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House File 2539

Partial Bill History

Bill Text

PAG LIN
  1  1                                            HOUSE FILE 2539
  1  2 
  1  3                             AN ACT
  1  4 RELATING TO TRUSTS AND ESTATES AND THEIR RELATIONSHIP TO
  1  5    MEDICAL ASSISTANCE BENEFITS, THE RIGHT TO DISCLAIM ON BEHALF
  1  6    OF A WARD, THE CREATION OF TOTAL RETURN UNITRUSTS, AND
  1  7    PROVIDING AN EFFECTIVE DATE.  
  1  8 
  1  9 BE IT ENACTED BY THE GENERAL ASSEMBLY OF THE STATE OF IOWA:
  1 10 
  1 11    Section 1.  Section 249A.2, Code 2001, is amended by adding
  1 12 the following new subsection:
  1 13    NEW SUBSECTION.  11.  "Retained life estate" means any of
  1 14 the following:
  1 15    a.  A life estate created by the recipient or recipient's
  1 16 spouse, in which either the recipient or the recipient's
  1 17 spouse held any interest in the property at the time of the
  1 18 creation of the life estate.
  1 19    b.  A life estate created for the benefit of the recipient
  1 20 or the recipient's spouse in property in which either the
  1 21 recipient or the recipient's spouse held any interest in the
  1 22 property within five years prior to the creation of the life
  1 23 estate.
  1 24    Sec. 2.  Section 249A.5, subsection 2, paragraphs b and c,
  1 25 Code 2001, are amended to read as follows:
  1 26    b.  If the collection of all or part of a debt is waived
  1 27 pursuant to subsection 2, paragraph "a", subparagraph (1), the
  1 28 amount waived shall be a debt due from the estate of the
  1 29 recipient's surviving spouse, or child who is blind or has a
  1 30 disability, or the recipient of a hardship waiver under
  1 31 subsection 2, paragraph "a", subparagraph (2), upon the death
  1 32 of the such spouse, or child or recipient, or due from a
  1 33 surviving child who was under twenty-one years of age at the
  1 34 time of the recipient's death, upon the child reaching age
  1 35 twenty-one, to the extent the recipient's estate is received
  2  1 by the surviving such spouse, or child, or recipient.
  2  2    c.  For purposes of this section, the estate of a medical
  2  3 assistance recipient, surviving spouse, or surviving child
  2  4 includes any real property, personal property, or other asset
  2  5 in which the recipient, spouse, or child had any legal title
  2  6 or interest at the time of the recipient's, spouse's, or
  2  7 child's death, to the extent of such interests, including but
  2  8 not limited to interests in jointly held property, retained
  2  9 life estates, and interests in trusts.
  2 10    Sec. 3.  Section 633.647, Code 2001, is amended by adding
  2 11 the following new subsection:
  2 12    NEW SUBSECTION.  6A.  To exercise the right to disclaim on
  2 13 behalf of the ward as provided in section 633.704.
  2 14    Sec. 4.  Section 633.704, subsection 3, paragraph c, Code
  2 15 2001, is amended to read as follows:
  2 16    c.  DEATH OR DISABILITY OF DISCLAIMANT.  If a person
  2 17 eligible to disclaim dies within the time allowed for a
  2 18 disclaimer, the right to disclaim continues for the time
  2 19 allowed and the personal representative of the person eligible
  2 20 to disclaim has the same right to disclaim as the disclaimant
  2 21 and may disclaim on behalf of the personal representative's
  2 22 decedent.  If a person entitled to disclaim is disabled, the
  2 23 court may authorize or direct a conservator or guardian to
  2 24 exercise the right to disclaim on behalf of the person under
  2 25 disability if the court finds it is in the person's best
  2 26 interests pursuant to section 633.647.
  2 27    Sec. 5.  Section 637.601, Code 2001, is amended by striking
  2 28 the section and inserting in lieu thereof the following:
  2 29    637.601  DEFINITIONS.
  2 30    For purposes of this section:
  2 31    1.  "Disinterested person" means a person who is not a
  2 32 related or subordinate party as defined in section 672(c) of
  2 33 the Internal Revenue Code with respect to the person acting as
  2 34 trustee of the trust and excludes the trustor of the trust and
  2 35 any interested trustee.
