Amends TCA Title 35; Title 45; Title 61 and Title 66.

DISINTERESTED TRUSTEE This bill provides that if a disinterested trustee is serving as a trustee of a trust, then the holder of any non-general power of appointment may, regardless of whether there is a material conflict of interest between the holder of the non-general power of appointment and the persons represented with respect to the particular question or dispute, represent and bind persons whose interests, as permissible appointees, takers in default, or otherwise, are subject to such power. As used in this bill, a "disinterested trustee" means a trustee that is not a related or subordinate party with respect to the grantor or a qualified beneficiary if the qualified beneficiary were the grantor. REPRESENTATION BY FIDUCIARIES AND PARENTS Present law provides that to the extent there is no material conflict of interest between the representative and the person represented or among those being represented with respect to a particular question or dispute, certain listed individuals may represent and bind specific individuals, including: (1) A conservator may represent and bind the estate that the conservator controls; (2) A guardian may represent and bind the ward if a conservator of the ward's estate has not been appointed; (3) A person may represent and bind the person's minor or unborn descendant if a guardian for the descendant has not been appointed. If a disagreement or material conflict of interest arises between persons seeking to represent the same minor descendant or unborn descendant, representation is determined as follows: (A) If only one person is a beneficiary of the trust that is the subject of the representation, that person may represent the minor descendant or unborn descendant; (B) If both persons are beneficiaries of the trust that is the subject of the representation, then the person who is related to the settlor, other than by reason of being married to the other person, may represent the minor descendant or unborn descendant; (C) Subject to (D) below, if neither person is a beneficiary of the trust that is the subject of the representation, then the person who is the settlor of the trust that is the subject of the representation may represent the minor descendant or unborn descendant; or (D) If neither person is a beneficiary or settlor of the trust that is the subject of the representation, then the person who is related to the settlor, other than by reason of being married to the other person, may represent the minor descendant or unborn descendant; and (4) A parent or spouse of an incapacitated adult who has assumed responsibility for the adult, may represent and bind the incapacitated adult if no conservator or guardian has been appointed and no agent has authority to act with respect to the matter in question. This bill amends (1) above to provide, instead, that a guardian of the property or a conservator of the property may represent and bind the estate that the guardian or conservator controls. This bill amends (2) above to provide, instead that a conservator of the person or guardian of the person may represent and bind the ward if a conservator or guardian of the ward's estate has not been appointed. This bill clarifies in (3) above that if either a guardian of the person or of the property for the descendant has not been appointed, then a person may represent and bind the person's minor or unborn descendant. Additionally, this bill removes the ability for the representation as listed in (A)-(D) above to be determined if a material conflict of interest arises between persons seeking to represent the same minor or unborn descendant. This bill amends (4) above to provide, instead, that if a disinterested party is serving as trustee, then a parent or spouse of an incapacitated adult who has assumed responsibility for the adult as determined by the disinterested trustee in the trustee's own discretion, may represent and bind the incapacitated adult if a conservator of the property or of the person has not been appointed and an agent does not have authority to act with respect to the matter in question. MODIFICATION OF NONCHARITABLE IRREVOCABLE TRUST Following the settlor's death, present law authorizes a noncharitable irrevocable trust to be modified or terminated upon the unanimous agreement of the trustee and all qualified beneficiaries if such modification or termination does not violate a material purpose of the trust. Additionally, a noncharitable irrevocable trust may be modified or terminated upon consent of all of the qualified beneficiaries if the court concludes that modification or termination is not inconsistent with a material purpose of the trust. This bill removes the ability for a noncharitable irrevocable trust to be terminated upon the unanimous agreement of the trustee and all qualified beneficiaries if such termination does not violate a material purpose of the trust. Additionally, this bill removes ability of a noncharitable irrevocable trust to be terminated upon consent of all of the qualified beneficiaries if the court concludes that the termination is not inconsistent with a material purpose of the trust. CREDITOR'S CLAIM AGAINST SETTLOR Present law provides that whether or not the terms of a trust contain a spendthrift provision, during the period a power of withdrawal may be exercised or upon the