HB 132

Abstract

Section 1 of this Act amends § 6504 of Title 10 to correct two erroneous cross-references (the cross-references will now correctly reference Title 12 rather than Title 10 of the Delaware Code). Section 2 of this Act corrects § 3301(d) of Title 12 by updating the definition of the term “fiduciary” to be consistent with 2019 updates to § 3322 of Title 12, the effect of which was that when an agent is delegated duties by a fiduciary, such delegation neither causes the agent to cease to be a fiduciary nor causes the agent to be a fiduciary. Section 3 of this Act amends § 3332(b) of Title 12 to add a cross-reference to, and incorporation of criteria from, § 3340 of Title 12, thereby emphasizing that satisfaction of the criteria of § 3340 of Title 12 means that a trust is administered in Delaware, but also emphasizing that § 3340 of Title 12 is a non-exclusive list of the criteria that may mean that a trust is administered in Delaware. Section 4 of this Act amends § 3338 of Title 12 to: (1) expressly state that a consent to a nonjudicial settlement agreement under this section must be in writing; (2) permit parties to issue a written nonobjection, rather than a written affirmative consent, to a nonjudicial settlement agreement under this section (much as parties can do under § 3342 of Title 12, which is a similar statute; and as also contemplated under Court of Chancery rules for consent petitions); (3) emphasize that the permitted subjects of a nonjudicial settlement agreement for a trust, including those expressly listed in subsection (e) of this section, remain subject to the material purpose requirement of subsection (c) of this section; (4) make it clearer that the ability of a nonjudicial settlement agreement to resolve the interpretation or construction of the terms of a trust under paragraph (e)(1) of this section applies to any (and not just all) of the terms of a trust; and (5) expressly state (and thus make it clearer) that, in addition to other types of modifications to the terms of a trust that were already expressly listed in subsection (e) of this section, the terms of a trust may be modified by a nonjudicial settlement agreement under this section—though, again, any such modification will continue to be subject to the “material purpose” requirement of subsection (c) of this section, as is already the case, including for those matters currently expressly listed in subsection (e) of this section. Section 5 of this Act amends § 3339 of Title 12 to make it clearer that: (1) a designated representative may be appointed via the methods specified in § 3339(a)(4) and (5) of Title 12, when those appointed under the methods given precedence under previous paragraphs of subsection (a) are not serving—in other words, when those appointed are unwilling or unable to serve (and not merely when such persons have been “appointed” in the sense of being named or nominated under the methods given precedence under previous paragraphs of subsection (a)); and (2) the limitation of § 3339(a)(4)b. of Title 12 that, in the stated circumstance under paragraph (4), does not allow a trustor to appoint a designated representative that is related or subordinate to the trustor, also applies to the trustor such that in such circumstance, the trustor cannot appoint himself or herself as the designated representative. Section 6 of this Act amends § 3340 of Title 12 to make it clearer that: (1) a trust’s satisfaction of any of the criteria listed in § 3340(1) through (3) of Title 12 conclusively means that the trust is administered in Delaware (such that satisfaction of such criteria does not lead merely to a rebuttable presumption); and (2) the criteria listed in § 3340(1) through (3) of Title 12 are not the exclusive means by which a trust is, or is considered to be, administered in Delaware. Section 7 of this Act amends § 3536 of Title 12 to make it clear that a former spouse of a trust beneficiary who has a claim against such beneficiary, such beneficiary’s estate, or such beneficiary’s property is considered a creditor of such beneficiary, thereby affording the beneficiary the protections of § 3536 of Title 12. The amendment is distinguishable from the factual situation addressed by, and is not intended to conflict with, Garretson v. Garretson, 306 A.2d 737, which held that a current spouse of a trust beneficiary who has a claim against such beneficiary is not considered a creditor of such beneficiary. Section 8 of this Act amends § 3570(4) of Title 12 to make it clearer that the term “disposition” under Delaware’s Qualified Dispositions in Trust Act can include a transfer to another trust (and not merely to a trustee or trustees). Section 9 of this Act amends § 3573 of Title 12 to provide that the limitations on qualified dispositions applicable to the spouse of a transferor as imposed by § 3572 of Title 12, do not include transfers to trusts for which the spouse: (1) is given (a) written notice of the transfer, (b) a copy of the Qualified Dispositions in Trust Act, (c) a copy of the trust instrument of the receiving trust, (d) a list of the property subject to the transfer, (e) disclosure of all material information relating to the value of such property; (f) disclosure of the estimated value of the property, and (g) the basis for such estimate; and (2) consents in writing to the transfer after receipt of the foregoing. Section 10 of this Act amends § 3585(c)(3) of Title 12 to update a cross-reference so that the current reference to § 3303(d) of Title 12 will now refer to § 3339 of Title 12, which is the more precise reference in light of recent statutory changes. Section 11 of this Act amends § 61-604(a)(5) of Title 12 to: (1) include limited liability companies and statutory trusts as entities whose ownership by certain types of charitable trusts will be treated in the same way as partnerships owned by such trusts; and (2) make it clearer that any of those types of entities will receive such treatment even if such entities are disregarded for federal income tax purposes. Section 12 of this Act amends § 1513 of Title 13 to make it clearer that a spouse’s beneficial interest in a trust created by another person is not included within the term “marital property,” which is defined by this statute, because such an interest falls within the statute’s exclusion of gifts from the term “marital property.” In addition, consistent with § 3315(b) of Title 12, language has been added to § 1513 of Title 13 to confirm that a discretionary interest in a trust is not a property interest under existing Delaware statutory law and, therefore, is not included in the definition of “property acquired” by a spouse (as such term “property acquired” is used in § 1513 of Title 13). Section 13 of this Act amends § 2704(e)(4) of Title 18 such that the term “trust-owned life insurance policy” now includes a policy owned by an entity that is disregarded for federal income tax purposes and that is wholly owned by a trust (in addition to such a policy that is directly owned by a trust). Section 14 of this Act provides an effective date.