CHAPTER 386 Administration of Trusts — Legal Investments — Uniform Principal and Income Act

Administration — Investments

386.010. Definitions for KRS 386.010 to 386.175.

As used in KRS 386.010 to 386.175 , unless the context requires otherwise:

  1. “Fiduciary” means any trustee, guardian, executor, administrator, conservator or other individual or corporation holding funds or otherwise acting in a fiduciary capacity.
  2. “Principal” means any person to whom a fiduciary, as such, owes an obligation.

History. 4711-1: amend. Acts 1982, ch. 141, § 99, effective July 1, 1982; 1984, ch. 111, § 152, effective July 13, 1984; 2014, ch. 25, § 100, effective July 15, 2014.

Compiler’s Notes.

This section was amended by § 108 of Acts 1980, ch. 396, which would have taken effect July 1, 1982; however, Acts 1982, ch. 141, § 146, effective July 1, 1982, repealed Acts 1980, ch. 396.

NOTES TO DECISIONS

Cited:

Peoples Nat’l Bank v. Guier, 284 Ky. 702 , 145 S.W.2d 1042, 1940 Ky. LEXIS 567 ( Ky. 1940 ); Everett v. Downing, 298 Ky. 195 , 182 S.W.2d 232, 1944 Ky. LEXIS 850 ( Ky. 1944 ).

Opinions of Attorney General.

Under the doctrine of ejusdem generis the term “… other individual … acting in a fiduciary capacity,” as it appears in subsection (1) of this section, must necessarily refer to one of the preceding named categories of statutory fiduciaries. OAG 80-634 .

KRS 41.220 , 41.380 (now KRS 42.500 ), 386.020 and this section should be read together, i.e., in pari materia, since they concern the same subject matter. OAG 81-353 .

The State Investment Commission, in carrying out its investment function under KRS 41.380 (now KRS 42.500 ), is a fiduciary of the state government. OAG 81-353 .

Research References and Practice Aids

Cross-References.

Trustees may sue or be sued, KRS 273.110 .

Bank acting as fiduciary, provisions for, KRS 286.3-200 , 286.3-220 .

Appointment of a nominee by banking institutions acting in a fiduciary capacity, 286.3-225 .

Bond of fiduciary, provisions for, KRS 62.060 .

Claims against decedent’s estate, KRS 396.011 , et seq.

Gift to charity not defeated for want of trustee, KRS 381.270 .

Bonding of fiduciary by authorized surety company to be a charge against estate, KRS 395.130 .

Debts of fiduciary to be paid before claims of general creditors from a voluntary assignment, KRS 379.010 .

Consideration paid by other than grantee — Effect, KRS 381.170 .

Fiduciaries, oath required of, KRS 62.030 .

Inventory of personal property held by fiduciary, for tax purposes, investigation of accounts, payment of taxes before final discharge, KRS 132.510 .

Liability and payment of income tax on trust estate, return by fiduciary, KRS 141.030 , 141.190 .

Order of appointment and bond of fiduciary, re-issue if lost, KRS 422.230 .

Prohibition of special legislation on estates of persons under disability, Const., § 59, sixth.

Release of fiduciary from liability, indemnity, KRS 62.090 to 62.130 .

Trust company acting as fiduciary, provisions for, KRS 286.3-210 .

386.020. Authorized investments of trust funds — Fiduciary to account for profits — Section not applicable to trustees.

  1. Any fiduciary holding funds for loan or investment may invest them in:
    1. Bonds or other interest-bearing obligations of the federal government;
    2. Bonds, state warrants, and other interest-bearing obligations of this state;
    3. Obligations issued separately or collectively by or for federal land banks, federal intermediate credit banks, and banks for cooperatives under the Act of Congress known as the Farm Credit Act of 1971, 85 Stat. 583, 12 U.S.C. sec. 2001 and amendments thereto;
    4. Notes and bonds secured by mortgage or trust deed insured by the federal housing administrator, obligations issued or insured by the federal housing administrator, and securities issued by national mortgage associations;
    5. Obligations representing loans and advances of credit that are eligible for credit insurance by the federal housing administrator, and the fiduciary may obtain such insurance;
    6. Loans secured by real property or leasehold, that the federal housing administrator insures or makes a commitment to insure, and the fiduciary may obtain such insurance;
    7. Real estate mortgage notes, bonds, and other interest-bearing or dividend-paying securities, including securities of any open-end or closed-end management type investment company or investment trust registered under the Federal Investment Company Act of 1940 or units of common trust funds managed by the fiduciary, which would be regarded by prudent businessmen as a safe investment. The fact that the fiduciary is providing services to the foregoing investment company or trust as investment advisor, custodian, transfer agent, registrar, or otherwise shall not preclude the fiduciary from investing in the securities of such investment or trust;
    8. Real estate, after obtaining the approval of the District Court for such investment;
    9. Life insurance, endowment, and annuity contracts issued by legal reserve companies authorized to do business in this state, after obtaining the approval of the District Court for such investment. Said fiduciary may select any optional settlement provided in a policy maturing by death or as an endowment;
    10. Notes, other interest-bearing obligations, and purchases of participations in such instruments, that are guaranteed in whole or in part by the United States of America or by any agency or instrumentality thereof;
    11. Certificates of deposit and savings accounts of any state or national bank whose deposits are insured by the Federal Deposit Insurance Corporation and whose main office is in this state, including itself, if such fiduciary is a bank. Any portion of such investments that is not insured by the Federal Deposit Insurance Corporation shall be fully secured by:
      1. An irrevocable letter of credit issued by the United States of America or by an agency or instrumentality thereof;
      2. A pledge of securities named in this subsection as collateral;
      3. A surety bond; or
      4. A combination of such irrevocable letters of credit, securities, and surety bonds; and
    12. United States government securities or United States government agency securities, the payment of the principal and interest on which the full faith and credit of the United States is pledged, said investments being made under the terms of a repurchase agreement between the fiduciary and any state or national bank whose main office is in this state, including itself, if such fiduciary is a bank.
  2. Fiduciaries holding funds for loan or investment may make loans with the securities named in subsection (1) of this section as collateral.
  3. The fiduciary shall account for all interest or profit received.
  4. This section shall not apply to trustees.

History. 4706, 4706a, 4706-6, 4706-7: amend. Acts 1944, ch. 111; 1950, ch. 171; 1954, ch. 52; 1960, ch. 155; 1962, ch. 133; 1970, ch. 267, § 1; 1976, ch. 107, § 3; 1976 (Ex. Sess.), ch. 14, § 325, effective January 1, 1978; 1980, ch. 134, § 1, effective July 15, 1980; 1986, ch. 391, § 1, effective July 15, 1986; 1990, ch. 450, § 1, effective July 13, 1990; 2002, ch. 157, § 1, effective July 15, 2002; 2014, ch. 25, § 101, effective July 15, 2014.

Compiler’s Notes.

The Federal Investment Company Act of 1940 referred to in subsection (1)(g) is compiled as 15 USCS, §§ 80a-1 — 80a-52.

NOTES TO DECISIONS

1.Real Estate.

“Real estate” is not limited to real estate situated in this state. Ridley v. Dedman, 134 Ky. 146 , 119 S.W. 756, 1909 Ky. LEXIS 358 ( Ky. 1909 ).

Under no circumstances has a guardian authority to purchase real estate for his wards or to improve real estate belonging to his wards, where the purchase price or the cost of the improvements is in excess of the funds in his hands, and this creates a debt which may jeopardize the ward’s estate. Harris v. Preston, 153 Ky. 810 , 156 S.W. 902, 1913 Ky. LEXIS 936 ( Ky. 1913 ).

Where will directed investment of trust funds in securities, chancellor could not order that funds be invested in real estate in absence of showing that good and safe securities could not be found or that such investment would probably result in loss to trust estate. Hackett's Ex'rs v. Hackett's Devissees, 180 Ky. 406 , 202 S.W. 864, 1918 Ky. LEXIS 68 ( Ky. 1918 ).

Trustee may invest trust funds in real estate, and under KRS 386.080 (repealed) he may sell such real estate for reinvestment unless prohibited by KRS 386.060 . Vansant v. Spillman, 193 Ky. 788 , 237 S.W. 379, 1922 Ky. LEXIS 58 ( Ky. 1922 ).

Guardian of infant children having $5,500 in money was authorized to invest $2,000 of same, to be supplemented by $1,000 furnished by their mother, in the purchase of a home for the mother and children. Ex parte Allnutt, 194 Ky. 312 , 238 S.W. 752, 1922 Ky. LEXIS 142 ( Ky. 1922 ).

Under the provisions of this section the guardian may, with the direction of the Circuit Court (now District Court), invest the funds of his ward in real estate, where it appears to be a safe investment or reasonably necessary for her maintenance. National Surety Co. v. Taylor's Guardian, 200 Ky. 728 , 255 S.W. 542, 1923 Ky. LEXIS 180 ( Ky. 1923 ). See Houston's Guardian v. Luker's Former Guardian, 253 Ky. 602 , 69 S.W.2d 1014, 1934 Ky. LEXIS 697 ( Ky. 1934 ).

While it is the duty of a trustee, no matter in what he invests the trust funds, to make in good faith such an investment as would be made by prudent business men with a view to securing a safe income for themselves and their families, and, as a rule such funds should not be invested in land, guardian was without authority to invest funds of his wards in a vacant lot. Gee v. Womack, 203 Ky. 718 , 263 S.W. 6, 1924 Ky. LEXIS 991 ( Ky. 1924 ). See First State Bank v. Catron, 268 Ky. 513 , 105 S.W.2d 162, 1937 Ky. LEXIS 480 ( Ky. 1937 ).

An exchange of an infant ward’s real estate for other real estate may be approved by the court under this section and the sections relating to sale of an infant’s real estate. Homans v. Johnson, 294 Ky. 158 , 171 S.W.2d 241, 1943 Ky. LEXIS 412 ( Ky. 1943 ).

2.Bank Stock.

Where charter authorized college to make any investment of its funds which is “authorized by law” it was authorized to hold bank stock. Gamble v. Cumberland College, 4 F. Supp. 767, 1933 U.S. Dist. LEXIS 1341 (D. Ky. 1933 ).

Stocks of state and national banks in good standing have always been regarded as prudent and safe investments. Gamble v. Cumberland College, 4 F. Supp. 767, 1933 U.S. Dist. LEXIS 1341 (D. Ky. 1933 ).

Where bank stock is bequeathed to infant, guardian may accept it and hold title, but neither infant nor guardian is personally liable for assessment in case of bank’s insolvency. Fitzpatrick's Guardian v. First Nat'l Bank, 256 Ky. 93 , 75 S.W.2d 754, 1934 Ky. LEXIS 359 ( Ky. 1934 ).

3.— Exchange of Stock.

Where new bank took over assets of old bank, executrix of stockholder of old bank had no authority to exchange the stock in the old bank for stock in the new bank and thereby impose double liability upon the estate for the debts of the new bank. Wood v. First American Bank, 278 Ky. 526 , 128 S.W.2d 971, 1939 Ky. LEXIS 461 ( Ky. 1939 ).

4.State Warrants.

Chancellor may order investment of trust funds in state warrants even though they are subject to call at any time. Hackett's Ex'rs v. Hackett's Devissees, 180 Ky. 406 , 202 S.W. 864, 1918 Ky. LEXIS 68 ( Ky. 1918 ).

5.Common Stock.

Where testator put farm in trust with restriction that it not be sold, and court allowed sale with proceeds invested in government bonds, it was proper for the court later, on petition of beneficiary of life income of trust, to order 75% of government bonds sold and proceeds reinvested in common stocks. Security Trust Co. v. Mahoney, 307 Ky. 661 , 212 S.W.2d 115, 1948 Ky. LEXIS 811 ( Ky. 1948 ) (decision prior to 1960 amendment).

Where the distribution of stocks resulting from a stock dividend to the life tenant beneficiary of a trust fund was proper under the law existing at the time of the distribution, a subsequent opinion by the Court of Appeals in a similar case was not given retroactive effect so as to render the transaction invalid. Pohlman v. Owensboro Nat'l Bank, 447 S.W.2d 859, 1969 Ky. LEXIS 105 ( Ky. 1969 ) (decision prior to 1962 amendment).

6.— Continuation of Beneficiary’s Business.

A fiduciary may not risk trust property in trade or speculation nor may he simply continue the business or trade of the cestui que trust; it is his duty to close up the business at the earliest convenient moment and withdraw the funds and invest them in securities permitted by law. W. T. Sistrunk & Co. v. Navarra's Committee, 268 Ky. 753 , 105 S.W.2d 1039, 1937 Ky. LEXIS 529 ( Ky. 1937 ).

7.Time Deposits.