  3  1    2.  "Income trust" means a trust, created by either an
  3  2 inter vivos or a testamentary instrument, which directs or
  3  3 permits the trustee to distribute the net income of the trust
  3  4 to one or more persons, either in fixed proportions or in
  3  5 amounts or proportions determined by the trustee.  However, a
  3  6 trust that does not meet this definition is nonetheless an
  3  7 income trust if the trust is subject to taxation under section
  3  8 2001 or 2501 of the Internal Revenue Code, until the
  3  9 expiration of the period for filing the return, including
  3 10 extensions.
  3 11    3.  "Interested distributee" means a person, to whom
  3 12 distributions of income or principal can currently be made,
  3 13 who has the power to remove the existing trustee and designate
  3 14 as successor a person who may be a related or subordinate
  3 15 party, as defined in section 672(c) of the Internal Revenue
  3 16 Code, with respect to such distributee.
  3 17    4.  "Interested trustee" means any of the following:
  3 18    a.  An individual trustee to whom the net income or
  3 19 principal of the trust can currently be distributed or would
  3 20 be distributed if the trust were to terminate and be
  3 21 distributed.
  3 22    b.  Any trustee who may be removed and replaced by an
  3 23 interested distributee.
  3 24    c.  An individual trustee whose legal obligation to support
  3 25 a beneficiary may be satisfied by distributions of income and
  3 26 principal of the trust.
  3 27    5.  "Total return unitrust" means an income trust which has
  3 28 been converted under and meets the provisions of this
  3 29 subchapter.
  3 30    6.  "Trustee" means a person acting as trustee of the
  3 31 trust, except where expressly noted otherwise, whether acting
  3 32 in the trustee's discretion or on the direction of one or more
  3 33 persons acting in a fiduciary capacity.
  3 34    7.  "Trustor" means an individual who creates an inter
  3 35 vivos or a testamentary trust.
  4  1    8.  "Unitrust amount" means an amount computed as a
  4  2 percentage of the fair market value of the trust.
  4  3    Sec. 6.  NEW SECTION.  637.602  TRUSTEE'S AUTHORITY TO
  4  4 CONVERT.
  4  5    A trustee, other than an interested trustee, or, where two
  4  6 or more persons are acting as trustee, a majority of the
  4  7 trustees who are not interested trustees, may, in the
  4  8 trustee's sole discretion and without the approval of the
  4  9 court, do any of the following subject to the requirements of
  4 10 section 637.603:
  4 11    1.  Convert an income trust to a total return unitrust.
  4 12    2.  Reconvert a total return unitrust to an income trust.
  4 13    3.  Change the method used to determine the fair market
  4 14 value of the trust.
  4 15    Sec. 7.  NEW SECTION.  637.603  TRUSTEE REQUIREMENTS TO
  4 16 CONVERT OR CHANGE COMPUTATION METHOD.
  4 17    A trustee may proceed to take action under section 637.602
  4 18 if all of the following apply:
  4 19    1.  The trustee adopts a written policy for the trust as
  4 20 follows:
  4 21    a.  In the case of a trust being administered as an income
  4 22 trust, requiring that future distributions from the trust will
  4 23 be unitrust amounts rather than net income.
  4 24    b.  In the case of a trust being administered as a total
  4 25 return unitrust, requiring that future distributions from the
  4 26 trust will be net income rather than unitrust amounts.
  4 27    c.  Requiring that the method used to determine the fair
  4 28 market value of the trust will be changed as stated in the
  4 29 policy.
  4 30    2.  The trustee sends written notice of the trustee's
  4 31 intention to take any action described in subsection 1, along
  4 32 with copies of such written policy and this subchapter, to all
  4 33 of the following persons:
  4 34    a.  The trustor of the trust, if living.
  4 35    b.  All living persons who are currently receiving or
  5  1 eligible to receive distributions of income of the trust.
  5  2    c.  All living persons who would receive principal of the
  5  3 trust if the trust were to terminate at the time of the giving
  5  4 of such notice, without regard to the exercise of any power of
  5  5 appointment or, if the trust does not provide for its
  5  6 termination, all living persons who would receive or be
  5  7 eligible to receive distributions of income or principal of
  5  8 the trust if the persons identified in paragraph "b" were
  5  9 deceased.
  5 10    d.  All persons named in the governing instrument as
  5 11 adviser to or protector of the trust.
  5 12    3.  At least one person receiving notice under subsection
  5 13 2, paragraph "b" and "c", is legally competent.
