ENROLLED
H. B. 2095
(By Delegates Burk and Rowe)
[Passed April 8, 1993; in effect ninety days from passage.]
AN ACT to amend chapter forty-four of the code of West Virginia,
one thousand nine hundred thirty-one, as amended, by adding
thereto a new article, designated article five-a, relating
to the administration of estates and trusts; powers of
fiduciaries; providing that certain enumerated powers may be
incorporated by reference in trust instrument; definition;
and restrictions on exercise of power.
Be it enacted by the Legislature of West Virginia:
That chapter forty-four of the code of West Virginia, one
thousand nine hundred thirty-one, as amended, be amended by
adding thereto a new article, designated article five-a, to read
as follows:
ARTICLE 5A. POWERS OF FIDUCIARIES.
§44-5A-1. Definition.
As used in this article, the term "fiduciary" means the one
or more executors of the estate of a decedent, or the one or more
trustees of a testamentary or inter vivos trust estate, whichever
in a particular case is appropriate.
§44-5A-2. Incorporation by reference of enumerated powers;
restriction on exercise of such powers.
(a) By an express intention of the testator or settlor so to
do contained in a will, or in an instrument in writing whereby a
trust estate is created inter vivos, any or all of the powers or
any portion thereof enumerated in section three of this article,
as they exist at the time of the signing of the will by the
testator or at the time of the signing by the first settlor who
signs the trust instrument, may be, by appropriate reference made
thereto, incorporated in such will or other written instrument,
with the same effect as though such language were set forth
verbatim in the instrument. Incorporation of one or more of the
powers contained in section three of this article by reference to
that section shall be in addition to and not in limitation of the
common law or statutory powers of the fiduciary.
(b) No power of authority conferred upon a fiduciary as
provided in this article may be exercised by such fiduciary in
such a manner as, in the aggregate, to deprive the trust or the
estate involved of an otherwise available tax exemption,
deduction or credit, expressly including the marital deduction,
or operate to impose a tax upon a donor or testator or other
person as owner of any portion of the trust or estate involved.
"Tax" includes, but is not limited to, any federal, state, or
local income, gift, estate or inheritance tax.
(c) Nothing herein shall be construed to prevent the
incorporation of the powers enumerated in section three of this
article in any other kind of instrument or agreement.
§44-5A-3. Powers which may be incorporated by reference in
trust instrument.
The following powers may be incorporated by reference as
provided in section two of this article:
(a)
Retain original property.
-- To retain for such time as
the fiduciary considers advisable any property, real or personal,
which the fiduciary may receive, even though the retention of
such property by reason of its character, amount, proportion to
the total estate or otherwise would not be appropriate for the
fiduciary apart from this provision.
(b)
Sell and exchange property.
-- To sell, exchange, give
options upon, partition or otherwise dispose of any property or
interest therein which the fiduciary may hold from time to time,
with or without order of court, at public or private sale or
otherwise, upon such terms and conditions, including credit, and
for such consideration as the fiduciary considers advisable, and
to transfer and convey the property or interest therein which is
at the disposal of the fiduciary, in fee simple absolute or
otherwise, free of all trust; and the party dealing with the
fiduciary is not under a duty to follow the proceeds or other
consideration received by the fiduciary from such sale or
exchange.
(c)
Invest and reinvest.
-- To invest and reinvest, as the
fiduciary considers advisable, in stocks (common or preferred),
bonds, debentures, notes, mortgages or other securities, in or
outside the United States; in insurance contracts on the life of
any beneficiary or of any person in whom a beneficiary has aninsurable interest, or in annuity contracts for any beneficiary,
in any real or personal property, in investment trusts; in
participations in common trust funds, and generally in such
property as the fiduciary considers advisable, even though such
investment is not of the character approved by applicable law but
for this provision.
(d)
Invest without diversification.
-- To make investments
which cause a greater proportion of the total property held by
the fiduciary to be invested in investments of one type or of one
company than would be considered appropriate for the fiduciary
apart from this provision.
(e)
Continue business.
-- To the extent and upon such terms
and conditions and for such periods of time as the fiduciary
considers necessary or advisable, to continue or participate in
the operation of any business or other enterprise, whatever its
form of organization, including, but not limited to, the power:
(1) To effect incorporation, dissolution, or other change in
the form of the organization of the business or enterprise;
(2) To dispose of any interest therein or acquire the
interest of others therein;
(3) To contribute thereto or invest therein additional
capital or to lend money thereto, in any such case upon such
terms and conditions as the fiduciary approves from time to time;
(4) To determine whether the liabilities incurred in the
conduct of the business are to be chargeable solely to the part
of the estate or trust set aside for use in the business or to
the estate or trust as a whole; and
(5) In all cases in which the fiduciary is required to file
accounts in any court or in any other public office, it is not
necessary to itemize receipts and disbursements and distributions
of property but it is sufficient for the fiduciary to show in the
account a single figure or consolidation of figures, and the
fiduciary is permitted to account for money and property received
from the business and any payments made to the business in lump
sum without itemization.