When the committee deposited his ward’s funds in the bank and obtained therefrom an interest-bearing certificate, it was such investment as is authorized by this section. Hines v. Brown's Committee, 261 Ky. 630 , 88 S.W.2d 314, 1935 Ky. LEXIS 705 ( Ky. 1935 ).

8.Trustees.
9.— Adviser.

A settlor may appoint an adviser to his trustee whose consent is a prerequisite to valid execution of parts of the trust, but capacity of advisers is limited to advising and they are not trustees. Gathright's Trustee v. Gaut, 276 Ky. 562 , 124 S.W.2d 782, 1939 Ky. LEXIS 553 ( Ky. 1939 ).

10.— Personal Powers.

A settlor may make powers and duties of trustee or adviser personal, and in such event no one can be substituted for named trustee or adviser, but where not personal, equity will appoint a substitute in order to prevent trust from failing. Gathright's Trustee v. Gaut, 276 Ky. 562 , 124 S.W.2d 782, 1939 Ky. LEXIS 553 ( Ky. 1939 ).

11.— Duties.

It is the duty of a trustee, no matter in what he invests the trust funds, to make in good faith such an investment as would be made by prudent business men with a view to securing a safe income for themselves and their families. Bank of Kentucky v. Winn, 110 Ky. 140 , 61 S.W. 32, 22 Ky. L. Rptr. 1629 , 1901 Ky. LEXIS 71 ( Ky. 1901 ); Aydelott v. Breeding, 111 Ky. 847 , 64 S.W. 916, 23 Ky. L. Rptr. 1146 , 1901 Ky. LEXIS 265 ( Ky. 1901 ); Germania Safety Vault & Trust Co. v. Driskell, 66 S.W. 610, 23 Ky. L. Rptr. 2050 , 1902 Ky. LEXIS 458 ( Ky. 1902 ); Robertson v. Robertson's Trustee, 130 Ky. 293 , 113 S.W. 138, 1908 Ky. LEXIS 269 ( Ky. 1908 ); Harris v. Preston, 153 Ky. 810 , 156 S.W. 902, 1913 Ky. LEXIS 936 ( Ky. 1913 ); Gee v. Womack, 203 Ky. 718 , 263 S.W. 6, 1924 Ky. LEXIS 991 ( Ky. 1924 ).

Guardian, in making loan to failing corporation, secured by the notes of failing firm, which were a lien upon property of less value than the loan, did not exercise diligence of “prudent business men” where he might, by inquiry, have known the facts. Atkinson v. Wittg, 40 S.W. 457, 19 Ky. L. Rptr. 513 (1897) (Decision prior to 1960 amendment).

A guardian is required only to exercise such prudence as ordinarily prudent men do in their own affairs in investments of the same character. United States Fidelity & Guaranty Co. v. Drinkard, 250 Ky. 695 , 63 S.W.2d 916, 1933 Ky. LEXIS 761 ( Ky. 1933 ).

A trustee cannot rely upon the general reputation of the solvency of a corporation or the worth of its securities as a good investment when it had the means at hand coupled with the duty to ascertain its actual value. Bryan v. Security Trust Co., 296 Ky. 95 , 176 S.W.2d 104, 1943 Ky. LEXIS 102 ( Ky. 1943 ).

Where income from trust was to go to life beneficiary and the corpus to a remainderman, it was the duty of the trustee to treat the beneficiaries impartially, to make such investments as would yield a reasonable income and yet not unreasonably jeopardize the corpus. Security Trust Co. v. Mahoney, 307 Ky. 661 , 212 S.W.2d 115, 1948 Ky. LEXIS 811 ( Ky. 1948 ).

12.— Transfer of Funds Among Trusts.

In absence of controlling statute, a trustee of several estates may legally transfer securities from one trust to another by purchase and sale, provided the trustee is not personally interested in transaction and terms of the transaction are fair to both trusts. Bryan v. Security Trust Co., 296 Ky. 95 , 176 S.W.2d 104, 1943 Ky. LEXIS 102 ( Ky. 1943 ).

13.— Violations of Duties.

Failure of committee to invest funds of his ward as authorized by this section was not excused by general economic depression making investments unsafe, but such failure was not grounds for removal of committee. Burton v. Burton's Committee, 262 Ky. 499 , 90 S.W.2d 687, 1936 Ky. LEXIS 46 ( Ky. 1936 ).

If trust money is invested in unauthorized security and law is changed making such investment authorized, before it depreciates in value, the trustee is excused from any liability. People's State Bank & Trust Co. v. Wade, 269 Ky. 89 , 106 S.W.2d 74, 1937 Ky. LEXIS 546 ( Ky. 1937 ).

Trustee of money awarded in lump sum under workers’ compensation act for benefit of dependents of deceased employee has no power to invest trust money in land and then jeopardize the interest of the beneficiaries of the trust fund by encumbering the land with a lien to secure the balance of the purchase price; and such a purchase and encumbrance constitutes a misapplication of the trust money. Turner v. Risner, 280 Ky. 822 , 134 S.W.2d 951, 1939 Ky. LEXIS 220 ( Ky. 1939 ).

Alleged impropriety of selling stock initially to other trust estates would not of itself be enough to justify rescission of the transfer of such stock to the trust estate of the beneficiaries, in the absence of a showing that such transfer was made in bad faith or to avoid the consequences of the initial sale. Bryan v. Security Trust Co., 296 Ky. 95 , 176 S.W.2d 104, 1943 Ky. LEXIS 102 ( Ky. 1943 ).

The rule that a beneficiary may repudiate the sale to the trust estate, by a trustee of his own property, is sufficiently broad to embrace transactions with trust funds resulting in indirect profit to the trustee and this section requires a fiduciary to account for all interest or profit received. Bryan v. Security Trust Co., 296 Ky. 95 , 176 S.W.2d 104, 1943 Ky. LEXIS 102 ( Ky. 1943 ).

A trustee cannot flagrantly violate its duty and then relieve itself of liability by turning over to the beneficiary, just before it becomes worthless, a lot of stock that to say the least is highly speculative. Hutchings v. Louisville Trust Co., 303 Ky. 147 , 197 S.W.2d 83, 1946 Ky. LEXIS 807 ( Ky. 1946 ).

Petition, in action by beneficiaries of trust against trustee, seeking to recover value of original trust securities which trustee had exchanged for stock of holding company which later went bankrupt sufficiently stated a cause of action, where it alleged that the trustee was financially interested in holding company and made the change for selfish interests, that the trustee was familiar with the hazards involved in the holding company structure, and that after the trust had been terminated and the stock delivered to the beneficiaries the holding company “became insolvent and its stock worthless,” although the petition did not specifically allege that the stock was worthless at the time it was turned over to the beneficiaries. Hutchings v. Louisville Trust Co., 303 Ky. 147 , 197 S.W.2d 83, 1946 Ky. LEXIS 807 ( Ky. 1946 ).

14.— Accounting.

The plaintiff must produce some evidence to indicate there has probably been an improper handling of the estate or a failure to make a full accounting to place upon the trusts the burden and expense to render an accounting. Bryan v. Security Trust Co., 296 Ky. 95 , 176 S.W.2d 104, 1943 Ky. LEXIS 102 ( Ky. 1943 ).

15.— Forfeiture of Compensation.

The rule of forfeiture of compensation by the trustee applies to transactions concerned in the repudiations and refund to be made but could not in justice and equity be extended to all transactions during the trust company’s 42 years of service to the trust estate. Bryan v. Security Trust Co., 296 Ky. 95 , 176 S.W.2d 104, 1943 Ky. LEXIS 102 ( Ky. 1943 ).

16.— Interest on Investments.

Where guardian in exercise of diligence and good faith was unable to procure six per cent interest on his ward’s money, he was only accountable for the greatest rate he could have procured under the circumstances. If he was not able by exercise of reasonable diligence to loan the money or to find remunerative investment for it, he was not accountable for interest. Goff's Guardian v. Goff, 123 Ky. 73 , 93 S.W. 625, 29 Ky. L. Rptr. 501 , 1906 Ky. LEXIS 119 ( Ky. 1906 ).

17.— Limitation on Power of Sale.

Will providing that trustee should have no power to sell property or make investments without consent of named persons, or of a Circuit Court Judge in case named persons failed to act, contemplated merely advice of Circuit Judge, and not court order. Gathright's Trustee v. Gaut, 276 Ky. 562 , 124 S.W.2d 782, 1939 Ky. LEXIS 553 ( Ky. 1939 ).

18.— Beneficiary’s Consent to Investment.

A beneficiary of a trust may consent to an investment that would not otherwise be allowed and given this consent may not hold the trustee liable for any interest that could have been realized from proper investments. Davis v. Woods, 273 Ky. 210 , 115 S.W.2d 1043, 1938 Ky. LEXIS 596 ( Ky. 1938 ).

19.Attorneys Not Deemed Fiduciaries.

An attorney in fact is not a fiduciary within the meaning of this section and is not limited by this section in the investment of funds of his principal. Reily v. Fleece, 259 Ky. 330 , 82 S.W.2d 341, 1935 Ky. LEXIS 305 ( Ky. 1935 ).

Attorney who, after obtaining substantial sum for woman client in settlement of action for personal injuries, advised her as to investment of sum received and purchased corporate stocks for her, did not occupy the position of a de son tort fiduciary and was under no duty to restrict the investments to those securities authorized by this section. Everett v. Downing, 298 Ky. 195 , 182 S.W.2d 232, 1944 Ky. LEXIS 850 ( Ky. 1944 ), cert. denied, 329 U.S. 750, 67 S. Ct. 79, 91 L. Ed. 647, 1946 U.S. LEXIS 2100 (U.S. 1946).

20.Liability for Depreciation.

Neither a guardian nor his surety is liable to the ward for the depreciation of securities in which the ward’s estate was lawfully invested by the guardian, unless they could have prevented the loss by exercising proper care after learning of the facts. Fidelity & Casualty Co. v. Pippin, 276 Ky. 393 , 124 S.W.2d 62, 1939 Ky. LEXIS 513 ( Ky. 1939 ).

Cited:

Goff’s Guardian v. Goff, 123 Ky. 73 , 29 Ky. L. Rptr. 501 , 93 S.W. 625, 1906 Ky. LEXIS 119 ( Ky. 1906 ); Louisville Trust Co. v. Glenn, 33 F. Supp. 403, 1940 U.S. Dist. LEXIS 3091 (W.D. Ky. 1940 ); Jenkins v. Keith, 285 Ky. 240 , 147 S.W.2d 397, 1941 Ky. LEXIS 365 ( Ky. 1941 ); Hutchings v. Louisville Trust Co., 276 S.W.2d 461, 1954 Ky. LEXIS 1255 ( Ky. 1954 ); Morris v. Morris, 293 S.W.2d 243, 1956 Ky. LEXIS 62 ( Ky. 1956 ).

Opinions of Attorney General.

The utility commission could make a loan to the city from the depreciation fund of the water works system as an investment only if it could be effected within the basic requirements of this section. OAG 64-798 .

The Circuit Court would authorize the master commissioner to invest money held by him for unknown defendants in the various obligations described in this section until such time as the money will escheat to the Commonwealth under KRS 393.100 . OAG 71-61 .

Where the trustees of the policemen’s and firemen’s pension fund of a city of the fourth class sought to turn over all of the assets of the pension fund to an insurance company to invest and administer pursuant to the pension fund act in the place of the board, it was doubtful that such a procedure would be legal under the provisions of KRS 95.768 et seq., but investment of pension fund money in interest-producing stock of insurance companies would most likely be permissible. OAG 71-154 .

The circuit judges could authorize the Circuit Court clerk to invest funds from advance filing fees collected pursuant to KRS 64.030 (repealed) in one of the obligations permitted in this chapter, provided that sufficient amounts of the principal are available to apply to the clerk’s costs and give refunds to a party where applicable. OAG 72-198 .

Although the literal provision in KRS 41.380(2) (now KRS 42.500 ), that the State Investment Commission may invest state surplus funds in federal obligations, remains unchanged from the original enactment in 1952 the General Assembly amended this section in 1980 to expressly provide that any fiduciary holding funds for loan or investment may invest them in Certificates of Deposit of any state or national bank whose deposits are insured by the Federal Deposit Insurance Corporation, and, as the later statute, this section controls. OAG 81-353 .

KRS 41.220 , 41.380 (now KRS 42.500 ), 386.010 and this section should be read together, i.e., in pari materia, since they concern the same subject matter. OAG 81-353 .

The State Investment Commission, in carrying out its investment function under KRS 41.380 (now KRS 42.500 ), is a fiduciary of the state government. OAG 81-353 .