  5 14    4.  No person receiving such notice under subsection 2,
  5 15 objects, by written instrument delivered to the trustee, to
  5 16 the proposed action of the trustee within sixty days of
  5 17 receipt of such notice.
  5 18    Sec. 8.  NEW SECTION.  637.604  INTERESTED TRUSTEE'S
  5 19 AUTHORITY TO CONVERT.
  5 20    If there is no trustee of the trust other than an
  5 21 interested trustee, the interested trustee or, where two or
  5 22 more persons are acting as trustee and are interested
  5 23 trustees, a majority of such interested trustees may, in the
  5 24 trustee's sole discretion and without the approval of the
  5 25 court, do any of the following subject to the requirements of
  5 26 section 637.605:
  5 27    1.  Convert an income trust to a total return unitrust.
  5 28    2.  Reconvert a total return unitrust to an income trust.
  5 29    3.  Change the method used to determine the fair market
  5 30 value of the trust.
  5 31    Sec. 9.  NEW SECTION.  637.605  INTERESTED TRUSTEE
  5 32 REQUIREMENTS TO CONVERT OR CHANGE COMPUTATION METHOD.
  5 33    An interested trustee may proceed to take action under
  5 34 section 637.604 if all of the following apply:
  5 35    1.  The trustee adopts a written policy for the trust as
  6  1 follows:
  6  2    a.  In the case of a trust being administered as an income
  6  3 trust, requiring that future distributions from the trust will
  6  4 be unitrust amounts rather than net income.
  6  5    b.  In the case of a trust being administered as a total
  6  6 return unitrust, requiring that future distributions from the
  6  7 trust will be net income rather than unitrust amounts.
  6  8    c.  Requiring that the method used to determine the fair
  6  9 market value of the trust will be changed as stated in the
  6 10 policy.
  6 11    2.  The trustee appoints a disinterested person who, in its
  6 12 sole discretion, but acting in a fiduciary capacity,
  6 13 determines for the trustee the method to be used in
  6 14 determining the fair market value of the trust, and which
  6 15 assets, if any, are to be excluded in determining the unitrust
  6 16 amount.
  6 17    3.  The trustee sends written notice of the trustee's
  6 18 intention to take any action described in subsection 1, along
  6 19 with copies of such written policy, this subchapter, and the
  6 20 determination of the disinterested person to all of the
  6 21 following persons:
  6 22    a.  The trustor of the trust, if living.
  6 23    b.  All living persons who are currently receiving or
  6 24 eligible to receive distributions of income of the trust.
  6 25    c.  All living persons who would receive principal of the
  6 26 trust if the trust were to terminate at the time of the giving
  6 27 of such notice, without regard to the exercise of any power of
  6 28 appointment or, if the trust does not provide for its
  6 29 termination, all living persons who would receive or be
  6 30 eligible to receive distributions of income or principal of
  6 31 the trust if the persons identified in paragraph "b" were
  6 32 deceased.
  6 33    d.  All persons named in the governing instrument as
  6 34 adviser to or protector of the trust.
  6 35    4.  At least one person receiving notice under subsection
  7  1 3, paragraphs "b" and "c", is legally competent.
  7  2    5.  No person receiving the notice described in subsection
  7  3 3 objects, by written instrument delivered to the trustee, to
  7  4 the proposed action of the trustee within sixty days of
  7  5 receipt of such notice.
  7  6    Sec. 10.  NEW SECTION.  637.606  PETITION TO COURT TO
  7  7 CONVERT TRUST.
  7  8    If any trustee desires to do any of the following but does
  7  9 not have the ability to or elects not to do so under the
  7 10 provisions of section 637.602 or 637.604, the trustee may
  7 11 petition the court for such order as the trustee deems
  7 12 appropriate:
  7 13    1.  Convert an income trust to a total return unitrust.
  7 14    2.  Reconvert a total return unitrust to an income trust.
  7 15    3.  Change the percentage used to calculate the unitrust
  7 16 amount or the method used to determine the fair market value
  7 17 of the trust.
  7 18    If, however, there is only one trustee of such trust and
  7 19 such trustee is an interested trustee or in the event there
  7 20 are two or more trustees of such trust and a majority of them
  7 21 are interested trustees, the court, in its own discretion or
  7 22 upon the petition of such trustee or trustees or any person
  7 23 interested in the trust, may appoint a disinterested person
  7 24 who, acting in a fiduciary capacity, shall present such
  7 25 information to the court as necessary to enable the court to
  7 26 make its determinations.
