ (name of minor) as provided in the South Carolina Uniform Transfers to Minors Act'; or
(b) delivered to an adult other than the transferor or to a trust company, endorsed to that person followed in substance by the words: 'as custodian for ____________________ (name of minor) as provided in the South Carolina Uniform Transfers to Minors Act'; or
(7) an interest in any property not described in items (1) through (6) is transferred to an adult other than the transferor or to a trust company by a written instrument in substantially the form as provided in subsection (b).
(B) An instrument in the following form satisfies the requirements of items (1)(b) and (7) of subsection (A):
I, ____________________ (name of transferor or name and representative capacity if a fiduciary) hereby transfer to ____________________ (name of custodian), as custodian for ____________________ (name of minor) as provided in the South Carolina Uniform Transfers to Minors Act, the following: (insert a description of the custodial property sufficient to identify it).
Dated: ____________________
__________________________________________________
(Signature)
____________________ (name of custodian) acknowledges receipt of the property described above as custodian for the minor named above as provided in the South Carolina Uniform Transfers to Minors Act.
Dated: ____________________
__________________________________________________'
(Signature of Custodian)
(C) A transferor shall place the custodian in control of the custodial property as soon as practicable.
Section 20-7-170. A transfer may be made only for one minor, and only one person may be the custodian. All custodial property held pursuant to this subarticle by the same custodian for the benefit of the same minor constitutes a single custodianship.
Section 20-7-175. (A) The validity of a transfer made in a manner prescribed in this subarticle is not affected by:
(1) failure of the transferor to comply with Section 20-7-165(C) concerning possession and control;
(2) designation of an ineligible custodian, except designation of the transferor in the case of property for which the transferor is ineligible to serve as custodian pursuant to Section 20-7-165(A);
(3) death or incapacity of a person nominated as provided by Section 20-7-155 or designated as provided by Section 20-7-165 as custodian or the disclaimer of the office by that person; or
(4) the use of an abbreviation in referring to this subarticle or the equivalent act of another state.
(B) A transfer made pursuant to Section 20-7-165 is irrevocable. Upon transfer, the custodial property is indefeasibly vested in the minor, however, the custodian has all the rights, powers, duties, and authority provided in this subarticle, and neither the minor nor the minor's legal representative has any right, power, duty, or authority with respect to the custodial property except as provided in this subarticle.
(C) By making a transfer, the transferor incorporates in the disposition all the provisions of this subarticle and grants to the custodian, and to a third person dealing with a person designated as custodian, the respective powers, rights, and immunities provided in this subarticle.
Section 20-7-180. (A)(1) A custodian shall:
(a) take control of custodial property;
(b) register or record title to custodial property if appropriate; and
(c) collect, hold, manage, invest, and reinvest custodial property.
(2) In dealing with custodial property, a custodian shall observe the standard of care observed by a prudent person dealing with property of another and is not limited by another statute restricting investments by fiduciaries. If a custodian has a special skill or expertise or is named custodian on the basis of representations of a special skill or expertise, the custodian shall use that skill or expertise. However, a custodian, in the custodian's discretion and without liability to the minor or the minor's estate, may retain custodial property received from a transferor.
(3) A custodian may invest in or pay premiums on life insurance or endowment policies on the life of:
(a) the minor, only if the minor or the minor's estate or the custodian in the capacity of custodian is the sole beneficiary; or
(b) another person in whom the minor has an insurable interest, only to the extent that the minor, the minor's estate, or the custodian in the capacity of custodian, is the irrevocable beneficiary.
(4) A custodian shall keep custodial property separate and distinct from all other property in a manner sufficient to identify it clearly as custodial property of the minor. Custodial property consisting of an undivided interest is identified if the minor's interest is held as a tenant in common and is fixed. Custodial property subject to recordation is identified if it is recorded. Custodial property subject to registration is identified if it is either registered or held in an account designated in the name of the custodian, followed in substance by the words: 'as a custodian for ____________________ (name of minor) under the South Carolina Uniform Transfers to Minors Act'.
(5) A custodian shall keep records of all transactions with respect to custodial property, including information necessary for the preparation of the minor's tax returns, and shall make them available for inspection at reasonable intervals by a parent or legal representative of the minor or by the minor if the minor has attained the age of fourteen years.
(B)(1) A custodian, acting in a custodial capacity, has all rights, powers, and authority over custodial property that an unmarried adult owner has over his own property. A custodian may exercise those rights, powers, and authority only in the capacity of a custodian.
(2) This section does not relieve a custodian from liability for breach of subsection (A).
(C)(1) A custodian may deliver or pay to the minor or expend for the minor's benefit as much of the custodial property as the custodian considers advisable for the use and benefit of the minor, without court order and without regard to:
(a) the duty or ability of the custodian personally or of any other person to support the minor; or
(b) other income or property of the minor that may be applicable or available for that purpose.
(2) On petition of an interested person, or the minor if the minor has attained the age of fourteen years, the court may order the custodian to deliver or pay to the minor or expend for the minor's benefit as much of the custodial property as the court considers advisable for the use and benefit of the minor.
(3) A delivery, payment, or expenditure pursuant to this subsection is in addition to, not in substitution for, and does not otherwise affect an obligation of a person to support the minor.
Section 20-7-185. (A) A custodian may use custodial property for payment of or reimbursement for reasonable expenses incurred in the performance of the custodian's duties.
(B) Except for a transferor pursuant to Section 20-7-160(A), a custodian has a noncumulative election during each calendar year to charge reasonable compensation for services performed during that year.
(C) Except as provided in Section 20-7-200(F), a custodian is not required to give a bond.
Section 20-7-190. A third person, in good faith and without court order, may act on the instructions of or otherwise deal with a person purporting to make a transfer or purporting to act in the capacity of a custodian and, in the absence of knowledge, is not responsible for determining:
(1) the validity of the purported custodian's designation;
(2) the propriety of, or the authority pursuant to this subarticle for, any act of the purported custodian;
(3) the validity or propriety pursuant to this subarticle of any instrument or instructions executed or given either by the person purporting to make a transfer or by the purported custodian; or
(4) the propriety of the application of property of the minor delivered to the purported custodian.
Section 20-7-195. (A) A claim may be asserted against the custodial property by proceeding against the custodian in the custodial capacity, whether or not the custodian or the minor is liable personally for the claim, if the claim is based on:
(1) a contract entered into by a custodian acting in a custodial capacity;
(2) an obligation arising from the ownership or control of custodial property; or
(3) a tort committed during the custodianship.
(B) A custodian is not liable personally:
(1) on a contract properly entered into in the custodial capacity if the custodian fails to reveal that capacity and to identify the custodianship in the contract; or
(2) for an obligation arising from control of custodial property or for a tort committed during the custodianship unless the custodian is personally at fault.
(C) A minor is not liable personally for:
(1) an obligation arising from ownership of custodial property; or
(2) a tort committed during the custodianship unless the minor is personally at fault.
Section 20-7-200. (A) A person nominated as provided by Section 20-7-155 or designated as provided by Section 20-7-165 as custodian may decline to serve by delivering a valid disclaimer to the person who made the nomination or to the transferor or the transferor's legal representative. If the event giving rise to a transfer has not occurred and a substitute custodian able, willing, and eligible to serve is not nominated pursuant to Section 20-7-155, the person who made the nomination may nominate a substitute custodian pursuant to Section 20-7-155, or the transferor or the transferor's legal representative shall designate a substitute custodian at the time of the transfer. In either case, the designation must be from among the persons eligible to serve as custodian for that kind of property pursuant to Section 20-7-165(A). The designated custodian has the rights of a successor custodian.
(B) A custodian may designate at any time a trust company or an adult other than a transferor as provided by Section 20-7-160(A) as successor custodian by executing and dating an instrument of designation before a subscribing witness other than the successor. If the instrument of designation does not contain or is not accompanied by the resignation of the custodian, the designation of the successor does not take effect until the custodian resigns, dies, becomes incapacitated, or is removed.
(C) A custodian may resign at any time by delivering written notice to the minor if the minor has attained the age of fourteen years and to the successor custodian and by delivering the custodial property to the successor custodian.
(D) If a custodian is ineligible, dies, or becomes incapacitated without effectively having designated a successor and the minor has attained the age of fourteen years, the minor may designate as successor custodian, in the manner prescribed in subsection (B), an adult member of the minor's family, a conservator of the minor, or a trust company. If the minor has not attained the age of fourteen years or fails to act within sixty days after the ineligibility, death, or incapacity, the conservator of the minor becomes successor custodian. If the minor has no conservator or the conservator declines to act, the transferor, the legal representative of the transferor or of the custodian, an adult member of the minor's family, or any other interested person may petition the court to designate a successor custodian.
(E) A custodian who declines to serve as provided by subsection (A) or resigns as provided by subsection (C), or the legal representative of a deceased or incapacitated custodian, as soon as practicable, shall put the custodial property and records in the possession and control of the successor custodian. The successor custodian by action may enforce the obligation to deliver custodial property and records and becomes responsible for each item as received.
(F) A transferor, the legal representative of a transferor, an adult member of the minor's family, a guardian of the person of the minor, the conservator of the minor, or the minor if the minor has attained the age of fourteen years may petition the court to remove the custodian for cause and to designate a successor custodian other than a transferor as provided by Section 20-7-160(A) or to require the custodian to give appropriate bond.
Section 20-7-205. (A) A minor who has attained the age of fourteen years, the minor's guardian of the person or legal representative, an adult member of the minor's family, a transferor, or a transferor's legal representative may petition the court for:
(1) an accounting by the custodian or the custodian's legal representative; or
(2) a determination of responsibility, as between the custodial property and the custodian personally, for claims against the custodial property unless the responsibility has been adjudicated in an action pursuant to Section 20-7-195 to which the minor or the minor's legal representative was a party.
(B) A successor custodian may petition the court for an accounting by the predecessor custodian.
(C) The court, in a proceeding pursuant to this subarticle or in another proceeding, may require or permit the custodian or the custodian's legal representative to account.
(D) If a custodian is removed pursuant to Section 20-7-200(F), the court shall require an accounting and order delivery of the custodial property and records to the successor custodian and the execution of all instruments required for transfer of the custodial property.