The State Investment Commission has the authority under KRS 41.380(2) (now KRS 42.500 ) and subdivision (1)(l) of this section to invest “excess cash” in term repurchase agreements involving United States Treasury Bills since such agreements, in reality, involve the state’s purchase of United States Treasury Bills from a financial institution with an agreement that the financial institution will repurchase the treasury bills at some definite future date, not to exceed one year from date of investment. OAG 82-29 .

Since proposed “reverse repurchase agreements,” by which the state would sell an investment that it held (such as treasury bills) for a specified number of days with the condition that the state repurchase the security at the end of that time, contemplated the use of “excess” funds (in excess of that amount required to meet current state expenditures under normal payment schedules) within the time limits of KRS 41.380(2) (now subsection (2) of KRS 42.500 ), such agreements would be valid and permissible on the part of the State Investment Commission. OAG 82-209 .

The authority to engage in “reverse repurchase agreements” is implicit in the express power of investment. OAG 82-209 .

The obvious purpose of KRS 41.380 (now KRS 42.500 ) and this section is to derive the maximum possible under marketing conditions from the investment of the state money. OAG 82-209 .

Though the term “reverse repurchase agreement” is not found in that terminology in the statutes, the language of KRS 41.380 (now KRS 42.500 ) and subsection (1)(l) of this section is broad enough to cover this temporary sale of the securities, since the temporary sale does not negate the basic “investment” posture of the State Investment Commission in holding the securities involved in this procedure. OAG 82-209 .

A bank acting in its capacity as a trustee may invest the trust assets under management in a mutual fund registered with the SEC under the Investment Company Act of 1940 so long as such investments are not prohibited by the trust instrument or court order and the investments would be regarded by a prudent businessman as a safe investment. OAG 84-227 .

This section has no application to the public funds governed by the specific statutes, KRS 66.480 , subsection (2) of KRS 386.030 , and KRS 386.050 . OAG 88-52 . Modifying OAG 82-124 .

Research References and Practice Aids

Cross-References.

Investment of trust funds by banks and trust companies, KRS 286.3-220 to 286.3-270 .

Redevelopment corporation obligations are authorized investments, KRS 99.270 .

Sale of personal property by fiduciaries, KRS 395.200 .

State funds, investment of, KRS 42.500 .

Kentucky Bench & Bar.

Cullian, The Innate Prudence of Writing Options Against a Trust Portfolio, Volume 51, No. 2, Spring 1987 Ky. Bench & B. 16.

Treece, Powers of Attorney, Volume 54, No. 1, Winter 1990 Ky. Bench & B. 26.

Northern Kentucky Law Review.

A Survey of Key Issues Kentucky Elder Law, 29 N. Ky. L. Rev. 139 (2002).

386.023. Investment method alternatives.

Any other provisions of this chapter notwithstanding, and in the absence of an express provision to the contrary in an instrument establishing a fiduciary relationship, whenever such instrument requires, directs, authorizes, or permits a fiduciary to invest funds in obligations of the United States government or in obligations unconditionally guaranteed by the United States government, such fiduciary may invest in and hold such obligations either directly or in the form of securities in any open-end management type investment company or investment trust registered under the Investment Company Act of 1940, as from time to time amended, provided that the portfolio of such investment company or investment trust is limited to such obligations and to repurchase agreements fully collateralized by obligations of the United States government or obligations unconditionally guaranteed by the United States government and provided further that any such investment company or investment trust shall take delivery of such collateral either directly or through an authorized custodian.

History. Enact. Acts 1986, ch. 321, § 1, effective July 15, 1986.

Compiler’s Notes.

The Federal Investment Company Act of 1940 referred to in this section is compiled as 15 USCS, §§ 80a-1 — 80a-52.

386.025. Restrictions on investment in own stock by bank or trust company acting as fiduciary.

No bank or trust company empowered to act as a fiduciary under the laws of this state, shall purchase shares of its own capital stock or shares of the capital stock of an affiliated institution as an investment for any estate or trust under its management, unless expressly authorized so to do by the instrument creating the estate or trust, or unless acquired through the exercise of rights issued in respect to stock originally received; provided however, if shares of its own capital stock or shares of the capital stock of an affiliated institution are received by any such bank or trust company direct from the testator or donor, as an original investment in an estate or trust, the fact that they are shares in the fiduciary institution, or an affiliate thereof, shall not, of itself, be sufficient to cause them to be considered improper investments, regardless of the number of said shares or value thereof, but said shares together with any additional shares subsequently acquired through the exercise of rights issued in respect thereto shall be regarded as proper trust investments in the hands of such fiduciary bank or trust company, if they would be so regarded if held by an individual acting in such fiduciary capacity.

History. Enact. Acts 1944, ch. 13.

NOTES TO DECISIONS

Cited:

Graves v. Security Trust Co., 369 S.W.2d 114, 1963 Ky. LEXIS 62 ( Ky. 1963 ).

Research References and Practice Aids

Cross-References.

Restrictions on corporation’s ownership of own shares, KRS 271B.6-310 .

386.030. Investment of funds of financial institutions and funds in hands of public officials.

  1. Banks, trust companies, insurance companies, savings and loan associations, executors, administrators, trustees or others acting in a fiduciary capacity, trust funds, and other financial institutions, originating mortgagee institutions, and other institutions approved as mortgagees and meeting otherwise the requirements of the secretary of housing and urban development, the Federal Housing Administration or Department of Veterans Affairs to act as mortgagees under that agency’s approval program, subject to the laws of this state, may:
    1. Make such loans and advances of credit and purchases of obligations representing loans and advances of credit as are eligible for credit insurance or guaranty by the secretary of housing and urban development, the federal housing administrator or administrator of veterans’ affairs, and may obtain such insurance, guaranty or other approval;
    2. Make such loans secured by real property or leasehold, as the secretary of housing and urban development, the federal housing administrator or administrator of veterans’ affairs insures or issues a guaranty or makes a commitment to insure, or guaranty, and may obtain such insurance, or guaranty;
    3. Invest their funds, eligible for investment, in notes or bonds secured by mortgage or trust deed insured by the secretary of housing and urban development, the federal housing administrator or administrator of veterans’ affairs, and in debentures issued by the secretary of housing and urban development, the federal housing administrator or administrator of veterans’ affairs, and also in securities issued by national mortgage associations; and
    4. Invest their funds in real estate mortgage notes, bonds and other interest-bearing or dividend-paying securities (including securities of any open-end or closed-end management type investment company or investment trust registered under the Federal Investment Company Act of 1940) which would be regarded by prudent businessmen as a safe investment. The fact that the persons listed in this subsection are providing services to the foregoing investment company or trust as investment advisor, custodian, transfer agent, registrar or otherwise shall not preclude such persons from investing in the securities of such investment company or trust.
  2. This state and any of its political subdivisions, or any agency or instrumentality thereof may invest its funds and the moneys in its custody or possession, eligible for investment, in notes or bonds described in paragraph (c) of subsection (1) of this section.
  3. No law of this state requiring security upon which loans or investments may be made, or prescribing the nature, amount or form of the security, or prescribing or limiting interest rates upon loans or investments, or limiting investments of capital or deposits, or prescribing or limiting the period for which loans or investments may be made, shall apply to loans or investments made pursuant to this section.

HISTORY: 4706-6, 4706-7, 4706-9: amend. Acts 1960, ch. 163, § 1; 1968, ch. 152, § 159; 1970, ch. 205, § 1; 1972, ch. 327, § 1; 1984, ch. 408, § 66, effective July 13, 1984; 1986, ch. 391, § 2, effective July 15, 1986; 2017 ch. 42, § 19, effective June 29, 2017.

Compiler’s Notes.

The Federal Investment Company Act of 1940 referred to in subdivision (1)(d) is compiled as 15 USCS §§ 80a-1 — 80a-52.

Opinions of Attorney General.

Under subsection (3) of this section loans insured by the Federal Housing Administration are not subject to the maximum rate of interest prescribed by KRS 360.010 . OAG 69-35 .

This section does exempt loans guaranteed by the Veterans Administration from Kentucky’s usury law and is valid. OAG 70-479 .

A savings and loan association in making loans insured by the FHA can charge “points” to the seller at a percentage of the principal amount of the loan in addition to the maximum legal interest rate as set forth in KRS 360.010 without violating Kentucky’s usury laws. OAG 70-782 .

Under this section a credit union may invest in mutual funds if such funds are considered a safe investment by prudent businessmen, and to the extent there is any conflict between this opinion and OAG 60-1236 or any other opinion, those opinions are accordingly amended. OAG 72-566 .

The board of trustees of a policemen’s and firefighter’s pension fund in a city of the fourth class is authorized under this section to invest those funds in qualifying investment companies, including a money market fund, so long as those companies would be regarded by a prudent businessman as a safe investment. OAG 80-355 .

Section 386.020 has no application to the public funds governed by the specific statutes, KRS 66.480 , subsection (2) of this section, and KRS 386.050 . OAG 88-52 . Modifying OAG 82-124 .

Research References and Practice Aids

Cross-References.

Investment of funds of:

Banks and trust companies, KRS 286.3-100 to 286.3-115 .

Annual audit, KRS 286.6-285 .

Scope of subtitle, KRS 304.7-010 et seq.

Redevelopment corporation obligations are authorized investments, KRS 99.270 .

386.040. Securities of certain federal agencies authorized as collateral.

Notes or bonds secured by mortgage or trust deed insured and debentures issued by the Federal Housing Administrator, debentures issued by national mortgage associations, and any electric revenue bonds or other obligations issued by the Tennessee Valley Authority, are eligible securities for the purpose, wherever the statutes of this state require, of:

  1. Collateral as security for the deposit of public or other funds;
  2. Deposits to be made with any public official or department;
  3. Investment of capital or surplus; or
  4. A reserve or other fund to be maintained consisting of designated securities.

History. 4706-8: amend. Acts 1960, ch. 188, § 1, effective June 16, 1960.

Opinions of Attorney General.

A county could invest in any Federal National Mortgage Association notes or debentures which fall within the category described in this section. OAG 79-317 .

386.050. Housing authority obligations — Authorized investments — Security for public deposits — Negotiable — United States bonds.

  1. This state and all public officers, cities, political subdivisions and public bodies, all banks, trust companies, savings institutions, savings and loan associations, investment companies and other persons carrying on a banking business, all insurance companies, and other persons carrying on an insurance business and all fiduciaries may legally invest any sinking funds, moneys or other funds belonging to them or within their control in any bonds or other obligations issued by a housing authority pursuant to the Municipal Housing Authority Act or the Rural Housing Authority Act, and any additional amendments thereto, or issued by any public housing authority or agency in the United States, when these bonds or other obligations are secured by a pledge of annual contributions to be paid by the United States or any agency thereof, or in any electric revenue bonds or other obligations issued by the Tennessee Valley Authority.
  2. These bonds and other obligations shall be authorized security for all public deposits and shall be fully negotiable in this state.
  3. Nothing in this section with regard to legal investments shall relieve any individual or corporation from any duty of exercising reasonable care in selecting securities.
  4. Any county, municipality, or other taxing district may legally invest its sinking funds, money, or other funds belonging to it or within its control in United States Defense Bonds or any other bonds or obligations for the payment of which the faith and credit of the United States Government is pledged.

History. 4706-11: amend. Acts 1942, ch. 57, §§ 1, 2; 1960, ch. 188, § 2; 1968, ch. 152, § 160.

NOTES TO DECISIONS

1.Generally.

Kentucky's public policy of protecting trust beneficiaries against self-dealing trustees is so strong that Kentucky has enacted this separate statutory provision. Osborn v. Griffin, 865 F.3d 417, 2017 FED App. 0168P, 2017 U.S. App. LEXIS 13721 (6th Cir. Ky. 2017 ).

Opinions of Attorney General.

KRS 386.020 has no application to the public funds governed by the specific statutes, KRS 66.480 , subsection (2) of KRS 386.030 and this section. OAG 88-52 . Modifying OAG 82-124 .

Research References and Practice Aids

Cross-References.

Bank investments, limit on, not applicable to housing commission obligations, KRS 286.3-290 .

Scope of subtitle, KRS 304.7-010 et seq.

386.060. Investments not to be contrary to instrument creating trust.

The provisions of this chapter shall not be construed to permit a sale, investment or loan in conflict with the provisions of the will, deed or other instrument creating the trust, or under which the funds or property may be held.

History. 4708.

NOTES TO DECISIONS

1.Power to Sell.

Power given trustee to sell trust property may be implied as well as expressed. Vansant v. Spillman, 193 Ky. 788 , 237 S.W. 379, 1922 Ky. LEXIS 58 ( Ky. 1922 ).

Where instrument creating trust directs fund be paid to and held, managed and controlled by trustee for benefit of life tenant and further directs that trustee may pay beneficiary whole or any part of trust funds, the power to sell the trust property, though it be real estate, is implied. Vansant v. Spillman, 193 Ky. 788 , 237 S.W. 379, 1922 Ky. LEXIS 58 ( Ky. 1922 ).

