S.F. _____ Section 1. Section 633A.1102, Code 2020, is amended by 1 adding the following new subsections: 2 NEW SUBSECTION . 6A. “Distribution trust director” means 3 any person given authority by an instrument to exercise all or 4 any portion of the powers and discretions set forth in section 5 633A.4810. Except as provided in the trust instrument, the 6 distribution trust director shall have the same fiduciary duty 7 and liability in the exercise or nonexercise of such powers 8 and discretions as the trustee would in the absence of such 9 directory powers. 10 NEW SUBSECTION . 6B. “Excluded fiduciary” means any 11 fiduciary excluded from exercising certain powers under an 12 instrument which powers may be exercised by the settlor, trust 13 director, trust protector, or other persons designated in the 14 instrument. 15 NEW SUBSECTION . 10A. “Investment trust director” means any 16 person given authority by an instrument to exercise all or any 17 portion of the powers and discretions set forth in section 18 633A.4809. Except as provided in the trust instrument, the 19 investment trust director shall have the same fiduciary duty 20 and liability in the exercise or nonexercise of such powers 21 and discretions as the trustee would in the absence of such 22 directory powers. 23 NEW SUBSECTION . 19A. “Trust director” means either an 24 investment trust director or a distribution trust director. 25 NEW SUBSECTION . 19B. “Trust protector” means any person 26 given authority by an instrument to exercise all or any portion 27 of the powers and discretions set forth in section 633A.4805. 28 A trust protector shall not be considered to be acting in 29 a fiduciary capacity except to the extent the governing 30 instrument provides otherwise. However, a trust protector 31 shall be considered to be acting in a fiduciary capacity to 32 the extent that the trust protector exercises the authority or 33 powers of a trust director. 34 Sec. 2. Section 633A.1102, subsection 7, Code 2020, is 35 -1- LSB 5523XC (5) 88 ja/jh 1/ 20

S.F. _____ amended to read as follows: 1 7. “Fiduciary” includes a personal representative, executor, 2 administrator, guardian, conservator, and trustee , and trust 3 director . 4 Sec. 3. Section 633A.4207, subsection 2, Code 2020, is 5 amended to read as follows: 6 2. If In addition to any powers granted to a trustee, the 7 terms of the trust may confer upon a person other than the 8 settlor of a revocable trust director the power to direct 9 certain actions of the trustee , the trustee shall act in 10 accordance with an exercise of the power unless the trustee 11 knows the attempted exercise violates the terms of the trust 12 or the trustee knows that the person holding the power is not 13 competent and to take such other actions with respect to the 14 trust as set forth in sections 633A.4801 through 633A.4810 . 15 A person’s status as a trust director or trust protector 16 under Iowa law shall be determined on the basis of the powers 17 granted and not on the name given to such person in the trust 18 instrument. 19 Sec. 4. Section 633A.4207, subsection 3, Code 2020, is 20 amended by striking the subsection. 21 Sec. 5. Section 633A.4213, Code 2020, is amended by adding 22 the following new subsection: 23 NEW SUBSECTION . 8. Notwithstanding anything in this 24 chapter to the contrary, if a trust instrument, or a trust 25 protector authorized by the trust instrument, designates that a 26 notice, accounting, or report may be delivered to the settlor 27 or to a designated representative on behalf of a beneficiary 28 prior to such beneficiary’s twenty-fifth birthday, then, 29 to the extent there is no conflict of interest between the 30 representative and the beneficiary, all notices, accountings, 31 and reports served on such representative with respect to such 32 period will have the same effect as if such beneficiary had 33 been served directly. 34 Sec. 6. NEW SECTION . 633A.4215 Distributions in further 35 -2- LSB 5523XC (5) 88 ja/jh 2/ 20