  7 27    Sec. 11.  NEW SECTION.  637.607  VALUATION OF TRUST.
  7 28    The fair market value of the trust shall be determined at
  7 29 least annually, using such valuation date or dates or averages
  7 30 of valuation dates as are deemed appropriate.  Assets for
  7 31 which a fair market value cannot be readily ascertained shall
  7 32 be valued using such valuation methods as are deemed
  7 33 reasonable and appropriate.  Such assets may be excluded from
  7 34 valuation, provided all income received with respect to such
  7 35 assets is distributed to the extent distributable in
  8  1 accordance with the terms of the governing instrument.
  8  2    Sec. 12.  NEW SECTION.  637.608  PAYOUT PERCENTAGE.
  8  3    The annual unitrust payout percentage shall be four percent
  8  4 unless the governing instrument specifically provides a
  8  5 different percentage or the court approves a percentage of not
  8  6 less than three percent or more than five percent after notice
  8  7 of intent to seek a payout percentage other than four percent
  8  8 has been given to all of the following persons:
  8  9    1.  The trustor of the trust, if living.
  8 10    2.  All living persons who are currently receiving or
  8 11 eligible to receive distributions of income of the trust.
  8 12    3.  All living persons who would receive principal of the
  8 13 trust if the trust were to terminate at the time of the giving
  8 14 of such notice without regard to the exercise of any power of
  8 15 appointment or, if the trust does not provide for its
  8 16 termination, all living persons who would receive or be
  8 17 eligible to receive distributions of income or principal of
  8 18 the trust if the persons identified in subsection 2 were
  8 19 deceased.
  8 20    4.  All persons named in the governing instrument as
  8 21 adviser to or protector of the trust.
  8 22    Sec. 13.  NEW SECTION.  637.609  UNITRUST AMOUNT.
  8 23    The unitrust amount shall not be less than the net income
  8 24 of the trust, determined without regard to the provisions of
  8 25 section 637.610 for any of the following:
  8 26    1.  A trust for which a marital deduction has been taken
  8 27 for federal tax purposes under section 2056 or 2523 of the
  8 28 Internal Revenue Code, during the lifetime of the spouse for
  8 29 whom the trust was created.
  8 30    2.  A trust to which the generation-skipping transfer tax
  8 31 due under section 2601 of the Internal Revenue Code does not
  8 32 apply by reason of any effective date or transition rule.
  8 33    Sec. 14.  NEW SECTION.  637.610  PROCEDURE UPON CONVERSION
  8 34 OF INCOME TRUST TO TOTAL RETURN UNITRUST.
  8 35    Following the conversion of an income trust to a total
  9  1 return unitrust, the trustee:
  9  2    1.  Shall treat the unitrust amount as if it were net
  9  3 income of the trust for purposes of determining the amount
  9  4 available, from time to time, for distribution from the trust.
  9  5    2.  Shall allocate an amount to trust income, not in excess
  9  6 of the annual unitrust payout amount, in the following order:
  9  7    a.  The amount derived from net income, as determined if
  9  8 the trust were other than a total return unitrust.
  9  9    b.  The amount derived from other ordinary income as
  9 10 determined for federal income tax purposes.
  9 11    c.  The amount derived from net realized short-term capital
  9 12 gains as determined for federal income tax purposes.
  9 13    d.  The amount derived from net realized long-term capital
  9 14 gains as determined for federal income tax purposes.
  9 15    e.  The amount derived from trust principal.
  9 16    Sec. 15.  NEW SECTION.  637.611  TOTAL RETURN UNITRUST
  9 17 ADMINISTRATION.
  9 18    In administering a total return unitrust, the trustee may,
  9 19 in the trustee's sole discretion but subject to the provisions
  9 20 of the governing instrument, determine all of the following:
  9 21    1.  The effective date of the conversion.
  9 22    2.  The timing of distributions, including provisions for
  9 23 prorating a distribution for a short year in which a
  9 24 beneficiary's right to payments commences or ceases.
  9 25    3.  Whether distributions are to be made in cash or in kind
  9 26 or partly in cash and partly in kind.
  9 27    4.  If the trust is reconverted to an income trust, the
  9 28 effective date of such reconversion.
  9 29    5.  Such other administrative issues as may be necessary or
  9 30 appropriate to carry out the purposes of this subchapter.