Section 20-7-210. The custodian shall transfer the custodial property in an appropriate manner to the minor or to the minor's estate upon the earlier of:
(1) the minor's attainment of twenty-one years of age with respect to custodial property transferred pursuant to Section 20-7-160(A) or (B);
(2) the minor's attainment of eighteen years of age with respect to custodial property transferred pursuant to Section 20-7-160(C) or (D); or
(3) the minor's death.
Section 20-7-215. This subarticle applies to a transfer within the scope of Section 20-7-150 and made after its effective date if:
(1) the transfer purports to have been made pursuant to the Uniform Gifts to Minors Act of South Carolina; or
(2) the instrument by which the transfer was made uses in substance the designation 'as custodian pursuant to the Uniform Gifts to Minors Act' or 'as custodian pursuant to the Uniform Transfers to Minors Act' of any other state, and the application of this subarticle is necessary to validate the transfer.
Section 20-7-220. (A) A transfer of custodial property, as defined in this subarticle, made before its effective date is a valid transfer, notwithstanding that there was no specific authority in the Uniform Gifts to Minors Act of South Carolina for the coverage of custodial property of that kind or for a transfer from that source at the time the transfer was made.
(B) This subarticle applies to all transfers made before the effective date of this subarticle in a manner and form prescribed in the Uniform Gifts to Minors Act of South Carolina, except to the extent the application impairs constitutionally vested rights or extends the duration of custodianships in existence on the effective date of this subarticle.
(C) Sections 20-7-145 and 20-7-210, with respect to the age of a minor for whom custodial property is held pursuant to this subarticle, do not apply to custodial property held in a custodianship that terminated before the effective date of this subarticle because of the minor's attainment of the age of majority.
Section 20-7-225. This subarticle must be applied and construed to effectuate its general purpose to make uniform the law with respect to the subject of this subarticle among states enacting it."
SECTION 3. Section 62-7-302 of the 1976 Code, as last amended by Act 449 of 1994, is further amended to read:
'Section 62-7-302. (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. (A) This section may be cited as the South Carolina Uniform Prudent Investor Act.
(B)(1) Except as otherwise provided in item (2), a trustee who invests and manages trust assets owes a duty to the beneficiaries of the trust to comply with the prudent investor rule in this section.
(2) The prudent investor rule is a default rule that may be expanded, restricted, eliminated, or otherwise altered by the provisions of a trust. A trustee is not liable to a beneficiary to the extent that the trustee acted in reasonable reliance on the provisions of the trust.
(C)(1) A trustee shall invest and manage trust assets as a prudent investor would by considering the purposes, terms, distribution requirements, and other circumstances of the trust. In satisfying this standard, the trustee shall exercise reasonable care, skill, and caution.
(2) A trustee's investment and management decisions respecting individual assets must be evaluated not in isolation but in the context of the trust portfolio as a whole and as a part of an overall investment strategy having risk and return objectives reasonably suited to the trust.
(3) A trustee shall consider in investing and managing trust assets those circumstances of the following as are relevant to the trust or its beneficiaries:
(a) general economic conditions;
(b) the possible effect of inflation or deflation;
(c) the expected tax consequences of investment decisions or strategies;
(d) the role that each investment or course of action plays within the overall trust portfolio, including financial assets, interests in closely held enterprises, tangible and intangible personal property, and real property;
(e) the expected total return from income and the appreciation of capital;
(f) other resources of the beneficiaries;
(g) needs for liquidity, regularity of income, and preservation or appreciation of capital; and
(h) an asset's special relationship or special value to the purposes of the trust or to one or more of the beneficiaries.
(4) A trustee shall make a reasonable effort to verify facts relevant to the investment and management of trust assets.
(5) A trustee may invest in any kind of property or type of investment consistent with the standards of this section.
(6) A trustee who has special skills or expertise, or is named trustee in reliance upon the trustee's representation that the trustee has special skills or expertise, has a duty to use those special skills or expertise.
(D) A trustee shall diversify the investments of the trust unless the trustee reasonably determines that, because of special circumstances, the purposes of the trust are better served without diversifying.
(E) Within a reasonable time after accepting a trusteeship or receiving trust assets, a trustee shall review the trust assets and make and implement decisions concerning the retention and disposition of assets in order to bring the trust portfolio into compliance with the purposes, terms, distribution requirements, and other circumstances of the trust and with the requirements of this section.
(F) A trustee shall:
(1) invest and manage the trust assets solely in the interest of the beneficiaries;
(2) act impartially in investing and managing the trust assets, taking into account any differing interests of the beneficiaries if a trust has two or more beneficiaries;
(3) incur only costs that are appropriate and reasonable in relation to the assets, the purposes of the trust, and the skills of the trustee in investing and managing trust assets.
(G) Compliance with the prudent investor rule is determined in light of the facts and circumstances existing at the time of a trustee's decision or action and not by hindsight.
(H)(1) A trustee may delegate investment and management functions if it is prudent to do so under the circumstances. The trustee shall exercise reasonable care, skill, and caution in:
(a) selecting an agent;
(b) establishing the scope and terms of the delegation, consistent with the purposes and terms of the trust; and
(c) periodically reviewing the actions of the agent to monitor his performance and compliance with the terms of the delegation.
(2) In performing a delegated function, an agent owes a duty to the trust to exercise reasonable care to comply with the terms of the delegation.
(3) A trustee who complies with the requirements of item (1) is not liable to the beneficiaries or to the trust for the decisions or actions of the agent to whom the function was delegated.
(4) By accepting the delegation of a trust function from the trustee of a trust that is subject to the law of this State, an agent submits to the jurisdiction of the courts of this State.
(I) The following terms or comparable language in the provisions of a trust, unless otherwise limited or modified, authorize any investment or strategy permitted pursuant to this section: 'investments permissible by law for investment of trust funds', 'legal investments', 'authorized investments', 'using the judgment and care under the circumstances then prevailing that persons of prudence, discretion, and intelligence exercise in the management of their own affairs, not in regard to speculation but in regard to the permanent disposition of their funds, considering the probable income as well as the probable safety of their capital', 'prudent man rule', 'prudent trustee rule', 'prudent person rule', and 'prudent investor rule'.
(J)(1) Notwithstanding provisions of this section to the contrary, the duties of a trustee with respect to acquiring 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:
(a) determine whether the contract is or remains a proper investment;
(b) exercise policy options available under the contract; or
(c) diversify the contract.
(2) The trustee is not liable to the beneficiaries of the contract of insurance or to another party for loss arising from this subsection.
(3) Except as specifically provided in the trust instrument, the provisions of this subsection apply to trust established before or after the effective date of this subsection and to a life insurance policy acquired by the trustee before or after the effective date of this section.
(K) This section applies to 'charitable remainder trusts'. 'Charitable remainder trust' means a trust that provides for a specified distribution at least annually for either life or a term of years to one or more beneficiaries, at least one of which is not a charity with an irrevocable remainder interest to be held for the benefit of, or paid over to, charity.
(L) This section must be applied and construed to effectuate its general purpose to make uniform the law with respect to the subject of this section among the States enacting it."
SECTION 4. Part 4, Article 7, Chapter 7, Title 62 of the 1976 Code is amended to read:
Section 62-7-401. This part [Sections 62-7-401 et seq.] may be cited as the Revised Uniform Principal and Income Act.
Section 62-7-402. 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. 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. (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 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 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. (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. 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. (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. (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. (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. (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. 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. 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. (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. 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. (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. 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. 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. 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. 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.
Section 62-7-401. This part may be cited as the South Carolina Uniform Principal and Income Act.
Section 62-7-402. As used in this part:
(1) 'Accounting period' means a calendar year unless another twelve-month period is selected by a fiduciary. The term includes a portion of a calendar year or other twelve-month period that begins when an income interest begins or ends when an income interest ends.
(2) 'Beneficiary' includes, in the case of a decedent's estate, an heir, legatee, and devisee and, in the case of a trust, an income beneficiary and a remainder beneficiary.
(3) 'Fiduciary' means a personal representative or a trustee. The term includes an executor, administrator, successor personal representative, special administrator, and a person performing substantially the same function.
(4) 'Income' means money or property that a fiduciary receives as current return from a principal asset. The term includes a portion of receipts from a sale, exchange, or liquidation of a principal asset, to the extent provided in Section 62-7-410 through Section 62-7-424.
(5) 'Income beneficiary' means a person to whom net income of a trust is or may be payable.
(6) 'Income interest' means the right of an income beneficiary to receive all or part of net income, whether the terms of the trust require it to be distributed or authorize it to be distributed in the trustee's discretion.
(7) 'Mandatory income interest' means the right of an income beneficiary to receive net income that the terms of the trust require the fiduciary to distribute.
(8) 'Net income' means the total receipts allocated to income during an accounting period minus the disbursements made from income during the period, plus or minus transfers under this part to or from income during the period.
(9) 'Person' means an individual, a corporation, a business trust, an estate, a trust, a partnership, a limited liability company, an association, a joint venture, a government or a governmental subdivision, an agency, or an instrumentality; a public corporation, or other legal or commercial entity.
(10) 'Principal' means property held in trust for distribution to a remainder beneficiary when the trust terminates.
(11) 'Remainder beneficiary' means a person entitled to receive principal when an income interest ends.
(12) 'Terms of a trust' means the manifestation of the intent of a settlor or decedent with respect to the trust, expressed in a manner that admits of its proof in a judicial proceeding, whether by written or spoken words or by conduct.
(13) 'Trustee' includes an original, additional, or successor trustee, whether or not appointed or confirmed by a court.
Section 62-7-403. (A) In allocating receipts and disbursements to or between principal and income, and with respect to any matter within the scope of Sections 62-7-405 and 62-7-409, a fiduciary:
(1) shall administer a trust or estate in accordance with the terms of the trust or the will, even if there is a different provision in this part;
(2) may administer a trust or estate by the exercise of a discretionary power of administration given to the fiduciary by the terms of the trust or the will, even if the exercise of the power produces a result different from a result required or permitted by this part;
(3) shall administer a trust or estate in accordance with this part if the terms of the trust or the will do not contain a different provision or do not give the fiduciary a discretionary power of administration; and
(4) shall add a receipt or charge a disbursement to principal to the extent that the terms of the trust and this part do not provide a rule for allocating the receipt or disbursement to or between principal and income.
