Virginia Code 64.2-779.8: Decanting power under expanded distributive discretion
A. As used in this section:
Terms Used In Virginia Code 64.2-779.8
- Authorized fiduciary: means (i) a trustee or other fiduciary, other than a settlor, that has discretion to distribute or direct a trustee to distribute part or all of the income or principal of the first trust to one or more current beneficiaries and that is not (a) a current beneficiary of the first trust or a beneficiary to which the net income or principal of the first trust would be distributed if the first trust were terminated, (b) a trustee of the first trust that may be removed and replaced by a current beneficiary who has the power to remove the existing trustee of the first trust and designate as successor trustee a person that may be a related or subordinate party, as defined in 26 U. See Virginia Code 64.2-701
- Beneficiary: A person who is entitled to receive the benefits or proceeds of a will, trust, insurance policy, retirement plan, annuity, or other contract. Source: OCC
- Beneficiary: means a person that (i) has a present or future, vested or contingent, beneficial interest in a trust; (ii) holds a power of appointment over trust property; or (iii) is an identified charitable organization that will or may receive distributions under the terms of the trust. See Virginia Code 64.2-701
- Current beneficiary: includes the holder of a presently exercisable general power of appointment but does not include a person that is a beneficiary only because the person holds any other power of appointment. See Virginia Code 64.2-701
- Decanting power: means the power of an authorized fiduciary under the Uniform Trust Decanting Act (§ 64. See Virginia Code 64.2-701
- Expanded distributive discretion: means a discretionary power of distribution that is not limited to an ascertainable standard or a reasonably definite standard. See Virginia Code 64.2-701
- Fiduciary: includes a guardian, committee, trustee, executor, conservator, or personal representative. See Virginia Code 64.2-100
- Fiduciary: A trustee, executor, or administrator.
- First trust: means a trust over which an authorized fiduciary may exercise the decanting power. See Virginia Code 64.2-701
- General power of appointment: means a power of appointment exercisable in favor of a powerholder, the powerholder's estate, a creditor of the powerholder, or a creditor of the powerholder's estate. See Virginia Code 64.2-701
- Jurisdiction: (1) The legal authority of a court to hear and decide a case. Concurrent jurisdiction exists when two courts have simultaneous responsibility for the same case. (2) The geographic area over which the court has authority to decide cases.
- Person: means an individual; estate; business or nonprofit entity; government; governmental subdivision, agency, or instrumentality; public corporation; or other legal entity. See Virginia Code 64.2-701
- Power of appointment: means a power that enables a powerholder acting in a nonfiduciary capacity to designate a recipient of an ownership interest in or another power of appointment over the appointive property. See Virginia Code 64.2-701
- Powerholder: means a person in which a donor creates a power of appointment. See Virginia Code 64.2-701
- Property: means anything that may be the subject of ownership, whether real or personal, legal or equitable, or any interest therein. See Virginia Code 64.2-701
- Qualified beneficiary: means a beneficiary who, on the date the beneficiary's qualification is determined, (i) is a distributee or permissible distributee of trust income or principal; (ii) would be a distributee or permissible distributee of trust income or principal if the interests of the distributees described in clause (i) terminated on that date without causing the trust to terminate; or (iii) would be a distributee or permissible distributee of trust income or principal if the trust terminated on that date. See Virginia Code 64.2-701
- Remainder: An interest in property that takes effect in the future at a specified time or after the occurrence of some event, such as the death of a life tenant.
- Second trust: means (i) a first trust after modification, including a restatement of the first trust, under the Uniform Trust Decanting Act (§ 64. See Virginia Code 64.2-701
“Noncontingent right” means a right that is not subject to the exercise of discretion or the occurrence of a specified event that is not certain to occur. “Noncontingent right” does not include a right held by a beneficiary if any person has discretion to distribute property subject to the right to any person other than the beneficiary or the beneficiary’s estate.
“Presumptive remainder beneficiary” means a qualified beneficiary other than a current beneficiary.
“Successor beneficiary” means a beneficiary that is not a qualified beneficiary on the date the beneficiary’s qualification is determined. “Successor beneficiary” does not include a person that is a beneficiary only because the person holds a nongeneral power of appointment.
“Vested interest” means:
1. A right to a mandatory distribution that is a noncontingent right as of the date of the exercise of the decanting power;
2. A current and noncontingent right, annually or more frequently, to a mandatory distribution of income, a specified dollar amount, or a percentage of value of some or all of the trust property;
3. A current and noncontingent right, annually or more frequently, to withdraw income, a specified dollar amount, or a percentage of value of some or all of the trust property;
4. A presently exercisable general power of appointment; or
5. A right to receive an ascertainable part of the trust property on the trust’s termination that is not subject to the exercise of discretion or to the occurrence of a specified event that is not certain to occur.
B. Subject to subsection C and § 64.2-779.11, an authorized fiduciary that has expanded distributive discretion over the income or principal of a first trust for the benefit of one or more current beneficiaries may exercise the decanting power over the income or principal of the first trust.
C. Subject to § 64.2-779.10, in an exercise of the decanting power under this section, a second trust may not:
1. Include as a current beneficiary a person that is not a current beneficiary of the first trust, except as otherwise provided in subsection D;
2. Include as a presumptive remainder beneficiary or successor beneficiary a person that is not a current beneficiary, presumptive remainder beneficiary, or successor beneficiary of the first trust, except as otherwise provided in subsection D; or
3. Reduce or eliminate a vested interest.
D. Subject to subdivision C 3 and § 64.2-779.11, in an exercise of the decanting power under this section, a second trust may be a trust created or administered under the law of any jurisdiction and may:
1. Retain a power of appointment granted in the first trust;
2. Omit a power of appointment granted in the first trust, other than a presently exercisable general power of appointment;
3. Create or modify a power of appointment if the powerholder is a current beneficiary of the first trust and the authorized fiduciary has expanded distributive discretion to distribute principal to the beneficiary; and
4. Create or modify a power of appointment if the powerholder is a presumptive remainder beneficiary or successor beneficiary of the first trust, but the exercise of the power may take effect only after the powerholder becomes, or would have become if then living, a current beneficiary.
E. A power of appointment described in subdivisions D 1 through 4 may be general or nongeneral. The class of permissible appointees in favor of which the power may be exercised may be broader than or different from the beneficiaries of the first trust.
F. If an authorized fiduciary has expanded distributive discretion over part but not all of the income or principal of a first trust, the fiduciary may exercise the decanting power under this section over that part of the income or principal over which the authorized fiduciary has expanded distributive discretion.
2017, c. 592.