Senate Bill No. 510

(By Senator Rowe)

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[Introduced March 16, 2001; referred to the Committee on the Judiciary.]

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A BILL to amend and reenact section twelve, article five, chapter forty-four of the code of West Virginia, one thousand nine hundred thirty-one, as amended, relating to the distribution of assets in satisfaction of pecuniary bequests or transfers in trust of a pecuniary amount or formula; providing for discretionary division of trusts for tax or administrative purposes; and making certain changes to comply with federal tax law.

Be it enacted by the Legislature of West Virginia:

That section twelve, article five, chapter forty-four of the code of West Virginia, one thousand nine hundred thirty-one, as amended, be amended and reenacted to read as follows:

ARTICLE 5. GENERAL PROVISIONS AS TO FIDUCIARIES.

§44-5-12. Distribution of assets in satisfaction of pecuniary bequests; authority of fiduciaries to enter into certain agreements; validating certain agreements; providing for discretionary division of trusts for certain purposes.

(a) Where a will, trust or other governing instrument authorizes or directs the fiduciary to satisfy wholly or partly in kind a pecuniary bequest or a separate trust to be funded by a pecuniary amount or pursuant to a specified formula unless the will, trust or other governing instrument shall otherwise expressly provide, the assets selected by the fiduciary for that purpose shall be valued at their respective values on the date or dates of their distribution and in the case of any pecuniary bequests or separate trusts established under the will or trust by a pecuniary amount or formula if the pecuniary bequest or separate trust is not entirely funded or an amount necessary to fund the bequest or trust completely is not irrevocably set aside within fifteen months following the date of the testator's or grantor's death, the fiduciary shall allocate to the bequest or trust a pro rata share of the income earned by the estate of the testator or grantor or such other fund from which the bequest or trust is to be funded between the date of death of the testator or grantor and the date or dates of the funding.
(b) Whenever a fiduciary under the provisions of a will, trust or other governing instrument is required to satisfy a pecuniary bequest or transfer in trust in favor of the testator's or donor's spouse and is authorized to satisfy such the bequest or transfer by selection and distribution of assets in kind and the will, trust or other governing instrument further provides that the assets to be so distributed shall or may be valued by some standard other than their fair market value on the date of distribution, the fiduciary, unless the will, trust or other governing instrument otherwise specifically directs, shall distribute assets, including cash, fairly representative of appreciation or depreciation in the value of all property available for distribution in satisfaction of such pecuniary bequest or transfer. This section shall does not apply to prevent a fiduciary from carrying into effect the provisions of the will, trust or other governing instrument that the fiduciary, in order to implement such a bequest or transfer, must distribute assets, including cash, having an aggregate fair market value at the date or dates of distribution amounting to no less than the amount of the pecuniary bequest or transfer as finally determined for federal estate tax purposes.
(c) Any fiduciary having discretionary powers under a will or other governing instrument with respect to the selection of assets to be distributed in satisfaction of a pecuniary bequest or transfer in trust in favor of the testator's or donor's spouse, shall be is authorized to enter into agreements with the commissioner of internal revenue of the United States of America and other taxing authorities requiring the fiduciary to exercise the fiduciary's discretion so that cash and other properties distributed in satisfaction of such the bequest or transfer in trust will be fairly representative of the appreciation or depreciation in value of all property then available for distribution in satisfaction of such the bequest or transfer in trust and any such agreement heretofore entered into after the first day of April, one, one thousand nine hundred sixty-four, is hereby validated. Any such fiduciary shall be authorized to may enter into any other agreement not in conflict with the express terms of the will, trust or other governing instrument that may be necessary or advisable in order to secure for federal estate tax purposes the appropriate marital deduction or other deduction or exemption available under the Internal Revenue Laws of the United States of America and to do and perform all acts incident to such that purpose.
Unless ordered by a court of competent jurisdiction, the bank or trust company operating such a common trust fund, as provided for in section six of this article, shall not be is not required to render an accounting with regard to such the fund before any fiduciary commissioner but it may, by application to the circuit court of the county in which is located the principal place of business of said the bank or trust company, secure the approval of an accounting in such condition as the court may fix: Provided, That nothing herein shall may be interpreted as relieving any fiduciary acquiring, holding or disposing of an interest in any common trust fund from making an accounting as required by law with respect of such that interest.
(d) The fiduciary of any trust created by will, trust or other governing instrument has discretionary power from time to time, without the need of court approval, to divide the applicable trust or trusts for purposes of the federal generation skipping transfer tax of section 2601 of the Internal Revenue Code of 1986, as amended, or for any similar or successor law of like import or for any other tax or administrative purposes. In exercising this authority for any inclusion ratio, marital deduction election, reverse qualified terminal interest property election, generation skipping transfer skipping tax or other tax purposes, the power must be exercised in a manner that complies with any applicable provisions of the Internal Revenue Code or pertinent treasury regulations or other requirements for accomplishing the intended purposes. In the event the division is made for purposes of separating those assets with respect to which the federal estate tax marital deduction election is to be made from those assets as to which that election is not to be made, the division shall be done on a fractional or percentage basis and the assets of the trust or other fund or property to be divided shall be valued for purposes of this division on the date or dates the division is made.
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(NOTE: The purpose of this bill is to bring this section with applicable tax law, and to give West Virginia residents options now available under federal tax law. The bill extends pecuniary bequest language to trusts, expands the availability of federal tax deductions or exemptions to trusts for other family members, rather than limiting applicability only to marital trusts. The bill makes other changes to bring current state law into compliance with federal tax law.

Strike-throughs indicate language that would be stricken from the present law, and underscoring indicates new language that would be added.)