NY State Senate Bill 2023-S7475

Senate Bill S7475

2023-2024 Legislative Session

Relates to the computation and allocation of the commissions of trustees of charitable trusts; repealer

download bill text pdf

Current Bill Status - On Floor Calendar

Introduced
- In Committee Assembly
- In Committee Senate
- On Floor Calendar Assembly
- On Floor Calendar Senate
- Passed Assembly
- Passed Senate
Delivered to Governor
Signed By Governor

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Actions

View Actions

	Assembly Actions - Lowercase Senate Actions - UPPERCASE
Mar 14, 2024	advanced to third reading
Mar 13, 2024	2nd report cal.
Mar 12, 2024	1st report cal.618
Jan 03, 2024	referred to judiciary returned to senate died in assembly
Jun 07, 2023	referred to judiciary delivered to assembly passed senate
Jun 01, 2023	ordered to third reading cal.1558 committee discharged and committed to rules
May 30, 2023	referred to judiciary

Votes

- Jun 7, 2023 - Floor Vote
  S7475
  
  53
  
  Aye
  
  8
  
  Nay
  
  0
  
  Absent
  
  2
  
  Excused
  
  0
  
  Abstained
  - - Floor Vote: Jun 7, 2023
      
      aye (53)
      
      Addabbo Jr.
      
      Ashby
      
      Bailey
      
      Breslin
      
      Brisport
      
      Brouk
      
      Canzoneri-Fitzpatrick
      
      Chu
      
      Cleare
      
      Comrie
      
      Fernandez
      
      Gallivan
      
      Gianaris
      
      Gonzalez
      
      Gounardes
      
      Harckham
      
      Hinchey
      
      Hoylman-Sigal
      
      Jackson
      
      Kavanagh
      
      Kennedy
      
      Krueger
      
      Lanza
      
      Liu
      
      Mannion
      
      Martinez
      
      Martins
      
      Mattera
      
      May
      
      Mayer
      
      Murray
      
      Myrie
      
      Ortt
      
      Palumbo
      
      Parker
      
      Persaud
      
      Ramos
      
      Rivera
      
      Rolison
      
      Ryan
      
      Salazar
      
      Sanders Jr.
      
      Scarcella-Spanton
      
      Sepúlveda
      
      Serrano
      
      Skoufis
      
      Stavisky
      
      Stec
      
      Stewart-Cousins
      
      Thomas
      
      Webb
      
      Weber
      
      Weik
      
      nay (8)
      
      Borrello
      
      Griffo
      
      Helming
      
      O'Mara
      
      Oberacker
      
      Rhoads
      
      Tedisco
      
      Walczyk
      
      excused (2)
      
      Cooney
      
      Felder
  Jun 1, 2023 - Rules Committee Vote
  S7475
  
  17
  
  Aye
  
  3
  
  Nay
  
  1
  
  Aye with Reservations
  
  0
  
  Absent
  
  0
  
  Excused
  
  0
  
  Abstained
  - - Rules Committee Vote: Jun 1, 2023
      
      aye (17)
      
      Addabbo Jr.
      
      Bailey
      
      Breslin
      
      Comrie
      
      Fernandez
      
      Gallivan
      
      Gianaris
      
      Kennedy
      
      Krueger
      
      Liu
      
      Mayer
      
      Ortt
      
      Parker
      
      Sepúlveda
      
      Stec
      
      Stewart-Cousins
      
      Thomas
      
      nay (3)
      
      Griffo
      
      Helming
      
      O'Mara
      
      aye wr (1)
      
      Lanza
  Mar 12, 2024 - Judiciary Committee Vote
  S7475
  
  16
  
  Aye
  
  2
  
  Nay
  
  1
  
  Aye with Reservations
  
  0
  
  Absent
  
  0
  
  Excused
  
  0
  
  Abstained
  - - Judiciary Committee Vote: Mar 12, 2024
      
      aye (16)
      
      Bailey
      
      Breslin
      
      Gounardes
      
      Hoylman-Sigal
      
      Lanza
      
      Liu
      
      Martins
      
      Mayer
      
      Myrie
      
      Palumbo
      
      Ramos
      
      Ryan
      
      Sepúlveda
      
      Skoufis
      
      Stavisky
      
      Thomas
      
      nay (2)
      
      O'Mara
      
      Rhoads
      
      aye wr (1)
      
      Canzoneri-Fitzpatrick

2023-S7475 (ACTIVE) - Details

Law Section:: Surrogate's Court Procedure Act
Laws Affected:: Amd §§2308, 2309 & 2312, rpld §2308 sub 6 ¶(c), SCPA
Versions Introduced in 2021-2022 Legislative Session:: S6499

2023-S7475 (ACTIVE) - Summary

Relates to the computation and allocation of the commissions of trustees of charitable trusts.