(B) In exercising the power to adjust pursuant to Section 62-7-404(A) or a discretionary power of administration regarding a matter within the scope of this part, whether granted by the terms of a trust, a will, or this part, a fiduciary shall administer a trust or estate impartially, based on what is fair and reasonable to all of the beneficiaries, except to the extent that the terms of the trust or the will clearly manifest an intention that the fiduciary shall or may favor one or more of the beneficiaries. A determination in accordance with this part is presumed to be fair and reasonable to all of the beneficiaries.
Section 62-7-404. (A) A trustee may adjust between principal and income to the extent the trustee considers necessary if the trustee invests and manages trust assets as a prudent investor, the terms of the trust describe the amount that may or must be distributed to a beneficiary by referring to the trust's income, and the trustee determines, after applying the provisions in Section 62-7-403(A), that the trustee is unable to comply with Section 62-7-403(B).
(B) In deciding whether and to what extent to exercise the power of adjustment in subsection (A), a trustee shall consider all factors relevant to the trust and its beneficiaries, including:
(1) nature, purpose, and expected duration of the trust;
(2) intent of the settlor;
(3) identity and circumstances of the beneficiaries;
(4) needs for liquidity, regularity of income, and preservation and appreciation of capital;
(5) assets held in the trust and the extent to which they consist of financial assets, interests in closely held enterprises, tangible and intangible personal property, or real property and the extent to which an asset is used by a beneficiary, and whether an asset was purchased by the trustee or received from the settlor;
(6) net amount otherwise allocated to income and the increase or decrease in the value of the principal assets, which the trustee may estimate as to assets for which market values are not readily available;
(7) terms of the trust and whether and to what extent they give the trustee the power to, or prohibit him from, invade principal or accumulate income or prohibit the trustee from invading principal or accumulating income, and the extent to which the trustee has exercised a power from time to time to invade principal or accumulate income;
(8) actual and anticipated effect of economic conditions on principal and income and effects of inflation and deflation; and
(9) anticipated tax consequences of an adjustment.
(C) A trustee may not make an adjustment:
(1) that diminishes the income interest in a trust that requires all of the income to be paid at least annually to a surviving spouse and for which an estate tax or gift tax marital deduction is allowed, in whole or in part, if the trustee did not have the power to make the adjustment;
(2) that reduces the actuarial value of the income interest in a trust to which a person transfers property with the intent to qualify for a gift tax exclusion;
(3) that changes the amount payable to a beneficiary as a fixed annuity or a fixed fraction of the value of the trust assets;
(4) from any amount that is permanently set aside for charitable purposes under a will or the terms of a trust unless both income and principal are so set aside;
(5) if possessing or exercising the power to make an adjustment is determinative in causing an individual to be treated as the owner of all or part of the trust for income tax purposes;
(6) if possessing or exercising the power to make an adjustment is determinative in causing all or part of the trust assets to be included for estate tax purposes in the estate of an individual who has the power to remove a trustee or appoint a trustee, or both;
(7) if the trustee is a beneficiary of the trust; or
(8) if the trustee is not a beneficiary, but the adjustment benefits the trustee directly or indirectly.
(D) If subsection (C)(5), (6), (7), or (8) applies to a trustee and there is more than one trustee, a cotrustee to whom the provision does not apply may make the adjustment unless the exercise of the power by the remaining trustee or trustees is not permitted by the terms of the trust.
(E) A trustee may release the entire power of adjustment in by subsection (A) or may release only the power to adjust from income to principal or the power to adjust from principal to income if the trustee is uncertain about whether possessing or exercising the power causes a result described in subsections (C)(1) through (6) or (C)(8) or if the trustee determines that possessing or exercising the power may deprive the trust of a tax benefit or impose a tax burden not contemplated in subsection (C). The release may be permanent or for a specified period, including a period measured by the life of an individual.
(F) Terms of a trust that limit the power of a trustee to make an adjustment between principal and income do not affect the application of this section unless it is clear from the terms of the trust that the terms are intended to deny the trustee the power of adjustment in subsection (A).
Section 62-7-405. After a decedent dies, in the case of an estate, or after an income interest in a trust ends, a fiduciary:
(1) of an estate or of a terminating income interest shall determine the amount of net income and net principal receipts received from property specifically given to a beneficiary pursuant to Sections 62-7-407 through 62-7-430 which apply to trustees and the provisions of item (5). The fiduciary shall distribute the net income and net principal receipts to the beneficiary who is to receive the specific property;
(2) shall determine the remaining net income of a decedent's estate or a terminating income interest pursuant to Sections 62-7-407 through 62-7-430 which apply to trustees and by:
(a) including in net income all income from property used to discharge liabilities;
(b) paying from income or principal, in the fiduciary's discretion, fees of attorneys, accountants, and fiduciaries, court costs and other expenses of administration, and interest on death taxes; except that the fiduciary may pay those expenses from income of property passing to a trust for which the fiduciary claims an estate tax marital or charitable deduction only to the extent that the payment of those expenses from income does not cause the reduction or loss of the deduction; and
(c) paying from principal all other disbursements made or incurred in connection with the settlement of a decedent's estate or the winding up of a terminating income interest, including debts, funeral expenses, disposition of remains, family allowances, and death taxes and related penalties that are apportioned to the estate or terminating income interest by the will, the terms of the trust, or applicable law;
(3) shall distribute to a beneficiary who receives a pecuniary amount outright the interest or other amount provided by the will, the terms of the trust, or applicable law from net income as determined by item (2) or from principal to the extent that net income is insufficient. If a beneficiary is to receive a pecuniary amount outright from a trust after an income interest ends and no interest or other amount is provided for by the terms of the trust or applicable law, the fiduciary shall distribute the interest or other amount to which the beneficiary would be entitled under applicable law if the pecuniary amount were required to be paid under a will;
(4) shall distribute the net income remaining after distributions required by item (3) in the manner pursuant to Section 62-7-406 to all other beneficiaries, including a beneficiary who receives a pecuniary amount in trust, even if the beneficiary holds an unqualified power to withdraw assets from the trust or other presently exercisable general power of appointment over the trust; and
(5) may not reduce principal or income receipts from property described in item (1) because of a payment pursuant to Sections 62-7-424 and 62-7-425 to the extent that the will, the terms of the trust, or applicable law requires the fiduciary to make the payment from assets other than the property or to the extent that the fiduciary recovers or expects to recover the payment from a third party. The net income and principal receipts from the property are determined by including all of the amounts the fiduciary receives or pays with respect to the property, whether those amounts accrued or became due before, on, or after the date of a decedent's death or an income interest's terminating event, and by making a reasonable provision for amounts that the fiduciary believes the estate or terminating income interest may become obligated to pay after the property is distributed.
Section 62-7-406. (A) Each beneficiary described in Section 62-7-405(4) is entitled to receive a portion of the net income equal to his fractional interest in undistributed principal assets, using values as of the distribution date. If a fiduciary makes more than one distribution of assets to beneficiaries to whom this section applies, each beneficiary, including one who does not receive part of the distribution, is entitled, as of each distribution date, to the net income the fiduciary has received after the date of death or terminating event or earlier distribution date but has not distributed as of the current distribution date.
(B) In determining a beneficiary's share of net income, the:
(1) beneficiary is entitled to receive a portion of the net income equal to his fractional interest in the undistributed principal assets immediately before the distribution date, including assets that later may be sold to meet principal obligations.
(2) fractional interest of the beneficiary in the undistributed principal assets must be calculated without regard to property specifically given to a beneficiary and property required to pay pecuniary amounts not in trust.
(3) fractional interest of the beneficiary in the undistributed principal assets must be calculated on the basis of the aggregate value of those assets as of the distribution date without reducing the value by any unpaid principal obligation; and
(4) distribution date for purposes of this section may be the date as of which the fiduciary calculates the value of the assets if that date is reasonably near the date on which assets are actually distributed.
(C) If a fiduciary does not distribute all of the collected but undistributed net income to each person as of a distribution date, the fiduciary shall maintain appropriate records showing the interest of each beneficiary in that net income.
(D) A trustee may apply the provisions of this section, to the extent that the trustee considers it appropriate, to net gain or loss realized after the date of death or terminating event or earlier distribution date from the disposition of a principal asset if this section applies to the income from the asset.
Section 62-7-407. (A) An income beneficiary is entitled to net income from the date on which the income interest begins. An income interest begins on the date specified in the terms of the trust or, if no date is specified, on the date an asset becomes subject to a trust or successive income interest.
(B) An asset becomes subject to a trust on the date:
(1) it is transferred to the trust, in the case of an asset that is transferred to a trust during the transferor's life;
(2) the testator dies, in the case of an asset that becomes subject to a trust by reason of a will, even if there is an intervening period of administration of the estate; or
(3) the individual dies, in the case of an asset that is transferred to a fiduciary by a third party because of the death of the individual.
(C) An asset becomes subject to a successive income interest on the day after the preceding income interest ends, as determined pursuant to subsection (D), even if there is an intervening period of administration to wind up the preceding income interest.
(D) An income interest ends on the day before an income beneficiary dies or another terminating event occurs or on the last day of a period during which there is no beneficiary to whom a trustee may distribute income.
Section 62-7-408. (A) A trustee shall allocate an income receipt or disbursement, other than one subject to Section 62-7-405(1), to principal if its due date occurs before a decedent dies in the case of an estate or before an income interest begins in the case of a trust or successive income interest.
(B) A trustee shall allocate an income receipt or disbursement to income if its due date occurs on or after the date on which a decedent dies or an income interest begins and it is a periodic due date. An income receipt or disbursement must be treated as accruing from day to day if its due date is not periodic or it has no due date. The portion of the receipt or disbursement accruing before the date on which a decedent dies or an income interest begins must be allocated to principal and the balance must be allocated to income.
(C) An item of income or an obligation is due on the date the payer is required to make a payment. If a payment date is not stated, there is no due date for the purposes of this part. Distributions to shareholders or other owners from an entity subject to Section 62-7-410 are considered due on the date fixed by the entity for determining who is entitled to receive the distribution or, if no date is fixed, on the declaration date for the distribution. A due date is periodic for receipts or disbursements that must be paid at regular intervals under a lease or an obligation to pay interest or if an entity customarily makes distributions at regular intervals.
Section 62-7-409. (A) In this section, 'undistributed income' means net income received before the date on which an income interest ends. The term does not include an item of income or expense that is due or accrued or net income that has been added or must be added to principal under the terms of the trust.
