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SPONSOR: Rep. Bush & Sen. Mantzavinos & Sen. Townsend
Rep. Carson; Sens. Hocker, Sokola, Walsh
HOUSE OF REPRESENTATIVES
153rd GENERAL ASSEMBLY
HOUSE BILL NO. 297
AN ACT TO AMEND TITLES 12 AND 25 OF THE DELAWARE CODE RELATING TO DECEDENTS’ ESTATES
AND PROPERTY.
BE IT ENACTED BY THE GENERAL ASSEMBLY OF THE STATE OF DELAWARE:
1 Section 1. Amend § 3323, Title 12 of the Delaware Code by making deletions as shown by strike through and
2 insertions as shown by underline as follows:
3 § 3323. Cofiduciaries and co-nonfiduciaries.
4 (a) Unless provided otherwise by the governing instrument, the following applies:
5 (1) Any power vested in 2 fiduciaries or nonfiduciaries by the governing instrument or by law must be
6 exercised by both of the fiduciaries or nonfiduciaries.
7 (2) any Any power vested in 3 or more fiduciaries or nonfiduciaries by the governing instrument or by law
8 may must be exercised by a majority of such the fiduciaries or nonfiduciaries and nonfiduciaries.
9 (3) A fiduciary or nonfiduciary that dissents from the action of the majority of the fiduciaries or nonfiduciaries
10 is not liable with respect to the action to anyone having an interest in the fiduciary fund, or to the other fiduciaries or
11 nonfiduciaries, if the fiduciary’s or nonfiduciary’s dissent is evidenced by a writing delivered to the majority.
12 (4) Unless otherwise provided in a governing instrument, when the governing instrument names 2 fiduciaries
13 or nonfiduciaries, the fiduciaries or nonfiduciaries may designate 1 of the fiduciaries or nonfiduciaries to perform
14 ministerial functions on behalf of both of the fiduciaries or nonfiduciaries.
15 (5) Unless otherwise provided in a governing instrument, when the governing instrument names 3 or more
16 fiduciaries or nonfiduciaries, a majority of the fiduciaries or nonfiduciaries named in a governing instrument may
17 designate 1 or more of such the fiduciaries or nonfiduciaries to perform ministerial functions on behalf of all such of
18 the fiduciaries or nonfiduciaries. A fiduciary or nonfiduciary who dissents from the action of the majority is not liable
19 to anyone having an interest in the fiduciary fund, or to the other fiduciaries or nonfiduciaries, if such dissent is
20 evidenced by a writing delivered to the majority of the fiduciaries or nonfiduciaries.
21 (b) This Unless otherwise expressly provided by a governing instrument or other law of this State, this section
22 does not excuse a cofiduciary or co-nonfiduciary from liability for any of the following:
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23 (1) failure Failure to participate in the administration of the fiduciary fund fund.
24 (2) or for failure Failure to attempt to prevent a breach of trust, trust.
25 (3) or for failure Failure to seek advice and guidance from the court in a recurring situation, unless otherwise
26 expressly provided by the governing instrument. situation.
27 Section 2. Amend § 3325, Title 12 of the Delaware Code by making deletions as shown by strike through and
28 insertions as shown by underline as follows:
29 § 3325. Specific powers of trustee.
30 Without limiting the authority conferred by § 3324 of this title, a trustee may:
31 (29) Declare 1 or more new trusts for the purpose of merging all, or a portion, of the trust with or into the new
32 trust or trusts and merge all or a portion of the trust with or into any other trust or trusts, including statutory trusts and
33 foreign statutory trusts as defined in § 3801 of this title, whether or not created by the same trustor and whether or not
34 funded prior to the merger, to be held and administered as a single trust if and administered in accordance with the
35 terms of such governing instrument as the trustee shall select in connection with such merger, which governing
36 instrument may be the governing instrument of either the transferee trust (as defined in § 3341 of this title) or the
37 transferor trust (as defined in § 3341 of this title), so long as such a merger would not result in a material change in the
38 dispositive terms of the trust defining the nature and extent of any trust beneficiary’s interest in the principal or income
39 of the trust;
40 Section 3. Amend § 3326, Title 12 of the Delaware Code by making deletions as shown by strike through and
41 insertions as shown by underline as follows:
42 § 3326. Resignation of an officeholder.
43 (a) For purposes of this section and § 3327 §§ 3327 and 3327A of this title, the term “officeholder” includes all of
44 the following:
45 (1) a trustee, A trustee.
46 (2) an “adviser” An adviser, as defined in § 3313 of this title, title.
47 (3) a “designated representative” A designated representative, as defined in § 3339 of this title, and title.
48 (4) an An enforcer under § 3556(3) of this title.
