Delaware General Assembly

CHAPTER 299

FORMERLY

SENATE BILL NO. 310

AS AMENDED BY

SENATE AMENDMENT NO. 1

BE IT ENACTED BY THE GENERAL ASSEMBLY OF THE STATE OF DELAWARE:

Section 1. Amend Chapter 35, Title 12, of the Delaware Code by creating a new Section 3592 to read as follows:

Ҥ 3592. Failure of trust to dispose of all assets.

In the event that the terms of an inter vivos trust do not effectively dispose of a portion of or all of the principal and income of such inter vivos trust:

(a) If such failure occurs simultaneously with the death of the trustor, the trust principal not effectively disposed of shall be treated as though it were an additional part of the trustor’s estate, and the provisions of 12 Del. C. §501 et seq. shall govern the disposition of such principal.

(b) If such failure occurs at any time other than simultaneously with the death of the trustor, the trust income and principal not effectively disposed of shall be distributed as though the trustor had died on the date on which such failure occurred, a resident of the state of Delaware, owning the property so distributable, as though the provisions of 12 Del. C. §501 et seq. applied, but provided that if the provisions of 12 Del. C. §502(2) or 502(3) would apply for purposes of determining the share of a surviving spouse, the share of such surviving spouse shall be half of the personal property of the trust plus a life estate in the real estate of the trust.”

Section 2. Amend Chapter 35, Title 12 of the Delaware Code by creating a new Section 3593 to read as follows:

Except where circumstances justify a longer period, pecuniary gifts from an inter vivos trust which are payable as of the death of the trustor shall bear interest at the rate of 4 percent per annum payable from the trust beginning 13 months after the trustee first takes office as trustee following the death of the trustor until payment, unless a contrary intent is indicated by the trust instrument.”

Section 3. Amend Chapter 35, Title 12 of the Delaware Code by creating a new Section 3595 to read as follows:

A gift to a beneficiary of an inter vivos trust which is made effective as of the death of the trustor shall not be deemed to be in satisfaction of a debt due from the trustor to the donee, unless the intention of the trustor that it shall be so accepted shall appear in the trust expressly or by manifest implication.”

Section 4. Amend Chapter 35, Title 12 of the Delaware Code by creating a new Section 3596 to read as follows:

(a) Except as provided in subsection (b) of this section, shares of distributees of an inter vivos trust, who are entitled to distributions from the trust as of the date of the death of the trustor, abate, with personal property to be abated prior to real property within each class, in the following order:

(1) Property owned by the trust not disposed of by the trust instrument.

(2) Residuary gifts under the trust instrument.

(3) General gifts under the trust instrument.

(4) Specific gifts under the trust instrument.

For purposes of abatement, a general gift charged on any specific property or fund is a specific gift to the extent of the value of the property on which it is charged, and upon the failure or insufficiency of the property on which it is charged, a general gift to the extent of the failure or insufficiency. Abatement within each classification is in proportion to the amounts of property that each of the beneficiaries would have received if full distribution of the property had been made in accordance with the terms of the trust instrument.

(b) If the trust instrument expresses an order of abatement, or if the overall plan of distribution at the trustor’s death or the express or implied purpose of the gift would be defeated by the order of abatement stated in subsection (a) of this section, the shares of the distributees abate as may be found necessary to give effect to the intention of the trustor.

(c) If the subject of a preferred gift is sold or used incident to administration of the trust, abatement shall be achieved by appropriate adjustments in, or contributions from, other interests in the remaining assets.”

Section 5. Amend chapter 23, Title 12, §2312(c) of the Delaware Code to read as follows:

“(c) Except where circumstances justify a longer period, pecuniary legacies shall bear interest at the rate of 4 percent per annum payable from the estate beginning 13 months after the first appointment of a personal representative until payment unless a contrary intent is indicated by the will.”

Section 6. This Act shall be effective on August 1, 2006, and Sections 1 through 4 shall apply to trusts becoming irrevocable on or after that date.