(B) When a mandatory income interest ends, the trustee shall pay to a mandatory income beneficiary who survives that date, or the estate of a deceased mandatory income beneficiary whose death causes the interest to end, the beneficiary's share of the undistributed income that is not disposed of under the terms of the trust, unless the beneficiary has an unqualified power to revoke more than five percent of the trust immediately before the income interest ends. In that case, the undistributed income from the portion of the trust that may be revoked must be added to principal.
(C) When the obligation of a trustee to pay a fixed annuity or a fixed fraction of the value of the trust assets ends, the trustee shall prorate the final payment if, and to the extent, required by applicable law to accomplish a purpose of the trust or its settlor relating to income, gift, estate, or other tax requirements.
Section 62-7-410. (A) In this section, 'entity' means a corporation, partnership, limited liability company, regulated investment company, real estate investment trust, common trust fund, or other organization in which a trustee has an interest other than a trust or estate subject to Section 62-7-411, a business or activity to which Section 62-7-412 applies, or an asset-backed security to which Section 62-7-424 applies.
(B) Except as otherwise provided in this section, a trustee shall allocate to income money received from an entity.
(C) A trustee shall allocate the following receipts from an entity to principal:
(1) property other than money;
(2) money received in one distribution or a series of related distributions in exchange for part or all of a trust's interest in the entity;
(3) money received in total or partial liquidation of the entity; and
(4) money received from an entity that is a regulated investment company or a real estate investment trust if the money distributed is a capital gain dividend for federal income tax purposes.
(D) Money is received in partial liquidation:
(1) to the extent that the entity, at or near the time of a distribution, indicates that it is a distribution in partial liquidation; or
(2) if the total amount of money and property received in a distribution or series of related distributions is greater than twenty percent of the entity's gross assets of the entity, as shown by the its year-end financial statements immediately preceding the initial receipt.
(E) Money is not received in partial liquidation, nor may it be taken into account pursuant to subsection (D)(2), to the extent that it does not exceed the amount of income tax that a trustee or beneficiary must pay on taxable income of the entity that distributes the money.
(F) A trustee may rely upon a statement made by an entity about the source or character of a distribution if the statement is made at or near the time of distribution by the its board of directors or other person or group of persons authorized to exercise powers to pay money or transfer property comparable to those of a corporation's board of directors.
Section 62-7-411. A trustee shall allocate to income an amount received as a distribution of income from a trust or an estate in which the trust has an interest other than a purchased interest, and shall allocate to principal an amount received as a distribution of principal from such a trust or estate. If a trustee purchases an interest in a trust that is an investment entity, or a decedent or donor transfers an interest in such a trust to a trustee, Section 62-7-410 or 62-7-424 applies to a receipt from the trust.
Section 62-7-412. (A) If a trustee who conducts a business or other activity determines that it is in the best interest of all the beneficiaries to account separately for the business or activity instead of accounting for it as part of the general accounting records of the trust, the trustee may maintain separate accounting records for its transactions, whether or not its assets are segregated from other trust assets.
(B) A trustee who accounts separately for a business or other activity may determine the extent to which its net cash receipts must be retained for working capital, the acquisition or replacement of fixed assets, and other reasonably foreseeable needs of the business or activity, and the extent to which the remaining net cash receipts are accounted for as principal or income in the trust's general accounting records. If a trustee sells assets of the business or other activity, other than in the ordinary course of the business or activity, the trustee shall account for the net amount received as principal in the general accounting records of the trust to the extent the trustee determines that the amount received is no longer required in the conduct of the business.
(C) Activities for which a trustee may maintain separate accounting records include:
(1) retail, manufacturing, service, and other traditional business activities;
(2) farming;
(3) raising and selling livestock and other animals;
(4) management of rental properties;
(5) extraction of minerals and other natural resources;
(6) timber operations; and
(7) activities subject to Section 62-7-423.
Section 62-7-413. A trustee shall allocate to principal:
(1) to the extent not allocated to income pursuant to this part, assets received from a transferor during his lifetime, a decedent's estate, a trust with a terminating income interest, or a payer under a contract naming the trust or its trustee as beneficiary;
(2) money or other property received from the sale, exchange, liquidation, or change in form of a principal asset, including realized profit;
(3) amounts recovered from third parties to reimburse the trust because of disbursements described in Section 62-7-426(A)(7) or for other reasons to the extent not based on the loss of income;
(4) proceeds of property taken by eminent domain, but a separate award made for the loss of income with respect to an accounting period during which a current income beneficiary had a mandatory income interest is income;
(5) net income received in an accounting period during which there is no beneficiary to whom a trustee may or must distribute income; and
(6) other receipts as provided in Sections 62-7-417 through 62-7-424.
Section 62-7-414. To the extent that a trustee accounts for receipts from rental property pursuant to this section, the trustee shall allocate to income an amount received as rent of real or personal property, including an amount received for cancellation or renewal of a lease. An amount received as a refundable deposit, including a security deposit or a deposit applied as rent for future periods, must be added to principal and held subject to the terms of the lease and is not available for distribution to a beneficiary until the trustee's contractual obligations have been satisfied with respect to that amount.
Section 62-7-415. (A) An amount received as interest, whether determined at a fixed, variable, or floating rate, on an obligation to pay money to the trustee, including an amount received as consideration for prepaying principal, must be allocated to income without provision for amortization of premium.
(B) A trustee shall allocate to principal an amount received from the sale, redemption, or other disposition of an obligation to pay money to the trustee more than one year after it is purchased or acquired by the trustee, including an obligation whose purchase price or value when it is acquired is less than its value at maturity. If the obligation matures within one year after it is purchased or acquired by the trustee, an amount received in excess of its purchase price or its value when acquired by the trust must be allocated to income.
(C) This section does not apply to an obligation subject to Section 62-7-418, 62-7-419, 62-7-420, 62-7-421, or 62-7-424.
Section 62-7-416. (A) Except as otherwise provided in subsection (B), a trustee shall allocate to principal the proceeds of a life insurance policy or other contract in which the trust or its trustee is named as beneficiary, including a contract that insures the trust or its trustee against loss for damage to, destruction of, or loss of title to a trust asset. The trustee shall allocate dividends on an insurance policy to income if the premiums on the policy are paid from income, and to principal if the premiums are paid from principal.
(B) A trustee shall allocate to income proceeds of a contract that insures the trustee against loss of occupancy or other use by an income beneficiary, loss of income, or, subject to Section 62-7-412, loss of profits from a business.
(C) This section does not apply to a contract subject to Section 62-7-418.
Section 62-7-417. If a trustee determines that an allocation between principal and income required by Section 62-7-418, 62-7-419, 62-7-420, 62-7-421, or 62-7-424 is insubstantial, the trustee may allocate the entire amount to principal unless one of the circumstances provided in Section 62-7-404(C) applies to the allocation. This power may be exercised by a cotrustee in the circumstances provided in Section 62-7-404(D) and may be released for the reasons and in the manner provided in Section 62-7-404(E). An allocation is presumed to be insubstantial if:
(1) the amount of the allocation increases or decreases net income in an accounting period, as determined before the allocation, by less than ten percent; or
(2) the value of the asset producing the receipt for which the allocation is made is less than ten percent of the total value of the assets of the trust at the beginning of the accounting period.
Section 62-7-418. (A) In this section, 'payment' means a payment that a trustee may receive over a fixed number of years or during the life of one or more individuals because of services rendered or property transferred to the payer in exchange for future payments. The term includes a payment made in money or property from the payer's general assets or from a separate fund created by the payer, including a private or commercial annuity, an individual retirement account, and a pension, profit-sharing, stock-bonus, or stock-ownership plan.
(B) To the extent that a payment is characterized as interest or a dividend or a payment made instead of interest or a dividend, a trustee shall allocate it to income. The trustee shall allocate to principal the balance of the payment and any other payment received in the same accounting period that is not characterized as interest, a dividend, or an equivalent payment.
(C) If part of a payment is not characterized as interest, a dividend, or an equivalent payment, and all or part of the payment is required to be made, a trustee shall allocate to income ten percent of the part that is required to be made during the accounting period and the balance to principal. If a part of a payment is not required to be made or the payment received is the entire amount to which the trustee is entitled, the trustee shall allocate the entire payment to principal. For purposes of this subsection, a payment is not 'required to be made' to the extent that it is made because the trustee exercises a right of withdrawal.
(D) If, to obtain an estate tax marital deduction for a trust, a trustee must allocate more of a payment to income than provided for by this section, the trustee shall allocate to income the additional amount necessary to obtain the marital deduction.
(E) This section does not apply to payments subject to Section 62-7-419.
Section 62-7-419. (A) In this section, 'liquidating asset' means an asset whose value diminishes or terminates because the asset is expected to produce receipts for a period of limited duration. The term includes a leasehold, patent, copyright, royalty right, and right to receive payments during a period of more than one year under an arrangement that does not provide for the payment of interest on the unpaid balance. The term does not include a payment subject to Section 62-7-418, resources subject to Section 62-7-420, timber subject to Section 62-7-421, an activity subject to Section 62-7-423, an asset subject to Section 62-7-424, or any asset for which the trustee establishes a reserve for depreciation pursuant to Section 62-7-427.
(B) A trustee shall allocate to income ten percent of the receipts from a liquidating asset and the balance to principal.
Section 62-7-420. (A) To the extent that a trustee accounts for receipts from an interest in minerals or other natural resources pursuant to this section, the trustee shall allocate them if:
(1) received as nominal delay rental or nominal annual rent on a lease, a receipt must be allocated to income;
(2) received from a production payment, a receipt must be allocated to income if and to the extent that the agreement creating the production payment provides a factor for interest or its equivalent. The balance must be allocated to principal;
(3) an amount received as a royalty, shut-in-well payment, take-or-pay payment, bonus, or delay rental is more than nominal, ninety percent must be allocated to principal and the balance to income;
(4) an amount is received from a working interest or any other interest not otherwise provided for in this subsection, ninety percent of the net amount received must be allocated to principal and the balance to income.
(B) An amount received on account of an interest in water that is renewable must be allocated to income. If the water is not renewable, ninety percent of the amount must be allocated to principal and the balance to income.
(C) This part applies whether or not a decedent or donor was extracting minerals, water, or other natural resources before the interest became subject to the trust.