lapse, release, or waiver of the power, the holder is treated as the settlor of the trust only to the extent the value of the property affected by the lapse, release, or waiver exceeds the greater of the amount specified in §§ 2041(b)(2), 2514(e), or 2503(b) of the Internal Revenue Code. This bill deletes this provision entirely. APPOINTMENT OF SUCCESSOR TRUSTEES Present law provides that the power to appoint a successor trustee under a trust instrument includes the power to appoint multiple successor trustees. A presently exercisable power to remove and replace a trustee under a trust instrument includes the power to appoint additional trustees to serve with the current trustee. Such power to appoint multiple successor trustees and additional trustees includes the power to allocate various trustee powers, including the power to direct or prevent certain actions of the trustees, exclusively to one or more of the trustees serving from time to time. All of the provisions of a trust instrument generally applicable to the trustees, including the provisions regarding trustee qualifications, resignation, removal, standard of care, indemnification, compensation, and the scope and nature of the restrictions, limitations, and immunities applicable when exercising powers and authority, apply to trustees appointed. Such provisions include: (1) Provisions waiving certain duties when exercising certain investment powers apply equally to trustees appointed under present law; (2) Provisions permitting the removal and replacement of a trustee subject to various limitations and conditions apply equally to trustees appointed under present law; and (3) Provisions proscribing the settlor and beneficiaries and persons or entities related or subordinate to the settlor and any beneficiary from being eligible to serve as a trustee apply equally to proscribe all of those persons from serving as trustees appointed under present law. Under present law, if an appointment confers upon a co-trustee, to the exclusion of another co-trustee, the power to take certain actions with respect to the trust, including the power to direct or prevent certain actions of the trustees, then the respective duties and liabilities of the trustee who is an excluded fiduciary as well as of the co-trustee holding the power are as set forth under present law. Furthermore, any powers granted to appoint additional trustees, which are exercised in such a manner as to modify the duties of an existing trustee, do not become effective until 30 days after the receipt by the existing trustee of a written notice from the person authorized to appoint additional trustees detailing the changes. The 30-day notice requirement may be waived by the existing trustee. Except as otherwise expressly provided by the terms of a trust instrument, these provisions are available to any trust that is administered in this state or otherwise governed by the laws of this state. This bill amends the above provisions to provide, instead, that the power to appoint a successor trustee under a trust instrument includes the power to appoint multiple successor trustees, trust protectors, and trust advisors. An exercisable power to remove and replace a trustee under a trust instrument includes the power to appoint additional trustees, trust protectors, and trust advisors to serve with an existing trustee. The power to appoint multiple successor trustees and additional trustees, trust protectors, and trust advisors includes the power to allocate various powers, including the power to direct or prevent certain actions of the trustees, exclusively to one or more of the trustees, trust protectors, and trust advisors serving from time to time. Additionally, this bill provides that all of the provisions of a trust instrument generally applicable to the trustees, including the provisions regarding trustee qualifications, resignation, removal, standard of care, indemnification, compensation, and the scope and nature of the restrictions, limitations, and immunities applicable when exercising powers and authority, apply to trustees, trust protectors, and trust advisors appointed under this section. These include provisions: (1) Waiving certain duties when exercising certain investment powers apply equally to trustees, trust protectors, and trust advisors appointed under this bill; (2) Permitting the removal and replacement of a trustee subject to various limitations and conditions apply equally to trustees, trust protectors, and trust advisors appointed under this bill; and (3) Proscribing the settlor and beneficiaries and persons or entities related or subordinate to the settlor and any beneficiary from being eligible to serve as a trustee apply equally to proscribe all of those persons from serving as trustees, trust protectors, and trust advisors appointed under this bill. This bill provides that if an appointment under this bill confers upon a co-trustee, trust protector, or trust advisor to the exclusion of another co-trustee, trust protector, or trust advisor, the power to take certain actions with respect to the trust, including the power to direct or prevent certain actions of a trustee, trust protector, or trust advisor, then the respective duties and liabilities of the trustee, trust protector, or trust advisor who are excluded fiduciaries as well as of the co-trustee, trust protector, or trust advisor holding