72nd OREGON LEGISLATIVE ASSEMBLY--2003 Regular Session
HA to HB 2063
LC 465/HB 2063-3
HOUSE AMENDMENTS TO
HOUSE BILL 2063
By COMMITTEE ON JUDICIARY
March 26
On page 1 of the printed bill, line 2, delete the second ' and'
and insert a comma.
In line 3, after '116.007' insert 'and 128.135'.
On page 3, delete lines 41 and 42 and insert:
' (h) If the power to make adjustments has been released upon
conversion of the trust to a unitrust under section 4b of this
2003 Act.'.
On page 4, line 45, after 'fiduciary' insert 'for instructions
under ORS 128.135 (2)(c)'.
On page 5, line 1, delete 'shall determine' and insert ' may
instruct the fiduciary on'.
After line 8, insert:
' { + SECTION 4b. + } { + Conversion to unitrust. (1) As
used in this section, 'beneficiary' means a person who has an
interest in the trust to be converted and who has the legal
capacity to take all actions authorized under this section.
' (2)(a) Unless expressly prohibited by the terms of the trust,
a trustee may release the power to make adjustments under section
4 (1) of this 2003 Act and convert a trust into a unitrust if the
trustee determines that the conversion will enable the trustee to
carry out more accurately the intent of the settlor and the
purposes of the trust and that operation of the trust as a
unitrust is consistent with the duties of the trustee under
section 3 (2) of this 2003 Act.
' (b) Not less than 60 days before making a conversion under
this section, a trustee must give written notice to all
beneficiaries who either are eligible to receive income from the
trust at the time the notice is given, or who would receive a
distribution of principal if the trust were to terminate
immediately before the notice is given and no power of
appointment was exercised. The notice must indicate that the
trustee intends to release the power to adjust and to convert the
trust into a unitrust, must describe how the unitrust will
operate and must include a description of the initial decisions
the trustee will make under this section.
' (c) A trustee may not convert a trust to a unitrust under
this section if any beneficiary objects to the conversion to a
unitrust in a writing delivered to the trustee within 60 days
after notice is given under this subsection.
' (3) The trustee or any beneficiary may file a petition
pursuant to ORS 128.135 (2)(e) to seek issuance of a court order
directing conversion of a trust to a unitrust. The court shall
order the requested conversion if the court concludes that the
conversion will enable the trustee to carry out more accurately
the intent of the settlor and the purposes of the trust, and that
operation of the trust as a unitrust is consistent with the
duties of the trustee under section 3 (2) of this 2003 Act.
' (4) After a trust is converted to a unitrust under this
section, all of the following apply:
' (a) The trustee must invest and manage trust assets as a
prudent investor, and must follow an investment policy seeking a
total return for trust investments, whether that return is
derived from appreciation of principal or from earnings and
distributions from principal.
' (b) The trustee must make regular distributions in accordance
with the terms of the trust. All provisions of the trust relating
to distribution of income shall be construed to refer to an
annual unitrust distribution equal to four percent of the fair
market value of trust assets, averaged over the lesser of the
three preceding calendar years or the period during which the
trust has been in existence.
' (c) In calculating the unitrust distribution, the trustee
shall use the value of trust assets on the first business day of
each calendar year for purposes of determining average value. The
trustee may, in the trustee's discretion, determine the manner in
which the unitrust distribution will be prorated for a year in
which a beneficiary's right to payments begins or ends, the
effect on trust asset valuation of other payments from or
contributions to the trust, whether to estimate the value of
nonliquid assets, whether to omit from the calculations trust
property occupied or possessed by a beneficiary and any other
matters necessary for the proper administration of the unitrust.
' (d) Expenses that would be deducted from income under
sections 1 to 31 of this 2003 Act if the trust was not a unitrust
shall not be deducted from the unitrust distribution.
' (e) Unless otherwise provided by the terms of the trust, the
unitrust distribution must be paid first from net income, as that
amount would be determined if the trust were not a unitrust. To
the extent that net income is insufficient, the unitrust
distribution shall be paid first from net realized short-term
capital gains, then from net realized long-term capital gains and
finally from trust principal.
' (f) Conversion to a unitrust does not affect any provision in
the terms of the trust directing or authorizing a trustee to
distribute trust principal or authorizing a beneficiary to
withdraw a portion or all of the principal.
' (5) The trustee or any beneficiary may file a petition
pursuant to ORS 128.135 (2)(e) to seek issuance of a court order
directing any of the following:
' (a) The distribution of net income, as that amount would be
determined if the trust were not a unitrust, in excess of the
unitrust distribution, if the excess distribution is necessary to
preserve a tax benefit.
' (b) The selection of a period other than three years for
purposes of calculating average trust asset values.
' (c) Reconversion from a unitrust. If a reconversion is
ordered, the power to make adjustments under section 4 (1) of
this 2003 Act is revived.
' (6) A trustee does not have and may not exercise any power
under this section in any of the following circumstances:
' (a) The unitrust distribution would be made from any amount
that is permanently set aside for charitable purposes under the
terms of the trust and for which a charitable deduction from
federal gift, estate or income taxes has been taken.
