| SB 267 | Signed | Mantzavinos | This Act clarifies various aspects of the State’s unclaimed property laws, specifically:
Section 1 clarifies and confirms current practice regarding the definition of “foreign country” or “foreign jurisdiction.”
Section 2 clarifies and confirms current practice regarding the definition of “owner.” This section is not intended to limit holder reimbursement claims, where a holder seeks to claim from the state previously reported property that the holder returned to the owner subsequent to the filing of the report.
Section 3 conforms Delaware's unclaimed property statute more closely to the 2016 Revised Uniform Unclaimed Property Act (RUUPA), clarifying that foreign-addressed property that is reportable to (or specifically exempted by) a foreign country is not reportable to Delaware. This section applies to reports filed and property remitted after the effective date of this Act. This Section shall not be construed to allow for holder refunds under 12 Del. C. § 1144 for reports filed or property remitted prior to the effective date of this Act.
Section 4 limits the filing of amended reports by holders seeking a refund of property when claims have been filed and paid on the property; when the original report was filed in conjunction with an examination or voluntary disclosure agreement submission; or after 3 years, when the holder seeks a refund due to an error in a cost of goods sold (COGS) calculation, as it usually pertains to the reporting of gift card property. This section is not intended to limit holder reimbursement claims, where a holder seeks to claim from the state previously reported property that the holder has since returned to the owner.
Section 5 clarifies when the owner notice requirements enacted on February 2, 2017, took effect.
Section 6 clarifies and confirms current practice that holders must pay and deliver property at the same time they file their report.
Section 7 section enacts provisions that have allowed Texas to successfully pursue claims in bankruptcy for unclaimed property reported, but not paid to the state, prior to a bankruptcy, should Delaware pursue similar claims in the future.
Section 8 clarifies the state’s indemnification obligations and definition of good faith generally and specifically for property reported "early" (before the full dormancy period has run). This section also establishes that the State Escheator may enter into written indemnification agreements with holders requesting to report and remit property "early" (before the full dormancy period has run). The amendment of this section to clarify the State Escheator’s complete discretion to grant or deny early escheatment requests under § 1155(b) merely recognizes the unreviewable discretion already provided under that section.
Section 9 clarifies and confirms current practice, allowing the State Escheator to decline to take custody of physical property, including savings and bearer bonds, any property that may present a future litigation risk to the state, worthless or nonfreely transferable securities, and virtual currency for which no ready public market exists.
Section 10 clarifies and confirms current practice, allowing the State Escheator to submit an affidavit after a review of business records and procedures as evidence of owner notice and publication.
Section 11 eliminates inefficient administrative processes and ensures that unclaimed property reported as owned by state agencies and discretely presented component units included in the state’s annual comprehensive financial report of the state remains in the state’s General Fund to be allocated only via the conventional legislative budget process. This section is similar to a statute adopted by Illinois.
Section 12 clarifies and confirms current practice that during an examination, the State Escheator may send or direct a holder or agent to send an owner notice letter (commonly called a “due diligence letter”) in the format specified by the State for any item identified as potential unclaimed property, including items that may be part of a sample population in conjunction with estimation, extrapolation, and statistical sampling, even if the item is not or would not be reportable to Delaware.
Section 13 clarifies that requests to the Secretary of Finance to review certain discretionary determinations of the State Escheator during expedited examinations must be submitted in writing within 30 days of the State Escheator’s determination.
Section 14 clarifies and confirms current practice that Voluntary Disclosure Agreements administered by the Secretary of State must comply with all provisions of this title.
Section 15 states that Sections 1, 3, 6, 7, 8, and 9 of this Act take effect on enactment.
Section 16 states that it is the intent of the General Assembly that Sections 5, 10, 12, 13, and 14 of this Act take effect upon enactment and also apply retroactively to any claims, examinations, voluntary disclosure agreements, or litigation pending as of the effective date of this Act.
Section 17 states that it is the intent of the General Assembly that Sections 2, 4, and 11 of this Act take effect upon enactment and also apply retroactively to reports filed or property remitted prior the effective date of this Act.
This Act also makes technical corrections to conform existing law to the standards of the Delaware Legislative Drafting Manual.
| AN ACT TO AMEND TITLE 12 OF THE DELAWARE CODE RELATING TO UNCLAIMED PROPERTY. |
| SB 268 | Signed | Mantzavinos | 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. | AN ACT TO AMEND TITLE 12 OF THE DELAWARE CODE RELATING TO DECEDENTS’ ESTATES AND FIDUCIARY RELATIONS. |