2.Securities.

Where will directs investment of trust funds in securities, they may be invested in state warrants, but may not be invested in real estate, in absence of showing that good and safe securities can not be found or that such investment would probably result in loss to trust estate. Hackett's Ex'rs v. Hackett's Devissees, 180 Ky. 406 , 202 S.W. 864, 1918 Ky. LEXIS 68 ( Ky. 1918 ).

Research References and Practice Aids

Kentucky Law Journal.

Vahlsing and Hudson, Inchoate Dower — An Idea Whose Time Is Past, 60 Ky. L.J. 671 (1972).

386.070. Disposition of unauthorized securities. [Repealed]

Compiler’s Notes.

This section (4706) was repealed by Acts 2014, ch. 25, § 118, effective July 15, 2014.

386.080. Sale of securities held by fiduciary; protection of purchaser. [Repealed.]

Compiler’s Notes.

This section (4707) was repealed by Acts 1944, ch. 115, § 2.

386.090. Sale of real property held under express trust. [Repealed.]

Compiler’s Notes.

This section (4708-1, 4708-2) was repealed by Acts 1980, ch. 87, § 10, effective July 15, 1980.

386.093. Effect of disability, incapacity, or death on power of attorney, durable or otherwise. [Repealed]

HISTORY: Enact. Acts 1972, ch. 168, § 1; 1998, ch. 421, § 2, effective July 15, 1998; 2000, ch. 27, § 1, effective July 14, 2000; repealed by 2018 ch. 185, § 30, effective July 14, 2018.

386.095. Execution and delivery of releases of powers exercisable by deed, will or otherwise. [Repealed]

History. Enact. Acts 1944, ch. 14; 1984, ch. 111, § 196, effective July 13, 1984; repealed by 2020 ch. 41, § 40, effective July 15, 2020.

386.100. Application of payments made to a fiduciary — Section not applicable to trustees.

  1. Any person who in good faith pays or transfers to a fiduciary any money or other property which the fiduciary as such is authorized to receive shall not be responsible for the proper application thereof by the fiduciary, and any right or title acquired from the fiduciary in consideration of the payment or transfer shall not be invalid because of a misapplication by the fiduciary.
  2. This section shall not apply to trustees.

History. 4711-2; 2014, ch. 25, § 102, effective July 15, 2014.

NOTES TO DECISIONS

1.Bad Faith.

Petition, in action by surety on fidelity bond of corporation secretary, alleging that secretary had cashed check payable to corporation at bank and that bank, at direction of secretary, had deposited proceeds to credit of third person, with notice and knowledge that such negotiation was unauthorized and that proceeds were being wrongfully diverted, stated cause of action against bank and third person. National Surety Corp. v. First Nat'l Bank, 278 Ky. 273 , 128 S.W.2d 766, 1939 Ky. LEXIS 435 ( Ky. 1939 ).

2.Misapplication.

Where bank, with knowledge of the facts, sold land to trustee for a sum much greater than the value of the land and in excess of the trust fund, and took from the trustee a note for the unpaid balance of the purchase money, secured by a lien on the land, and later took back the land for default in payment of interest, it was liable for misapplication of the trust fund, and the land was subject to a lien in favor of the dependents of the deceased employee. Turner v. Risner, 280 Ky. 822 , 134 S.W.2d 951, 1939 Ky. LEXIS 220 ( Ky. 1939 ).

Research References and Practice Aids

Cross-References.

Purchaser of trust estate, when required to look to application of purchase money, KRS 394.530 .

386.110. Transfer of a negotiable instrument by a fiduciary.

If any negotiable instrument payable or endorsed to a fiduciary as such is endorsed by the fiduciary, or if any negotiable instrument payable or endorsed to his principal is endorsed by a fiduciary empowered to endorse the instrument on behalf of his principal, the endorsee is not bound to inquire whether the fiduciary is committing a breach of his obligation as fiduciary in endorsing or delivering the instrument, and is not chargeable with notice that the fiduciary is committing a breach of his obligation as fiduciary, unless he takes the instrument with actual knowledge of the breach or with knowledge of such facts that his action in taking the instrument amounts to bad faith.

History. 4711-3.

386.120. Deposits in fiduciary’s personal account.

If a fiduciary makes a deposit in a bank or trust company to his personal credit of checks drawn by him upon an account in his own name as fiduciary, or of checks payable to him as fiduciary, or of checks drawn by him upon an account in the name of his principal if he is empowered to draw checks thereon, or of checks payable to his principal and endorsed by him if he is empowered to endorse them, or if he otherwise makes a deposit of funds held by him as fiduciary, the bank or trust company receiving the deposit is not bound to inquire whether the fiduciary is committing thereby a breach of his obligation as fiduciary. The bank or trust company may pay the amount of the deposit or any part thereof upon the personal check of the fiduciary without being liable to the principal, unless it receives the deposit or pays the check with actual knowledge that the fiduciary is committing a breach of his obligation as fiduciary in making the deposit or in drawing the check or with knowledge of such facts that its action in receiving the deposit or paying the check amounts to bad faith.

History. 4711-8.

NOTES TO DECISIONS

1.Bad Faith.

Petition, in action by surety on fidelity bond of corporation secretary, alleging that secretary had cashed check payable to corporation at bank and that bank, at direction of secretary, had deposited proceeds to credit of third person, with notice and knowledge that such negotiation was unauthorized and that proceeds were being wrongfully diverted, stated cause of action against bank and third person. National Surety Corp. v. First Nat'l Bank, 278 Ky. 273 , 128 S.W.2d 766, 1939 Ky. LEXIS 435 ( Ky. 1939 ).

The fact that personal checks drawn by administrator on his personal account, in which he had deposited certain checks payable to him as administrator, and at a time when his own funds were insufficient, contained notations indicating that they were “for” certain purposes which were probably personal was not sufficient to charge bank with knowledge that the administrator was committing a breach of his obligation as fiduciary, or to charge the bank with bad faith. Taylor v. Citizens Bank of Albany, 290 Ky. 149 , 160 S.W.2d 639, 1942 Ky. LEXIS 383 ( Ky. 1942 ).

There was no evidence that the bank acted in bad faith or with knowledge that the signatory breached his fiduciary duty when it conducted the financial transactions concerning the decedent’s account, KRS 386.120 ; it acted pursuant to a valid power of attorney and Consumer Account Agreement. Caudill v. Salyersville Nat'l Bank, 2010 Ky. App. LEXIS 1 (Ky. Ct. App. Jan. 8, 2010).

2.Bank President.

Where the president of a bank and his family owned virtually all of the stock of the bank and he was the dominant personage at the bank, knowledge of the president’s fraud in depositing funds held as a fiduciary in his own account was imputed to the bank so that the bank was liable to the committee of the incompetent whose funds the president so deposited. Federal Deposit Ins. Corp. v. American Surety Co., 39 F. Supp. 551, 1941 U.S. Dist. LEXIS 3262 (D. Ky. 1941 ), disapproved, Federal Deposit Ins. Corp. v. Liberty Nat'l Bank & Trust Co., 806 F.2d 961, 1986 U.S. App. LEXIS 34116 (10th Cir. Okla. 1986).

386.130. Deposits in name of fiduciary as such — In name of principal.

  1. If a deposit is made in a bank or trust company to the credit of a fiduciary as such, the bank or trust company may pay the amount of the deposit or any part thereof upon the check of the fiduciary, signed with the name in which the deposit is entered, without being liable to the principal, unless it pays the check with actual knowledge that the fiduciary is committing a breach of his obligation as fiduciary in drawing the check or with knowledge of such facts that its action in paying the check amounts to bad faith.
  2. If a check is drawn upon the account of his principal by a fiduciary empowered to draw checks upon his principal’s account, the bank or trust company may pay the check without being liable to the principal, unless it pays the check with actual knowledge that the fiduciary is committing a breach of his obligation as fiduciary in drawing the check or with knowledge of such facts that its action in paying the check amounts to bad faith.

History. 4711-6, 4711-7.

NOTES TO DECISIONS

1.Bank’s Liability.

Where a person gave her stepson a power of attorney to handle her property and he deposited moneys in a bank as a fiduciary, withdrew them and converted them to his own use, in the absence of a showing of knowledge of the fraud or negligence on the part of the bank, it was not liable for the amounts so converted. Long v. Watkins, 271 F. Supp. 630, 1967 U.S. Dist. LEXIS 7185 (E.D. Ky. 1967 ).

Where a person with a power of attorney deposited funds to the credit jointly of his principal and himself as attorney in fact for the principal, withdrew the money by checks signed by him without any indication of his fiduciary capacity, and converted it, the bank was liable to the principal for the amounts so paid. Long v. Watkins, 271 F. Supp. 630, 1967 U.S. Dist. LEXIS 7185 (E.D. Ky. 1967 ).

Bank was liable for receiving payment from executor and residuary legatee of his personal note to it and for paying checks signed as executor which he gave to his personal creditors on deposit made shortly before in his name as executor after explaining situation to officers of bank; presumption that executor would apply funds to proper purposes ceasing when it accepted his check to pay his personal note, and its knowledge of facts being such that its action amounted to bad faith. Peoples Nat'l Bank v. Guier, 284 Ky. 702 , 145 S.W.2d 1042, 1940 Ky. LEXIS 567 ( Ky. 1940 ).

Uniform Fiduciaries Act does not make due care or negligence the test of liability, but, in general, makes liability depend upon actual knowledge or bad faith. Peoples Nat'l Bank v. Guier, 284 Ky. 702 , 145 S.W.2d 1042, 1940 Ky. LEXIS 567 ( Ky. 1940 ).

386.140. Checks drawn by a fiduciary payable to third person or to himself.

  1. If a check or other bill of exchange is drawn by a fiduciary as such, or in the name of his principal by a fiduciary empowered to draw the instrument in the name of his principal, the payee is not bound to inquire whether the fiduciary is committing a breach of his obligation as fiduciary in drawing or delivering the instrument, and is not chargeable with notice that the fiduciary is committing a breach of his obligation as fiduciary, unless he takes the instrument with actual knowledge of the breach or with knowledge of such facts that his action in taking the instrument amounts to bad faith.
  2. If a check or other bill of exchange is drawn by a fiduciary as such or in the name of his principal by a fiduciary empowered to draw the instrument in the name of his principal, payable to the fiduciary personally, or payable to a third person and by him transferred to the fiduciary, and is thereafter transferred by the fiduciary, whether in payment of a personal debt of the fiduciary or otherwise, the transferee is not bound to inquire whether the fiduciary is committing a breach of his obligation as fiduciary in transferring the instrument, and is not chargeable with notice that the fiduciary is committing a breach of his obligation as fiduciary unless he takes the instrument with actual knowledge of the breach or with knowledge of such facts that his action in taking the instrument amounts to bad faith.

History. 4711-4, 4711-5.

NOTES TO DECISIONS

1.Fiduciary Also Agent of Payee.

When fiduciary is also an agent of payee, payee is chargeable with notice of bad faith of fiduciary in passing instrument. Fidelity & Deposit Co. v. Citizens Nat'l Bank, 290 Ky. 306 , 161 S.W.2d 62, 1942 Ky. LEXIS 399 ( Ky. 1942 ).

386.150. Fiduciary not relieved of liability.

KRS 386.100 to 386.140 do not in any way relieve a fiduciary who breaches his trust and causes any loss thereby of his liability under his bond, or of any civil or criminal liability provided for by law.

History. 4711-9.

Research References and Practice Aids

Cross-References.

Bond of fiduciary, provisions for, KRS 62.060 .

Contribution among persons in trust or official capacity, KRS 412.050 .

386.160. Deposit of funds with joint control by surety and fiduciary.

Any fiduciary of whom a bond, undertaking or other obligation is required may agree with his surety for the deposit and safekeeping of any moneys and assets for which he and his surety may be held responsible, with a bank, safe deposit or trust company, authorized by law to do business in this state as such, or with another depository in this state approved by the court, if the depository is otherwise proper. The agreement and the deposit shall be made so as to prevent the withdrawal of the deposit or any part thereof without the written consent of the surety, or an order of court, made on such notice to the surety as the court may direct. However, the agreement shall not in any manner release from or change the liability of the principal or surety as established by the terms of the bond.

History. 4671a: amend. Acts 1976 (Ex. Sess.), ch. 14, § 326, effective January 2, 1978.