(f)
Form corporation or other entity.
-- To form a
corporation or other entity and to transfer, assign, and convey
to such corporation or entity all or any part of the estate or of
any trust property in exchange for the stock, securities or
obligations of any such corporation or entity, and to continue to
hold such stock and securities and obligations.
(g)
Operate farm.
-- To continue any farming operation
received by the fiduciary pursuant to the will or other
instrument and to do any and all things considered advisable by
the fiduciary in the management and maintenance of such farm and
the production and marketing of crops and dairy, poultry,
livestock, orchard and forest products including, but not limited
to, the following powers:
(1) To operate the farm with hired labor, tenants or
sharecroppers;
(2) To lease or rent the farm for cash or for a share of the
crops;
(3) To purchase or otherwise acquire farm machinery and
equipment and livestock;
(4) To construct, repair and improve farm buildings of all
kinds needed in the fiduciary's judgment, for the operation of
the farm;
(5) To make or obtain loans or advances at the prevailing
rate or rates of interest for farm purposes such as for
production, harvesting, or marketing, or for the construction,
repair, or improvement of farm buildings or for the purchase of
farm machinery or equipment or livestock;
(6) To employ approved soil conservation practices in order
to conserve, improve and maintain the fertility and productivity
of the soil;
(7) To protect, manage and improve the timber and forest on
the farm and sell the timber and forest products when it is to
the best interest of the estate;
(8) To ditch, dam and drain damp or wet fields and areas of
the farm when and where needed;
(9) To engage in the production of livestock, poultry or
dairy products, and to construct such fences and buildings and
plant such pastures and crops as may be necessary to carry on
such operations;
(10) To market the products of the farm; and
(11) In general, to employ good husbandry in the farming
operation.
(h)
Manage real property.
-- (1) To improve, manage, protect
and subdivide any real property;
(2) To dedicate or withdraw from dedication parks, streets,
highways or alleys;
(3) To terminate any subdivision or part thereof;
(4) To borrow money for the purposes authorized by this
subdivision for such periods of time and upon such terms and
conditions as to rates, maturities and renewals as the fiduciary
considers advisable and to mortgage or otherwise encumber any
such property or part thereof, whether in possession or
reversion;
(5) To lease any such property or part thereof to commence
at the present or in the future, upon such terms and conditions,
including options to renew or purchase, and for such period or
periods of time as the fiduciary considers advisable although
such period or periods may extend beyond the duration of the
trust or the administration of the estate involved;
(6) To make coal, gravel, sand, oil, gas and other mineral
leases, contracts, licenses, conveyances or grants of every
nature and kind which are lawful in the jurisdiction in which
such property lies;
(7) To manage and improve timber and forests on such
property, to sell the timber and forest products, and to make
grants, leases, and contracts with respect thereto;
(8) To modify, renew or extend leases;
(9) To employ agents to rent and collect rents;
(10) To create easements and release, convey, or assign any
right, title, or interest with respect to any easement on such
property or part thereof;
(11) To erect, repair or renovate any building or other
improvement on such property, and to remove or demolish anybuilding or other improvement, in whole or in part; and
(12) To deal with any such property and every part thereof
in all other ways and for such other purposes or considerations
as it would be lawful for any person owning the same to deal with
such property either in the same or in different ways from those
specified elsewhere in this subdivision (h).
(i)
Pay taxes and expenses.
-- To pay taxes, assessments,
compensation of the fiduciary, and other expenses incurred in the
collection, care, administration, and protection of the trust or
estate.
(j)
Receive additional property.
-- To receive additional
property from any source and administer such additional property
as a portion of the appropriate trust or estate under the
management of the fiduciary but the fiduciary is not required to
receive such property without his or her consent.
(k)
Deal with other trusts.
-- In dealing with one or more
fiduciaries:
(1) To sell property, real or personal, to, or to exchange
property with, the trustee of any trust which the decedent or the
settlor or his spouse or any child of his shall have created, for
such estates and upon such terms and conditions as to sale price,
terms of payment, and security as the fiduciary considers
advisable; and the fiduciary is under no duty to follow the
proceeds of any such sale; and
(2) To borrow money for such periods of time and upon such
terms and conditions as to rates, maturities, renewals and
securities as the fiduciary considers advisable from any trustcreated by the decedent, his spouse, or any child of his, for the
purpose of paying debts of the decedent, taxes, the costs of the
administration of the estate, and like charges against the
estate, or any part thereof, or discharging the liability of any
fiduciary thereof and to mortgage, pledge or otherwise encumber
such portion of the estate or any trust as may be required to
secure such loan or loans and to renew such loans.