49 (5) A holder of a power to remove or appoint one or more fiduciaries or nonfiduciaries with respect to a trust.
50 Section 4. Amend Chapter 33 of Title 12 of the Delaware Code by transferring § 3336 of Title 12 of the Delaware
51 Code to § 3327A of Title 12 of the Delaware Code and making deletions as shown by strike through and insertions as
52 shown by underline as follows:
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53 § 3336. § 3327A. Appointment of successor trustee. an officeholder.
54 (a) If a trust has no serving trustee trust’s governing instrument does not include a provision that effectively can be
55 used to appoint a successor officeholder, an officeholder or successor officeholder may be appointed as provided under this
56 section when the trust does not have a serving officeholder in a given position for any reason, including the following:
57 (1) Due to the death, incapacity, removal removal, or resignation of the last serving trustee of the trust,
58 officeholder in that position.
59 (2) or due Due to the renunciation or declination of the last named successor trustee of the trust officeholder in
60 that position of its appointment as such, and if the provisions of the governing instrument do not include any provisions
61 which can be effectively used to appoint a successor trustee, and such.
62 (3) Due to the declination to appoint a successor officeholder by the holder or holders of the power to so
63 appoint.
64 (b) Except as otherwise provided in a governing instrument, when the trust instrument expressly requires an
65 officeholder to be appointed or when a trust has no trustee, the holder or holders of the power to appoint the successor
66 trustee or other officeholder are deemed to have declined to do so if the holder or holders have not appointed a successor
67 trustee or other officeholder within 60 days of being notified of the corresponding vacancy.
68 (c) if If the only remaining dispositive provisions of the trust governing instrument then require distribution of the
69 remaining property of the trust to 1 or more beneficiaries (whether outright, or to 1 or more other trusts which do have a
70 serving trustee), then the taking beneficiaries of the trust, by unanimous vote, consent, may name a successor trustee or
71 other officeholder of the trust without the approval of the Court of Chancery. For purposes of the preceding sentence, this
72 subsection, the person entitled to vote with respect to consent on behalf of a beneficiary which that is another trust which
73 that has a serving trustee is the trustee or trustees of such the other trust.
74 (d) If subsection (c) of this section does not apply, the current permissible beneficiaries and presumptive remainder
75 beneficiaries of the trust, by unanimous consent, may name a successor trustee or other officeholder of the trust, subject to
76 any conditions under the governing instrument with respect to such appointee, without the approval of the Court of
77 Chancery.
78 (e) For purposes of subsections (c) and (d) of this section, unanimous consent may be achieved via representation
79 by one or more designated representatives under § 3339 of this title or by one or more virtual representatives under § 3547
80 of this title.
81 (f) Except when a trustee vacancy is required by law to be filled, nothing in this section is to be construed to
82 require a vacancy of a trustee or other officeholder to be filled when not expressly required by the governing instrument.
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83 (g) Nothing in this section is to be construed to limit the appointment of a trustee or other officeholder by a
84 modification of a trust under § 3342 of this title or by a nonjudicial settlement agreement under § 3338 of this title.
85 Section 5. Amend § 3341, Title 12 of the Delaware Code by making deletions as shown by strike through and
86 insertions as shown by underline as follows:
87 § 3341. Consequences of trust merger and similar transactions.
88 Furthermore, all rights of creditors and all liens upon the property of the transferor trust shall be preserved
89 unimpaired and all debts, liabilities, and duties of the transferor trust shall thenceforth attach to the transferee trust and may
90 be enforced against the transferee trust to the same extent as if the transferor trust’s debts, liabilities, and duties had been
91 incurred or contracted by the transferee trust. Except to the extent provided in paragraph (5) of this section, the terms of the
92 governing instrument of either the transferor trust or the transferee trust trust, as selected in accordance with § 3325(29) of
93 this title, shall, following the merger, control the administration and disposition of the property of the transferee trust,
94 including any such property obtained by the transferee trust by reason of the merger. Furthermore, any transaction in which
95 all of the property of a trust is appointed or otherwise transferred to another trust or to the same trust as modified after such
96 appointment, whether pursuant to § 3528 of this title, the terms of a governing instrument or otherwise, shall be treated as a
97 merger within the meaning of this section with the appointing or transferring trust and the recipient trust treated as a
98 transferor trust and transferee trust, respectively, for purposes of applying the provisions of this section to the transaction.
99 This section is not intended, nor shall it be construed, to grant to any trustee a right or power to merge trusts but rather this
100 section is intended only to describe certain consequences of a trust merger in cases where the merger is authorized by other
101 applicable law. Except as expressly provided in clause (ii) of paragraph (4) of this section, this section is not intended, nor
102 shall it be construed, to address the validity or effect of any instrument in writing, executed prior to a trust merger,
103 purporting to exercise a power of appointment over property of any trust participating in a trust merger.