the power are as set forth under present law. Any powers granted in this bill to appoint additional trustees, trust protectors, and trust advisors that are exercised in such a manner as to modify the duties of any existing trustee, trust protector, or trust advisor do not become effective until 30 days after the receipt by the existing trustee or trustees, trust protector or trust protectors, and trust advisor or trust advisors of a written notice from the person authorized to appoint additional trustees detailing the changes. The 30-day notice requirement may be waived by the existing trustee or trustees, trust protector or trust protectors, and trust advisor or trust advisors. CHANGE OF CONTROL - REQUIREMENTS FOR PRIVATE TRUST COMPANY This bill provides that for purposes of private trust companies, if an exempt private trust company is controlled by a trust, then a change in the trusteeship of the trust, for any reason, including the addition of a new co-trustee, is not deemed a change of control that results in the termination of the private trust company's exempt status. EFFECTS OF A PARTNER'S DISSOCIATION This bill provides that if a partner dissociates or is dissociated, then the dissociation does not cause the winding up of the partnership business and does not obligate or cause the partnership to purchase the dissociating partner's interest in the partnership, unless a written partnership agreement provides otherwise. Additionally, this bill provides that the dissociating partner's interest in the partnership must for all purposes be treated as the interest of a transferee of the dissociating partner's share of the profits and losses of the partnership and the partner's right to receive distributions, and the dissociated partner is not deemed a partner but may be deemed a transferee of the partnership interest. FAMILY PARTNERSHIP - DISSOCIATED PARTNER'S INTEREST This bill adds that, with respect to a family partnership, present law regarding the purchase of a dissociated partner's interest does not apply to a dissociated partner's interest to the extent provided under present law regarding the effect of a partner's dissociation. As used in this bill, a "family partnership" means a partnership subject to a written partnership agreement entered into, or amended with consent of all partners, on or after July 1, 2024, in which, at the relevant time, members of the same family hold, in the aggregate, at least 50 percent of the interests in the partnership's profits or capital. FAMILY PARTNERSHIP - DISSOCIATION NOT CAUSING WIND UP Present law provides that a partnership is dissolved, and its business must be wound up only upon the occurrence of certain listed events including in a partnership at will, the partnership's having notice from a partner, other than a partner who is dissociated, of that partner's express will to withdraw as a partner, or on a later date specified by the partner. This bill adds to the above provision that, with respect to a family partnership, the dissociation does not cause the partnership to wind up. TRUST CREATED IN A FOREIGN JURISDICTION This bill provides that if a trustee of an irrevocable trust transfers to this state the principal place of administration of a trust validly created in a foreign jurisdiction, then all beneficial interests in the trust must vest or terminate and any power of appointment must be exercised within: (1) If the trust instrument does not contain a state jurisdiction provision the least of 360 years from the date of creation of the trust, then the period stated in the trust instrument, or the period governing under of the law of the foreign jurisdiction in effect in the jurisdiction at the time the trust became irrevocable; or (2) If the trust instrument does contain a state jurisdiction provision, then the lesser of the period stated in the trust instrument, or the period governing under the law provided in the state jurisdiction provision. ON MARCH 18, 2024, THE SENATE ADOPTED AMENDMENT #1 AND PASSED SENATE BILL 2256, AS AMENDED. AMENDMENT #1 makes the following changes: (1) Revises the bill by also authorizing a grandparent or sibling of an incapacitated adult who has assumed responsibility for the adult as determined by the disinterested trustee in the trustee's own discretion to represent and bind the incapacitated adult if a conservator of the property or of the person has not been appointed and an agent does not have authority to act with respect to the matter in question; (2) Deletes the provision in the bill that authorizes, following the settlor's death, a noncharitable irrevocable trust to be modified upon the unanimous agreement of the trustee and all qualified beneficiaries if the modification does not violate a material purpose of the trust. Additionally, a noncharitable irrevocable trust may be modified upon consent of all of the qualified beneficiaries if the court concludes that modification is not inconsistent with a material purpose of the trust; and (3) Adds to the present law that provides that a person who is the holder of a power of withdrawal is not considered a settlor of the trust by failing to exercise that power of withdrawal or letting that power of withdrawal lapse by also providing that a person who is the holder of a power of withdrawal is not considered a settlor of the trust by or releasing or waiving that power of withdrawal.