S.F. _____ trust. 1 1. As used in this section: 2 a. “First trust” means a trust from which income or 3 principal is transferred into the second trust. 4 b. “Restricted trustee” means a trustee of the first trust 5 if such trustee is a beneficiary of the first trust or if such 6 trustee has the power to change the trustees of the first trust 7 within the meaning of subsection 5. 8 c. “Second trust” means a trust into which the income or 9 principal of the first trust has been transferred. 10 2. Unless the terms of the governing instrument expressly 11 provide otherwise, if a trustee of the first trust has 12 discretion under the terms of a governing instrument to make a 13 distribution of income or principal to or for the benefit of 14 one or more beneficiaries of the first trust, whether or not 15 restricted by any standard, then the trustee, independently or 16 with court approval, may appoint part or all of the income or 17 principal subject to the trustee’s discretion in favor of a 18 trustee of a second trust under a governing instrument separate 19 from the governing instrument of the first trust. Before 20 exercising the trustee’s discretion to appoint and distribute 21 assets to a second trust, the trustee of the first trust shall 22 determine whether the appointment is necessary or desirable 23 after taking into account the purposes of the first trust, the 24 terms and conditions of the second trust, and the consequences 25 of the distribution. In addition, the following apply to all 26 appointments made under this section: 27 a. The second trust may only have as beneficiaries one or 28 more of the beneficiaries of the first trust to or for whom 29 a discretionary distribution of income or principal may be 30 made from the first trust, or to or for whom a distribution of 31 income or principal may be made in the future from the first 32 trust at a time or upon the happening of an event specified 33 under the first trust. 34 b. No restricted trustee of the first trust may exercise 35 -3- LSB 5523XC (5) 88 ja/jh 3/ 20

S.F. _____ such authority over the first trust to the extent that doing so 1 could have any of the following effects: 2 (1) Benefiting the restricted trustee as a beneficiary 3 of the first trust, unless the exercise of such authority is 4 limited by an ascertainable standard based on or related to 5 health, education, maintenance, or support. 6 (2) Removing restrictions on discretionary distributions to 7 a beneficiary imposed by the governing instrument under which 8 the first trust was created, except that a provision in the 9 second trust which limits distributions by an ascertainable 10 standard based on or related to the health, education, 11 maintenance, or support of any such beneficiary is permitted, 12 as is a distribution to a trust established pursuant to 42 13 U.S.C. §1396p(d)(4). 14 c. No restricted trustee of the first trust may exercise 15 such authority over the first trust to the extent that doing 16 so would have the effect of increasing the distributions that 17 can be made from the second trust to the restricted trustees of 18 the first trust or to a beneficiary who may change the trustees 19 of the first trust within the meaning of subsection 5 compared 20 to the distributions that can be made to such trustee or 21 beneficiary, as the case may be, under the first trust, unless 22 the exercise of such authority is limited by an ascertainable 23 standard based on or related to health, education, support, 24 or maintenance within the meaning of section 2041(b)(1)(A) or 25 2514(c)(1) of the Internal Revenue Code. 26 d. The provisions of paragraphs “a” and “b” only apply to 27 restrict the authority of a trustee if either a trustee, or 28 a beneficiary who may change the trustee, is a United States 29 citizen or domiciliary under the Internal Revenue Code, or the 30 trust owns property that would be subject to United States 31 estate or gift taxes if owned directly by such a person. 32 e. In the case of any trust contributions which have been 33 treated as gifts qualifying for the exclusion from gift tax 34 described in section 2503(b) of the Internal Revenue Code, by 35 -4- LSB 5523XC (5) 88 ja/jh 4/ 20

S.F. _____ reason of the application of section 2503(c) of the Internal 1 Revenue Code, the governing instrument for the second trust 2 shall provide that the beneficiary’s remainder interest shall 3 vest no later than the date upon which such interest would have 4 vested under the terms of the governing instrument for the 5 first trust. 6 f. The exercise of such authority may not reduce any income 7 interest of any income beneficiary of any of the following 8 trusts: 9 (1) A trust for which a marital deduction has been taken for 10 federal tax purposes under section 2056 or 2523 of the Internal 11 Revenue Code, or for state tax purposes under any comparable 12 provision of applicable state law. 13 (2) A charitable remainder trust under section 664 of the 14 Internal Revenue Code. 15 (3) A grantor retained annuity or unitrust trust under 16 section 2702 of the Internal Revenue Code. 17 g. The exercise of such authority does not apply to trust 18 property subject to a presently exercisable power of withdrawal 19 held by a trust beneficiary to whom, or for the benefit of 20 whom, the trustee has authority to make distributions, unless 21 after the exercise of such authority, the beneficiary’s power 22 of withdrawal is unchanged with respect to the trust property. 23 h. The exercise of such authority is not prohibited by a 24 provision in the governing instrument that prohibits amendment 25 or revocation of the trust. 26 i. Any appointment made by a trustee shall be considered 27 a distribution by the trustee pursuant to the trustee’s 28 distribution powers and authority. 29 j. Notwithstanding the foregoing provisions of this 30 subsection, the governing instrument of the second trust 31 may grant a power of appointment to one or more of the 32 beneficiaries of the second trust who are beneficiaries of 33 the first trust. The power of appointment may include the 34 power to appoint trust property to the holder of the power of 35 -5- LSB 5523XC (5) 88 ja/jh 5/ 20