104 Section 6. Amend § 3345, Title 12 of the Delaware Code by making deletions as shown by strike through and
105 insertions as shown by underline as follows:
106 § 3345. Beneficiary well-being trust.
107 (c) The trustees and advisers of a beneficiary well-being trust shall provide (or if applicable, the advisers shall
108 direct the trustees to provide or shall consent to the trustees’ decision to provide) the beneficiaries individually or as a group
109 with beneficiary well-being programs at such times and in such manner as set forth in the provisions of the governing
110 instrument, or in the absence of such provisions, then at such times and in such manner as the trustee or adviser, as
111 applicable, may determine is appropriate, in accordance with § 3315 of this title.
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112 (d) Subject to the fiduciary duties and authority of the trustees and advisers under the governing instrument and
113 applicable law, applicable fiduciary duties, the trustees and advisers of a beneficiary well-being trust shall pay (or if
114 applicable, the advisers shall direct the trustees to pay or shall consent to the trustees’ decision to pay) from the trust the
115 costs and expenses of beneficiary well-being programs.
116 (1) The payments under this subsection are an expense of administration of the trust to the extent permitted by
117 law.
118 (2) A trustee itself may provide (or if applicable, the advisers may direct the trustee to provide or may consent
119 to the trustee’s decision to provide) beneficiary well-being programs, and may select, hire, retain, and pay (or if
120 applicable, the advisers may direct the trustee to do so or may consent to the trustee’s decision to do so) providers of
121 beneficiary well-being programs whether or not the providers are third parties or affiliates of the trustee or adviser
122 within the meaning of § 3312 of this title.
123 (3) Each If the governing instrument expressly so provides, each provider of beneficiary well-being programs
124 is entitled to payment for providing a beneficiary well-being program, and a trustee (or if applicable, an adviser) is
125 entitled to the full fiduciary compensation to which the trustee or adviser is otherwise entitled as trustee or adviser
126 without diminution for the fees and costs of the beneficiary well-being program, without prior notice or prior disclosure
127 to any beneficiary of the trust.
128 Section 7. Amend § 504, Title 25 of the Delaware Code by making deletions as shown by strike through and
129 insertions as shown by underline as follows:
130 § 504. Certain powers of appointment.
131 (b) Subsection (a) of this section shall not apply to the exercise of a power of appointment (other than any such
132 power of appointment created through the exercise of another power of appointment) over property held in a trust that is not
133 subject to, or has an inclusion ratio of zero for purposes of, the tax on generation-skipping transfers imposed pursuant to
134 Chapter 13 of the Internal Revenue Code (26 U.S.C. Ch. 13) or any successor provision thereto if the instrument of exercise
135 of the power makes express reference to subsection (a) of this section and expressly states that subsection (a) of this section
136 shall not apply to the exercise of the power or makes express reference to § 501 § 501(a) of this title and expressly states
137 that § 501 § 501(a) of this title shall apply to the exercise of the power.
138 Section 8. This Act is effective upon enactment and applies to trusts whenever created.
SYNOPSIS
Section 1 of this Act amends § 3323 of Title 12 to clarify: (1) that powers vested in 2 fiduciaries or nonfiduciaries
must be exercised by agreement of both (that is, unanimously), while actions of 3 or more fiduciaries must be exercised by
a majority; and (2) how these rules also apply when fiduciaries or nonfiduciaries are designating 1 or more of them to
perform ministerial functions on behalf of all of them. In particular, Section 1 of this Act clarifies that when 2 fiduciaries or
nonfiduciaries are serving, they can designate 1 of them to perform ministerial functions on behalf of both of them—in
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other words, that the statute’s existing mention of such designation being available to a majority does not mean that it is
available only when there are 3 or more fiduciaries or nonfiduciaries serving. Section 1 of the Act also clarifies (in
subsection (a) of § 3323) that the non-liability of fiduciaries or nonfiduciaries who dissent from an action of the majority (if
the dissent is evidenced in writing and delivered to the majority) applies only with respect to such action. Section 1 of the
Act also reorganizes and rewords § 3323 to reflect current stylistic and formatting preferences.
Section 2 of this Act amends § 3325(29) of Title 12 to allow the trustee to select the governing instrument of either
the transferor trust or the transferee trust (those two terms being defined in § 3341 of Title 12) in the context of a merger.
The purpose of this amendment is to allow flexibility and improve administrative ease so that the name, EIN, account
numbers, and other identifying information of the trust may remain unchanged post-merger.