(l)
Borrow money.
-- To borrow money for such periods of
time and upon such terms and conditions as to rates, maturities,
renewals, and security as the fiduciary considers advisable,
including the power of a corporate fiduciary to borrow from its
own banking department, for the purpose of paying debts, taxes,
or other charges against the estate or any trust, or any part
thereof, and to mortgage, pledge or otherwise encumber such
portion of the estate or any trust as may be required to secure
such loan or loans; and to renew existing loans either as maker
or endorser.
(m)
Make advances.
-- To advance money for the protection of
the trust or estate, and for all expenses, losses and liabilities
sustained in the administration of the trust or estate or because
of the holding or ownership of any trust or estate assets, for
which advances with any interest the fiduciary shall have a lien
on the assets of the trust or estate as against a beneficiary.
(n)
Vote shares.
-- To vote shares of stock owned by the
estate or any trust at stockholders meetings in person or by
special, limited, or general proxy, with or without power of
substitution.
(o)
Register in name of nominee.
-- To hold a security in
the name of a nominee or in other form without disclosure of the
fiduciary relationship so that title to the security may pass by
delivery, but the fiduciary is liable for any act of the nominee
in connection with the stock so held.
(p)
Exercise options, rights and privileges.
-- To exercise
all options, rights, and privileges to convert stocks, bonds,
debentures, notes, mortgages, or other property into other
stocks, bonds, debentures, notes, mortgages, or other property;
to subscribe for other or additional stocks, bonds, debentures,
notes, mortgages, or other property; and to hold such stocks,
bonds, debentures, notes, mortgages, or other property so
acquired as investments of the estate or trust so long as the
fiduciary considers advisable.
(q)
Participate in reorganizations.
-- To unite with other
owners of property similar to any which may be held at any time
in the decedent's estate or in any trusts in carrying out any
plan for the consolidation or merger, dissolution or liquidation,
foreclosure, lease, or sale of the property, incorporation or
reincorporation, reorganization or readjustment of the capital or
financial structure of any corporation, company or association
the securities of which may form any portion of an estate or
trust; to become and serve as a member of a stockholders or
bondholders protective committee; to deposit securities in
accordance with any plan agreed upon; to pay any assessments,
expenses, or sums of money that may be required for the
protection or furtherance of the interest of the distributees ofan estate or beneficiaries of any trust with reference to any
such plan; and to receive as investments of an estate or any
trust any securities issued as a result of the execution of such
plan.
(r)
Reduce interest rates.
-- To reduce the interest rate
from time to time on any obligation, whether secured or
unsecured, constituting a part of an estate or trust.
(s)
Renew and extend obligations.
-- To continue any
obligation, whether secured or unsecured, upon and after maturity
with or without renewal or extension upon such terms as the
fiduciary considers advisable, without regard to the value of the
security, if any, at the time of such continuance.
(t)
Foreclose and bid in.
-- To foreclose, as an incident to
the collection of any bond, note or other obligation, any
mortgage, deed of trust, or other lien securing such bond, note
or other obligation, and to bid in the property at such
foreclosure sale, or to acquire the property by deed from the
mortgagor or obligor without foreclosure; and to retain the
property so bid in or taken over without foreclosure.
(u)
Insure.
-- To carry such insurance coverage, including
public liability, for such hazards and in such amounts, either in
stock companies or in mutual companies, as the fiduciary
considers advisable.
(v)
Collect.
-- To collect, receive and receipt for rents,
issues, profits, and income of an estate or trust.
(w)
Litigate, compromise or abandon.
-- To compromise,
adjust, arbitrate, sue on or defend, abandon, or otherwise dealwith and settle claims in favor of or against the estate or trust
as the fiduciary considers advisable, and the fiduciary's
decision is conclusive between the fiduciary and the
beneficiaries of the estate or trust and the person against or
for whom the claim is asserted, in the absence of fraud by such
persons; and in the absence of fraud, bad faith or gross
negligence of the fiduciary, is conclusive between the fiduciary
and the beneficiaries of the estate or trust.
(x)
Employ and compensate agents, etc.
-- To employ and
compensate, out of income or principal or both and in such
proportion as the fiduciary considers advisable, persons
considered by the fiduciary needful to advise or assist in the
proper settlement of the estate or administration of any trust,
including, but not limited to, agents, accountants, brokers,
attorneys-at-law, attorneys-in-fact, investment brokers, rental
agents, realtors, appraisers, and tax specialists; and to do so
without liability for any neglect, omission, misconduct, or
default of such agent or representative provided he or she was
selected and retained with due care on the part of the fiduciary.