(D) If a trust owns an interest in minerals, water, or other natural resources on the effective date of this part, the trustee may allocate receipts from the interest as provided in this part or in the manner used by the trustee before the effective date of this part. If the trust acquires an interest in minerals, water, or other natural resources after the effective date of this part, the trustee shall allocate receipts from the interest as provided in this part.
Section 62-7-421. (A) To the extent that a trustee accounts for receipts from the sale of timber and related products pursuant to this section, the trustee shall allocate the net receipts to:
(1) income, to the extent that the amount of timber removed from the land does not exceed the rate of growth of the timber during the accounting periods in which a beneficiary has a mandatory income interest;
(2) principal, to the extent that the amount of timber removed from the land exceeds the rate of growth of the timber or the net receipts are from the sale of standing timber;
(3) or between income and principal, if the net receipts are from the lease of timberland or from a contract to cut timber from land owned by a trust, by determining the amount of timber removed from the land under the lease or contract and applying items (1) and (2); or
(4) principal, to the extent that advance payments, bonuses, and other payments are not otherwise allocated pursuant this subsection.
(B) In determining net receipts to be allocated pursuant to subsection (A), a trustee shall deduct and transfer to principal a reasonable amount for depletion.
(C) This part applies whether or not a decedent or transferor was harvesting timber from the property before it become subject to the trust.
(D) If a trust owns an interest in timberland on the effective date of this part, the trustee may allocate net receipts from the sale of timber and related products as provided in this part or in the manner used by the trustee before the effective date of this part. If the trust acquires an interest in timberland after the effective date of this part, the trustee shall allocate net receipts from the sale of timber and related products as provided in this part.
Section 62-7-422. (A) If a marital deduction is allowed for all or part of a trust whose assets consist substantially of property that does not provide the surviving spouse with sufficient income from or use of the trust assets, and if the amounts that the trustee transfers from principal to income pursuant to Section 62-7-404 and distributes to the spouse from principal pursuant to the terms of the trust are insufficient to provide the spouse with the beneficial enjoyment required to obtain the marital deduction, the spouse may require the trustee to make property productive of income, convert property within a reasonable time, or exercise the power in Section 62-7-404(A). The trustee may decide which action or combination of actions to take.
(B) If subsection (A) is inapplicable, proceeds from the sale or other disposition of an asset are principal without regard to the amount of income the asset produces during any accounting period.
Section 62-7-423. (A) In this section, 'derivative' means a contract or financial instrument or a combination of contracts and financial instruments which gives a trust the right or obligation to participate in some or all changes in the price of a tangible or intangible asset or group of assets, or changes in a rate, an index of prices or rates, or other market indicator for an asset or a group of assets.
(B) To the extent that a trustee does not account pursuant to Section 62-7-412 for transactions in derivatives, the trustee shall allocate to principal receipts from and disbursements made in connection with those transactions.
(C) If a trustee grants an option to buy property from the trust, whether or not the trust owns the property when the option is granted, grants an option that permits another person to sell property to the trust, or acquires an option to buy property for the trust or an option to sell an asset owned by the trust, and the trustee or other owner of the asset is required to deliver the asset if the option is exercised, an amount received for granting the option must be allocated to principal. An amount paid to acquire the option must be paid from principal. A gain or loss realized upon the exercise of an option, including an option granted to a settlor of the trust for services rendered, must be allocated to principal.
Section 62-7-424. (A) In this section, 'asset-backed security' means an asset whose value is based upon the right it gives the owner to receive distributions from the proceeds of financial assets that provide collateral for the security. The term includes an asset that gives the owner the right to receive from the collateral financial assets only the interest or other current return or only the proceeds other than interest or current return. The term does not include an asset subject to Section 62-7-409 or 62-7-418.
(B) If a trust receives a payment from interest or other current return and from other proceeds of the collateral financial assets, the trustee shall allocate to income the portion of the payment which the payer identifies as being from interest or other current return and shall allocate the balance of the payment to principal.
(C) If a trust receives one or more payments in exchange for the its entire interest in an asset-backed security in one accounting period, the trustee shall allocate the payments to principal. If a payment is one of a series of payments that results in the liquidation of the interest of the trust in the security over more than one accounting period, the trustee shall allocate ten percent of the payment to income and the balance to principal.
Section 62-7-425. A trustee shall make the following disbursements from income to the extent that they are not disbursements subject to Section 62-7-405(2)(b) or (c):
(1) one-half of the regular compensation of the trustee and of any person providing investment advisory or custodial services to the trustee;
(2) one-half of all expenses for accountings, judicial proceedings, or other matters that involve both the income and remainder interests;
(3) all of the other ordinary expenses incurred in connection with the administration, management, or preservation of trust property and the distribution of income, including interest, ordinary repairs, regularly recurring taxes assessed against principal, and expenses of a proceeding or other matter that concerns primarily the income interest; and
(4) recurring premiums on insurance covering the loss of a principal asset or the loss of income from or use of the asset.
Section 62-7-426. (A) A trustee shall make the following disbursements from principal:
(1) the remaining one-half of the disbursements provided in Section 62-7-425(1) and (2);
(2) all of the trustee's compensation calculated on principal as a fee for acceptance, distribution, or termination, and disbursements made to prepare property for sale;
(3) payments on the principal of a trust debt;
(4) expenses of a proceeding that concerns primarily principal, including a proceeding to construe the trust or to protect the trust or its property;
(5) premiums paid on a policy of insurance not provided in Section 62-7-425(4) of which the trust is the owner and beneficiary;
(6) estate, inheritance, and other transfer taxes, including penalties, apportioned to the trust; and
(7) disbursements related to environmental matters, including reclamation, assessing environmental conditions, remedying and removing environmental contamination, monitoring remedial activities and the release of substances, preventing future releases of substances, collecting amounts from persons liable or potentially liable for the costs of those activities, penalties imposed under environmental laws or regulations and other payments made to comply with those laws or regulations, statutory or common law claims by third parties, and defending claims based on environmental matters.
(B) If a principal asset is encumbered with an obligation that requires income from that asset to be paid directly to the creditor, the trustee shall transfer from principal to income an amount equal to the income paid to the creditor in reduction of the principal balance of the obligation.
Section 62-7-427. (A) In this section, 'depreciation' means a reduction in value due to wear, tear, decay, corrosion, or gradual obsolescence of a fixed asset having a useful life of more than one year.
(B) A trustee may transfer to principal a reasonable amount of the net cash receipts from a principal asset that is subject to depreciation, but may not transfer any amount for depreciation:
(1) of that portion of real property used or available for use by a beneficiary as a residence or of tangible personal property held or made available for the personal use or enjoyment of a beneficiary;
(2) during the administration of a decedent's estate; or
(3) under this section if the trustee is accounting pursuant to Section 62-7-412 for the business or activity in which the asset is used.
(C) An amount transferred to principal need not be held as a separate fund.
Section 62-7-428. (A) If a trustee makes or expects to make a principal disbursement described in this section, the trustee may transfer an appropriate amount from income to principal in one or more accounting periods to reimburse principal or to provide a reserve for future principal disbursements.
(B) A principal disbursement for purposes of this section includes the following, but only to the extent that the trustee has not been, and does not expect to be, reimbursed by a third party:
(1) an amount chargeable to income but paid from principal because it is unusually large, including extraordinary repairs;
(2) a capital improvement to a principal asset, whether in the form of changes to an existing asset or the construction of a new asset, including special assessments;
(3) a disbursement made to prepare property for rental, including tenant allowances, leasehold improvements, and broker's commissions;
(4) a periodic payment on an obligation secured by a principal asset to the extent that the amount transferred from income to principal for depreciation is less than the periodic payments; and
(5) a disbursement described in Section 62-7-426(A)(7).
(C) If the asset whose ownership gives rise to the disbursements becomes subject to a successive income interest after an income interest ends, a trustee may continue to transfer amounts from income to principal as provided in subsection (A).
Section 62-7-429. (A) A tax required to be paid by a trustee based on receipts allocated to income must be paid from income.
(B) A tax required to be paid by a trustee based on receipts allocated to principal must be paid from principal, even if the tax is called an income tax by the taxing authority.
(C) A tax required to be paid by a trustee on the trust's share of the taxable income of the entity must be paid proportionately from:
(1) income, to the extent that receipts from the entity are allocated to income; and
(2) principal, to the extent that:
(a) receipts from the entity are allocated to principal; and
(b) the trust's share of the taxable income of the entity exceeds the total receipts described in items (1) and (2)(a).
(D) For purposes of this section, receipts allocated to principal or income must be reduced by the amount distributed to a beneficiary from principal or income for which the trust receives a deduction in calculating the tax.
Section 62-7-430. (A) A fiduciary may make adjustments between principal and income to offset the shifting of economic interests or tax benefits between income beneficiaries and remainder beneficiaries which arise from:
(1) elections and decisions, other than those provided in subsection (B), that the fiduciary makes from time to time regarding tax matters;
(2) an income tax or any other tax that is imposed upon the fiduciary or a beneficiary as a result of a transaction involving or a distribution from the estate or trust; or
(3) the ownership by an estate or trust of an interest in an entity whose taxable income, whether or not distributed, is includable in the taxable income of the estate, trust, or a beneficiary.
(B) If the amount of an estate tax marital deduction or charitable contribution deduction is reduced because a fiduciary deducts an amount paid from principal for income tax purposes instead of deducting it for estate tax purposes, and as a result estate taxes paid from principal are increased and income taxes paid by an estate, trust, or beneficiary are decreased, each estate, trust, or beneficiary that benefits from the decrease in income tax shall reimburse the principal from which the increase in estate tax is paid. The total reimbursement must equal the increase in the estate tax to the extent that the principal used to pay the increase would have qualified for a marital deduction or charitable contribution deduction but for the payment. The proportionate share of the reimbursement for each estate, trust, or beneficiary whose income taxes are reduced must be the same as its proportionate share of the total decrease in income tax. An estate or trust shall reimburse principal from income.
Section 62-7-431. In applying and construing this Uniform Act, consideration must be given to the need to promote uniformity of the law with respect to its subject matter among states that enact it.
Section 62-7-432. (A) A court shall not change a fiduciary's decision to exercise or not to exercise a discretionary power conferred by this part unless it determines that the decision was an abuse of the fiduciary's discretion. A court shall not determine that a fiduciary abused its discretion merely because the court would have exercised the discretion in a different manner or would not have exercised the discretion.
