1     
TRUST PROVISIONS AMENDMENTS

2     
2019 GENERAL SESSION

3     
STATE OF UTAH

4     
Chief Sponsor: Kelly B. Miles

5     
Senate Sponsor: Lyle W. Hillyard

6     

7     LONG TITLE
8     General Description:
9          This bill modifies provisions related to the power of appointment and enacts the
10     Uniform Directed Trust Act.
11     Highlighted Provisions:
12          This bill:
13          ▸     addresses compliance to the provisions of the Uniform Directed Trust Act;
14          ▸     enacts the Uniform Directed Trust Act, including definitions, general provisions,
15     and governing law;
16          ▸     describes the principal place of administration;
17          ▸     describes a trust director's powers and limitations;
18          ▸     describes the duty and liability of a trust director and directed trustee;
19          ▸     describes the duty of a trust director and trustee;
20          ▸     describes the application of a directed trust to a cotrustee;
21          ▸     describes the limitations and defenses of an action against a trust director;
22          ▸     describes jurisdiction over a trust director;
23          ▸     describes the office of a trust director;
24          ▸     modifies the power of appointment; and
25          ▸     makes technical and conforming changes.
26     Money Appropriated in this Bill:
27          None

28     Other Special Clauses:
29          None
30     Utah Code Sections Affected:
31     AMENDS:
32          75-7-103, as enacted by Laws of Utah 2004, Chapter 89
33          75-7-105, as last amended by Laws of Utah 2017, Chapter 204
34          75-7-606, as enacted by Laws of Utah 2004, Chapter 89
35          75-7-703, as enacted by Laws of Utah 2004, Chapter 89
36          75-10-305, as enacted by Laws of Utah 2017, Chapter 125
37     ENACTS:
38          75-12-101, Utah Code Annotated 1953
39          75-12-102, Utah Code Annotated 1953
40          75-12-103, Utah Code Annotated 1953
41          75-12-104, Utah Code Annotated 1953
42          75-12-105, Utah Code Annotated 1953
43          75-12-106, Utah Code Annotated 1953
44          75-12-107, Utah Code Annotated 1953
45          75-12-108, Utah Code Annotated 1953
46          75-12-109, Utah Code Annotated 1953
47          75-12-110, Utah Code Annotated 1953
48          75-12-111, Utah Code Annotated 1953
49          75-12-112, Utah Code Annotated 1953
50          75-12-113, Utah Code Annotated 1953
51          75-12-114, Utah Code Annotated 1953
52          75-12-115, Utah Code Annotated 1953
53          75-12-116, Utah Code Annotated 1953
54          75-12-117, Utah Code Annotated 1953
55          75-12-118, Utah Code Annotated 1953
56     

57     Be it enacted by the Legislature of the state of Utah:
58          Section 1. Section 75-7-103 is amended to read:

59          75-7-103. Definitions.
60          (1) In this chapter:
61          (a) "Action," with respect to an act of a trustee, includes a failure to act.
62          (b) "Beneficiary" means a person that:
63          (i) has a present or future beneficial interest in a trust, vested or contingent; or
64          (ii) in a capacity other than that of trustee, holds a power of appointment over trust
65     property.
66          (c) "Charitable trust" means a trust, or portion of a trust, created for a charitable
67     purpose described in Subsection 75-7-405(1).
68          (d) "Environmental law" means a federal, state, or local law, rule, regulation, or
69     ordinance relating to protection of the environment.
70          (e) "Interests of the beneficiaries" means the beneficial interests provided in the terms
71     of the trust.
72          (f) "Jurisdiction," with respect to a geographic area, includes a state or country.
73          (g) "Power of withdrawal" means a presently exercisable general power of appointment
74     other than a power exercisable only upon consent of the trustee or a person holding an adverse
75     interest.
76          (h) "Qualified beneficiary" means a beneficiary who, on the date the beneficiary's
77     qualification is determined:
78          (i) is a current distributee or permissible distributee of trust income or principal; or
79          (ii) would be a distributee or permissible distributee of trust income or principal if the
80     trust terminated on that date.
81          (i) "Resident estate" or "resident trust"means:
82          (i) an estate of a decedent who at death was domiciled in this state;
83          (ii) a trust, or a portion of a trust, consisting of property transferred by will of a
84     decedent who at his death was domiciled in this state; or
85          (iii) a trust administered in this state.
86          (j) "Revocable," as applied to a trust, means revocable by the settlor without the
87     consent of the trustee or a person holding an adverse interest.
88          (k) "Settlor" means a person, including a testator, who creates, or contributes property
89     to, a trust. If more than one person creates or contributes property to a trust, each person is a

