senate Bill S2014

2013-2014 Legislative Session

Relates to the role and duties of advisors in trust agreements

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Archive: Last Bill Status - In Committee


  • Introduced
  • In Committee
  • On Floor Calendar
    • Passed Senate
    • Passed Assembly
  • Delivered to Governor
  • Signed/Vetoed by Governor

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Assembly Actions - Lowercase
Senate Actions - UPPERCASE
Jan 08, 2014 referred to judiciary
Jan 09, 2013 referred to judiciary

S2014 - Bill Details

Current Committee:
Law Section:
Estates, Powers and Trusts Law
Laws Affected:
Add ยง11-2.2-a, EPT L
Versions Introduced in 2011-2012 Legislative Session:
S7183

S2014 - Bill Texts

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Relates to the role and duties of advisors in trust agreements.

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BILL NUMBER:S2014

TITLE OF BILL: An act to amend the estates, powers and trusts law, in
relation to the role and duties of advisors in trust agreements

PURPOSE: This bill creates authority for grantors to establish directed
trusteeships under which fiduciaries would act under the advice or
direction of an advisor or protector who could direct, consent to or
disapprove the fiduciaries' decisions with regard to investments,
distributions or other matters.

SUMMARY OF PROVISIONS:

Section 1: Amends the Estates, Powers and Trusts Law by adding a new
section 11-2.2-a to make clear that grantors may establish directed
trusteeships, clarifies the responsibilities of fiduciaries who follow
the advice or direction of an advisor or protector, and specifies the
duties of the fiduciary in relation to advisors and protectors. Also, it
states that advisors accept the jurisdiction of New York courts when
accepting appointment. It also sets the same standard of reasonable
compensation for an advisor as exists for other fiduciaries. Finally, it
clarifies that the term "advisor" includes "protectors," and specifies
some, but not all, of the powers of advisors; and clarifies the term
"investment decision."

Section 2: Effective date.

JUSTIFICATION: This legislation is designed to remedy a gap in the
State's judicial fabric by providing guidance for the courts, grantors
and fiduciaries as to the governing law, in the absence of provisions in
the trust instrument to the contrary, for directed trusteeships. It
clarifies matters of definition, court jurisdiction, compensation, fidu-
ciary liability and the responsibility of administrative trustees and
advisors or protectors. As in the Uniform Prudent Management of Institu-
tional Funds Act, Chapter 490 of the Laws of 2010, it allows a fiduciary
to delegate responsibility to a delegee so long as the instrument so
provides and the delegation is in accordance with its terms. This bill
is designed to help New York fiduciaries compete for trust business,
which is increasingly flowing to states with more modern trust laws.

A growing number of states are recognizing the desire of trust grantors
to establish bifurcated trusts which vest authority for investment and
other major decisions in the hands of an advisor or protector while
retaining a traditional corporate trustee perform other ministerial
functions, While the New York courts have recognized the validity of
directed trusteeships in New York, there is no body of law which
provides guidance as to how such trusteeships should function. In addi-
tion, New York's Prudent Investor Act makes a fiduciary liable for any
delegation of investment or other decisions, even when the fiduciary
follows all of the rules of delegation contained in the Prudent Investor
Act. This is unusual among the states that have enacted a prudent inves-

tor act. Thus, New York fiduciaries, even when directed by an advisor or
protector in all investment decision, remain liable under New York law
for those decisions. The broad liability exposure that fiduciaries are
subjected to causes grantors to choose states other than New York to
establish directed trusts. New York fiduciaries have, in many cases,
established non-New York affiliates to administer directed trusts, but
using out-of-State affiliates has two problems. First, many New York
corporate trustees are too small to establish an out-of-State affiliate,
resulting in their being at a competitive disadvantage in competing for
directed trusteeship business with larger corporate trustees. Second,
the existence of out-of-State affiliates encourages a large number of
trust grantors to establish their trusts in jurisdictions more friendly
to directed trusteeships than New York. This pulls jobs and the corpo-
rate and personal income taxes they generate out of the State, which
this legislation will help resolve.

LEGISLATIVE HISTORY: S.7183 of 2012: Died in Senate Judiciary Committee

FISCAL IMPLICATIONS: None.

EFFECTIVE DATE: This act shall take effect immediately and shall apply
to all trusts which come into existence after this act shall have become
a law, provided, however, those trusts incorporate this section by
reference within the trust agreement.

