Delaware General Assembly

House Economic Development/Banking/Insurance & Commerce 5/8/24

Committee Hearing takes place within twelve legislative days.

4/16/24

Mantzavinos

Sen. Gay, Hansen, Townsend
Rep. Bush

Sen. Hocker, Pettyjohn
Reps. Carson, Griffith, Spiegelman

AN ACT TO AMEND TITLE 12 OF THE DELAWARE CODE RELATING TO DECEDENTS’ ESTATES AND FIDUCIARY RELATIONS.

Sections 1 and 2 of this Act update Chapter 8 of Title 12, the Uniform TOD Security Registration Act. Section 1 of this Act does the following: (1) Adds a new definition to § 801 of Title 12 to define “cash equivalents”. (2) Amends the definition of “registering entity” in § 801 of Title 12 to confirm that registering entities may include securities dealers, banks, savings banks, trust companies, investment advisers, and other financial institutions that maintain securities accounts for customers. (3) Amends the definition of “security” in § 801 of Title 12 to confirm that interests in or obligations of a corporation; a limited liability company or any series of a limited liability company; a partnership, whether general or limited, or any series of a partnership; and a trust, including a common law trust, a voting trust, a business trust, or a statutory trust, or any series of a trust, constitute a “security” for purposes of the Unform TOD Security Registration Act. (4) Amends the definition of “security account” in § 801 of Title 12 to make ministerial changes to the language of the definition and to expand the definition to include investment management accounts, securities accounts, custody accounts, or other agency accounts for the investment or custody of securities maintained with a bank, a savings bank, a trust company, a securities dealer, an investment adviser, or other financial institution. Section 2 of this Act amends § 805 of Title 12 to confirm that registration in beneficiary form with respect to an uncertificated security or a security account need not include the names of beneficiaries if the names of all beneficiaries are otherwise maintained by the registering entity. This avoids, for example, any requirement for the book entry of an uncertificated security or the name of a security account to include the names of all beneficiaries, so long as the registering entity otherwise maintains the names of such beneficiaries. Sections 1 and 2 of this Act are not intended to override provisions of an entity’s operating agreement or governing provisions, and will take effect subject to any implementing requirements of the agreement or governing provisions, such as transfer or ownership restrictions. Sections 3 and 4 of this Act pertain to “letters of wishes” by trustors and add a new definition to § 3301 of Title 12 and a new subsection to § 3315 of Title 12. Letters of wishes have long been created by trustors as a means of assisting fiduciaries to understand the discretionary terms of the trust’s governing instrument, to understand the application of those terms as intended by trustors, and to assist fiduciaries to exercise distribution discretion. Accordingly, Sections 3 and 4 of this Act acknowledge existing and common practice by affirming that the standard of review of a fiduciary’s decision to consider or not to consider a letter of wishes is the same “abuse of discretion” (within the meaning of § 187 of the Restatement (Second) of Trusts, not §§ 50 and 60 of the Restatement (Third) of Trusts) standard described in § 3315 of Title 12. The new provisions recognize that a letter of wishes is a non-binding document intended to provide guidance and insight into the trustor’s intent relevant to a particular trust. New subsection (c) of § 3315 of Title 12 specifically provides 3 safe harbors for determining that a fiduciary has not abused its discretion, by stating that the following do not constitute an abuse of that fiduciary’s discretion: (1) the fiduciary’s decision not to consider a letter of wishes with respect to an unambiguous provision of the trust’s governing instrument; (2) the fiduciary’s decision not to consider a letter of wishes not meeting the criteria of the new subsection (c) of § 3315 of Title 12; and (3) the fiduciary’s decision to consider a letter of wishes meeting the criteria of the new subsection (c) of § 3315 of Title 12, with respect to an ambiguous provision of a trust’s governing instrument. In addition, the new subsection (c) of § 3315 of Title 12 provides that the letter of wishes is not binding on the fiduciary, that the fiduciary has no duty to follow the letter of wishes, and that the fiduciary’s exercise or non-exercise of a discretionary power does not create an inference that the fiduciary improperly exercised such power or abused the fiduciary’s discretion under § 3315(a) of Title 12. Sections 3 and 4 of this Act, however, are not intended to override the Court of Chancery’s decision in Bishop v. McNeil, 1999 Del. Ch. LEXIS 186, 1999 WL 743489 (Del. Ch. 1999), in which the Court declined to take into account a letter