90     settlor of the portion of the trust property attributable to that person's contribution except to the
91     extent another person has the power to revoke or withdraw that portion.
92          (l) "Spendthrift provision" means a term of a trust which restrains both voluntary and
93     involuntary transfer or encumbrance of a beneficiary's interest.
94          (m) "Terms of a trust" means:
95          (i) subject to Subsection (1)(m)(ii), the manifestation of the settlor's intent regarding a
96     trust's provisions as:
97          (A) expressed in the trust instrument; or [as may be]
98          (B) established by other evidence that would be admissible in a judicial proceeding[.];
99     or
100          (ii) the trust's provisions, as established, determined, or amended by:
101          (A) a trustee or other person in accordance with applicable law;
102          (B) a court order; or
103          (C) a nonjudicial settlement agreement under Section 75-7-110.
104          (n) "Trust instrument" means an instrument executed by the settlor that contains terms
105     of the trust, including any amendments thereto.
106          (2) Terms not specifically defined in this section have the meanings provided in
107     Section 75-1-201.
108          Section 2. Section 75-7-105 is amended to read:
109          75-7-105. Default and mandatory rules.
110          (1) Except as otherwise provided in the terms of the trust, this chapter governs the
111     duties and powers of a trustee, relations among trustees, and the rights and interests of a
112     beneficiary.
113          (2) Except as specifically provided in this chapter, the terms of a trust prevail over any
114     provision of this chapter except:
115          (a) the requirements for creating a trust;
116          (b) subject to Sections 75-12-109, 75-12-111, and 75-12-112, the duty of a trustee to
117     act in good faith and in accordance with the purposes of the trust;
118          (c) the requirement that a trust and [its terms] the terms of the trust be for the benefit of
119     [its] the trust's beneficiaries;
120          (d) the power of the court to modify or terminate a trust under Sections 75-7-410

121     through 75-7-416;
122          (e) the effect of a spendthrift provision, Section 25-6-502, and the rights of certain
123     creditors and assignees to reach a trust as provided in Part 5, Creditor's Claims - Spendthrift
124     and Discretionary Trusts;
125          (f) the power of the court under Section 75-7-702 to require, dispense with, or modify
126     or terminate a bond;
127          (g) the effect of an exculpatory term under Section 75-7-1008;
128          (h) the rights under Sections 75-7-1010 through 75-7-1013 of a person other than a
129     trustee or beneficiary;
130          (i) periods of limitation for commencing a judicial proceeding; and
131          (j) the subject-matter jurisdiction of the court and venue for commencing a proceeding
132     as provided in Sections 75-7-203 and 75-7-205.
133          Section 3. Section 75-7-606 is amended to read:
134          75-7-606. Settlor's powers -- Powers of withdrawal.
135          (1) (a) To the extent a trust is revocable by a settlor, a trustee may follow a direction of
136     the settlor that is contrary to the terms of the trust.
137          (b) To the extent a trust is revocable by a settlor in conjunction with a person other
138     than a trustee or a person holding an adverse interest, the trustee may follow a direction from
139     the settlor and the other person holding the power to revoke even if the direction is contrary to
140     the terms of the trust.
141          [(1)] (2) [While] To the extent a trust is revocable and the settlor has capacity to revoke
142     the trust, rights of the beneficiaries are subject to the control of, and the duties of the trustee are
143     owed exclusively to, the settlor.
144          [(2)] (3) If a revocable trust has more than one settlor, the duties of the trustee are owed
145     to all of the settlors having capacity to revoke the trust.
146          [(3)] (4) During the period the power may be exercised, the holder of a power of
147     withdrawal has the rights of a settlor of a revocable trust under this section to the extent of the
148     property subject to the power.
149          Section 4. Section 75-7-703 is amended to read:
150          75-7-703. Cotrustees.
151          (1) Cotrustees who are unable to reach a unanimous decision may act by majority

