Trust Act 2021
On June 30, 2021, Governor John Carney signed into law the Delaware Trust Act 2021. This Act includes several important changes to Title 12 of the Delaware statutes, as outlined below:
- Trustee Exercise of Discretion (Section 3315): this Section was revised to clarify the fact that a discretionary interest in a trust is merely an expectancy and not a property right. This is true regardless of the type of discretion which must be exercised by the trustee, whether it be ascertainable or absolute discretion. In both cases, the discretionary beneficiary does not have a property right in the trust which can be enforced by a creditor.
- Resignation and Removal of Office Holders (Section 3326 & 3327): the modification of these Sections expand their application beyond “trustees” to all fiduciary “officeholders,” a term which is defined as trustees, advisers, and designated representatives. These Sections provide a method for resignation and removal of officeholders where the trust instrument is silent.
- Designated Representatives (Section 3339): the update to this Section includes (i) an expansion of the definition of actions which may be taken to constitute acceptance of the role of designated representative to including prior service; (ii) a prioritization of the methods available for appointing a designated representative; (iii) an expansion of the circumstances in which a designated representative may be appointed to include representation of minors, incapacitated persons, and unborns in non-judicial matters outside of the context of a silent trust; and (iv) acknowledgement that anyone accepting appointment as a designated representative is deemed to have submitted to personal jurisdiction in the State of Delaware.
- Modification by Consent (Section 3342): the power to modify a trust, even if such modification would change a material purpose of the trusts is not a power that every trustor is comfortable having available for future use by his or her future beneficiaries or trustees. As such, the modification statute has been updated to more clearly outline the methods by which a trustor may “opt out” of the application of this statue to his or her trust by adding specific language which expressly provides that the trust may not be modified pursuant to Section 3342 or 3338, or any successors thereto.
- Income Tax Reimbursement (Section 3344): the revised statute expressly expands the categories of taxes for which a trustor may be reimbursed to include state and federal income tax, county tax, metropolitan-regional tax, city tax, local tax, foreign tax and such other income taxes as may be applicable to the individual trust.
- Rights of Creditors (Section 3536): Subsection (c) of this Section now provides that a person who becomes a beneficiary of a trust due to the exercise of a power of appointment by someone else, is not considered to be the trustor of that new trust (even if that individual was the trustor of the original trust). Instead, the trustor would be treated as a beneficiary only of the new trust and his or her creditors would have only such ability to attach the assets of the trust as they would with any other beneficiary.
- Electronic Execution of Documents (Section 3550): new to the Delaware Statute, Section 3550 provides that trusts and related documents may be validly executed by electronic methods in accordance with the Uniform Electronic Transactions ACT (UETA). This includes documents such as trust documents, mergers, NJSAs, modifications, delegation documents, decanting instruments, resignations/removals/appointments, consents, and releases.