2023-S7475 (ACTIVE) - Sponsor Memo

                                 
BILL NUMBER: S7475

SPONSOR: HOYLMAN-SIGAL
 
TITLE OF BILL:

An act to amend the surrogate's court procedure act, in relation to the
computation and allocation of the commissions of trustees of charitable
trusts; and to repeal certain provisions of such law relating thereto

This is one in a series of measures being introduced at the request of
the Acting Chief Administrative Judge upon the recommendation of her
Surrogate's Court Advisory Committee.

This measure would amend sections 2308, 2309 and 2312 of the SCPA to
provide that an individual trustee of a wholly charitable trust would
receive commissions at the same rates as an individual trustee of a
non-charitable trust, with a reduced rate of 80% of the rates for a
non-charitable trust with a principal value of up to $20,000,000, and a
reduced rate of 50% on the principal value in excess of $20,000,000, and
to make other clarifications to existing law affecting wholly charitable
trusts and split interest trusts as described herein.

There is a difference under current law in the manner in which trustees
of wholly charitable trusts and trustees of non-charitable trusts are

compensated. Under such law (in the SCPA, section 2309(5) and others), a
trustee of a wholly charitable trust is entitled to 6% of the annual
income collected as compensation, while a trustee of a non-charitable
trust is entitled to compensation at the rate of $10.50 per $1,000 (or
major fraction thereof) on the first $400,000 of principal, $4.50 per
$1,000 (or major fraction thereof) on the next $600,000 of principal and
$3.00 per $1,000 (or major fraction thereof) on all additional princi-
pal. Therefore, if a non-charitable trust has $1,000,000 of assets, the
trustee's annual commissions would amount to $6,900, regardless of how
much income was collected during the year. Meanwhile, if a wholly chari-
table trust has $1,000,000 of assets that generates $1,000 of income
throughout the year, then the trustee will be entitled to only $600 for
his or her annual commissions.

Such a discrepancy in compensation is unwarranted considering that the
duties of the trustee of a wholly charitable trust and those of the
trustee of a non-charitable trust are comparable. A trustee of a private
trust must devote time and effort in dealing with beneficiaries and
analyzing their financial needs and responsibilities. Similarly, a trus-
tee of a wholly charitable trust must devote comparable time and energy
analyzing grant requests and exercising due diligence with respect to
charitable grantees. In either case, the trustee has traditional fiduci-
ary responsibility for administering the trust faithfully and competent-
ly.

The private trustee is accountable to the beneficiaries while the chari-
table trustee is accountable to not only the charities but also the
Internal Revenue Service and the Charities Bureau of the New York Attor-
ney General 's Office.

The existing compensation structure is also at odds with modern trust
administration. Under the total return concept embodied in the prudent
investor rule, the existing compensation structure for a trustee of a
wholly charitable trust creates a potential conflict of interest.
Although investments with a significant capital gain component may be
the most appropriate trust investment under the prudent investor rule, a
trustee of a wholly charitable trust has personal incentive to maximize
the income component of the investment return. An incentive to maximize
income seems particularly inappropriate because most trusts do not base
charitable distributions on trust incomes (see the following paragraph).
Furthermore, if a trustee of a wholly charitable trust faithfully
invests using prudent investor principles as required by applicable law,
his or her trustee commissions will in most cases be substantially less
than commissions payable to a trustee of a non-charitable trust of simi-
lar value (see above).

There also is a difference in the manner in which trustee commissions
are allocated against income and principal: commissions of a trustee of
a wholly charitable trust are allocated entirely to income, while
commissions of a trustee of a private trust are payable one-third from
income and two-thirds from principal. Allocation of commissions of a
trustee of a wholly charitable trust all to income has inadvertent
consequences. By requiring the trustee of a charitable trust to take
commissions from income, the income available for distribution to chari-
table beneficiaries of certain pre-1969 wholly charitable trusts is
substantially reduced (pre-1969 wholly charitable trusts generally
provide for public charities to receive the net income of a trust - the
proposed change will increase the amounts payable to charities from
those trusts).

This measure addresses the need to treat trustees of private trusts and
charitable trusts uniformly and to eliminate the disparate treatment of
trustees of wholly charitable trusts.