152     decision.
153          (2) If a vacancy occurs in a cotrusteeship, the remaining cotrustees may act for the
154     trust.
155          (3) [A] Subject to Section 75-12-112, a cotrustee must participate in the performance
156     of a trustee's function unless the cotrustee is unavailable to perform the function because of
157     absence, illness, disqualification under other law, or other temporary incapacity, or the
158     cotrustee has properly delegated the performance of the function to another trustee.
159          (4) If a cotrustee is unavailable to perform duties because of absence, illness,
160     disqualification under other law, or other temporary incapacity, or if a cotrustee fails or refuses
161     to act after reasonable notice, and prompt action is necessary to achieve the purposes of the
162     trust or to avoid injury to the trust property, the remaining cotrustee or a majority of the
163     remaining cotrustees may act for the trust.
164          (5) A trustee may not delegate to a cotrustee the performance of a function the settlor
165     intended the trustees to perform jointly as determined from the terms of the trust. If one of the
166     cotrustees is a regulated financial service institution qualified to do trust business in this state
167     and the remaining cotrustees are individuals, a delegation by the individual cotrustees to the
168     regulated financial service institution of the performance of trust investment functions shall be
169     presumed to be in accordance with the settlor's intent unless the terms of the trust specifically
170     provide otherwise. Unless a delegation was irrevocable, a trustee may revoke a delegation
171     previously made.
172          (6) Except as otherwise provided in Subsection (7), a trustee who does not join in an
173     action of another trustee is not liable for the action.
174          (7) [Each] Subject to Section 75-12-112, each trustee shall exercise reasonable care to:
175          (a) prevent a cotrustee from committing a serious breach of trust; and
176          (b) compel a cotrustee to redress a serious breach of trust.
177          (8) A dissenting trustee who joins in an action at the direction of the majority of the
178     trustees and who notified any cotrustee of the dissent at or before the time of the action is not
179     liable for the action unless the action is a serious breach of trust.
180          Section 5. Section 75-10-305 is amended to read:
181          75-10-305. Permissible appointment.
182          (1) A powerholder of a general power of appointment that permits appointment to the

183     powerholder or the powerholder's estate may make any appointment, including an appointment
184     in trust or creating a new power of appointment, that the powerholder could make in disposing
185     of the powerholder's own property.
186          (2) A powerholder of a general power of appointment that permits appointment only to
187     the creditors of the powerholder or of the powerholder's estate may appoint only to those
188     creditors.
189          (3) Unless the terms of the instrument creating a power of appointment manifest a
190     contrary intent, the powerholder of a nongeneral power may:
191          (a) make an appointment in any form, including an appointment in trust, in favor of a
192     permissible appointee;
193          (b) create a general power in a permissible appointee; [or]
194          (c) create a nongeneral power in any person to appoint one or more of the permissible
195     appointees of the original nongeneral power[.]; or
196          (d) create a nongeneral power in a permissible appointee to appoint one or more
197     persons if the permissible appointees of the new nongeneral power include the permissible
198     appointees of the original nongeneral power.
199          Section 6. Section 75-12-101 is enacted to read:
200     
CHAPTER 12. UNIFORM DIRECTED TRUST ACT

201          75-12-101. Title.
202          This chapter is known as the "Uniform Directed Trust Act."
203          Section 7. Section 75-12-102 is enacted to read:
204          75-12-102. Definitions.
205          As used in this chapter:
206          (1) "Breach of trust" includes a violation by a trust director or trustee of a duty imposed
207     on the director or trustee by the terms of the trust, this chapter, or the law of this state other
208     than this chapter pertaining to trusts.
209          (2) "Directed trust" means a trust for which the terms of the trust grant a power of
210     direction.
211          (3) "Directed trustee" means a trustee that is subject to a trust director's power of
212     direction.
213          (4) "Person" means an individual, estate, business or nonprofit entity, public