(B) The decisions subject to subsection (a) include a determination:
(1) pursuant to Section 62-7-404(A) of whether and to what extent an amount should be transferred from principal to income or from income to principal; and
(2) of the factors that are relevant to the trust and its beneficiaries, the extent to which they are relevant, and the weight, if any, to be given to the relevant factors, in deciding whether and to what extent to exercise the power in Section 62-7-404(A).
(C) If a court determines that a fiduciary has abused its discretion, the remedy is to restore the income and remainder beneficiaries to the positions they would have occupied if the fiduciary had not abused its discretion, according to the following rules:
(1) to the extent that the abuse of discretion has resulted in no distribution to a beneficiary or a distribution that is too small, the court shall require the fiduciary to distribute from the trust to the beneficiary an amount that the court determines will restore the beneficiary, in whole or in part, to his or her appropriate position;
(2) to the extent that the abuse of discretion has resulted in a distribution to a beneficiary that is too large, the court shall restore the beneficiaries, the trust, or both, in whole or in part, to their appropriate positions by requiring the fiduciary to withhold an amount from one or more future distributions to the beneficiary who received the distribution that was too large or requiring that beneficiary to return some or all of the distribution to the trust;
(3) to the extent that the court is unable, after applying items (1) and (2), to restore the beneficiaries, the trust, or both, to the positions they would have occupied if the fiduciary had not abused its discretion, the court may require the fiduciary to pay an appropriate amount from its own funds to one or more of the beneficiaries or the trust or both.
(D) Upon a petition by the fiduciary, the court having jurisdiction over the trust or estate shall determine whether a proposed exercise or nonexercise by the fiduciary of a discretionary power in this part results in an abuse of the fiduciary's discretion. If the petition describes the proposed exercise or nonexercise of the power and contains sufficient information to inform the beneficiaries of the reasons for the proposal, the facts upon which the fiduciary relies, and an explanation of how the income and remainder beneficiaries are affected by the proposed exercise or nonexercise of the power, a beneficiary who challenges the proposed exercise or nonexercise has the burden of establishing that it will result in an abuse of discretion."
SECTION 5. Section 62-5-501 of the 1976 Code, as last amended by Act 152 of 1997, is further amended by adding at the end:
"(F)(1) A third person in this State who receives or is presented with a valid power of attorney executed pursuant to this section, and has not received actual written notice of its revocation or termination, shall not refuse to honor the power of attorney if:
(a) it contains the following provision or a substantially similar provision:
'No person who may act in reliance upon the representations of my attorney-in-fact for the scope of authority granted to the attorney-in-fact shall incur any liability to me or to my estate as a result of permitting the attorney-in-fact to exercise any such authority, nor shall any such person who deals with my attorney-in-fact be responsible to determine or insure the proper application of funds or property.'; or
(b) the attorney-in-fact gives him an affidavit under oath and subject to perjury, stating that the powers of the attorney-in-fact are then in effect, the action the attorney-in-fact desires to take is within the scope of his authority granted pursuant to the power of attorney, and the power of attorney has not been revoked or terminated by the principal.
(2) Unless the third person actually has received written notice of the revocation or termination of a valid power of attorney executed in accordance with this section, a third person in this State who receives or is presented with a power of attorney:
(a) does not incur liability to the principal or the principal's estate by reason of acting upon the authority of it or permitting the attorney-in-fact to exercise authority;
(b) is not required to inquire whether the attorney-in-fact has power to act or is properly exercising the power; or
(c) is not responsible to determine or ensure the proper application of assets, funds, or property belonging to the principal.
(3) A 'third person' means an individual, a corporation, an organization, or other legal entity for purposes of this subsection.
(G)(1) Subject to the provisions of the power of attorney or separate written agreement:
(a) an attorney-in-fact is entitled to reimbursement for all reasonable costs and expenses actually incurred and paid by the attorney-in-fact on the principal's behalf;
(b) an attorney-in-fact is entitled to reasonable compensation based upon the responsibilities he assumed and the effort he expended; and
(c) if two or more attorneys-in-fact are serving together, the compensation paid must be divided by them in a manner as they agree or as determined by a court of competent jurisdiction if they fail to agree.
(2) An interested person may petition a court of competent jurisdiction to review the propriety and reasonableness of payment for reimbursement or compensation to the attorney-in-fact, and an attorney-in-fact who has received excessive payment may be ordered to make appropriate refunds to the principal."
SECTION 6. The title of Article 2, Chapter 2, Title 62 of the 1976 Code is amended to read:
SECTION 7. Part 7, Article 2, Chapter 2, Title 62 of the 1976 Code is amended to read:
Section 62-2-701. A contract to make a will or devise, or to revoke a will or devise, or not to revoke a will or devise, or to die intestate, if executed after the effective date of this act, can be established only by (1) provisions of a will of the decedent stating material provisions of the contract; (2) an express reference in a will of the decedent to a contract and extrinsic evidence proving the terms of the contract; or (3) a writing signed by the decedent evidencing the contract and extrinsic evidence proving the terms of the contract. The execution of a joint will or mutual wills does not create a presumption of a contract not to revoke the will or wills. In the absence of a finding of a contrary intention, the rules of construction in this part control the construction of a governing instrument. The rules of construction in this part apply to a governing instrument of any type, except as the application of a particular section is limited by its terms to a specific type or types of provision or governing instrument.
Section 62-2-702. (A) For the purposes of probate, not including purposes of the Uniform Transfer on Death Security Registration Act and except as provided in subsection (D), an individual who is not established by clear and convincing evidence to have survived an event, including the death of another individual, by one hundred twenty hours is considered to have predeceased the event.
(B) Except as provided in subsection (D) and except for a security registered in beneficiary form pursuant to the Uniform Transfer on Death Security Registration Act, for purposes of a provision of a governing instrument that relates to an individual surviving an event, including the death of another individual, an individual who is not established by clear and convincing evidence to have survived the event by one hundred twenty hours is considered to have predeceased the event.
(C)(1) Except as provided in subsection (D), if:
(a) it is not established by clear and convincing evidence that one of two co-owners with right of survivorship survived the other co-owner by one hundred twenty hours, one-half of the property passes as if one had survived by one hundred twenty hours and one-half as if the other had survived by one hundred twenty hours; and
(b) there are more than two co-owners and it is not established by clear and convincing evidence that at least one of them survived the others by one hundred twenty hours, the property passes in the proportion that one bears to the whole number of co-owners.
(2) For the purposes of this subsection, 'co-owners with right of survivorship' includes joint tenants and other co-owners of property or accounts held under circumstances that entitles one or more to the whole of the property or account on the death of the other or others.
(D) This section does not apply if: (1) the governing instrument contains language dealing explicitly with simultaneous deaths or deaths in a common disaster and that language is operable under the facts of the case;
(2) the governing instrument expressly indicates that an individual is not required to survive an event, including the death of another individual, by a specified period or expressly requires the individual to survive the event by a specified period;
(3) the imposition of a one hundred twenty-hour requirement of survival causes a nonvested property interest or a power of appointment to fail to qualify for validity pursuant to the Uniform Statutory Rule Against Perpetuities; or
(4) the application of this section to multiple governing instruments results in an unintended failure or duplication of a disposition.
(E)(1) A payor or other third party is not liable for having made a payment or transferred an item of property or another benefit to a beneficiary designated in a governing instrument who, pursuant to this section, is not entitled to the payment or item of property, or for having taken another action in good faith reliance on the beneficiary's apparent entitlement pursuant to the terms of the governing instrument, before the payor or other third party received written notice of a claimed lack of entitlement pursuant to this section. A payor or other third party is liable for a payment made or other action taken after the payor or other third party receives written notice of a claimed lack of entitlement pursuant to this section.
(2) Written notice of a claimed lack of entitlement pursuant to item (1) must be mailed to the payor's or other third party's main office or home by registered or certified mail, return receipt requested, or served upon the payor or other third party in the same manner as a summons in a civil action. Upon receipt of written notice of a claimed lack of entitlement pursuant to this section, a payor or other third party may pay an amount owed or transfer or deposit an item of property held by it to or with the court having jurisdiction of the probate proceedings relating to the decedent's estate, or if no proceedings have been commenced, to or with the court having jurisdiction of probate proceedings relating to decedents' estates located in the county of the decedent's residence. The court shall hold the funds or item of property and shall order disbursement in accordance with its determination pursuant to this section. Payments, transfers, or deposits made to or with the court discharge the payor or other third party from all claims for the value of amounts paid to or items of property transferred to or deposited with the court.
(F)(1) A person who purchases property for value and without notice of entitlement, or who receives a payment or other item of property in partial or full satisfaction of a legally enforceable obligation, is neither obligated to return the payment, item of property, or benefit, nor liable for the amount of the payment or the value of the item of property or benefit. A person who, not for value, receives a payment, item of property, or other benefit to which the person is not entitled pursuant to this section is obligated to return the payment, item of property, or benefit, or is liable personally for the amount of the payment or the value of the item of property or benefit, to the person who is entitled to it pursuant to this section.
(2) If this section or a part of this section is preempted by federal law with respect to a payment, an item of property, or another benefit covered by this section, a person who, not for value, receives the payment, item of property, or another benefit to which the person is not entitled pursuant to this section is obligated to return the payment, item of property, or benefit, or is liable personally for the amount of the payment or the value of the item of property or benefit, to the person entitled to it if this section or part of this section were not preempted.
Section 62-2-703. The meaning and legal effect of a governing instrument is determined by the local law of the state selected by the transferor in the governing instrument, the provisions relating to exempt property and allowances provided in Part 4 of this article, or another public policy of this State otherwise applicable to the disposition.
Section 62-2-704. If a governing instrument creating a power of appointment expressly requires that the power be exercised by a reference, an express reference, or a specific reference, to the power or its source, it is presumed that the donor's intention, in requiring that the donee exercise the power by making reference to the particular power or to the creating instrument, was to prevent an inadvertent exercise of the power.
Section 62-2-705. The issue of a deceased transferee who survive the transferor take in place of the deceased transferee if the transferee, who is a great-grandparent or a lineal descendant of a great-grandparent of the transferor:
(1) is dead at the time of execution of the governing instrument;
(2) fails to survive the transferor; or
(3) is treated as if he predeceased the transferor. If they are all of the same degree of kinship to the transferee they take equally. If they are of unequal degree, then those of more remote degree take by representation. One who would have been a transferee under a class gift if he had survived the transferor is treated as a transferee for purposes of this section whether his death occurred before or after the execution of the governing instrument.