386.165. Deposit of securities in a clearing corporation — Accounting and crediting of deposits.

  1. Notwithstanding any other provision of law, any fiduciary holding securities in its fiduciary capacity, any bank or trust company holding securities as a custodian or managing agent, any bank or trust company holding securities as custodian for a fiduciary, is authorized to deposit or arrange for the deposit of such securities in a clearing corporation as defined in KRS 355.8-102 . When such securities are so deposited, certificates representing securities of the same class of the same issuer may be merged and held in bulk in the name of the nominee of such clearing corporation with any other such securities deposited in such clearing corporation by any person regardless of the ownership of such securities, and certificates of small denomination may be merged into one (1) or more certificates of larger denomination. The records of such fiduciary and the records of such bank or trust company acting as custodian, as managing agent or as custodian for a fiduciary shall at all times show the name of the party for whose account the securities are so deposited. Title to such securities may be transferred by bookkeeping entry on the books of such clearing corporation without physical delivery or certificates representing such securities. A bank or trust company depositing securities pursuant to this section shall be subject to such rules and regulations with respect to the making and maintenance of such deposit as, in the case of a bank or trust company organized under the laws of this state, the executive director of financial institutions and, in the case of national banking associations, the comptroller of the currency may from time to time issue. A bank or trust company acting as custodian for a fiduciary shall, on demand of the fiduciary, certify in writing to the fiduciary the securities so deposited by such bank or trust company in such clearing corporation for the account of such fiduciary. A fiduciary shall, on demand by any party to its accounting or on demand by the attorney for such party, certify in writing to such party the securities deposited by such fiduciary in such clearing corporation for its account as such fiduciary.
  2. This section shall apply to any fiduciary holding securities in a fiduciary capacity, and to any bank or trust company holding securities as a custodian, managing agent or custodian for a fiduciary, acting on June 21, 1974, or who thereafter may act regardless of the date of the agreement, instrument or court order by which it is appointed and regardless of whether or not such fiduciary, custodian, managing agent or custodian for a fiduciary owns capital stock of such clearing corporation.
  3. As used in this section, “fiduciary” includes an executor, administrator, trustee under any trust, express, implied, resulting or constructive, guardian, conservator, receiver, trustee in bankruptcy, assignee for the benefit of creditors, partner, agent, officer of a corporation, public or private, public officer or any other person acting in a fiduciary capacity for any person, trust or estate.

History. Enact. Acts 1974, ch. 194, § 1; 1982, ch. 141, § 100, effective July 1, 1982.

Compiler’s Notes.

This section was amended by § 109 of Acts 1980, ch. 396, which would have taken effect July 1, 1982; however, Acts 1982, ch. 141, § 146, effective July 1, 1982, repealed Acts 1980, ch. 396.

386.170. Nonresident trustee for personal property of nonresident beneficiary — Power to act in this state.

  1. Where the beneficial owner of personal estate, held and controlled for his benefit or the benefit of his children or heirs by a trustee, is a nonresident of this state and has no trustee in this state, his trustee, appointed and qualified according to the laws of the place where the person resides, may collect, receive and remove to such place of residence any personal estate of the person or cestui que trust located in this state.
  2. Upon application by petition in a summary way, the Circuit Court having jurisdiction may authorize the foreign trustee to sue for, recover and remove any such personal estate of the nonresident cestui que trust, or to otherwise act as a trustee appointed in this state.
  3. The court shall not grant the petition or authorize the collection or removal of such property unless it is satisfied by documentary evidence that the foreign trustee has, where he qualified, given bond with good and sufficient surety to account for all the estate of the nonresident cestui que trust that might come to his hands, nor unless the court is satisfied that neither the nonresident cestui que trust nor any person having a present, future or contingent interest in the personal estate will be prejudiced by the order.
  4. The venue for such action shall lie in the county where there is jurisdiction in the District Court to appoint a trustee for the nonresident person.

History. 4709 to 4711: amend. Acts 1980, ch. 259, § 3, effective July 15, 1980.

NOTES TO DECISIONS

Cited:

Butler v. Taggart’s Trustee, 86 S.W. 541, 27 Ky. L. Rptr. 708 (1905).

Opinions of Attorney General.

A corporate foreign fiduciary may not act as an executor or administrator of an estate in Kentucky or hold any of the other fiduciary positions, listed in KRS 395.005 , by appointment of a Kentucky Court or resident with the exception of the situation provided for by this section. OAG 62-1141 .

386.175. Trustee’s power to appoint principal or income in favor of trustee of second trust — Terms of second trust — Special fiduciary — Notice — Judicial proceedings.

  1. For the purposes of this section, the following definitions apply:
    1. “Current beneficiary” means a person who is a permissible distributee of trust income or principal;
    2. “Original trust” means a trust established under an irrevocable trust instrument pursuant to the terms of which a trustee has discretionary power to distribute principal or income of the trust to or for the benefit of one (1) or more current beneficiaries of the trust; and
    3. “Second trust” means a trust established under an irrevocable trust instrument, the current beneficiaries of which are one (1) or more of the current beneficiaries of the original trust. The second trust may be a trust created under the same trust instrument as the original trust or under a different trust instrument or the original trust whose terms have been modified under this section.
  2. A trustee of an original trust may, without authorization by the court, exercise the discretionary power to distribute principal or income to or for the benefit of one (1) or more current beneficiaries of the original trust by appointing all or part of the principal or income of the original trust subject to the power in favor of the trustee of a second trust or by modifying the terms of the original trust. The trustee of the original trust may exercise this power whether or not there is a current need to distribute principal or income under any standard provided in the terms of the original trust. The trustee’s special power to appoint trust principal or income in further trust under this section includes the power to create the second trust.
  3. The second trust may be a trust created or administered under the laws of any jurisdiction, within or without the United States.
  4. The terms of the second trust shall be subject to all of the following:
    1. The beneficiaries of the second trust may include only beneficiaries of the original trust;
    2. A beneficiary who has only a future beneficial interest, vested or contingent, in the original trust cannot have the future beneficial interest accelerated to a present interest in the second trust;
    3. The terms of the second trust may not reduce any fixed income, annuity, or unitrust interest of a beneficiary in the assets of the original trust, including an interest which is to take effect in the future;
    4. If any contribution to the original trust qualified for a marital or charitable deduction for federal income, gift, or estate tax purposes under the Internal Revenue Code, then the second trust shall not contain any provision that, if included in the original trust, would have prevented the original trust from qualifying for the deduction or that would have reduced the amount of the deduction;
    5. If contributions to the original trust have been excluded from the gift tax by the application of Sections 2503(b) and 2503(c) of the Internal Revenue Code, then the second trust shall provide that the beneficiary’s remainder interest in the contributions shall vest and become distributable no later than the date upon which the interest would have vested and become distributable under the terms of the original trust;
    6. If any beneficiary of the original trust has a currently exercisable power of withdrawal over trust property, then either:
      1. The terms of the second trust shall provide a power of withdrawal in the second trust identical to the power of withdrawal in the original trust; or
      2. Sufficient trust property shall remain in the original trust to satisfy the currently exercisable power of withdrawal;
    7. If the original trust holds stock of an S corporation, the terms of the second trust shall not prevent or eliminate an election to be a qualified subchapter S trust or an electing small business trust or result in the termination of the S election of such corporation;
    8. If the power to distribute principal or income in the original trust is subject to an ascertainable standard, then the power to distribute income or principal in the second trust shall be subject to the same or a more restrictive ascertainable standard as in the original trust when the trustee exercising the power described in subsection (2) of this section is a possible beneficiary under the standard; and
    9. The second trust may confer a power of appointment upon a beneficiary of the original trust to whom or for the benefit of whom the trustee has the power to distribute principal or income of the original trust. The permissible appointees of the power of appointment conferred upon a beneficiary may include persons who are not beneficiaries of the original or second trust. The power of appointment conferred upon a beneficiary shall be subject to KRS 381.224 , 381.225 , and 381.226 covering the time at which the permissible period of the rule against perpetuities and suspension of power of alienation begins and the law that determines the permissible period of the rule against perpetuities and suspension of power of alienation of the original trust.
  5. The court may appoint a special fiduciary with the authority to exercise the power to appoint principal or income under subsection (2) of this section.
  6. The exercise of the power to appoint principal or income under subsection (2) of this section:
    1. Shall be considered an exercise of a power of appointment, other than a power to appoint to the trustee, the trustee’s creditors, the trustee’s estate, or the creditors of the trustee’s estate;
    2. Shall be subject to KRS 381.224 , 381.225 , and 381.226 covering the time at which the permissible period of the rule against perpetuities and suspension of power of alienation begins and the law that determines the permissible period of the rule against perpetuities and suspension of power of alienation of the original trust; and
    3. Is not prohibited by a spendthrift provision or by a provision in the original trust instrument that prohibits amendment or revocation of the trust.
  7. To effect the exercise of the power to appoint principal or income under subsection (2) of this section, all of the following shall apply:
    1. The exercise of the power to appoint shall be made by an instrument in writing, signed and acknowledged by the trustee, setting forth the manner of the exercise of the power, including the terms of the second trust and the effective date of the exercise of the power. The instrument shall be filed with the records of the original trust;
    2. The trustee shall give written notice of the trustee’s intention to exercise the power to all current beneficiaries of the original trust and all beneficiaries of the oldest generation of remainder beneficiaries of the original trust, by certified mail with restricted delivery and return receipt, at least sixty (60) days prior to the effective date of the exercise of the power to appoint. The notice shall include a copy of the instrument described in paragraph (a) of this subsection;
    3. If all beneficiaries entitled to notice have received the notice as evidenced by the certified mail return receipt and waive the notice period by a signed written instrument delivered to the trustee, the trustee’s power to appoint principal or income shall be exercisable after notice is waived by all such beneficiaries, notwithstanding the effective date of the exercise of the power;
    4. A current beneficiary or a beneficiary who is not a current beneficiary but is a member of the oldest generation of the remainder beneficiaries of the original trust may, no later than thirty (30) days from the date of receiving notice under paragraph (b) of this subsection, commence a judicial proceeding pursuant to KRS 386B.2-010 to object to the proposed exercise of the power under subsection (2) of this section. In such case the proposed exercise of the power shall require consent of the court; and
    5. In the event that a beneficiary did not receive the notice as evidenced by the certified mail return receipt, and no other beneficiary has commenced a proceeding under paragraph (d) of this subsection, the trustee may seek the approval of the District Court to exercise the power.
  8. Nothing in this section shall be construed to create or imply a duty of the trustee to exercise the power to distribute principal or income, and no inference of impropriety shall be made as a result of a trustee not exercising the power to appoint principal or income conferred under subsection (2) of this section. Nothing in this section shall be construed to abridge the right of any trustee who has the power to appoint property in further trust that arises under the terms of the original trust or under any provision of law or under common law.
  9. This section shall not apply to any charitable remainder trust as defined in 26 U.S.C. sec. 664(d) .
  10. A trustee or beneficiary may commence a judicial proceeding pursuant to KRS 386B.2-010 to approve or disapprove of a proposed exercise of the trustee’s special power to appoint to a second trust pursuant to subsection (2) of this section.

History. Enact. Acts 2012, ch. 59, § 4, effective July 12, 2012; 2014, ch. 25, § 103, effective July 15, 2014; 2020 ch. 25, § 6, effective July 15, 2020.

386.180. Compensation of trustees of estates. [Repealed.]

Compiler’s Notes.

This section (4711-a; amend. Acts 1982, ch. 277, § 1, effective July 15, 1982) was repealed by Acts 2008, ch. 130, § 4, effective July 15, 2008.

NOTES TO DECISIONS

1.Effect of repeal.

Plain language of the repeal of KRS 386.180 indicates that the Kentucky Legislature intended to remove any form of statutorily imposed guidelines regulating the fee habits of trustees of testamentary trusts, otherwise, the Legislature would have drafted and enacted a new law establishing how the fees should be calculated; therefore, in the absence of a statute directing otherwise, a court can only conclude that trustees of testamentary trusts are entitled to collect a “reasonable fee” commensurate with the performance of their duties. As a result, summary judgment was properly granted to several trustees in a compensation dispute where beneficiaries argued that the ceilings expressed in KRS 386.180 at the time the trusts were created remained in effect. Jarvis v. Nat'l City, 2011 Ky. App. LEXIS 20 (Ky. Ct. App. Feb. 4, 2011) (decided under prior law).

Holding in a declaratory judgment action that the trustees were not bound by the constraints of former KRS 386.180 was appropriate because the repeal was unlimited and trustees of testamentary trusts could collect reasonable fees on trusts that predate the repeal of KRS 386.180 . Jarvis v. Nat'l City, 410 S.W.3d 148, 2013 Ky. LEXIS 394 ( Ky. 2013 ) (decided under prior law).

386.185. Distribution of trusts of $50,000 or less. [Repealed.]

Compiler’s Notes.