S.F. _____ appointment, the holder’s creditors, the holder’s estate, the 1 creditors of the holder’s estate, or any other person, whether 2 or not that person is a trust beneficiary. 3 l. This section applies to any trust administered under 4 the laws of this state, including a trust whose governing 5 jurisdiction is transferred to this state. 6 3. Any action that may not be taken by a trustee of the 7 first trust by reason of the restrictions in subsection 2, 8 paragraph “b” , may instead be taken by any other trustee of the 9 first trust who is not so restricted, or, if none, by the next 10 available party who can be a successor trustee and who is not 11 so restricted. 12 4. The second trust may be a trust created or administered 13 under the laws of any jurisdiction, within or without the 14 United States. 15 5. For the purposes of subsection 2, a beneficiary shall 16 be considered to have the power to change the trustees if the 17 beneficiary can, alone or with others, name such beneficiary 18 as a trustee or can remove a trustee and replace that trustee 19 with a new trustee who is the beneficiary or who is related or 20 subordinate, as defined in section 672 of the Internal Revenue 21 Code, to the beneficiary. 22 6. The exercise of the power to distribute the income 23 or principal of the trust under this section shall be by an 24 instrument in writing, signed and acknowledged by the trustee, 25 and filed with the records of the trust. The trustee of the 26 first trust may notify the beneficiaries of the first trust, in 27 writing, prior to the effective date of the trustee’s exercise 28 of the power under this section. A copy of the exercise of this 29 authority and the second trust agreement shall satisfy this 30 notice provision. For the purposes of this section, the term 31 “beneficiaries” means those persons who would be entitled to 32 notice and a copy of the first trust instrument under section 33 633A.4213. 34 7. The exercise of the power to distribute the income or 35 -6- LSB 5523XC (5) 88 ja/jh 6/ 20

S.F. _____ principal of the trust under this section shall be considered 1 the exercise of a power of appointment, excluding the power to 2 appoint the trustee, the trustee’s creditors, the trustee’s 3 estate, or the creditors of the trustee’s estate. 4 8. The power under this section may not be exercised to 5 suspend the power to alienate trust property or extend the 6 first trust beyond the permissible period of any rule against 7 perpetuities applicable to the first trust. 8 Sec. 7. NEW SECTION . 633A.4801 Governing instrument 9 may provide trust director or trust protector with powers and 10 immunities of trustee. 11 Any governing instrument providing for a trust director 12 or trust protector may also provide such trust director 13 or trust protector with some, none, or all of the rights, 14 powers, privileges, benefits, immunities, or authorities 15 available to a trustee under the law of this state or under 16 the governing instrument. Unless the governing instrument 17 provides otherwise, a trust director or trust protector has no 18 greater liability to any person than would a trustee holding 19 or benefiting from the rights, powers, privileges, benefits, 20 immunities, or authority provided or allowed by the governing 21 instrument to such trust director or trust protector. 22 Sec. 8. NEW SECTION . 633A.4802 Liability limits of excluded 23 fiduciary. 24 1. An excluded fiduciary is not liable, either individually 25 or as a fiduciary, for any of the following: 26 a. Any loss that results from compliance with a direction of 27 the trust director, including any loss from the trust director 28 breaching fiduciary responsibilities or acting beyond the trust 29 director’s scope of authority. 30 b. Any loss that results from a failure to take any 31 action proposed by an excluded fiduciary that requires prior 32 authorization of the trust director if that excluded fiduciary 33 timely sought but failed to obtain that authorization. 34 c. Any loss that results from any action or inaction of 35 -7- LSB 5523XC (5) 88 ja/jh 7/ 20

