HB 406

Abstract

Section 1 of the Act amends section 3534 of Title 12 to include, within the class of persons who may receive notice under the statute, designated representatives under section 3339 of Title 12 (representatives under section 3547 of Title 12 already being specifically included within section 3534). Section 2 of the Act expands, within existing section 3536(e) of Title 12, on the ability of a beneficiary of a charitable remainder trust to transfer the remainder interest to charity by assignment in addition to a release, and expands on the ability of a beneficiary of a QTIP trust to transfer an interest in the trust by assignment or other means to the next succeeding beneficial interest. Section 3 of the Act creates a new section 3536A in Title 12, similar in concept to the laws of other states, to permit a beneficiary of a trust to release (in full or in part) the interest, even if the beneficiary previously accepted the benefits of such interest (a situation not addressed by Chapter 6 of Title 12 of the Delaware Code (regarding disclaimers, which includes releases of nonfiduciary powers)), but subject to many conditions (and would overrule Smith v. Bank of Delaware, 219 A.2d 576 (Del. 1966) and Bank of Delaware v. Smith, 211 A.2d 591 (Del. Ch. 1965), but would be consistent with Shepard v. Burr, 87 A. 1020 (Del. Ch. 1913)). It should be further noted that: (i) while there is existing statutory authority that may be used to achieve the same outcome afforded herein, this statute provides a more efficient framework for releases of interests in trusts; (ii) a typical scenario that this statute is designed to resolve in a streamlined way involves a longtime income beneficiary of a trust who no longer wants or needs the income, and would like her interest to terminate so that her children may receive the remainder interest, which would not otherwise occur until her death; (iii) with death being a random event that could occur at any time, permitting a beneficiary to terminate her interest before her death does not run afoul of a trustor’s intent; and (iv) the language of subsection (f) of this new section 3536A was drafted to parallel that of section 502(b) of Title 25 of the Delaware Code, thereby reflecting concepts discussed in, for example, section 116 of the Bogert treatise. Section 4 of the Act amends section 3546 of Title 12 to conform its provisions regarding receipt of notice to those of section 3585 as changed under this Act. Section 5 of the Act: (i) clarifies that the bar of section 3585 of Title 12 applies against judicial proceedings; (ii) expands the class of those against whom that bar would apply to persons other than beneficiaries; (iii) defines when a person is deemed to have received a 120-day notice under section 3585 (in conformity with the aforementioned amendment to Section 3546 of Title 12 under this Act); (iv) provides that a person may waive the 120-day period to accelerate what would otherwise occur upon expiration of that period; and (v) clarifies that the limitation period of section 3585 does not expand the limitation period for claims against the estate or revocable trust of a deceased individual fiduciary. Section 6 of the Act provides an effective date.