(y)
Acquire and hold property of two or more trusts
undivided.
-- To acquire, receive, hold and retain the principal
of several trusts created by a single instrument undivided until
division becomes necessary in order to make distributions; to
hold, manage, invest, reinvest, and account for the several
shares or parts of shares by appropriate entries in the
fiduciary's books of account, and to allocate to each share or
part of share its proportionate part of all receipts andexpenses:
Provided,
That the provisions of this subdivision do
not defer the vesting in possession of any share or part of share
of the estate or trust.
(z)
Establish and maintain reserves.
-- To set up proper and
reasonable reserves for taxes, assessments, insurance premiums,
depreciation, obsolescence, amortization, depletion of mineral or
timber properties, repairs, improvements, and general maintenance
of buildings or other property out of rents, profits, or other
income received; and to set up reserves also for the equalization
of payments to or for beneficiaries:
Provided,
That the
provisions of this subdivision do not affect the ultimate
interests of beneficiaries in such reserves.
(aa)
Distribute in cash or kind.
-- To make distribution of
capital assets of the estate or trust in kind or in cash, or
partially in kind and partially in cash, in divided or undivided
interests, as the fiduciary finds to be most practicable and for
the best interests of the distributees; and to determine the
value of capital assets for the purpose of making distribution
thereof if and when there be more than one distributee thereof,
which determination shall be binding upon the distributees unless
clearly capricious, erroneous and inequitable:
Provided,
That
the fiduciary may not exercise any power under this subdivision
unless the fiduciary holds title to or an interest in the
property to be distributed and is required or authorized to make
distribution thereof.
(bb)
Pay to or for minors or incompetents.
-- To make
payments in money, or in property in lieu of money, to or for aminor or incompetent in any one or more of the following ways:
(1) Directly to such minor or incompetent;
(2) To apply directly in payment for the support,
maintenance, education, and medical, surgical, hospital, or other
institutional care of such minor or incompetent;
(3) To the legal or natural guardian of such minor or
incompetent;
(4) To any other person, whether or not appointed guardian
of the person by any court, who does, in fact, have the care and
custody of the person of such minor or incompetent.
The fiduciary is not under any duty to see to the
application of the payments so made, if the fiduciary exercised
due care in the selection of the person, including the minor or
incompetent, to whom such payments were made; and the receipt of
such person is full acquittance to the fiduciary.
(cc)
Apportion and allocate receipts and expenses.
-- Where
not otherwise provided by statute to determine:
(1) What is principal and what is income of any estate or
trust and to allocate or apportion receipts and expenses as
between principal and income in the exercise of the fiduciary's
discretion, and, by way of illustration and not limitation of the
fiduciary's discretion, to charge premiums on securities
purchased at a premium against principal or income or partly
against each;
(2) Whether to apply stock dividends and other noncash
dividends to income or principal or apportion them as the
fiduciary considers advisable; and
(3) What expenses, costs, taxes (other than estate,
inheritance, and succession taxes and other governmental charges)
shall be charged against principal or income or apportioned
between principal and income and in what proportions.
(dd)
Make contracts and execute instruments.
-- To make
contracts and to execute instruments, under seal or otherwise, as
may be necessary in the exercise of the powers herein granted.
(ee) The foregoing powers are limited as follows for any
trust which shall be classified as a "private foundation" as that
term is defined by section 509 of the Internal Revenue Code of
1954 or corresponding provisions of any subsequent federal tax
laws (including each nonexempt charitable trust described in
section 4947(a)(1) of the code which is treated as a private
foundation) or nonexempt split-interest trust described in
section 4947(a)(2) of the Internal Revenue Code of 1954 or
corresponding provisions of any subsequent federal tax laws (but
only to the extent that section 508(e) of the code is applicable
to such nonexempt split-interest trust under section 4947(a)(2)):
(1) The fiduciary shall make distributions of such amounts,
for each taxable year, at such time and in such manner as not to
become subject to the tax imposed by section 4942 of the Internal
Revenue Code of 1954, or corresponding provisions of any
subsequent federal tax laws;
(2) No fiduciary may engage in any act of self-dealing as
defined in section 4941(d) of the Internal Revenue Code of 1954,
or corresponding provisions of any subsequent federal tax laws;
(3) No fiduciary may retain any excess business holdings asdefined in section 4943(c) of the Internal Revenue Code of 1954,
or corresponding provisions of any subsequent federal tax laws;
(4) No fiduciary may make any investments in such manner as
to subject the trust to tax under section 4944 of the Internal
Revenue Code of 1954, or corresponding provisions of any
subsequent federal tax laws;
(5) No fiduciary may make any taxable expenditures as
defined in section 4945(e) of the Internal Revenue Code of 1954,
or corresponding provisions of any subsequent federal tax laws.