S.F. _____ the excluded fiduciary, except for gross negligence or willful 1 misconduct, when the excluded fiduciary is required, pursuant 2 to the trust agreement or any other reason, to assume the role 3 of trust director or trust protector. 4 2. An excluded fiduciary is relieved of any obligation 5 to review or evaluate any direction from a trust director or 6 to perform investment or suitability reviews, inquiries, or 7 investigations or to make recommendations or evaluations with 8 respect to any investments to the extent the trust director 9 had authority to direct the acquisition, disposition, or 10 retention of the investment. If the excluded fiduciary offers 11 recommendations or evaluations with respect to any investments 12 to the trust director, trust protector, or any investment 13 advisor selected by the investment trust director, such action 14 may not be deemed to constitute an undertaking by the excluded 15 fiduciary to monitor or otherwise participate in actions within 16 the scope of the trust director’s authority or to constitute 17 any duty to do so. 18 3. An excluded fiduciary is relieved of any duty to 19 communicate with, warn, or apprise any beneficiary or third 20 party concerning instances in which the excluded fiduciary may 21 have exercised the excluded fiduciary’s own discretion in a 22 manner different from the manner directed by the trust director 23 or trust protector. 24 4. Absent contrary provisions in the governing instrument, 25 the actions of the excluded fiduciary pertaining to matters 26 within the scope of authority of the trust director or trust 27 protector shall be deemed to be administrative actions taken by 28 the excluded fiduciary solely to allow the excluded fiduciary 29 to perform those duties assigned to the excluded fiduciary 30 under the governing instrument, and such administrative 31 actions shall not be deemed to constitute an undertaking by 32 the excluded fiduciary to monitor, participate, or otherwise 33 take on any fiduciary responsibility for actions within the 34 scope of authority of the trust director or trust protector. 35 -8- LSB 5523XC (5) 88 ja/jh 8/ 20

S.F. _____ For purposes of this subsection, “administrative actions” shall 1 include communications with the trust director or others and 2 carrying out, recording, or reporting actions taken at the 3 trust director’s direction. 4 5. In an action against an excluded fiduciary pursuant to 5 the provisions of this section, the burden to prove the matter 6 by clear and convincing evidence is on the person seeking to 7 hold the excluded fiduciary liable. 8 Sec. 9. NEW SECTION . 633A.4803 Death of settlor. 9 An excluded fiduciary may continue to follow the direction 10 of the trust director upon the incapacity or death of the 11 settlor if the instrument so allows. 12 Sec. 10. NEW SECTION . 633A.4804 Excluded fiduciary’s 13 liability for loss if trust protector appointed. 14 If an instrument appoints a trust protector, the excluded 15 fiduciary is not liable for any loss resulting from any action 16 taken upon the trust protector’s direction. 17 Sec. 11. NEW SECTION . 633A.4805 Powers and discretions of 18 trust protector. 19 1. The powers and discretions of a trust protector are as 20 provided in the governing instrument and may be exercised or 21 not exercised, in the best interests of the trust, in the sole 22 and absolute discretion of the trust protector and are binding 23 on all other persons. Except as otherwise provided in the 24 governing instrument, the trust protector may do all of the 25 following: 26 a. Modify or amend the trust instrument to achieve favorable 27 tax status or respond to changes in the Internal Revenue Code, 28 state law, or the rulings and regulations thereunder. 29 b. Increase or decrease the interests of any beneficiaries 30 to the trust. 31 c. Modify the terms of any power of appointment granted 32 by the trust. However, a modification or amendment shall 33 not grant a beneficial interest to any individual or class 34 of individuals not specifically provided for under the trust 35 -9- LSB 5523XC (5) 88 ja/jh 9/ 20

S.F. _____ instrument. 1 d. Remove and appoint a trustee, trust director, or other 2 person designated in the governing trust instrument. 3 e. Terminate the trust. 4 f. Veto or direct trust distributions. 5 g. Change situs of the trust. 6 h. Change the governing law of the trust. 7 i. Appoint a successor trust protector. 8 j. Interpret terms of the trust instrument at the request 9 of the trustee. 10 k. Advise the trustee on matters concerning a beneficiary. 11 l. Amend or modify the trust instrument to take advantage of 12 laws governing restraints on alienation, distribution of trust 13 property, or the administration of the trust. 14 m. Provide direction regarding notification of qualified 15 beneficiaries pursuant to section 633A.4213. 16 n. Add to the trust an individual beneficiary or 17 beneficiaries from a class of individuals identified in the 18 governing instrument. 19 o. Add to the trust a charitable beneficiary or 20 beneficiaries from a class of charities identified in the trust 21 instrument. 22 p. Provide other powers and discretions in the governing 23 instrument. 24 2. The powers referenced in subsection 1, paragraphs “e” , 25 “f” , and “l” , may be granted notwithstanding the provisions of 26 sections 633A.2201 through 633A.2208. 27 Sec. 12. NEW SECTION . 633A.4806 Submission to court 28 jurisdiction —— effect on trust director or trust protector. 29 By accepting an appointment to serve as a trust director or 30 trust protector of a trust that is subject to the laws of this 31 state, the trust director or the trust protector submits to the 32 jurisdiction of the courts of Iowa even if investment advisory 33 agreements or other related agreements provide otherwise. The 34 trust director or trust protector may be made a party to any 35 -10- LSB 5523XC (5) 88 ja/jh 10/ 20