This section (Enact. Acts 1974, ch. 23, § 1; 1976 (Ex. Sess.), ch. 14, § 327, effective January 2, 1978; 1978, ch. 366, § 1, effective June 17, 1978; 1982, ch. 277, § 2, effective July 15, 1982; 1990, ch. 450, § 2, effective July 13, 1990; 2010, ch. 21, § 4, effective July 15, 2010) was repealed by Acts 2014, ch. 25, § 118, effective July 15, 2014.

Revised Uniform Principal and Income Act

386.190. Definitions for KRS 386.190 to 386.340. [Repealed.]

Compiler’s Notes.

This section (Enact. Acts 1956, ch. 176, § 1, effective May 18, 1956) was repealed by Acts 1992, ch. 217, § 19, effective January 1, 1993.

386.191. Definitions for KRS 386.191 to 386.349. [Repealed.]

Compiler’s Notes.

This section (Enact. Acts 1992, ch. 217, § 1, effective January 1, 1993) was repealed by Acts 2004, ch. 158, § 29, effective January 1, 2005.

386.195. Rules of trust administration. [Repealed.]

Compiler’s Notes.

This section (Enact. Acts 1992, ch. 217, § 2, effective January 1, 1993) was repealed by Acts 2004, ch. 158, § 29, effective January 1, 2005.

386.200. Application of KRS 386.190 to 386.340 — Powers of settlor. [Repealed.]

Compiler’s Notes.

This section (Enact. Acts 1956, ch. 176, § 2, effective May 18, 1956) was repealed by Acts 1992, ch. 217, § 19, effective January 1, 1993.

386.205. Definition of income and principal. [Repealed.]

Compiler’s Notes.

This section (Enact. Acts 1992, ch. 217, § 3, effective January 1, 1993) was repealed by Acts 2004, ch. 158, § 29, effective January 1, 2005.

386.210. Receipts of money or property, when deemed income and when deemed principal — Disposition of income and principal. [Repealed.]

Compiler’s Notes.

This section (Enact. Acts 1956, ch. 176, § 3, effective May 18, 1956) was repealed by Acts 1992, ch. 217, § 19, effective January 1, 1993.

386.215. Income interest — Income beneficiary. [Repealed.]

Compiler’s Notes.

This section (Enact. Acts 1992, ch. 217, § 4, effective January 1, 1993) was repealed by Acts 2004, ch. 158, § 29, effective January 1, 2005.

386.220. Apportionment of income. [Repealed.]

Compiler’s Notes.

This section (Enact. Acts 1956, ch. 176, § 4, effective May 18, 1956) was repealed by Acts 1992, ch. 217, § 19, effective January 1, 1993.

386.225. Determination and distribution of income. [Repealed.]

Compiler’s Notes.

This section (Enact. Acts 1992, ch. 217, § 5, effective January 1, 1993) was repealed by Acts 2004, ch. 158, § 29, effective January 1, 2005.

386.230. Corporate dividends and share rights. [Repealed.]

Compiler’s Notes.

This section (Enact. Acts 1956, ch. 176, § 5, effective May 18, 1956; 1984, ch. 111, § 153, effective July 13, 1984) was repealed by Acts 1992, ch. 217, § 19, effective January 1, 1993.

386.235. Corporate distribution of shares. [Repealed.]

Compiler’s Notes.

This section (Enact. Acts 1992, ch. 217, § 5, effective January 1, 1993) was repealed by Acts 2004, ch. 158, § 29, effective January 1, 2005.

386.240. Bonds or other obligations for the payment of money. [Repealed.]

Compiler’s Notes.

This section (Enact. Acts 1956, ch. 176, § 6, effective May 18, 1956) was repealed by Acts 1992, ch. 217, § 19, effective January 1, 1993.

386.245. Corporate securities. [Repealed.]

Compiler’s Notes.

This section (Enact. Acts 1992, ch. 217, § 7, effective January 1, 1993) was repealed by Acts 2004, ch. 158, § 29, effective January 1, 2005.

386.250. Principal used in business. [Repealed.]

Compiler’s Notes.

This section (Enact. Acts 1956, ch. 176, § 7, effective May 18, 1956) was repealed by Acts 1992, ch. 217, § 19, effective January 1, 1993.

386.255. Net profits of business. [Repealed.]

Compiler’s Notes.

This section (Enact. Acts 1992, ch. 217, § 8, effective January 1, 1993) was repealed by Acts 2004, ch. 158, § 29, effective January 1, 2005.

386.260. Principal comprising animals. [Repealed.]

Compiler’s Notes.

This section (Enact. Acts 1956, ch. 176, § 8, effective May 18, 1956) was repealed by Acts 1992, ch. 217, § 19, effective January 1, 1993.

386.265. Royalties and other receipts from disposition of natural resources. [Repealed.]

Compiler’s Notes.

This section (Enact. Acts 1992, ch. 217, § 9, effective January 1, 1993) was repealed by Acts 2004, ch. 158, § 29, effective January 1, 2005.

386.270. Disposition of natural resources. [Repealed.]

Compiler’s Notes.

This section (Enact. Acts 1956, ch. 176, § 9, effective May 18, 1956) was repealed by Acts 1992, ch. 217, § 19, effective January 1, 1993.

386.275. Timber. [Repealed.]

Compiler’s Notes.

This section (Enact. Acts 1992, ch. 217, § 10, effective January 1, 1993) was repealed by Acts 2004, ch. 158, § 29, effective January 1, 2005.

386.280. Principal subject to depletion. [Repealed.]

Compiler’s Notes.

This section (Enact. Acts 1956, ch. 176, § 10, effective May 18, 1956) was repealed by Acts 1992, ch. 217, § 19, effective January 1, 1993.

386.285. Other depletable property. [Repealed.]

Compiler’s Notes.

This section (Enact. Acts 1992, ch. 217, § 11, effective January 1, 1993) was repealed by Acts 2004, ch. 158, § 29, effective January 1, 2005.

386.290. Unproductive principal. [Repealed.]

Compiler’s Notes.

This section (Enact. Acts 1956, ch. 176, § 11, effective May 18, 1956) was repealed by Acts 1992, ch. 217, § 19, effective January 1, 1993.

386.295. Delayed income from sale of underproductive property. [Repealed.]

Compiler’s Notes.

This section (Enact. Acts 1992, ch. 217, § 12, effective January 1, 1993) was repealed by Acts 2004, ch. 158, § 29, effective January 1, 2005.

386.300. Expenses incurred in connection with trust estate. [Repealed.]

Compiler’s Notes.

This section (Enact. Acts 1956, ch. 176, § 12, effective May 18, 1956) was repealed by Acts 1992, ch. 217, § 19, effective January 1, 1993.

386.305. Charges against income. [Repealed.]

Compiler’s Notes.

This section (Enact. Acts 1992, ch. 217, § 13, effective January 1, 1993) was repealed by Acts 2004, ch. 158, § 29, effective January 1, 2005.

386.310. Expenses of nontrust estates. [Repealed.]

Compiler’s Notes.

This section (Enact. Acts 1956, ch. 176, § 13, effective May 18, 1956) was repealed by Acts 1992, ch. 217, § 19, effective January 1, 1993.

386.315. Apportionment of expenses. [Repealed.]

Compiler’s Notes.

This section (Enact. Acts 1992, ch. 217, § 14, effective January 1, 1993) was repealed by Acts 2004, ch. 158, § 29, effective January 1, 2005.

386.320. Uniformity of interpretation. [Repealed.]

Compiler’s Notes.

This section (Enact. Acts 1956, ch. 176, § 14, effective May 18, 1956) was repealed by Acts 1992, ch. 217, § 19, effective January 1, 1993.

386.325. Application of KRS 386.191 to 386.459. [Repealed.]

Compiler’s Notes.

This section (Enact. Acts 1992, ch. 217, § 15, effective January 1, 1993) was repealed by Acts 2004, ch. 158, § 29, effective January 1, 2005.

386.330. Citation of KRS 386.190 to 386.340. [Repealed.]

Compiler’s Notes.

This section (Enact. Acts 1956, ch. 176, § 15, effective May 18, 1956) was repealed by Acts 1992, ch. 217, § 19, effective January 1, 1993.

386.335. Construction of KRS 386.191 to 386.349. [Repealed.]

Compiler’s Notes.

This section (Enact. Acts 1992, ch. 217, § 16, effective January 1, 1993) was repealed by Acts 2004, ch. 158, § 29, effective January 1, 2005.

386.340. Time of application of KRS 386.190 to 386.340. [Repealed.]

Compiler’s Notes.

This section (Enact. Acts 1956, ch. 176, § 17, effective May 18, 1956) was repealed by Acts 1992, ch. 217, § 19, effective January 1, 1993.

386.345. Effective date — Application on receipts and expenses. [Repealed.]

Compiler’s Notes.

This section (Enact. Acts 1992, ch. 217, § 17, effective January 1, 1993) was repealed by Acts 2004, ch. 158, § 29, effective January 1, 2005.

386.349. Short title. [Repealed.]

Compiler’s Notes.

This section (Enact. Acts 1992, ch. 217, § 17, effective January 1, 1993) was repealed by Acts 2004, ch. 158, § 29, effective January 1, 2005.

Private Foundations — Charitable Trusts

386.350. Definitions for KRS 386.355 and 386.360.

As used in KRS 386.355 and 386.360 , unless the context requires otherwise:

  1. “Internal Revenue Code” means the Internal Revenue Code of 1954, in effect on January 1, 1970, including all appropriate provisions of the Tax Reform Act of 1969 at the dates specified in that law, exclusive of any amendments made subsequent to December 31, 1969.
  2. “Trust” includes a trust or any other entity (other than a corporation) which has, in whole or in part, a charitable purpose.
  3. “Trustee” includes any member of the governing body of any trust, as defined in this section.

History. Enact. Acts 1972, ch. 344, § 1; 1974, ch. 56, § 1.

Compiler’s Notes.

The federal laws referred to in this section may also be found as follows:

Internal Revenue Code of 1954, Title 26, USCS.

Tax Reform Act of 1969, Title 26, USCS.

386.355. Acts prohibited — Policy of state regarding private foundations — Split-interest trusts — Charitable trusts.

  1. In the administration of any trust which is a “private foundation” as defined in Section 509 of the Internal Revenue Code, a trust for charitable purposes described in Section 4947(a)(1) of the Internal Revenue Code to the extent that it is treated for federal tax purposes as such a private foundation, or a “split-interest trust” as described in Section 4947(a)(2) of the Internal Revenue Code, the following acts are prohibited:
    1. Engaging in any act of “self-dealing” (as defined in Section 4941(d) of the Internal Revenue Code) which would give rise to any liability for any tax imposed by Section 4941 of the Internal Revenue Code;
    2. Retaining any “excess business holdings” (as defined in Section 4943(c) of the Internal Revenue Code) which would give rise to any liability for any tax imposed by Section 4943 of the Internal Revenue Code;
    3. Making any investments which would jeopardize the carrying out of any of the exempt purposes of the trust, within the meaning of Section 4944 of the Internal Revenue Code, so as to give rise to any liability for any tax imposed by Section 4944 of the Internal Revenue Code; and
    4. Making any “taxable expenditures” (as defined in Section 4945(d) of the Internal Revenue Code) which would give rise to any liability for any tax imposed by Section 4945 of the Internal Revenue Code; provided, however, that the prohibitions of this subsection shall not apply to split-interest trusts or to amounts thereof, to the extent that such prohibitions are made inapplicable thereto by Section 4947 of the Internal Revenue Code.
  2. In the administration of any trust which is a “private foundation” as defined in Section 509 of the Internal Revenue Code, or a trust for charitable purposes described in Section 4947(a)(1) of the Internal Revenue Code to the extent that it is treated for federal tax purposes as such a private foundation, there shall, for the purposes specified in the governing instrument, be distributed at such time and in such manner, for each taxable year, amounts of income and principal at least sufficient to avoid liability for any tax imposed by Section 4942 of the Internal Revenue Code.
  3. Subsections (1) and (2) of this section express the continuing policy of this state with respect to charitable trust interests and are enacted to assist such trusts in maintaining various tax benefits extended to them, and shall apply to all trusts described therein; provided, however, that subsections (1) and (2) of this section shall not apply to a trust in existence on July 1, 1972, to the extent that the Attorney General of this state, the trustor, or any beneficiary of such trust, on or before November 30, 1972, files with the trustee of such trust a written objection to the application to such trust of one (1) or more provisions of subsections (1) and (2) of this section and the trustee receiving such written objection commences an action on or before December 31, 1972, in the court having jurisdiction over such trust to reform its governing instrument or any other instrument in order to meet, or to excuse such trust from compliance with the requirements of subsections (1) and (2) of this section. If a trustee receiving such written objection shall commence such an action, the one (1) or more provisions of subsections (1) and (2) of this section specified in such written objection shall not apply to such trust unless and until such court determines that their application to such trust is in the best interests of all parties in interest.
  4. No trustee of a trust to which subsection (1) or (2) of this section is applicable shall be surcharged for a violation of a prohibition or requirement of said subsections unless he participated in such violation knowing that it was a violation, nor shall such a trustee be surcharged if such violation was not willful and was due to reasonable cause; provided, however, that this subsection does not exonerate a trustee from any responsibility or liability to which he is subject under any other rule of law, whether or not duplicated in subsections (1) and (2) of this section.
  5. Except as provided in subsection (4) of this section, nothing in this section shall impair the rights and powers of the courts or the Attorney General with respect to any trust.
  6. In furtherance of the continuing policy of this state to assist charitable trust interests in maintaining various tax benefits extended to them, the provisions of subsections (1) and (2) of this section shall be deemed to have been in force and effect on January 1, 1970; provided, however, the provisions of said subsections shall affect a trust organized before January 1, 1970, only on and after the first day of its first taxable year (for federal tax purposes) beginning on or after January 1, 1972.