The measure would implement the following changes:

(1) Annual commissions of trustees of wholly charitable trusts will be
computed under the same structure as annual commissions of trustees of
non-charitable trusts, viz. both sets of trustees will be compensated
based upon the principal value of the trust, rather than upon income
collected. However, there will be an exception that commissions for
trustees of wholly charitable trusts on principal up to $20,000,000 will
be reduced by 20% and, on any amount exceeding $20,000,000, by 50% to
$1.50 per $1,000 (or major fraction thereof).  Corporate trustees will
still be entitled to reasonable compensation at their published rates.

(2) Annual commissions of individual and corporate trustees for charita-
ble trusts will be payable one-third from income and two-thirds from
principal. This will increase the amounts of income payable to the char-
itable beneficiaries of certain wholly charitable trusts.

This measure, which would have no fiscal impact on the State, would take
effect immediately and apply to all trusts in existence on or after its
effective date; provided that a trustee of a trust in existence on the
effective date may continue to take commissions under the prior law
until the end of the year in which the act becomes effective.

This measure would take effect immediately.

 
LEGISLATIVE HISTORY 2021-22:

S6499 (Sen. Hoylman) (Passed) A7800 (MA Dinowitz) (Ref to Judiciary)
OCA-7(R I)
 
LEGISLATIVE HISTORY 2019-20:

A7523 (MA Dinowitz) (Ord to 3rd Rdg Cal.  274) OCA-35(R2)

2023-S7475 (ACTIVE) - Bill Text download pdf

                             
                     S T A T E   O F   N E W   Y O R K
 ________________________________________________________________________
 
                                   7475
 
                        2023-2024 Regular Sessions
 
                             I N  S E N A T E
 
                               May 30, 2023
                                ___________
 
 Introduced  by  Sen. HOYLMAN-SIGAL -- (at request of the Office of Court
   Administration) -- read twice and ordered printed, and when printed to
   be committed to the Committee on Judiciary
 
 AN ACT to amend the surrogate's court procedure act, in relation to  the
   computation  and allocation of the commissions of trustees of charita-
   ble trusts; and to repeal certain  provisions  of  such  law  relating
   thereto
 
   THE  PEOPLE OF THE STATE OF NEW YORK, REPRESENTED IN SENATE AND ASSEM-
 BLY, DO ENACT AS FOLLOWS:
 
   Section 1. Paragraphs (a) and (b) of subdivision 5 of section 2308  of
 the  surrogate's  court  procedure act, as amended by chapter 601 of the
 laws of 2019, are amended to read as follows:
   (a) During the continuance of a trust created solely for public, reli-
 gious, charitable, scientific, literary, educational or  fraternal  uses
 and  during  the period of continuance of such a trust ESTABLISHED after
 the termination of a life use or uses the trustee shall be  entitled  to
 and  may  retain  ANNUAL  commissions [from income in an amount annually
 equal to 6 per cent of income collected in each year] ACCORDING  TO  THE
 TERMS SPECIFIED IN SUBDIVISION 2 OF THIS SECTION, BUT ONLY TO THE EXTENT
 OF  80  PERCENT   OF   THE RATES STATED THEREIN.    NOTWITHSTANDING  ANY
 OTHER  PROVISION  OF  LAW, WITH RESPECT   TO   ANY PORTION OF SUCH TRUST
 WHICH EXCEEDS A PRINCIPAL VALUE OF TWENTY MILLION DOLLARS,  THE  TRUSTEE
 MAY ONLY TAKE ANNUAL COMMISSIONS TO THE EXTENT OF 50 PERCENT OF THE RATE
 SPECIFIED IN PARAGRAPH (C) OF SUBDIVISION 2 OF THIS SECTION.
   (b)  In  the  case  of  a trust [created solely for public, religious,
 charitable, scientific, literary, educational  or  fraternal  uses  the]
 DESCRIBED  IN  PARAGRAPH (A) OF THIS SUBDIVISION, A trustee shall not be
 entitled to any commission from principal AS SPECIFIED IN SUBDIVISION  1
 OF THIS SECTION FOR PAYING OUT PRINCIPAL.
   § 2. Paragraph (c) of subdivision 6 of section 2308 of the surrogate's
 court procedure act is REPEALED.
 