S.F. _____ action or proceeding if a decision or action of the trust 1 director or trust protector affects a trust that is subject to 2 the laws of this state. 3 Sec. 13. NEW SECTION . 633A.4807 Powers of trust director 4 incorporated by reference in will or trust instrument. 5 Any of the powers enumerated in section 633A.4805, as they 6 exist at the time of the signing of a will by a testator or at 7 the time of the signing of a trust instrument by a settlor, 8 may be, by appropriate reference made thereto, incorporated in 9 whole or in part in such will or trust instrument, by a clearly 10 expressed intention of a testator of a will or settlor of a 11 trust instrument. 12 Sec. 14. NEW SECTION . 633A.4808 Investment trust director 13 or distribution trust director provided for in trust instrument. 14 A trust instrument governed by the laws of this state may 15 provide for a person to act as an investment trust director 16 or a distribution trust director with regard to investment 17 decisions or discretionary distributions, respectively. Unless 18 otherwise provided by the terms of the governing instrument, a 19 person may simultaneously serve as a trust director and a trust 20 protector. 21 Sec. 15. NEW SECTION . 633A.4809 Powers and discretions of 22 investment trust director. 23 The powers and discretions of an investment trust director 24 shall be provided in the trust instrument and may be exercised 25 or not exercised, in the best interests of the trust, in the 26 sole and absolute discretion of the investment trust director 27 and are binding on any other person and any other interested 28 party, fiduciary, and excluded fiduciary. Unless the terms 29 of the governing instrument provide otherwise, the investment 30 trust director has the power to do all of the following: 31 1. Direct the trustee with respect to the retention, 32 purchase, sale, exchange, tender, or other transaction 33 affecting the ownership thereof or rights therein of trust 34 investments. These powers include the pledge or encumbrance 35 -11- LSB 5523XC (5) 88 ja/jh 11/ 20

S.F. _____ of trust property, lending of trust assets, either secured or 1 unsecured, at terms defined by the investment trust director, 2 to any party including beneficiaries of the trust, and the 3 investment and reinvestment of principal and income of the 4 trust. 5 2. Vote proxies for securities held in trust. 6 3. Select one or more investment directors, managers, or 7 counselors, including the trustee, and delegate to them any of 8 the investment trust director’s powers. 9 4. Direct the trustee with respect to any additional powers 10 and discretions over investment and management of trust assets 11 provided in the governing instrument. 12 5. Direct the trustee as to the value of nonpublicly traded 13 trust investments. 14 6. Direct the trustee as to any investment or management 15 power referenced in sections 633A.4401 and 633A.4402. 16 Sec. 16. NEW SECTION . 633A.4810 Powers and discretions of 17 distribution trust director. 18 The powers and discretions of a distribution trust director 19 over any discretionary distributions of income or principal, 20 including distributions pursuant to an ascertainable standard 21 or other criteria and appointments pursuant to section 22 633A.4215, shall be provided in the trust instrument and may 23 be exercised or not exercised, in the best interests of the 24 trust, in the sole and absolute discretion of the distribution 25 trust director and are binding on any other person and any 26 other interested party, fiduciary, and excluded fiduciary. 27 Unless the terms of the document provide otherwise, the 28 distribution trust director shall direct the trustee with 29 regard to all discretionary distributions to beneficiaries 30 and may direct appointments pursuant to section 633A.4215. 31 The distribution trust director may also provide direction 32 regarding notification of qualified beneficiaries pursuant to 33 section 633A.4213. 34 Sec. 17. LEGISLATIVE INTENT. It is the intent of the 35 -12- LSB 5523XC (5) 88 ja/jh 12/ 20