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                    S T A T E   O F   N E W   Y O R K
________________________________________________________________________

                                  2014

                       2013-2014 Regular Sessions

                            I N  S E N A T E

                               (PREFILED)

                             January 9, 2013
                               ___________

Introduced  by  Sen. BONACIC -- read twice and ordered printed, and when
  printed to be committed to the Committee on Judiciary

AN ACT to amend the estates, powers and trusts law, in relation  to  the
  role and duties of advisors in trust agreements

  THE  PEOPLE OF THE STATE OF NEW YORK, REPRESENTED IN SENATE AND ASSEM-
BLY, DO ENACT AS FOLLOWS:

  Section 1. The estates, powers and trusts law is amended by  adding  a
new section 11-2.2-a to read as follows:
S 11-2.2-A ADVISORS
  (A) ADVISORS.
  (1)  WHERE  ONE  OR MORE PERSONS ARE GIVEN AUTHORITY BY THE TERMS OF A
GOVERNING INSTRUMENT TO DIRECT, CONSENT TO OR DISAPPROVE  A  FIDUCIARY'S
ACTUAL OR PROPOSED INVESTMENT DECISIONS, DISTRIBUTION DECISIONS OR OTHER
DECISION  OF THE FIDUCIARY, SUCH PERSONS SHALL BE CONSIDERED TO BE ADVI-
SORS AND FIDUCIARIES WHEN EXERCISING SUCH AUTHORITY UNLESS THE GOVERNING
INSTRUMENT OTHERWISE PROVIDES.
  (2) IF A GOVERNING INSTRUMENT PROVIDES THAT A FIDUCIARY IS  TO  FOLLOW
THE  DIRECTION  OF AN ADVISOR, AND THE FIDUCIARY ACTS IN ACCORDANCE WITH
SUCH A DIRECTION, THEN EXCEPT IN CASES OF WILLFUL MISCONDUCT ON THE PART
OF THE FIDUCIARY SO DIRECTED, THE FIDUCIARY SHALL NOT BE LIABLE FOR  ANY
LOSS RESULTING DIRECTLY OR INDIRECTLY FROM ANY SUCH ACT.
  (3)  IF  A  GOVERNING  INSTRUMENT PROVIDES THAT A FIDUCIARY IS TO MAKE
DECISIONS WITH THE CONSENT OF AN ADVISOR, THEN EXCEPT IN CASES OF  WILL-
FUL  MISCONDUCT  OR  GROSS  NEGLIGENCE ON THE PART OF THE FIDUCIARY, THE
FIDUCIARY SHALL NOT BE LIABLE FOR ANY LOSS RESULTING DIRECTLY  OR  INDI-
RECTLY FROM ANY ACT TAKEN OR OMITTED AS A RESULT OF SUCH ADVISOR'S FAIL-
URE  TO PROVIDE SUCH CONSENT AFTER HAVING BEEN REQUESTED TO DO SO BY THE
FIDUCIARY.
  (4) WHENEVER A GOVERNING INSTRUMENT PROVIDES THAT A  FIDUCIARY  IS  TO
FOLLOW THE DIRECTION OF AN ADVISOR WITH RESPECT TO INVESTMENT DECISIONS,

 EXPLANATION--Matter in ITALICS (underscored) is new; matter in brackets
                      [ ] is old law to be omitted.
                                                           LBD05971-01-3