History. Enact. Acts 1972, ch. 344, § 2.

Compiler’s Notes.

The Internal Revenue Code, referred to in this section, is compiled as Title 26, USCS.

386.360. Trust instruments — How amended.

  1. In order to assist charitable trust interests in maintaining various tax benefits extended to them, the governing instrument of a trust may be amended to permit the trust to conform to the requirements of, or to obtain benefits available under, applicable provisions of the Internal Revenue Code. Such amendment may be made by the trustee with the approval of the Attorney General of this state, of the trustor and, if one (1) or more beneficiaries are named in the governing instrument of such trust, of each named beneficiary. If the trustor is not then living or is not then competent to give such approval, such amendment may be made by the trustee with the approval of the Attorney General and, if one (1) or more beneficiaries are named in the governing instrument of such trust, of each named beneficiary. If one (1) or more of said required approvals is not obtained, the trustee may apply to the court having jurisdiction over such trust for approval of such amendment. Said governing instrument may also be amended in any respect and by any method set forth in such instrument or as otherwise provided by law.
  2. Nothing in this section shall impair the rights and powers of the courts or the Attorney General with respect to any trust.

History. Enact. Acts 1972, ch. 344, § 3.

Compiler’s Notes.

The Internal Revenue Code, referred to in this section, is compiled as Title 26, USCS.

386.365. Distribution of assets upon dissolution — Process for selection of receiving trust — Assets available for distribution defined.

  1. Upon termination or dissolution of any trust or other entity (other than a corporation) which is or may become an exempt organization as described in Section 501(c)(3) of the Internal Revenue Code of 1954, as amended, or a charitable trust described in Section 4947(a)(1) of the Internal Revenue Code of 1954, as amended, any assets lawfully available for distribution shall be distributed to one (1) or more qualifying organizations described in Section 501(c)(3) of said Internal Revenue Code (or described in any corresponding provision of any successor statute) which organization or organizations have a charitable purpose which, at least generally, includes a purpose similar to the terminating or dissolving organization. The organization to receive the assets of the dissolving organization hereunder shall be selected in the discretion of a majority of the managing body of the dissolving organization, and if its members cannot so agree, then the recipient organization shall be selected pursuant to a verified petition in equity filed in a court of proper jurisdiction against the terminating or dissolving organization by one (1) or more of its managing body which verified petition shall contain such statements as reasonably indicate the applicability of this section. The court upon a finding that this section is applicable shall select the qualifying organization or organizations to receive the assets to be distributed, giving preference if practicable to organizations located within the Commonwealth of Kentucky. In the event that the court shall find that this section is applicable but that there is no qualifying organization known to it which has a charitable purpose, which, at least generally, includes a purpose similar to the terminating or dissolving organization, then the court shall direct the distribution of its assets lawfully available for distribution to the Treasurer of the Commonwealth of Kentucky to be added to the general fund.
  2. For purposes of this section “assets lawfully available for distribution” shall include the assets of a terminating or dissolving organization remaining after:
    1. Payment, or provision for payment, of all liabilities and obligations of the organization; and
    2. Return, transfer or conveyance of any assets held by the organization (the terms of creating instrument of which require such return, transfer or conveyance upon termination or dissolution or otherwise) in accordance with the terms of the creating instrument; and
    3. In the event legal action is filed pursuant hereto, payment or provision for payment of all costs, including a reasonable attorney’s fee for the parties, fixed by the court.
  3. This section shall not be construed to deprive any person of any vested property interest which he may have on June 21, 1974.

History. Enact. Acts 1974, ch. 155, § 1.

Compiler’s Notes.

For §§ 501 and 4947 of the Internal Revenue Code, referred to in subsection (1), see 26 USCS §§ 501 and 4947, respectively.

Business Trusts

386.370. Definition of business trust, business entity, and name of record.

  1. A business trust is an express trust created by a written declaration of trust whereby property is conveyed to one (1) or more trustees, who hold and manage same for the benefit and profit of such persons as may be or become, the holders of transferable certificates evidencing the beneficial interest in the trust estate. For the purposes of KRS 386.370 to 386.440 , business trusts shall include but are not limited to “Real Estate Investment Trusts” as defined by and which comply with the Federal Internal Revenue Code of 1986 as amended or such section or sections of any subsequent Internal Revenue Code as may be applicable to real estate investment trusts.
  2. “Business entity” means a domestic or foreign limited liability company, corporation, partnership, limited partnership, business or statutory trust, and not-for-profit unincorporated association.
  3. “Name of record with the Secretary of State” means any real, fictitious, reserved, registered, or assumed name of a business entity.

History. Enact. Acts 1966, ch. 19, § 1; 2007, ch. 137, § 164, effective June 26, 2007; repealed and reenact., Acts 2010, ch. 51, § 164, effective July 15, 2010.

Legislative Research Commission Note.

(7/15/2010). 2010 Ky. Acts ch. 51, sec. 183, provides, “The specific textual provisions of Sections 1 to 178 of this Act which reflect amendments made to those sections by 2007 Ky. Acts ch. 137 shall be deemed effective as of June 26, 2007, and those provisions are hereby made expressly retroactive to that date, with the remainder of the text of those sections being unaffected by the provisions of this section.”

Research References and Practice Aids

Kentucky Bench & Bar.

Rutledge, Recent Amendments to Kentucky Business Entity Laws, Vol. 71, No. 5, Sept. 2007, Ky. Bench & Bar 25.

Kentucky Law Journal.

Rutledge, The 2007 Amendments to the Kentucky Business Entity Statutes, 97 Ky. L.J. 229 (2008).

386.380. Establishment — Lawful purposes.

A business trust may be established by a declaration of trusts, duly executed by one (1) or more trustees, for any lawful purpose including, but not limited to, acquiring, managing, improving, leasing, dealing in, selling, or otherwise alienating, mortgaging, or otherwise encumbering, real and personal property of all kinds and descriptions, including dealing in, purchasing, holding, selling and exchanging stocks, bonds, mortgages, deeds of trust and other securities of all kinds and descriptions; receiving the income, dividends, rents, profits, and returns therefrom, and investing same or distributing same to the beneficial owners of the trust in accordance with the terms of the declaration of trust.

History. Enact. Acts 1966, ch. 19, § 2.

386.382. Name of business trust.

The name of a business trust or foreign business trust qualified to transact business in this Commonwealth shall satisfy the requirements of KRS 14A.3-010 .

History. Enact. Acts 2007, ch. 137, § 19, effective June 26, 2007; repealed and reenact., 2010, ch. 51, § 19, effective July 15, 2010; repealed, reenact., and amend., Acts 2010, ch. 151, § 114, effective January 1, 2011.

Legislative Research Commission Note.

(1/1/2011). This section was repealed, reenacted, and amended by 2010 Ky. Acts ch. 151, and repealed and reenacted by 2010 Ky. Acts ch. 51. Pursuant to Section 184 of Acts ch. 51, it was the intent of the General Assembly that the repeal and reenactment not serve to void the amendment, and these Acts do not appear to be in conflict, therefore, they have been codified together.

(7/15/2010). 2010 Ky. Acts ch. 51, sec. 183, provides, “The specific textual provisions of Sections 1 to 178 of this Act which reflect amendments made to those sections by 2007 Ky. Acts ch. 137 shall be deemed effective as of June 26, 2007, and those provisions are hereby made expressly retroactive to that date, with the remainder of the text of those sections being unaffected by the provisions of this section.”

386.384. Registered office — Registered agent.

Each domestic business trust and each foreign business trust authorized to transact business in the Commonwealth shall continuously maintain in this Commonwealth a registered office and a registered agent that comply with KRS 14A.4-010 .

History. Enact. Acts 2007, ch. 137, § 20, effective June 26, 2007; repealed and reenact., Acts 2010, ch. 51, § 20, effective July 15, 2010; repealed, reenact., and amend., Acts 2010, ch. 151, § 115, effective January 1, 2011.

Legislative Research Commission Note.

(1/1/2011). This section was repealed, reenacted, and amended by 2010 Ky. Acts ch. 151, and repealed and reenacted by 2010 Ky. Acts ch. 51. Pursuant to Section 184 of Acts ch. 51, it was the intent of the General Assembly that the repeal and reenactment not serve to void the amendment, and these Acts do not appear to be in conflict, therefore, they have been codified together.

(7/15/2010). 2010 Ky. Acts ch. 51, sec. 183, provides, “The specific textual provisions of Sections 1 to 178 of this Act which reflect amendments made to those sections by 2007 Ky. Acts ch. 137 shall be deemed effective as of June 26, 2007, and those provisions are hereby made expressly retroactive to that date, with the remainder of the text of those sections being unaffected by the provisions of this section.”

386.386. Change of registered office or registered agent. [Repealed.]

Compiler’s Notes.

This section (Repealed and reenact., Acts 2010, ch. 51, § 21, effective July 15, 2010) was repealed by Acts 2010, ch. 151, § 151, effective January 1, 2011.

386.388. Resignation of registered agent. [Repealed.]

Compiler’s Notes.

This section (Repealed and reenact., Acts 2010, ch. 51, § 22, effective July 15, 2010) was repealed by Acts 2010, ch. 151, § 151, effective January 1, 2011.

386.390. Powers and liabilities of trustees — Liability of trust for acts of trustees.

The trustees shall hold the legal title to all property at any time belonging to the business trust. They shall have control over such property as well as the control and management of the business and affairs of the business trust. Liability to third persons for any act, omission or obligation of a trustee of a business trust, when acting in such capacity shall extend to the whole of the trust estate, or so much thereof as may be necessary to discharge such obligation, but no trustee shall be personally liable for any such act, omission or obligation unless said act, omission or obligation constitute fraud or bad faith. The trustee shall have such powers as to the investment of the trust estate as may be set out in the declaration of trust without regard to the type of investments to which trustees generally are restricted by the laws of the Commonwealth of Kentucky.

History. Enact. Acts 1966, ch. 19, § 3.

386.392. Annual report.

Each business trust and each foreign business trust qualified to transact business in this Commonwealth is subject to KRS 14A.6-010 .

History. Enact. Acts 2007, ch. 137, § 24, effective June 26, 2007; repealed and reenact., Acts 2010, ch. 51, § 24, effective July 15, 2010; repealed and reenact., Acts 2010, ch. 151, § 116, effective January 1, 2011.

Legislative Research Commission Notes.

(1/1/2011). This section was repealed and reenacted without change to the existing language by 2010 Ky. Acts ch. 51, effective 7/15/10, and repealed and reenacted with the new language by 2010 Ky. Acts ch. 151, effective 1/1/2011. Pursuant to Section 184 of Acts ch. 51, it was the intent of the General Assembly that the repeal and reenactment by ch. 51 not serve to void amendments made by other bills, and these Acts do not appear to be in conflict, therefore, they have been codified together.

(7/15/2010). 2010 Ky. Acts ch. 51, sec. 183, provides, “The specific textual provisions of Sections 1 to 178 of this Act which reflect amendments made to those sections by 2007 Ky. Acts ch. 137 shall be deemed effective as of June 26, 2007, and those provisions are hereby made expressly retroactive to that date, with the remainder of the text of those sections being unaffected by the provisions of this section.”

386.400. Certificates of ownership — Liability of beneficial owners.

The beneficial ownership in a business trust shall be evidenced by certificates issued by the trustees. These certificates shall be transferable in the same manner as stock certificates of a corporation are transferable. No assessment shall be made against the interest of any beneficial owner and no beneficial owner shall be personally liable for any debts or liabilities incurred by the trustees or by the business trust.

History. Enact. Acts 1966, ch. 19, § 4.

386.410. Legality of foreign business trust.

No beneficial owner of certificates in a foreign business trust shall have his interests therein assessed and no beneficial owner of a foreign trust shall be personally liable for any debts or liabilities incurred by the trustees or by the foreign business trust after June 16, 1966.