S.F. _____ general assembly that the provisions of this Act enacting 1 section 433A.4215 is declaratory of the common law of this 2 state permitting distributions in further trust and shall be 3 liberally construed to effectuate the intent to maintain such 4 common law authority. Section 433A.4215, as enacted by this 5 Act, shall not be construed to abridge the right of any trustee 6 who has power to distribute income or principal in further 7 trust which arises under the terms of the first trust or any 8 statute or common law applicable to such trust. 9 Sec. 18. CODE EDITOR DIRECTIVE. The Code editor may 10 organize the provisions of this Act enacting sections 633A.4801 11 through 633A.4810 as a new part under subchapter IV in chapter 12 633A. 13 EXPLANATION 14 The inclusion of this explanation does not constitute agreement with 15 the explanation’s substance by the members of the general assembly. 16 This bill relates to the Iowa trust code. The bill codifies 17 the concept of decanting, which generally allows trustees to 18 appoint part or all of the income or principal subject to their 19 discretion in favor of a trustee of a second trust. The second 20 trust may be a trust created or administered under the laws of 21 any jurisdiction, within or without the United States. 22 The bill creates and empowers new positions in the trusts 23 area, including distribution trust directors, excluded 24 fiduciaries, investment trust directors, trust directors, and 25 trust protectors. 26 The bill defines “distribution trust director” as any person 27 given authority by the instrument to exercise all or any 28 portion of the powers and discretions set forth in new Code 29 section 633A.4810. 30 The bill defines “excluded fiduciary” as any fiduciary 31 excluded from exercising certain powers under the instrument 32 which powers may be exercised by the settlor, trust director, 33 trust protector, or other persons designated in the instrument. 34 The bill defines “investment trust director” as any person 35 -13- LSB 5523XC (5) 88 ja/jh 13/ 20

S.F. _____ given authority by the instrument to exercise all or any 1 portion of the powers and discretions set forth in new Code 2 section 633A.4809. 3 The bill defines “trust director” as either an investment 4 trust director or a distribution trust director. 5 The bill defines “trust protector” as any person given 6 authority by the instrument to exercise all or any portion 7 of the powers and discretions set forth in new Code section 8 633A.4805. 9 The bill amends the definition of “fiduciary” in Code 10 section 633A.1102 to include “trust director”. 11 The bill also amends Code section 633A.4207 to instead 12 provide for powers to be granted to a trust director. The 13 bill further modifies Code section 633A.4207 to indicate a 14 person’s status as a trust director or trust protector is to 15 be determined by the powers granted to such person, not the 16 language in the governing instrument. 17 The bill strikes Code section 633A.4207(3), which stated a 18 person other than a beneficiary who held the power to direct 19 was presumptively a fiduciary and was liable for any loss that 20 resulted from a breach of the person’s fiduciary duty. 21 The bill adds a new subsection to Code section 633A.4213. 22 This new subsection provides that if a trust instrument, or a 23 trust protector authorized by the trust instrument, designates 24 that a notice, accounting, or report may be delivered to the 25 settlor or to a designated representative on behalf of a 26 beneficiary prior to such beneficiary’s 25th birthday, then, 27 to the extent there is no conflict of interest between the 28 representative and the beneficiary, all notices, accountings, 29 and reports served on such representative with respect to such 30 period will have the same effect as if such beneficiary had 31 been served directly. 32 The bill limits a trustee’s decanting ability in several 33 ways. First, decanting is allowed when a trustee has 34 discretion under the terms of a governing instrument to make a 35 -14- LSB 5523XC (5) 88 ja/jh 14/ 20

S.F. _____ distribution of income or principal to or for the benefit of 1 one or more beneficiaries of a trust. 2 Second, before exercising the trustee’s discretion to 3 appoint and distribute assets to a second trust, the trustee 4 of the first trust must determine whether the appointment is 5 necessary or desirable after taking into account the purposes 6 of the first trust, the terms and conditions of the second 7 trust, and the consequences of the distribution. 8 Third, the bill limits a restricted trustee’s decanting 9 ability. The trustee of the first trust is a “restricted 10 trustee” if such trustee is a beneficiary of the first trust or 11 if a beneficiary of the first trust has a power to change the 12 trustees within the meaning of Code section 633A.4215(5). The 13 bill provides a restricted trustee is prohibited from decanting 14 the trust if doing so could benefit the restricted trustee as 15 a beneficiary of the first trust, unless the exercise of such 16 authority is limited by an ascertainable standard related to 17 health, education, maintenance, or support. The bill also 18 provides a restricted trustee is prohibited from decanting the 19 trust if doing so could remove restrictions on discretionary 20 distributions to a beneficiary imposed by the governing 21 instrument under which the first trust was created, except that 22 a provision in the second trust which limits distributions by 23 an ascertainable standard related to the health, education, 24 maintenance, or support of any such beneficiary is permitted, 25 as is a distribution to a trust established pursuant to 42 26 U.S.C. §1396p(d)(4). 27 Fourth, the second trust may only have as beneficiaries 28 one or more of the beneficiaries of the first trust to or for 29 whom a discretionary distribution of income or principal may 30 be made from the first trust, or to or for whom a distribution 31 of income or principal may be made in the future from the first 32 trust at a time or upon the happening of an event specified 33 under the first trust. 34 Fifth, no restricted trustee of the first trust may exercise 35 -15- LSB 5523XC (5) 88 ja/jh 15/ 20

