GENERAL ASSEMBLY OF NORTH CAROLINA

SESSION 1999

S	1 

SENATE BILL 1060

Short Title:  Division of Trusts.	(Public)

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Sponsors: Senators Hagan; and Kinnaird.

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Referred to:  Judiciary II.

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April 15, 1999

A BILL TO BE ENTITLED
AN ACT TO PROVIDE TRUSTEES WITH ADDITIONAL AUTHORITY TO SEVER TRUSTS INTO SEPARATE TRUSTS CONSISTENT WITH THE BEST INTERESTS OF THE TRUST BENEFICIARIES.
The General Assembly of North Carolina enacts:
Section 1.  G.S. 32-27(25a) reads as rewritten:
"(25a)	Divide One Trust into Several Trusts and Make Distributions From Those Trusts. –
a.	To divide the funds and properties constituting any trusts into two or more identical separate trusts that represent two or more fractional shares of the funds and properties being divided, or to hold any addition or contribution to an existing trust as a separate, identical trust, and to make distributions of income and principal by a method other than pro rata from the separate trusts so created as the fiduciary determines to be in the best interests of the trust beneficiaries. In any case where two separate, identical trusts are created pursuant to this sub-subdivision, one of which is fully exempt from the federal generation-skipping transfer tax and one of which is fully subject to that tax, the fiduciary may thereafter, to the extent possible consistent with the terms of the governing instrument, determine the value of any mandatory or discretionary distributions to trust beneficiaries on the basis of the combined value of both trusts, but may satisfy such distributions from the separate trusts in a manner designed to minimize the current and potential generation-skipping transfer tax.
b. 	To divide the funds and properties constituting any trusts into two or more separate, nonidentical trusts if (i) the new trusts so created are not inconsistent with the terms of the governing instrument; and (ii) the terms of the new trusts provide in the aggregate for the same succession of interests and beneficiaries as are provided in the original trust.
c.	To fund the new trusts created pursuant to the authority granted under this subsection either (i) by pro rata allocation of the assets of the original trust; (ii) based upon the fair market value of the assets at the date of funding; or (iii) in a manner fairly reflecting the net appreciation or depreciation of the trust assets measured from the valuation date to the date of funding."
Section 2.  G.S. 36A-136(24) reads as rewritten:
"(24)	To divide one trust into several trusts and make distributions from those trusts:
a.	To divide the funds and properties constituting any trust into two or more identical separate trusts that represent two or more fractional shares of the funds and properties being divided, or to hold any addition or contribution to an existing trust as a separate, identical trust, and to make distributions of income and principal by a method other than pro rata from the separate trusts so created as the fiduciary determines to be in the best interests of the trust beneficiaries. In any case where two separate, identical trusts are created pursuant to this sub-subdivision, one of which is fully exempt from the federal generation-skipping transfer tax and one of which is fully subject to that tax, the fiduciary may thereafter, to the extent possible consistent with the terms of the governing instrument, determine the value of any mandatory or discretionary distributions to trust beneficiaries on the basis of the combined value of both trusts, but may satisfy such distributions by a method other than pro rata from the separate trusts in a manner designed to minimize the current and potential generation-skipping transfer tax.
b.	To divide the funds and properties constituting any trusts treated for purposes of the federal generation-skipping transfer tax as separate trusts into two or more separate trusts to reflect that tax treatment, provided that (i) the separate trusts so created are not inconsistent with the terms of the governing instrument and that (ii) the severance is carried out in a manner permitted under the regulations promulgated under section 2654 of the Internal Revenue Code of 1986, as amended.
c.	To divide the funds and properties constituting any testamentary trusts and any trusts included in the gross estate of the grantor of the trust for federal tax purposes into two or more separate trusts, provided that (i) the terms of the new trusts provide in the aggregate for the same succession of interests and beneficiaries as are provided in the original trust and that (ii) the severance is carried out in a manner permitted under the regulations promulgated under section 2654 of the Internal Revenue Code of 1986, as amended.
d.	To fund the new trusts created pursuant to the authority granted under this subsection either (i) by pro rata allocation of the assets of the original trust; (ii) based upon the fair market value of the assets at the date of funding; or (iii) in a manner fairly reflecting the net appreciation or depreciation of the trust assets measured from the valuation date to the date of funding.  In the case of a pecuniary amount set aside as a separate trust, the provisions of G.S. 37-21.1 shall apply."
Section 3.  This act is effective when it becomes law.