214     corporation, government or governmental subdivision, agency, instrumentality, or other legal
215     entity.
216          (5) (a) "Power of direction" means a power over a trust granted to a person by the
217     terms of the trust to the extent the power is exercisable while the person is not serving as a
218     trustee.
219          (b) "Power of direction" includes a power over the investment, management, or
220     distribution of trust property or other matters of trust administration.
221          (c) "Power of direction" does not include the powers described in Subsection
222     75-12-105(2).
223          (6) "Settlor" means the same as that term is defined in Section 75-7-103.
224          (7) "State" means a state of the United States, the District of Columbia, Puerto Rico,
225     the United States Virgin Islands, or any territory or insular possession subject to the jurisdiction
226     of the United States.
227          (8) "Terms of a trust" means:
228          (a) subject to Subsection (8)(b), the manifestation of the settlor's intent regarding a
229     trust's provisions as:
230          (i) expressed in the trust instrument; or
231          (ii) established by other evidence that would be admissible in a judicial proceeding; or
232          (b) the trust's provisions as established, determined, or amended by:
233          (i) a trustee or trust director in accordance with applicable law;
234          (ii) a court order; or
235          (iii) a nonjudicial settlement agreement under Section 75-7-110.
236          (9) "Trust director" means a person that is granted a power of direction by the terms of
237     a trust to the extent the power is exercisable while the person is not serving as a trustee,
238     regardless of whether:
239          (a) the terms of the trust refer to the person as a trust director; or
240          (b) the person is a beneficiary or settlor of the trust.
241          (10) "Trustee" includes an original, additional, and successor trustee, and a cotrustee.
242          Section 8. Section 75-12-103 is enacted to read:
243          75-12-103. Application -- Principal place of administration.
244          (1) This chapter applies to a trust, whenever created, that has the trust's principal place

245     of administration in this state, subject to the following rules:
246          (a) if the trust was created before May 14, 2019, this chapter applies only to a decision
247     or action occurring on or after May 14, 2019; and
248          (b) if the principal place of administration of the trust is changed to this state on or
249     after May 14, 2019, this chapter applies only to a decision or action occurring on or after the
250     date of the change.
251          (2) Without precluding other means to establish a sufficient connection with the
252     designated jurisdiction in a directed trust, the terms of the trust that designate the principal
253     place of administration of the trust are valid and controlling if:
254          (a) a trustee's principal place of business is located in, or a trustee is a resident of, the
255     designated jurisdiction;
256          (b) a trust director's principal place of business is located in, or a trust director is a
257     resident of, the designated jurisdiction; or
258          (c) all or part of the administration occurs in the designated jurisdiction.
259          Section 9. Section 75-12-104 is enacted to read:
260          75-12-104. Common law and principles of equity.
261          The common law and principles of equity supplement this chapter, except to the extent
262     modified by this chapter or the law of this state other than this chapter.
263          Section 10. Section 75-12-105 is enacted to read:
264          75-12-105. Exclusions.
265          (1) As used in this section, "power of appointment" means a power that enables a
266     person acting in a nonfiduciary capacity to designate a recipient of an ownership interest in, or
267     another power of appointment over, trust property.
268          (2) This chapter does not apply to:
269          (a) a power of appointment;
270          (b) a power to appoint or remove a trustee or trust director;
271          (c) a power of a settlor over a trust to the extent the settlor has a power to revoke the
272     trust;
273          (d) a power of a beneficiary over a trust to the extent the exercise or nonexercise of the
274     power affects the beneficial interest of:
275          (i) the beneficiary; or