to construe the provisions of an unambiguous governing instrument for a trust because the letter was extrinsic evidence of trustor intent. Thus, Sections 3 and 4 of this Act are not intended to affect the law regarding the Court’s interpretation of unambiguous governing instruments for trusts, for which the Court may not consider extrinsic evidence, or to affect the law regarding the Court’s interpretation of ambiguous governing instruments for trusts, for which the Court may consider extrinsic evidence, including any such letter of wishes. Section 5 of this Act adds new paragraph (32) to § 3325 of Title 12 to provide trustees of trusts with a statutory power to hire, retain, and compensate providers of programs and education for trust beneficiaries that may help prepare the beneficiaries for inheriting wealth, by helping to develop wealth-management skills, enhance beneficiary mental health and well-being, particularly as those areas may be impacted by the trust itself, and to reduce the potential for the trust to disincentivize the beneficiaries’ productivity or impact their mental health or well-being. The trustee may provide these programs and services or may hire and pay third parties or affiliates from the trust estate to provide these services and, in each case, without diminution of the trustee’s regular compensation to which the trustee would otherwise be entitled to receive for serving as trustee. Section 6 of this Act amends § 3339 of Title 12, regarding designated representatives, to do all of the following: (1) Provide specifically that when a trustor appoints a designated representative for beneficiaries, the appointment may be with respect to beneficiaries who are minors, who are incapacitated, who are unborn, or whose identities or locations are not known and not reasonably ascertainable. (2) Make clearer that when notice of the appointment is required to be given to parents of the represented person or to a guardian of the property of the represented person, the requirement applies only to those beneficiaries who are minors or who are incapacitated. Section 7 of this Act adds new § 3345 of Title 12 to enable trustors to create what is to be known as a “Beneficiary Well-Being Trust” by expressly referencing § 3345 of Title 12 in the trust’s governing instrument. Section 3345 of Title 12 recognizes a growing concern of trustors that while there are many advantages to passing wealth through generations in trust, such as tax savings, creditor protection, consolidated investment and management, and protection of assets from imprudent waste, trusts may grow in value so that considerable wealth may become available to the beneficiaries, sometimes before beneficiaries have had an opportunity to learn and know the value of money and the personal and social responsibilities that access to wealth entails. The purpose of the Beneficiary Well-Being Trust is to provide wealth management training and services for the beneficiaries’ mental health and well-being and to educate beneficiaries about their family history and legacy, family values and dynamics, family governance, and philanthropy, all as more fully described in § 3345 of Title 12. The governing instrument of a Beneficiary Well-Being Trust may provide for additional powers, duties, rights, and interests of the beneficiaries, trustees, and advisers to the fullest extent permissible under § 3303 of Title 12. The trustees and advisers of a Beneficiary Well-Being Trust may provide beneficiary well-being programs or may hire and pay third parties or affiliates from the trust estate to provide beneficiary well-being programs and, in each case, without diminution of the trustee’s or adviser’s regular compensation to which the trustee or adviser would otherwise be entitled to receive for serving as trustee or adviser. Section 8 of this Act amends § 3547 of Title 12, regarding virtual representation, to extend the principles of the section by allowing a designated representative of a beneficiary under § 3339 of Title 12 to represent virtually those whom the beneficiary could virtually represent, including, under the circumstances already permitted under § 3547 of Title 12, someone who is a minor, is incapacitated, is unborn, or whose identity or location is not known and not reasonably ascertainable; a presumptive remainder beneficiary of a trust; a contingent successor remainder beneficiary of a trust; the holder of a power of appointment over a trust; or the beneficiaries of a trust that is itself the beneficiary of another trust, if there is not a material conflict of interest between the designated representative and those who are to be virtually represented. Section 9 of this Act provides an effective date for this Act and makes clear that this Act applies to trusts created before, on, or after the effective date of this Act.

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Takes effect upon being signed into law

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