S.F. _____ authority over the first trust to the extent that doing so 1 would have the effect of increasing the distributions that can 2 be made from the second trust to the restricted trustees of the 3 first trust or to a beneficiary who may change the trustees of 4 the first trust compared to the distributions that can be made 5 to such trustee or beneficiary, as the case may be, under the 6 first trust, unless the exercise of such authority is limited 7 by an ascertainable standard related to health, education, 8 support, or maintenance within the meaning of section 9 2041(b)(1)(A) or 2514(c)(1) of the Internal Revenue Code. 10 Sixth, in the case of any trust contributions which have 11 been treated as gifts qualifying for the exclusion from gift 12 tax described in section 2503(b) of the Internal Revenue Code, 13 by reason of the application of section 2503(c) of the Internal 14 Revenue Code, the governing instrument for the second trust 15 is to provide that the beneficiary’s remainder interest shall 16 vest no later than the date upon which such interest would have 17 vested under the terms of the governing instrument for the 18 first trust. 19 Seventh, the exercise of such authority may not reduce any 20 income interest of any income beneficiary of a charitable 21 remainder trust under section 664 of the Internal Revenue Code, 22 a grantor retained annuity or unitrust trust under section 2702 23 of the Internal Revenue Code, or a trust for which a marital 24 deduction has been taken for federal tax purposes under section 25 2056 or 2523 of the Internal Revenue Code, or for state tax 26 purposes under any comparable provision of applicable state 27 law. 28 Eighth, the exercise of such authority does not apply 29 to trust property subject to a presently exercisable power 30 of withdrawal held by a trust beneficiary to whom, or for 31 the benefit of whom, the trustee has authority to make 32 distributions, unless after the exercise of such authority, the 33 beneficiary’s power of withdrawal is unchanged with respect to 34 the trust property. 35 -16- LSB 5523XC (5) 88 ja/jh 16/ 20

S.F. _____ Ninth, the exercise of such authority may not suspend the 1 power to alienate trust property or extend the first trust 2 beyond the permissible period of any rule against perpetuities 3 applicable to the first trust. 4 The bill contains a provision describing the legislative 5 intent of the new decanting section. The new Code section 6 is to be declaratory of the common law of this state, which 7 permits distributions in further trust, and is to be liberally 8 construed to effectuate such intent. In addition, the bill 9 provides that no provision of the new decanting section is to 10 be construed to abridge the right of any trustee who has the 11 power to distribute income or principal. 12 The bill provides that any governing instrument providing 13 for a trust director or trust protector may also provide such 14 trust director or trust protector with some, none, or all 15 of the rights, powers, privileges, benefits, immunities, or 16 authorities available to a trustee under Iowa law or under the 17 governing instrument. The bill also limits the liability of 18 trust directors and trust protectors to no greater than that 19 of a trustee holding or benefiting from the rights, powers, 20 privileges, benefits, immunities, or authority provided or 21 allowed by the governing instrument, unless the governing 22 instrument provides otherwise. 23 The bill places limitations on the liability of an excluded 24 fiduciary. The bill provides an excluded fiduciary is not 25 liable for any loss that results from compliance with a 26 direction of the trust director; any loss that results from a 27 failure to take any action proposed by an excluded fiduciary 28 that requires prior authorization of the trust director if that 29 excluded fiduciary timely sought but failed to obtain that 30 authorization; and any loss that results from any action or 31 inaction of the excluded fiduciary, except for gross negligence 32 or willful misconduct, when the excluded fiduciary is required, 33 pursuant to the trust agreement or any other reason, to assume 34 the role of trust director or trust protector. 35 -17- LSB 5523XC (5) 88 ja/jh 17/ 20