Section 3 of this Act amends § 3326 of Title 12 to:
(1) Expand the definition of “officeholder” to include those who are empowered to appoint another officeholder;
(2) Add a cross-reference to new § 3327A of Title 12 so that the definition of “officeholder” in § 3326 will also
apply to § 3327A; and
(3) Reorganize and reword § 3326 to reflect current stylistic and formatting preferences.
Section 4 of this Act amends Title 12 by moving the language of § 3336 of Title 12 to new § 3327A of Title 12
and by adding provisions to new § 3327A that expand the subject matter of § 3336. More specifically, new § 3327A:
(1) Replaces “trustee” with “officeholder” or “trustee or other officeholder” to parallel §§ 3326 and 3327 of Title
12, so that § 3327A will address the appointment of officeholders generally, and not just the appointment of trustees;
(2) For trusts that are not continuing (that is, for trusts to which § 3327A(a)(1) —the existing subject matter of §
3336—does apply), changes the current language so that the appointment mechanism to appoint a distributing trustee can
also be used where needed to appoint an officeholder other than a trustee;
(3) For such distributing trusts, changes the current language so that the appointment of a distributing trustee or
other officeholder is accomplished by unanimous consent, rather than by unanimous vote, because “vote” implies
procedural formalities that ought not be necessary in such a situation;
(4) For trusts that are continuing (that is, for trusts to which § 3327A(a)(1) —the existing subject matter of §
3336—does not apply), creates a new procedure for the appointment of a trustee or other officeholder where there is a
vacancy, without the approval of the Court of Chancery, by unanimous consent of certain beneficiaries, but subject to any
restrictions that the governing instrument imposes on the appointee;
(5) Emphasizes that the unanimous consent required under § 3327A(c) and (d) may be achieved via representation
by one or more designated representatives under § 3339 of Title 12 or by one or more virtual representatives under § 3547
of Title 12;
(6) Provides expressly that, subject to certain conditions, § 3327A also applies to the appointment of a trustee or
other officeholder where another officeholder is supposed to fill a vacancy but has failed to do so within 60 days of being
notified of the vacancy;
(7) Confirms that, unless a trustee vacancy is required by law to be filled, nothing within § 3327A shall be
construed to require filling trustee or other officeholder vacancies when not expressly required by the trust’s governing
instrument; and
(8) Confirms that nothing within § 3327A shall be construed to limit the appointment of a trustee or other
officeholder by a modification of a trust under § 3342 of Title 12 or by a nonjudicial settlement agreement under § 3338 of
Title 12.
Section 5 of this Act amends § 3341 of Title 12 to allow the trustee to select the governing instrument of either the
transferor trust or the transferee trust in the context of a merger in order to align with the amendment made in Section 2 of
this Act.
Section 6 of this Act amends § 3345 of Title 12 to include references to both the trustee or adviser of a trust, in
each place in the statute where only the trustee was formerly referenced, to avoid any potential ambiguity about the
statute’s application to beneficiary well-being trusts that are drafted to provide that the trustee shall provide beneficiary
well-being programs at the direction of or with the consent of an adviser. Section 6 of this Act also shortens the first
sentence of § 3345(d) of Title 12—the original introductory sentence was intended to convey that the statute is applicable
where the trustee is directed by an adviser, but this introductory sentence is no longer necessary in light of the other
changes to this statute that more directly spell out the dynamic of a directed trust. It is noted for the sake of clarity,
however, that this shortening of the first sentence of § 3345(d) of Title 12 does not change that actions taken under §
3345(d) remain subject to applicable fiduciary duties. Section 6 of this Act also clarifies § 3345(d)(3) of Title 12 that
payment for beneficiary well-being programs to a trustee or affiliate or adviser is permitted only if the governing instrument
expressly authorizes such payment. Section 6 of this act also amends § 3345(d)(3) of Title 12 by deleting the word
“fiduciary” as modifying the term “compensation” to reflect that some advisers who are not fiduciaries may receive
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compensation (and not to have any effect on whether a trustee or adviser is or is not a fiduciary). Section 6 of this Act also
adds the word “prior” before the word “disclosure” in the last clause of § 3345(d)(3) of Title 12 to clarify that payment for
beneficiary well-being programs to a trustee or affiliate or adviser is permitted without prior notice or prior disclosure to
any beneficiary of the trust.
Section 7 of this Act amends § 504 of Title 25 to coordinate one of the methods for opting out of the effect of §
504(a) upon the exercise of a power of appointment. The amendment is that the instrument of exercise of a power of
appointment should make express reference to the provisions of § 501(a) of Title 25 and should expressly state that it shall
not apply to the exercise of the power in order to effectuate the opt-out of § 504(a). This change replaces the prior provision
that referred generally to § 501, rather than specifically to § 501(a).
Section 8 of this Act provides an effective date.
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