  9 31    Sec. 16.  NEW SECTION.  637.612  PRINCIPAL DISTRIBUTIONS
  9 32 SUBJECT TO GOVERNING INSTRUMENT.
  9 33    Conversion to a total return unitrust under the provisions
  9 34 of this subchapter shall not affect any other provision of the
  9 35 governing instrument, if any, regarding distributions of
 10  1 principal.
 10  2    Sec. 17.  NEW SECTION.  637.613  CONSTRUCTION AND
 10  3 APPLICABILITY.
 10  4    This subchapter shall be construed as pertaining to the
 10  5 administration of a trust and shall be available to any trust
 10  6 that is administered in Iowa under Iowa law unless any of the
 10  7 following apply:
 10  8    1.  The governing instrument reflects an intention that the
 10  9 current beneficiary or beneficiaries are to receive an amount
 10 10 other than a reasonable current return from the trust.
 10 11    2.  The trust is a trust described in section 170(f)(2)(B),
 10 12 664(d), 1361(d), 2702(a)(3), or 2702(b) of the Internal
 10 13 Revenue Code.
 10 14    3.  One or more persons to whom the trustee could
 10 15 distribute income have a power of withdrawal over the trust
 10 16 that is not subject to an ascertainable standard under section
 10 17 2041 or 2514 of the Internal Revenue Code or that can be
 10 18 exercised to discharge a duty of support the person possesses.
 10 19    4.  The governing instrument expressly prohibits use of
 10 20 this subchapter by specific reference to the subchapter.  A
 10 21 provision in the governing instrument that the provisions of
 10 22 sections 637.601 through 637.615 or any corresponding
 10 23 provision of future law shall not be used in the
 10 24 administration of this trust or similar words reflecting such
 10 25 intent shall be sufficient to preclude the use of this
 10 26 subchapter.
 10 27    Sec. 18.  NEW SECTION.  637.614  GOOD FAITH ACTIONS.
 10 28    Any trustee or disinterested person who in good faith takes
 10 29 or fails to take any action under this subchapter shall not be
 10 30 liable to any person affected by such action or inaction,
 10 31 regardless of whether such person received written notice as
 10 32 provided in this subchapter and regardless of whether such
 10 33 person was under a legal disability at the time of the
 10 34 delivery of such notice.  Such person's exclusive remedy shall
 10 35 be to obtain an order of the court directing the trustee to
 11  1 convert an income trust to a total return unitrust, or to
 11  2 reconvert a total return unitrust to an income trust.
 11  3    Sec. 19.  NEW SECTION.  637.615  EFFECTIVE DATE.
 11  4    This subchapter takes effect upon the effective date of
 11  5 this Act and applies to trusts in existence on that date or
 11  6 created after that date.  
 11  7                          SUBCHAPTER 7
 11  8                    MISCELLANEOUS PROVISIONS
 11  9    Sec. 20.  NEW SECTION.  637.701  APPLICATION OF CHAPTER TO
 11 10 EXISTING TRUSTS AND ESTATES – CHAPTER PREVAILS.
 11 11    This chapter applies to every trust or decedent's estate on
 11 12 and after July 1, 2000, except as otherwise expressly provided
 11 13 in the will, the terms of the trust, or this chapter.
 11 14 Notwithstanding any Code provision to the contrary, the
 11 15 provisions of this chapter shall prevail over any other
 11 16 applicable Code provision.
 11 17    Sec. 21.  EFFECTIVE DATE.  This Act, being deemed of
 11 18 immediate importance, takes effect upon enactment.  
 11 19 
 11 20 
 11 21                                                             
 11 22                               BRENT SIEGRIST
 11 23                               Speaker of the House
 11 24 
 11 25 
 11 26                                                             
 11 27                               MARY E. KRAMER
 11 28                               President of the Senate
 11 29 
 11 30    I hereby certify that this bill originated in the House and
 11 31 is known as House File 2539, Seventy-ninth General Assembly.
 11 32 
 11 33 
 11 34                                                             
 11 35                               MARGARET THOMSON
 12  1                               Chief Clerk of the House
 12  2 Approved                , 2002
 12  3 
 12  4 
 12  5                            
 12  6 THOMAS J. VILSACK
 12  7 Governor
     

Text: HF02538                           Text: HF02540
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Bills and Amendments: General Index     Bill History: General Index

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