Section 62-2-706. (A) As used in this section:
(1) 'Alternative beneficiary designation' means a beneficiary designation that is expressly created by the governing instrument and, under the terms of the governing instrument, can take effect instead of another beneficiary designation on the happening of one or more events, including survival of the decedent or failure to survive the decedent, whether an event is expressed in condition-precedent, condition-subsequent, or any other form.
(2) 'Beneficiary' means the beneficiary of a beneficiary designation and includes:
( i) a class member if the beneficiary designation is in the form of a class gift; and
(ii) an individual or class member who was deceased at the time the beneficiary designation was executed as well as an individual or class member who was then living but who failed to survive the decedent.
(3) 'Beneficiary designation' includes an alternative beneficiary designation and a beneficiary designation in the form of a class gift.
(4) 'Class member' includes an individual who fails to survive the decedent but who would have taken under a beneficiary designation in the form of a class gift had he survived the decedent.
(5) 'Surviving beneficiary' or 'surviving descendant' means a beneficiary or a descendant who neither predeceased the decedent nor is considered to have predeceased the decedent pursuant to Section 62-2-702. (B) If a beneficiary fails to survive the decedent and is a grandparent of the decedent, or a descendant of a grandparent of the decedent, then:
(1) except as provided in item (4), if the beneficiary designation is not in the form of a class gift and the deceased beneficiary leaves surviving descendants, a substitute gift is created in the beneficiary's surviving descendants, who take by representation the property to which the beneficiary would have been entitled had the beneficiary survived the decedent;
(2) except as provided in item (4), if the beneficiary designation is in the form of a class gift, other than a beneficiary designation to 'issue', 'descendants', 'heirs of the body', 'heirs', 'next of kin', 'relatives', or 'family', or a class described by language of similar import, a substitute gift is created in the surviving descendants of the deceased beneficiary or beneficiaries. The property to which the beneficiaries would have been entitled had all of them survived the decedent passes to the surviving beneficiaries and the surviving descendants of the deceased beneficiaries. Each surviving beneficiary takes the share to which he would have been entitled had the deceased beneficiaries survived the decedent. Each deceased beneficiary's surviving descendants who are substituted for the deceased beneficiary take by representation the share to which the deceased beneficiary would have been entitled had the deceased beneficiary survived the decedent. For the purpose of this item, 'deceased beneficiary' means a class member who failed to survive the decedent and left one or more surviving descendants;
(3) for the purpose of Section 62-2-701, words of survivorship, such as in a beneficiary designation to an individual 'if he survives me', or in a beneficiary designation to 'my surviving children', are not, in the absence of additional evidence, a sufficient indication of an intent contrary to the application of this section;
(4) if a governing instrument creates an alternative beneficiary designation with respect to a beneficiary designation for which a substitute gift is created by item (1) or (2), the substitute gift is superseded by the alternative beneficiary designation only if an expressly designated beneficiary of the alternative beneficiary designation is entitled to take.
(C)(1) If, pursuant to subsection (B), substitute gifts are created and not superseded with respect to more than one beneficiary designation and the beneficiary designations are alternative beneficiary designations, one to the other, the determination of which of the substitute gifts takes effect is resolved:
(a) except as provided in subitem (b), the property passes under the primary substitute gift;
(b) if there is a younger-generation beneficiary designation, the property passes under the younger-generation substitute gift and not under the primary substitute gift. (2) As used this subsection : (a) 'Primary beneficiary designation' means the beneficiary designation that would have taken effect had all the deceased beneficiaries of the alternative beneficiary designations who left surviving descendants survived the decedent.
(b) 'Primary substitute gift' means the substitute gift created with respect to the primary beneficiary designation.
(c) 'Younger-generation beneficiary designation' means a beneficiary designation that:
( i) is to a descendant of a beneficiary of the primary beneficiary designation;
(ii) is an alternative beneficiary designation with respect to the primary beneficiary designation;
(iii) is a beneficiary designation for which a substitute gift is created; and
(iv) would have taken effect had all the deceased beneficiaries who left surviving descendants survived the decedent except the deceased beneficiary or beneficiaries of the primary beneficiary designation.
(d) 'Younger-generation substitute gift' means the substitute gift created with respect to the younger-generation beneficiary designation.
(D)(1) A payor is protected from liability in making payments under the terms of the beneficiary designation until the payor has received written notice of a claim to a substitute gift pursuant to this section. Payment made before the receipt of written notice of a claim to a substitute gift pursuant to this section discharges the payor, but not the recipient, from all claims for the amounts paid. A payor is liable for a payment made after the payor has received written notice of the claim. A recipient is liable for a payment received, whether or not written notice of the claim is given.
(2) The written notice of the claim to a substitute gift must be mailed to the payor's main office or home by registered or certified mail, return receipt requested, or served upon the payor in the same manner as a summons in a civil action. Upon receipt of written notice of the claim, a payor may pay any amount owed by it to the court having jurisdiction of the probate proceedings relating to the decedent's estate or, if no proceedings have been commenced, to the court having jurisdiction of probate proceedings relating to decedents' estates located in the county of the decedent's residence. The court shall hold the funds and, upon its determination pursuant to this section, order disbursement in accordance with the determination. Payment made to the court discharges the payor from all claims for the amounts paid.
(E)(1) A person who purchases property for value and without notice of claim to a substitute gift, or who receives a payment or other item of property in partial or full satisfaction of a legally enforceable obligation, is neither obligated to return the payment, item of property, or benefit, nor liable for the amount of the payment or the value of the item of property or benefit. A person who, not for value, receives a payment, item of property, or other benefit to which the person is not entitled pursuant to this section is obligated to return the payment, item of property, or benefit, or is liable personally for the amount of the payment or the value of the item of property or benefit, to the person who is entitled to it pursuant to this section.
(2) If this section or a part of this section is preempted by federal law with respect to a payment, an item of property, or another benefit provided by this section, a person who, not for value, receives the payment, item of property, or another benefit to which the person is not entitled pursuant to this section is obligated to return the payment, item of property, or benefit, or is liable personally for the amount of the payment or the value of the item of property or benefit, to the person entitled to it if this section or part of this section were not preempted.
Section 62-2-707. If a class gift in favor of 'descendants', 'issue', or 'heirs of the body' does not specify the manner in which the property is distributed among the class members, the property is distributed among the class members who are living when the interest takes effect in possession or enjoyment, in the shares they would receive, pursuant to the applicable law of intestate succession if the designated ancestor died intestate owning the subject matter of the class gift.
Section 62-2-708. If an applicable statute or a governing instrument calls for a future distribution to, or creates a future interest in, a designated individual's 'heirs', 'heirs at law', 'next of kin', 'relatives', or 'family', or language of similar import, the property passes to those persons, including the state, pursuant to Section 62-2-106, and in the shares that would succeed to the designated individual's intestate estate pursuant to the intestate succession law of the designated individual's domicile if the designated individual died intestate."
SECTION 8. Section 62-2-803(e) of the 1976 Code is amended to read:
"(e) A final judgment of conviction of felonious and intentional killing is conclusive for purposes of this section. In the absence of a conviction of felonious and intentional killing the court may determine by a preponderance of evidence whether the killing was felonious and intentional for purposes of this section. After all right to appeal has been exhausted, a judgment of conviction establishing criminal accountability for the felonious and intentional killing of the decedent conclusively establishes the convicted individual as the decedent's killer for purposes of this section. In the absence of a conviction, the court, upon the petition of an interested person, shall determine whether, using the preponderance of evidence standard, the individual would be found criminally accountable for the felonious and intentional killing of the decedent. If the court determines using that standard, that the individual would be found criminally accountable for the felonious and intentional killing of the decedent, the determination conclusively establishes that individual as the decedent's killer for purposes of this section."
SECTION 9. Part 8, Article 2, Chapter 2, Title 62 of the 1976 Code is amended by adding:
"Section 62-2-805. (A) As used in this section:
(1) 'Disposition or appointment of property' includes a transfer of an item of property or other benefit to a beneficiary designated in a governing instrument.
(2) 'Divorce or annulment' means any divorce or annulment, or any dissolution or declaration of invalidity of a marriage, that excludes the spouse as a surviving spouse within the meaning of Section 62-2-802. A decree of separation that does not terminate the status of husband and wife is not a divorce for purposes of this section.
(3) 'Divorced individual' includes an individual whose marriage has been either dissolved or declared invalid.
(4) 'Governing instrument' means a governing instrument executed by the divorced individual before the divorce or annulment of his marriage to his former spouse.
(5) 'Relative of the divorced individual's former spouse' means an individual who is related to the divorced individual's former spouse by blood, adoption, or affinity and who, after the divorce or annulment, is not related to the divorced individual by blood, adoption, or affinity.
(6) 'Revocable,' with respect to a disposition, appointment, provision, or nomination, means one under which the divorced individual, at the time of the divorce or annulment, was alone empowered by law or under the governing instrument to cancel the designation in favor of his former spouse or former spouse's relative, whether or not the divorced individual was then empowered to designate himself in place of his former spouse or in place of his former spouse's relative and whether or not the divorced individual then had the capacity to exercise the power.
(B) Except as provided by the express terms of a governing instrument, a court order, or a contract relating to the division of the marital estate made between the divorced individuals before or after the marriage, divorce, or annulment, the divorce or annulment of a marriage:
(1) revokes a revocable:
(a) disposition or appointment of property made by a divorced individual to his former spouse in a governing instrument and a disposition or appointment created by law or in a governing instrument to a relative of the divorced individual's former spouse;
(b) provision in a governing instrument conferring a general or nongeneral power of appointment on the divorced individual's former spouse or on a relative of the divorced individual's former spouse; and
(c) nomination in a governing instrument nominating a divorced individual's former spouse or a relative of the divorced individual's former spouse to serve in a fiduciary or representative capacity, including a personal representative, executor, trustee, conservator, agent, or guardian; and
(2) severs the interests of the former spouses in property held by them at the time of the divorce or annulment as joint tenants with the right of survivorship, or as community property with the right of survivorship, in a community property jurisdiction, transforming the interests of the former spouses into tenancies in common.