  EXPLANATION--Matter in ITALICS (underscored) is new; matter in brackets
                       [ ] is old law to be omitted.
                                                            LBD09925-01-3

 S. 7475                             2
 
   § 3. Subdivision 12 of section 2308 of the surrogate's court procedure
 act,  as  amended by chapter 601 of the laws of 2019, is amended to read
 as follows:
   12.  If a trustee of a trust [or donee of a power in trust] is author-
 ized or required by the terms of the will to accumulate income  for  any
 purpose  permitted  by law, any income so accumulated which is not added
 to principal of the trust [or to the principal of the  property  subject
 to  the  power  in  trust] shall be deemed a separate trust [or separate
 fund subject to the power in trust] for purposes of this subdivision and
 the trustee [or donee of the  power  in  trust]  shall  be  entitled  to
 commissions  in  respect thereof at the rates and according to the terms
 and provisions of subdivisions 1 [and], 2  AND  5  of  this  section  as
 though,  for purposes of computing commissions of the trustee, income so
 accumulated was principal.
   § 4. Subdivision 3 of section 2309 of the surrogate's court  procedure
 act,  as  amended by chapter 601 of the laws of 2019, is amended to read
 as follows:
   3. Unless the will or lifetime trust instrument  otherwise  explicitly
 provides, the annual commissions allowed by [subdivision 2] THIS SECTION
 shall  be  payable  one-third  from the income of the trust [or property
 subject to the power in trust] and two-thirds from the principal of  the
 trust  [or property subject to the power in trust]. However, in the case
 of a trust whose definition of income is governed by section  11-2.4  of
 the  estates,  powers  and  trusts law or a charitable remainder annuity
 trust or a charitable remainder unitrust,  as  defined  in  section  six
 hundred  sixty-four  of  the  Internal  Revenue Code of nineteen hundred
 eighty-six, as amended, such annual commissions shall  be  payable  from
 the corpus of any such trust after allowance for the annuity or unitrust
 amounts  and  shall  not  be  payable  out  of  such annuity or unitrust
 amounts.
   § 5. Paragraphs (a) and (b) of subdivision 5 of section  2309  of  the
 surrogate's  court  procedure act, as amended by chapter 601 of the laws
 of 2019, are amended to read as follows:
   (a) During the continuance of a trust created solely for public, reli-
 gious, charitable, scientific, literary, educational or  fraternal  uses
 and  during  the period of continuance of such a trust ESTABLISHED after
 the termination of a life use or uses the trustee shall be  entitled  to
 and  may  retain  ANNUAL  commissions [from income in an amount annually
 equal to 6 per cent of income collected in each year] ACCORDING  TO  THE
 TERMS SPECIFIED IN SUBDIVISION 2 OF THIS SECTION, BUT ONLY TO THE EXTENT
 OF  80  PERCENT  OF THE RATES STATED THEREIN.  NOTWITHSTANDING ANY OTHER
 PROVISION OF LAW, WITH RESPECT  TO  ANY  PORTION  OF  SUCH  TRUST  WHICH
 EXCEEDS  A  PRINCIPAL  VALUE  OF TWENTY MILLION DOLLARS, THE TRUSTEE MAY
 ONLY TAKE ANNUAL COMMISSIONS TO THE EXTENT OF 50  PERCENT  OF  THE  RATE
 SPECIFIED IN PARAGRAPH (C) OF SUBDIVISION 2 OF THIS SECTION.
   (b) In the case of a trust  [created  solely  for  public,  religious,
 charitable,  scientific,  literary,  educational  or fraternal uses the]
 DESCRIBED IN PARAGRAPH (A) OF THIS SUBDIVISION, A trustee shall  not  be
 entitled  to any commission from principal AS SPECIFIED IN SUBDIVISION 1
 OF THIS SECTION FOR PAYING OUT PRINCIPAL.
   § 6. Paragraphs (a) and (b) of subdivision 3 of section  2312  of  the
 surrogate's  court  procedure act, as amended by chapter 601 of the laws
 of 2019, are amended to read as follows:
   (a) during the continuance of a trust created solely for public, reli-
 gious, charitable, scientific, literary, educational or  fraternal  uses
 and  during  the period of continuance of such a trust ESTABLISHED after
 S. 7475                             3
 
 the termination of a life use or uses a corporate trustee shall be enti-
 tled to and may retain ANNUAL commissions [from  income]  in  accordance
 with  the  provisions of subdivision 1 or 2 [hereof] OF THIS SECTION, as
 the  case  may  be,  EXCEPT  THAT THE TRUSTEE SHALL NOT BE ENTITLED TO A
 COMMISSION FOR PAYING OUT PRINCIPAL.
   (b) In the case of a trust created solely for public, religious, char-
 itable, scientific, literary, educational or fraternal uses a  corporate
 trustee  shall  not  be entitled to any commission [from] FOR PAYING OUT
 principal.
   § 7. This act shall take effect immediately and  shall  apply  to  all
 trusts  in existence on or after such effective date; provided, however,
 that a trustee of a trust in existence on such effective date may  elect
 to  continue  to  take commissions under the law in effect prior to such
 effective date until December 31 of the year this act takes effect.

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