55-548.14 - Discretionary powers; tax savings.
§ 55-548.14. Discretionary powers; tax savings.
A. Notwithstanding the breadth of discretion granted to a trustee in theterms of the trust, including the use of such terms as "absolute","sole", or "uncontrolled", the trustee shall exercise a discretionarypower in good faith and in accordance with the terms and purposes of thetrust and the interests of the beneficiaries.
B. Subject to subsection D, and unless the terms of the trust expresslyindicate that a rule in this subsection does not apply:
1. A person other than a settlor who is a beneficiary and trustee of a trustthat confers on the trustee a power to make discretionary distributions to orfor the trustee's personal benefit may exercise the power only in accordancewith an ascertainable standard; and
2. A trustee may not exercise a power to make discretionary distributions tosatisfy a legal obligation of support that the trustee personally owesanother person.
C. A power whose exercise is limited or prohibited by subsection B may beexercised by a majority of the remaining trustees whose exercise of the poweris not so limited or prohibited. If the power of all trustees is so limitedor prohibited, the court may appoint a special fiduciary with authority toexercise the power.
D. Subsection B does not apply to:
1. A power held by the settlor's spouse who is the trustee of a trust forwhich a marital deduction, as defined in § 2056 (b) (5) or 2523 (e) of theInternal Revenue Code of 1986, as in effect on the effective date of thischapter, or as later amended, was previously allowed;
2. Any trust during any period that the trust may be revoked or amended byits settlor; or
3. A trust if contributions to the trust qualify for the annual exclusionunder § 2503 (c) of the Internal Revenue Code of 1986, as in effect on theeffective date of this chapter, or as later amended.
(2005, c. 935.)