S.F. _____ In terms of other limitations on the liability of an excluded 1 fiduciary, the bill states an excluded fiduciary is relieved 2 of any obligation to review or evaluate any direction from a 3 trust director or to perform investment or suitability reviews, 4 or to make recommendations or evaluations with respect to any 5 investments to the extent the trust director had authority 6 to direct the acquisition, disposition, or retention of the 7 investment. The bill provides if the excluded fiduciary offers 8 recommendations to the trust director, trust protector, or any 9 investment advisor selected by the investment trust director, 10 with respect to any investments, such action may not be deemed 11 to constitute an undertaking by the excluded fiduciary to 12 monitor or otherwise participate in actions within the scope of 13 the trust director’s authority. 14 The bill also relieves the excluded fiduciary from any duty 15 to communicate with, warn, or apprise any beneficiary or third 16 party concerning instances in which the excluded fiduciary may 17 have exercised the excluded fiduciary’s own discretion in a 18 manner different from the manner directed by the trust director 19 or trust protector. 20 The bill provides, absent contrary provisions in the 21 governing instrument, the actions of the excluded fiduciary 22 pertaining to matters within the scope of authority of 23 the trust director or trust protector shall be deemed to 24 be administrative actions taken by the excluded fiduciary 25 solely to allow the excluded fiduciary to perform those 26 duties assigned to the excluded fiduciary under the governing 27 instrument. Pursuant to the bill, such administrative actions 28 shall not be deemed to constitute an undertaking by the 29 excluded fiduciary to monitor, participate, or otherwise take 30 on any fiduciary responsibility for actions within the scope of 31 authority of the trust director or trust protector. 32 In terms of the relationship between excluded fiduciaries 33 and trust protectors, the bill states that if an instrument 34 appoints a trust protector, the excluded fiduciary is not 35 -18- LSB 5523XC (5) 88 ja/jh 18/ 20

S.F. _____ liable for any loss resulting from any action taken upon the 1 trust protector’s direction. 2 The bill sets out that in an action against an excluded 3 fiduciary, the burden to prove the matter by clear and 4 convincing evidence is on the person seeking to hold the 5 excluded fiduciary liable. 6 The bill provides that, upon the incapacity or death of 7 the settlor, an excluded fiduciary may continue to follow the 8 direction of the trust director if the instrument so allows. 9 The bill states the powers and discretions of a trust 10 protector are as provided in the governing instrument and 11 may be exercised or not exercised, in the best interests of 12 the trust, in the sole and absolute discretion of the trust 13 protector. The bill describes actions trust protectors may 14 take, unless the governing instrument states otherwise. 15 The bill also addresses the jurisdiction of Iowa courts over 16 trust directors and trust protectors. The bill states that 17 by accepting an appointment to serve as a trust director or 18 trust protector of a trust that is subject to the laws of this 19 state, the trust director or the trust protector submits to the 20 jurisdiction of the courts of Iowa even if investment advisory 21 agreements or other related agreements provide otherwise. 22 The bill allows any of the powers enumerated in new Code 23 section 633A.4805, as such powers exist at the time of the 24 signing of a will by a testator or at the time of the signing 25 of a trust instrument by a settlor, to be incorporated in such 26 will or trust instrument, by a clearly expressed intention of a 27 testator of a will or settlor of a trust instrument. 28 The bill permits a person to simultaneously serve as a trust 29 director and a trust protector. 30 The bill states the powers and discretions of an investment 31 trust director shall be provided in the trust instrument and 32 may be exercised or not exercised, in the best interests of the 33 trust, in the sole and absolute discretion of the investment 34 trust director. The bill describes actions investment trust 35 -19- LSB 5523XC (5) 88 ja/jh 19/ 20

S.F. _____ directors may take, unless the governing instrument states 1 otherwise. 2 The bill provides the powers and discretions of a 3 distribution trust director over any discretionary 4 distributions of income or principal, including distributions 5 pursuant to an ascertainable standard or other criteria and 6 appointments pursuant to new Code section 633A.4215, shall be 7 provided in the trust instrument and may be exercised or not 8 exercised, in the best interests of the trust, in the sole and 9 absolute discretion of the distribution trust director. The 10 bill indicates that, unless the terms of the document provide 11 otherwise, the distribution trust director is to direct the 12 trustee with regard to all discretionary distributions to 13 beneficiaries. In addition, the bill allows the distribution 14 trust director to provide direction regarding notification of 15 qualified beneficiaries pursuant to Code section 633A.4213. 16 The bill allows the Code editor to organize the provisions of 17 the bill enacting new Code sections 633A.4801 through 633A.4810 18 as a new part under subchapter IV in Code chapter 633A. 19 -20- LSB 5523XC (5) 88 ja/jh 20/ 20