(C) A severance pursuant to subsection (B)(2) does not affect a third-party interest in property acquired for value and in good faith reliance on an apparent title by survivorship in the survivor of the former spouses unless a writing declaring the severance has been noted, registered, filed, or recorded in records appropriate to the kind and location of the property which are relied upon, in the ordinary course of transactions involving such property, as evidence of ownership.
(D) Provisions of a governing instrument that are not revoked by this section are given effect as if the former spouse and relatives of the former spouse disclaimed the revoked provisions or, in the case of a revoked nomination in a fiduciary or representative capacity, as if the former spouse and relatives of the former spouse died immediately before the divorce or annulment.
(E) Provisions revoked only by this section are revived by the divorced individual's remarriage to the former spouse or by a nullification of the divorce or annulment.
(F) A change of circumstances other than as provided in this section and in Section 62-2-803 does not result in a revocation.
(G)(1) A payor or other third party is not liable for having made a payment or transferred an item of property or other benefit to a beneficiary designated in a governing instrument affected by a divorce, annulment, or remarriage or for having taken other action in good faith reliance on the validity of the governing instrument before the payor or other third party received written notice of the divorce, annulment, or remarriage. A payor or other third party is liable for a payment made or other action taken after the payor or other third party received written notice of a claimed forfeiture or revocation pursuant to this section.
(2) Written notice of the divorce, annulment, or remarriage must be mailed to the payor's or other third party's main office or home by registered or certified mail, return receipt requested, or served upon the payor or other third party in the same manner as a summons in a civil action. Upon receipt of written notice of the divorce, annulment, or remarriage, a payor or other third party may pay any amount owed or transfer or deposit any item of property held by it to or with the court having jurisdiction of the probate proceedings relating to the decedent's estate or, if no proceedings have been commenced, to or with the court having jurisdiction of probate proceedings relating to decedents' estates located in the county of the decedent's residence. The court shall hold the funds or item of property and, upon its determination pursuant to this section, shall order disbursement or transfer in accordance with the determination. Payments, transfers, or deposits made to or with the court discharge the payor or other third party from all claims for the value of amounts paid to or items of property transferred to or deposited with the court.
(H)(1) A person who purchases property from a former spouse, relative of a former spouse, or other person for value and without notice of the divorce, annulment, or remarriage, or who receives from a former spouse, relative of a former spouse, or another person a payment or other item of property in partial or full satisfaction of a legally enforceable obligation, is neither obligated to return the payment, item of property, or benefit, nor liable for the amount of the payment or the value of the item of property or benefit. A former spouse, relative of a former spouse, or other person who, not for value, received a payment, item of property, or other benefit to which that person is not entitled pursuant to this section is obligated to return the payment, item of property, or benefit, or is liable personally for the amount of the payment or the value of the item of property or benefit, to the person who is entitled to it pursuant to this section.
(2) If this section or part of this section is preempted by federal law with respect to a payment, an item of property, or another benefit provided in this section, a former spouse, relative of the former spouse, or other person who, not for value, received a payment, item of property, or another benefit to which that person is not entitled pursuant to this section is obligated to return that payment, item of property, or benefit, or is liable personally for the amount of the payment or the value of the item of property or benefit, to the person entitled to it if this section or part of this section were not preempted."
SECTION 10. Section 34-19-120 of the 1976 Code, as added by Act 499 of 1988, is amended to read:
"Section 34-19-120. In cases where a person has been given a durable power of attorney by a lessee of a safe deposit box who has become mentally incompetent, and the original copy of the power is put in the box, the lessor may permit the person given the power to open the box to obtain the original copy of the power. The lessor may request the person purporting to have been given the durable power of attorney to produce a certified copy of the power or an affidavit declaring that he has been given the power before opening the box. No other contents may be removed from the box pursuant to this section.
The durable power of attorney provided for in this section means a power made durable under the provisions of Section 62-5-501. (A)(1) The person who has been given a durable power of attorney by a lessee of a safe deposit box may open, or direct the lessor to open, the safe deposit box of the lessee and obtain the original copy of the durable power of attorney; provided that a statement in the form of item (3), or in a similar form showing the same intent, is:
(a) incorporated in the body of the original durable power of attorney contained in the safe deposit box; or
(b) contained in a separate statement in the form provided in subsection (B), or in a similar form showing the same intent as that attached or annexed to the original durable power of attorney contained in the safe deposit box.
(2) If the statement is contained in a separate writing, the execution of the separate statement is not an amendment, modification, or revision of the original power of attorney.
(3) The statement must be substantially in the following form:
'I__________________, the Principal, do hereby authorize and direct my appointee or appointees as my Attorney-in-Fact in my durable power of attorney, to have access at any time or times to any safe deposit box rented by me, wherever located, in order to remove my original durable power of attorney, and any institution in which any such safe deposit box may be located shall not be required to make any inquiry and shall not incur any liability to me or my estate as a result of permitting my appointee or appointees in my original durable power of attorney to exercise this power. This power shall be exercisable without: (i) any contact with, or notice to, me, my spouse, and/or any interested persons to my estate; (ii) any prior court order or authorization, (iii) any knowledge of, or any prior determination as to, my mental or physical capacity or incapacity, (iv) any knowledge as to my whereabouts regardless whether my whereabouts are known or unknown, or (v) any inquiry.'
(B) The lessee, at any time after the execution of his durable power of attorney, may execute a separate statement authorizing the removal of his original durable power of attorney from his safe deposit box pursuant to subsection (A), provided that the separate statement is executed by the Principal with the same formalities as the execution and recording of a deed in the State of South Carolina pursuant to Section 30-5-30, and the separate statement is attached or annexed to the original durable power of attorney in the following form, or in a similar form showing the same intent, with the acknowledgement for recorded deeds pursuant to Section 30-5-30(B) or (C).
'STATE OF _____________ ) )
COUNTY OF ____________________ )
I, _______ the Principal, do hereby authorize and direct my appointee or appointees as my Attorney-in-Fact in my durable power of attorney dated the __day of __, in the year __, to have access at any time or times to any safe deposit box rented by me, wherever located, in order to remove my original durable power of attorney, and any institution in which any such safe deposit box may be located shall not be required to make any inquiry and shall not incur any liability to me or my estate as a result of permitting my appointee or appointees in my original durable power of attorney to exercise this power. This power shall be exercisable without: (i) any contact with, or notice to, me, my spouse, and/or any interested persons to my estate; (ii) any prior court order or authorization; (iii) any knowledge of, or any prior determination as to, my mental or physical capacity or incapacity; (iv) any knowledge as to my whereabouts regardless whether my whereabouts are known or unknown; or (v) any inquiry.'
IN WITNESSETH WHEREOF, I have executed this statement on the ________ day of ______________, in the year, ___________.
_________________________ ________________________
(Witness) Principal
_________________________(Witness)'
(C) If the original durable power of attorney does not contain a statement in the form provided in subsection (A) or in a similar form showing the same intent, or a separate statement in the form provided in subsection (B) or in a similar form showing the same intent is not attached or annexed to the original durable power of attorney, then to allow removal of the lessee's durable power of attorney from the lessee's safe deposit box the financial institution must have:
(1) contact with or notice to the lessee, the lessee's spouse, or an interested person in the lessee's estate;
(2) a prior court order or court authorization;
(3) knowledge of, or a prior determination as to, the mental or physical capacity or incapacity of the lessee;
(4) knowledge as to the lessee's whereabouts, whether the lessee's whereabouts are known or unknown; or
(5) other inquiry.
(D) A witness to a statement provided for in subsection (B), who also is an officer authorized to administer oaths pursuant to the laws of this State may notarize the signature of the other witness of the statement in the manner provided by this section.
(E) A financial institution that authorizes a person who has been given a durable power of attorney by a lessee of a safe deposit box, to remove the original durable power of attorney from the safe deposit box of the lessee, pursuant to subsection (A) or (B), or a financial institution that removes the original durable power of attorney from the safe deposit box of the lessee pursuant to the direction of the person who has been given a durable power of attorney by the lessee, is not required to make further inquiry, and is not liable to the lessee or the lessee's estate as a result of permitting removal of the original power of attorney. The financial institution may request the person purporting to have been given the durable power of attorney to produce a certified copy of the power or an affidavit declaring that he has been given the power before opening the box. No other contents may be removed from the box pursuant to this section.
(F) The provisions of this section enable the person who has been given a durable power of attorney by a lessee of a safe deposit box to remove or obtain the original durable power of attorney from the safe deposit box of the lessee, and enable the financial institution to allow the removal of the durable power of attorney from the safe deposit box without court action or findings of incapacity of the lessee. This section supplements and does not supplant the current procedures for obtaining the power of attorney of the lessee from the safe deposit box, and is not the exclusive method."
SECTION 11. Section 27-7-40(a)(iv) of the 1976 Code, as added by Act 398 of 2000, is amended to read:
'(iv) If all the joint tenants who own real estate held in joint tenancy join in an encumbrance or deed of conveyance, the interest in the real estate shall be is effectively encumbered or conveyed to a third party or parties."
SECTION 12. If any section, subsection, paragraph, subparagraph, sentence, clause, phrase, or word of this act is for any reason held to be unconstitutional or invalid, such holding shall not affect the constitutionality or validity of the remaining portions of this act, the General Assembly hereby declaring that it would have passed this act, and each and every section, subsection, paragraph, subparagraph, sentence, clause, phrase, and word thereof, irrespective of the fact that any one or more other sections, subsections, paragraphs, subparagraphs, sentences, clauses, phrases, or words hereof may be declared to be unconstitutional, invalid, or otherwise ineffective.
SECTION 13. This act takes effect upon approval by the Governor. To the extent that SECTION 2 does not apply to transfers made in a manner prescribed in the Gifts to Minors Act of South Carolina or to the powers, duties, and immunities conferred by transfers in that manner upon custodians and persons dealing with custodians, this section does not affect those transfers or those powers, duties, and immunities, subject to Sections 20-7-215 and 20-7-220. SECTION 3 applies to trusts existing on and created after its effective date, except that as applied to trusts existing on its effective date, SECTION 3 governs only decisions or actions occurring after that date. SECTION 4 applies to every trust or decedent's estate existing on the effective date of this act, except as otherwise expressly provided in the will or terms of the trust or in this section.
This web page was last updated on
Tuesday, December 8, 2009 at 11:13 A.M.