276          (ii) another beneficiary represented by the beneficiary under Sections 75-7-301 through
277     75-7-305 with respect to the exercise or nonexercise of the power; or
278          (e) power over a trust if:
279          (i) the terms of the trust provide that the power is held in a nonfiduciary capacity; and
280          (ii) the power must be held in a nonfiduciary capacity to achieve the settlor's tax
281     objectives under the Internal Revenue Code of 1986, as amended, and any related Internal
282     Revenue Service regulations.
283          (3) Unless the terms of a trust provide otherwise, a power granted to a person to
284     designate a recipient of an ownership interest in, or power of appointment over, trust property
285     that is exercisable while the person is not serving as trustee is a power of appointment and not a
286     power of direction.
287          Section 11. Section 75-12-106 is enacted to read:
288          75-12-106. Powers of trust director.
289          (1) Subject to Section 75-12-107, the terms of a trust may grant a power of direction to
290     a trust director.
291          (2) Unless the terms of a trust provide otherwise:
292          (a) a trust director may exercise any further power appropriate to the exercise or
293     nonexercise of a power of direction granted to the director under Subsection (1); and
294          (b) trust directors with joint powers shall act by majority decision.
295          Section 12. Section 75-12-107 is enacted to read:
296          75-12-107. Limitations on trust director.
297          A trust director is subject to the same rules as a trustee in a like position and under
298     similar circumstances in the exercise or nonexercise of a power of direction or further power
299     under Subsection 75-12-106(2)(a) regarding:
300          (1) a payback provision in the terms of a trust necessary to comply with the Medicaid
301     reimbursement requirements in Section 1917 of the Social Security Act, 42 U.S.C. Sec.
302     1396p(d)(4)(A), as amended, and any related regulations; and
303          (2) a charitable interest in the trust, including notice regarding the interest to the
304     attorney general.
305          Section 13. Section 75-12-108 is enacted to read:
306          75-12-108. Duty and liability of trust director.

307          (1) Subject to Subsection (2), with respect to a power of direction or further power
308     under Subsection 75-12-106(2)(a):
309          (a) a trust director has the same fiduciary duty and liability in the exercise or
310     nonexercise of the power:
311          (i) if the power is held individually, as a sole trustee in a like position and under similar
312     circumstances; or
313          (ii) if the power is held jointly with a trustee or another trust director, as a cotrustee in a
314     like position and under similar circumstances; and
315          (b) the terms of the trust may vary the director's duty or liability to the same extent the
316     terms of the trust could vary the duty or liability of a trustee in a like position and under similar
317     circumstances.
318          (2) Unless the terms of a trust provide otherwise, if a trust director is licensed,
319     certified, or otherwise authorized or permitted by law other than this chapter to provide health
320     care in the ordinary course of the director's business or practice of a profession, to the extent
321     the director acts in that capacity, the director has no duty or liability under this chapter.
322          (3) The terms of the a trust may impose a duty or liability on a trust director in addition
323     to the duties and liability described in this section.
324          Section 14. Section 75-12-109 is enacted to read:
325          75-12-109. Duty and liability of directed trustee.
326          (1) Subject to Subsection (2), a directed trustee shall take reasonable action to comply
327     with a trust director's exercise or nonexercise of a power of direction or further power under
328     Subsection 75-12-106(2)(a), and the trustee is not liable for the action.
329          (2) A directed trustee may not comply with a trust director's exercise or nonexercise of
330     a power of direction or further power under Subsection 75-12-106(2)(a) to the extent that by
331     complying the trustee would engage in willful misconduct.
332          (3) An exercise of a power of direction under which a trust director may release a
333     trustee or another trust director from liability for breach of trust is not effective if:
334          (a) the breach involved the trustee's or other director's willful misconduct;
335          (b) the release was induced by improper conduct of the trustee or other director in
336     procuring the release; or
337          (c) at the time of the release, the director did not know the material facts relating to the

338     breach.
339          (4) A directed trustee that has reasonable doubt about the directed trustee's duty under
340     this section may petition the court for instructions.
341          (5) The terms of a trust may impose a duty or liability on a directed trustee in addition
342     to the duties and liabilities under this section.
343          Section 15. Section 75-12-110 is enacted to read:
344          75-12-110. Duty to provide information to trust director or trustee.
345          (1) Subject to Section 75-12-111, a trustee shall provide information to a trust director
346     to the extent the information is reasonably related both to:
347          (a) the powers or duties of the trustee; and
348          (b) the powers or duties of the director.
349          (2) Subject to Section 75-12-111, a trust director shall provide information to a trustee
350     or another trust director to the extent the information is reasonably related both to:
351          (a) the powers or duties of the director; and
352          (b) the powers or duties of the trustee or other director.
353          (3) A trustee that acts in reliance on information provided by a trust director is not
354     liable for a breach of trust to the extent the breach resulted from the reliance, unless, by acting,
355     the trustee engages in willful misconduct.
356          (4) A trust director that acts in reliance on information provided by a trustee or another
357     trust director is not liable for a breach of trust to the extent the breach resulted from the
358     reliance, unless, by acting, the trust director engages in willful misconduct.
359          Section 16. Section 75-12-111 is enacted to read:
360          75-12-111. No duty to monitor, inform, or advise.
361          (1) Unless the terms of a trust provide otherwise:
362          (a) a trustee does not have a duty to:
363          (i) monitor a trust director; or
364          (ii) inform or give advice to a settlor, beneficiary, trustee, or trust director concerning
365     an instance in which the trustee might have acted differently than the director; and
366          (b) by taking an action described in Subsection (1)(a), a trustee does not assume the
367     duty excluded under Subsection (1)(a).
368          (2) Unless the terms of a trust provide otherwise:

369          (a) a trust director does not have a duty to:
370          (i) monitor a trustee or another trust director; or
371          (ii) inform or give advice to a settlor, beneficiary, trustee, or another trust director
372     concerning an instance in which the director might have acted differently than a trustee or
373     another trust director; and
374          (b) by taking an action described in Subsection (1)(a), a trust director does not assume
375     the duty excluded under Subsection (1)(a).
376          Section 17. Section 75-12-112 is enacted to read:
377          75-12-112. Application to cotrustee.
378          The terms of a trust may relieve a cotrustee from duty and liability with respect to
379     another cotrustee's exercise or nonexercise of a power of the other cotrustee to the same extent
380     that, in a directed trust, a directed trustee is relieved from duty and liability with respect to a
381     trust director's power of direction under Sections 75-12-109 through 75-12-111.
382          Section 18. Section 75-12-113 is enacted to read:
383          75-12-113. Limitation of action against trust director.
384          (1) An action against a trust director for a breach of trust must be commenced within
385     the same limitation period as described in Section 75-7-1005 for an action for a breach of trust
386     against a trustee in a like position and under similar circumstances.
387          (2) A report or accounting has the same effect on the limitation period for an action
388     against a trust director for breach of trust that the report or accounting would have as described
389     in Section 75-7-1005 in an action for a breach of trust against a trustee in a like position and
390     under similar circumstances.
391          Section 19. Section 75-12-114 is enacted to read:
392          75-12-114. Defenses in action against trust director.
393          In an action against a trust director for a breach of trust, the director may assert the
394     same defenses a trustee in a like position and under similar circumstances could assert in an
395     action for a breach of trust against the trustee.
396          Section 20. Section 75-12-115 is enacted to read:
397          75-12-115. Jurisdiction over trust director.
398          (1) By accepting appointment as a trust director of a trust subject to this chapter, the
399     director submits to personal jurisdiction of the courts of this state regarding any matter related

400     to a power or duty of the director.
401          (2) This section does not preclude other methods of obtaining jurisdiction over a trust
402     director.
403          Section 21. Section 75-12-116 is enacted to read:
404          75-12-116. Office of trust director.
405          Unless the terms of a trust provide otherwise, the rules applicable to a trustee apply to a
406     trust director regarding the following matters:
407          (1) acceptance under Section 75-7-701;
408          (2) giving of bond to secure performance under Section 75-7-702;
409          (3) reasonable compensation under Section 75-7-708;
410          (4) resignation under Section 75-7-705;
411          (5) removal under Section 75-7-706; and
412          (6) vacancy and appointment of successor under Section 75-7-704.
413          Section 22. Section 75-12-117 is enacted to read:
414          75-12-117. Uniformity of application and construction.
415          In applying and construing this chapter, consideration must be given to the need to
416     promote uniformity of the law with respect to its subject matter among states that enact it.
417          Section 23. Section 75-12-118 is enacted to read:
418          75-12-118. Electronic records and signatures.
419          This chapter modifies, limits, or supersedes the Electronic Signatures in Global and
420     National Commerce Act, 15 U.S.C. Sec. 7001 et seq., but does not modify, limit, or supersede
421     Section 101(c) of that act, 15 U.S.C. Sec. 7001(c), or authorize electronic delivery of any of the
422     notices described in Section 103(b) of that act, 15 U.S.C. Sec. 7003(b).