' (b) The possession or exercise of the power would cause an
individual to be treated as the owner of all or part of the trust
for federal income tax purposes and the individual would not be
treated as an owner if the trustee did not possess or exercise
the power.
' (c) The possession or exercise of the power would cause all
or any part of the trust assets to be subject to any federal gift
or estate tax with respect to an individual and the trust assets
would not be subject to that taxation if the trustee did not
possess or exercise the power.
' (d) The possession or exercise of the power would result in
the disallowance of a marital deduction from federal estate or
gift tax that would be allowed if the trustee did not possess or
exercise the power.
' (e) The trustee is a beneficiary of the trust.
' (7) If subsection (6) of this section applies to a trustee
and there is more than one trustee, a cotrustee to whom
subsection (6) of this section does not apply may possess and
exercise the powers under this section unless the possession or
exercise of those powers is not permitted by the terms of the
trust. If subsection (6) of this section restricts all trustees
from possessing or exercising a power under this section, a
trustee may file a petition pursuant to ORS 128.135 to order the
requested action. + } ' .
On page 11, line 9, after '(2)' insert 'Except as provided in
subsection (5) of this section,'.
In line 13, after '(3)' insert 'Except as provided in
subsection (5) of this section,'.
After line 22, insert:
' (5)(a) An increase in value of the following obligations over
the value of the obligations at the time of acquisition by the
trust is distributable as income:
' (A) A zero coupon security.
' (B) A deferred annuity contract surrendered wholly or
partially before annuitization.
' (C) A life insurance contract surrendered wholly or partially
before the death of the insured.
' (D) Any other obligation for the payment of money that is
payable at a future time in accordance with a fixed, variable or
discretionary schedule of appreciation in excess of the price at
which it was issued.
' (b) For purposes of this subsection, the increase in value of
an obligation is available for distribution only when the trustee
receives cash on account of the obligation. If the obligation is
surrendered or partially liquidated, the cash available must be
attributed first to the increase. The increase is distributable
to the income beneficiary who is the beneficiary at the time the
cash is received.'.
In line 23, delete '(5)' and insert '(6)'.
On page 17, after line 21, insert:
' { + SECTION 33a. + } ORS 128.135 is amended to read:
' 128.135. (1) As used in this section, ORS 128.145 and
128.155, 'beneficiary' means any vested or contingent beneficiary
of a trust, determined as of the date of the petition, or the
guardian or conservator of such beneficiary or the personal
representative of a deceased beneficiary.
' (2) Any beneficiary of a trust or the trustee thereof may
petition the circuit court in any county where trust assets are
located or where the trustee resides for the purpose of any of
the following:
' (a) Requiring, reviewing or approving an accounting of a
trustee of the trust.
' (b) Accepting a resignation of the trustee or appointing a
successor trustee or an additional trustee.
' (c) Obtaining authority, approval or instructions on any
matter concerning the interpretation of the trust or the
administration, settlement or distribution of the trust
estate { + , including approval of a proposed exercise or
nonexercise of a discretionary power under sections 1 to 31 of
this 2003 Act + }.
' (d) Making any modification of the trust that the parties
could make by agreement under the provisions of ORS 128.177.
' { + (e) Converting a trust to a unitrust under section 4b
of this 2003 Act. + }
' (3) Except as otherwise provided in this section, the
procedure, pleading and notice requirements for a proceeding
under this section shall be the same as provided in ORS 111.205
to 111.235 for petition to a probate court by a party interested
in the estate of a decedent, and the court shall have all of the
powers of the probate court in such proceedings in the probate
court.
' (4) Upon the filing of a petition under subsection (2) of
this section, the petitioner shall cause notice of the petition
to be given, prior to the time for filing objections or court
hearing specified in the notice, to all living beneficiaries and
the currently acting trustee, other than the petitioner, in the
manner and within the times provided in ORS 111.215. Any
beneficiary whose name, identity or existence is unknown to the
petitioner may be given notice as provided in ORS 111.215 (1)(c).
' (5) When petitioned to review or approve an accounting of a
trustee, the court shall determine the correctness of the account
and the validity and propriety of all actions of the trustee set
forth therein, including the purchase, retention or disposition
of any property or funds of the trust.
' (6) The court, by its order or judgment, may give directions,
instructions, authority or approval, or make appointments, as
appear to it to be most beneficial to all beneficiaries of the
trust. The court may approve or disapprove an accounting or any
part thereof and may surcharge the trustee for losses, if any,
caused by negligent or willful breaches of trust. Any order or
judgment entered in a proceeding under this section is final,
conclusive and binding upon all beneficiaries notified of the
proceeding, including all incompetent, unborn and unascertained
beneficiaries of the trust, subject only to the right of appeal
as provided in ORS 128.165.
' (7) Every unborn or unascertainable beneficiary shall be
bound by any action taken by the court for or against any living
beneficiary of the same class or whose interests are similar to
the interests of the unborn or unascertainable beneficiary.
' (8) The court, by a provision in an order or judgment entered
in a proceeding under this section, may retain jurisdiction over
all the parties and over all the trust assets, and may from time
to time, upon application under ORS 128.145, make such further
orders or judgments regarding the purposes set forth in
subsection (2) of this section as appear to be for the best
interest of the beneficiaries.'.
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