S. 2014                             2

DISTRIBUTION  DECISIONS,  OR  OTHER  DECISIONS  OF  THE FIDUCIARY, THEN,
EXCEPT TO THE EXTENT THAT THE GOVERNING INSTRUMENT  PROVIDES  OTHERWISE,
THE FIDUCIARY SHALL HAVE NO DUTY TO:
  (A) MONITOR THE CONDUCT OF THE ADVISOR;
  (B) PROVIDE ADVICE TO THE ADVISOR OR CONSULT WITH THE ADVISOR; OR
  (C) COMMUNICATE WITH OR WARN OR APPRISE ANY BENEFICIARY OR THIRD PARTY
CONCERNING  INSTANCES  IN  WHICH THE FIDUCIARY WOULD OR MIGHT HAVE EXER-
CISED THE FIDUCIARY'S OWN DISCRETION IN  A  MANNER  DIFFERENT  FROM  THE
MANNER DIRECTED BY THE ADVISOR.
  ABSENT  CLEAR  AND CONVINCING EVIDENCE TO THE CONTRARY, THE ACTIONS OF
THE FIDUCIARY PERTAINING TO MATTERS WITHIN THE SCOPE  OF  THE  ADVISOR'S
AUTHORITY  (SUCH  AS  CONFIRMING THAT THE ADVISOR'S DIRECTIONS HAVE BEEN
CARRIED OUT AND RECORDING AND REPORTING ACTIONS TAKEN AT  THE  ADVISOR'S
DIRECTION),  SHALL BE PRESUMED TO BE ADMINISTRATIVE ACTIONS TAKEN BY THE
FIDUCIARY SOLELY TO ALLOW THE FIDUCIARY TO PERFORM THOSE DUTIES ASSIGNED
TO THE FIDUCIARY UNDER THE GOVERNING INSTRUMENT AND SUCH  ADMINISTRATIVE
ACTIONS  SHALL NOT BE DEEMED TO CONSTITUTE AN UNDERTAKING BY THE FIDUCI-
ARY TO MONITOR THE ADVISOR OR OTHERWISE PARTICIPATE  IN  ACTIONS  WITHIN
THE SCOPE OF THE ADVISOR'S AUTHORITY.
  (B) COURT JURISDICTION.
  BY  ACCEPTING  APPOINTMENT TO SERVE AS ADVISOR, THE ADVISOR SUBMITS TO
THE JURISDICTION OF THE COURTS OF THIS STATE EVEN IF THE ADVISORY AGREE-
MENT OR OTHER RELATED AGREEMENTS PROVIDE OTHERWISE, AND THE ADVISOR  MAY
BE  MADE  A  PARTY  TO  ANY  ACTION OR PROCEEDING RELATING TO DECISIONS,
ACTIONS OR INACTIONS OF THE ADVISOR.
  (C) COMPENSATION.
  (1) THE ADVISOR SHALL BE ENTITLED  TO  SUCH  COMPENSATION  AS  MAY  BE
REASONABLE,  AND  THE  COURT, UPON APPLICATION OF A PERSON INTERESTED IN
THE TRUST, MAY REVIEW THE REASONABLENESS OF SUCH COMPENSATION.
  (2) THE FIDUCIARY SHALL BE ENTITLED TO COMMISSIONS IN ACCORDANCE  WITH
ARTICLE TWENTY-THREE OF THE SURROGATE'S COURT PROCEDURE ACT.
  (D) DEFINITIONS. AS USED IN THIS SECTION:
  (1)  "ADVISOR"  SHALL  INCLUDE A "PROTECTOR" WHO SHALL HAVE ALL OF THE
POWER AND AUTHORITY GRANTED TO THE PROTECTOR BY THE TERMS OF THE GOVERN-
ING INSTRUMENT, WHICH MAY INCLUDE BUT SHALL NOT BE LIMITED TO:
  (A) THE POWER TO REMOVE AND APPOINT TRUSTEES, ADVISORS, TRUST  COMMIT-
TEE MEMBERS, AND OTHER PROTECTORS;
  (B)  THE  POWER TO MODIFY OR AMEND THE GOVERNING INSTRUMENT TO ACHIEVE
FAVORABLE TAX STATUS OR TO FACILITATE THE  EFFICIENT  ADMINISTRATION  OF
THE TRUST; AND
  (C)  THE  POWER TO MODIFY, EXPAND, OR RESTRICT THE TERMS OF A POWER OF
APPOINTMENT GRANTED TO A BENEFICIARY BY THE GOVERNING INSTRUMENT.
  (2) "INVESTMENT DECISION" MEANS, WITH RESPECT TO ANY  INVESTMENT,  THE
RETENTION, PURCHASE, SALE, EXCHANGE, TENDER OR OTHER TRANSACTION AFFECT-
ING THE OWNERSHIP THEREOF OR RIGHTS THEREIN, AND AN ADVISOR WITH AUTHOR-
ITY WITH RESPECT TO SUCH DECISIONS IS AN INVESTMENT ADVISOR.
  S  2.  This  act  shall take effect immediately and shall apply to all
trusts which come into existence after this act shall have become a law,
provided, however, those trusts incorporate this  section  by  reference
within the trust agreement.

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