History. Enact. Acts 1966, ch. 19, § 5; 2007, ch. 137, § 165, effective June 26, 2007; repealed and reenact., Acts 2010, ch. 51, § 165, effective July 15, 2010.

Legislative Research Commission Note.

(7/15/2010). 2010 Ky. Acts ch. 51, sec. 183, provides, “The specific textual provisions of Sections 1 to 178 of this Act which reflect amendments made to those sections by 2007 Ky. Acts ch. 137 shall be deemed effective as of June 26, 2007, and those provisions are hereby made expressly retroactive to that date, with the remainder of the text of those sections being unaffected by the provisions of this section.”

386.420. Contents and recordation of declaration of trust.

  1. The written declaration of trust may provide for the election of successor trustees in the event of the death, resignation and removal of a trustee and may provide for the amendment of the declaration of trust. The declaration of trust may also contain such other provisions regarding the operating and administration of the business trust as may be necessary or desirable. A declaration of trust and any amendments thereto is effective as provided in KRS 14A.2-070 .
  2. A declaration of trust filed on or after June 26, 2007, shall name or shall be accompanied by a document naming the initial registered agent and registered office satisfying the requirements of KRS 14A.4-010 .
  3. Each document delivered to the Secretary of State for filing by a business trust or a foreign business trust shall satisfy the requirements of KRS 14A.2-010 to 14A.2-150 .

History. Enact. Acts 1966, ch. 19, § 6; 1968, ch. 152, § 161; 1978, ch. 384, § 511, effective June 17, 1978; 2007, ch. 137, § 166, effective June 26, 2007; repealed and reenact., Acts 2010, ch. 51, § 166, effective July 15, 2010; 2010, ch. 151, § 117, effective January 1, 2011.

Legislative Research Commission Note.

(1/1/2011). This section was amended by 2010 Ky. Acts ch. 151, and repealed and reenacted by 2010 Ky. Acts ch. 51. Pursuant to Section 184 of Acts ch. 51, it was the intent of the General Assembly that the repeal and reenactment not serve to void the amendment, and these Acts do not appear to be in conflict, therefore, they have been codified together.

(7/15/2010). 2010 Ky. Acts ch. 51, sec. 183, provides, “The specific textual provisions of Sections 1 to 178 of this Act which reflect amendments made to those sections by 2007 Ky. Acts ch. 137 shall be deemed effective as of June 26, 2007, and those provisions are hereby made expressly retroactive to that date, with the remainder of the text of those sections being unaffected by the provisions of this section.”

386.430. Duration of business trust — Rules against perpetuities and restraint of alienation not violated.

A business trust shall not be deemed invalid as violating the rule against perpetuities or the law against suspension of the powers of alienation. Such trust may continue for such time as may be necessary to accomplish the purposes for which it may be created, provided the declaration of trust contains a provision that such trust may be terminated at any time by action of the trustees or by the vote of a specified percentage in interest of the beneficial owners thereof as set forth in the declaration of trust.

History. Enact. Acts 1966, ch. 19, § 7.

386.432. Administrative dissolution — Reinstatement. [Repealed.]

Compiler’s Notes.

This section (Repealed and reenact., Acts 2010, ch. 51, § 25, effective July 15, 2010) was repealed by Acts 2010, ch. 151, § 151, effective January 1, 2011.

386.440. How business trust sued.

A business trust may be sued for debts and other obligations incurred by the trustees in the performance of their duties under the declaration of trust, and for any damages resulting from the negligence of such trustees and its property shall be subject to attachment and execution in like manner as if it were a corporation.

History. Enact. Acts 1966, ch. 19, § 8; 2007, ch. 137, § 167, effective June 26, 2007; repealed and reenact., Acts 2010, ch. 51, § 167, effective July 15, 2010.

Legislative Research Commission Note.

(7/15/2010). 2010 Ky. Acts ch. 51, sec. 183, provides, “The specific textual provisions of Sections 1 to 178 of this Act which reflect amendments made to those sections by 2007 Ky. Acts ch. 137 shall be deemed effective as of June 26, 2007, and those provisions are hereby made expressly retroactive to that date, with the remainder of the text of those sections being unaffected by the provisions of this section.”

386.441. Service of process. [Repealed.]

Compiler’s Notes.

This section (Repealed and reenact., Acts 2010, ch. 51, § 23, effective July 15, 2010) was repealed by Acts 2010, ch. 151, § 151, effective January 1, 2011.

386.4420. Laws governing foreign business trust.

  1. Subject to the Constitution of this Commonwealth:
    1. Except as provided in subsection (2) of this section, the laws of the state or other jurisdiction under which a foreign business trust is organized shall govern its organization and internal affairs, including the liability of its trustees and beneficial owners for the debts and obligations of the business trust and the inspection by a trustee or a beneficial owner of the books and records of the business trust; and
    2. A foreign business trust shall not be denied registration by reason of any difference between the laws of another jurisdiction under which a foreign business trust is organized and the laws of this Commonwealth.
  2. A certificate of authority obtained pursuant to this chapter shall not authorize a foreign business trust to exercise any powers or engage in any business that a domestic business trust is forbidden to exercise or engage in by the laws of this Commonwealth.

History. Enact. Acts 2007, ch. 137, § 26, effective June 26, 2007; repealed and reenact., Acts 2010, ch. 51, § 26, effective July 15, 2010.

386.4422. Transaction of business by foreign business trust.

A foreign business trust transacting business in this Commonwealth is subject to KRS 14A.9-010 .

History. Enact. Acts 2007, ch. 137, § 27, effective June 26, 2007; repealed and reenact., Acts 2010, ch. 51, § 27, effective July 15, 2010; repealed and reenact., Acts 2010, ch. 151, § 118, effective January 1, 2011; 2011, ch. 29, § 21, effective June 8, 2011.

Legislative Research Commission Notes.

(6/8/2011). 2011 Ky. Acts ch. 29, sec. 24, provides that the amendments to this section in 2011 Ky. Acts ch. 29, sec. 11, are retroactive to January 1, 2011.

(1/1/2011). This section was repealed and reenacted without change to the existing language by 2010 Ky. Acts ch. 51, effective 7/15/10, and repealed and reenacted with the new language by 2010 Ky. Acts ch. 151, effective 1/1/2011. Pursuant to Section 184 of Acts ch. 51, it was the intent of the General Assembly that the repeal and reenactment by ch. 51 not serve to void amendments made by other bills, and these Acts do not appear to be in conflict, therefore, they have been codified together.

(7/15/2010). 2010 Ky. Acts ch. 51, sec. 183, provides, “The specific textual provisions of Sections 1 to 178 of this Act which reflect amendments made to those sections by 2007 Ky. Acts ch. 137 shall be deemed effective as of June 26, 2007, and those provisions are hereby made expressly retroactive to that date, with the remainder of the text of those sections being unaffected by the provisions of this section.”

386.4424. Certificate of authority required of foreign business trust for access to courts — Civil penalty for violation. [Repealed.]

Compiler’s Notes.

This section (Repealed and reenact., Acts 2010, ch. 51, § 28, effective July 15, 2010) was repealed by Acts 2010, ch. 151, § 151, effective January 1, 2011.

386.4426. Application for certificate of authority for foreign business trust. [Repealed.]

Compiler’s Notes.

This section (Repealed and reenact., Acts 2010, ch. 51, § 29, effective July 15, 2010; 2010, ch. 133, § 73, effective July 15, 2010) was repealed by Acts 2010, ch. 151, § 151, effective January 1, 2011.

386.4428. Amended certificate of authority for foreign business trust. [Repealed.]

Compiler’s Notes.

This section (Repealed and reenact., Acts 2010, ch. 51, § 30, effective July 15, 2010; 2010, ch. 133, § 74, effective July 15, 2010) was repealed by Acts 2010, ch. 151, § 151, effective January 1, 2011.

386.4430. Effect of certificate of authority for foreign business trust. [Repealed.]

Compiler’s Notes.

This section (Repealed and reenact., Acts 2010, ch. 51, § 31, effective July 15, 2010) was repealed by Acts 2010, ch. 151, § 151, effective January 1, 2011.

386.4432. Name used by foreign business trust. [Repealed.]

Compiler’s Notes.

This section (Repealed and reenact., Acts 2010, ch. 51, § 32, effective July 15, 2010) was repealed by Acts 2010, ch. 151, § 151, effective January 1, 2011.

386.4434. Registered office and registered agent for foreign business trust.

Each foreign business trust authorized to transact business in this Commonwealth shall continuously maintain in this Commonwealth a registered office and a registered agent that comply with KRS 14A.4-010 .

History. Enact. Acts 2007, ch. 137, § 33, effective June 26, 2007; repealed and reenact., Acts 2010, ch. 51, § 33, effective July 15, 2010; repealed, reenact., and amend., Acts 2010, ch. 151, § 119, effective January 1, 2011.

Legislative Research Commission Note.

(1/1/2011). This section was repealed, reenacted, and amended by 2010 Ky. Acts ch. 151, and repealed and reenacted by 2010 Ky. Acts ch. 51. Pursuant to Section 184 of Acts ch. 51, it was the intent of the General Assembly that the repeal and reenactment not serve to void the amendment, and these Acts do not appear to be in conflict, therefore, they have been codified together.

(7/15/2010). 2010 Ky. Acts ch. 51, sec. 183, provides, “The specific textual provisions of Sections 1 to 178 of this Act which reflect amendments made to those sections by 2007 Ky. Acts ch. 137 shall be deemed effective as of June 26, 2007, and those provisions are hereby made expressly retroactive to that date, with the remainder of the text of those sections being unaffected by the provisions of this section.”

386.4436. Change of registered office or registered agent for foreign business trust. [Repealed.]

Compiler’s Notes.

This section (Repealed and reenact., Acts 2010, ch. 51, § 34, effective July 15, 2010) was repealed by Acts 2010, ch. 151, § 151, effective January 1, 2011.

386.4438. Statement of resignation of registered agent of foreign business trust. [Repealed.]

Compiler’s Notes.

This section (Repealed and reenact., Acts 2010, ch. 51, § 35, effective July 15, 2010) was repealed by Acts 2010, ch. 151, § 151, effective January 1, 2011.

386.4440. Service of process on foreign business trust. [Repealed.]

Compiler’s Notes.

This section (Repealed and reenact., Acts 2010, ch. 51, § 36, effective July 15, 2010) was repealed by Acts 2010, ch. 151, § 151, effective January 1, 2011.

386.4442. Certificate of withdrawal of foreign business trust. [Repealed.]

Compiler’s Notes.

This section (Repealed and reenact., Acts 2010, ch. 51, § 37, effective July 15, 2010) was repealed by Acts 2010, ch. 151, § 151, effective January 1, 2011.

386.4444. Grounds for revocation of certificate of authority of foreign business trust. [Repealed.]

Compiler’s Notes.

This section (Repealed and reenact., Acts 2010, ch. 51, § 38, effective July 15, 2010; 2010, ch. 133, § 75, effective July 15, 2010) was repealed by Acts 2010, ch. 151, § 151, effective January 1, 2011.

386.4446. Notice of determination — Revocation of certificate — Effect of revocation. [Repealed.]

Compiler’s Notes.

This section (Repealed and reenact., Acts 2010, ch. 51, § 39, effective July 15, 2010) was repealed by Acts 2010, ch. 151, § 151, effective January 1, 2011.

386.4448. Appeal of revocation. [Repealed.]

Compiler’s Notes.

This section (Repealed and reenact., Acts 2010, ch. 51, § 40, effective July 15, 2010) was repealed by Acts 2010, ch. 151, § 151, effective January 1, 2011.

Kentucky Principal and Income Act

Article 1. Definitions and Fiduciary Duties

386.450. Definitions for Kentucky Principal and Income Act, KRS 386.450 to 386.504.

As used in KRS 386.450 to 386.504 :

  1. “Accounting period” means a calendar year unless another twelve (12) month period is selected by a fiduciary. The term includes a portion of a calendar year or other twelve (12) month period that begins when an income interest begins or ends when an income interest ends;
  2. “Beneficiary” includes, in the case of a decedent’s estate, an heir, legatee, and devisee and, in the case of a trust, an income beneficiary and a remainder beneficiary;
  3. “District Court approval” means the consent of the District Court having jurisdiction over the fiduciary, with notice of the request for approval being given to all current beneficiaries and all reasonably ascertainable remainder beneficiaries in the oldest generation;
  4. “Fiduciary” means a personal representative or a trustee. The term includes an executor, administrator, successor personal representative, and public administrator;
  5. “Income” means money or property that a fiduciary receives as current return from a principal asset. The term includes a portion of receipts from a sale, exchange, or liquidation of a principal asset, to the extent provided in Articles 4 and 5 of the Kentucky Principal and Income Act;
  6. “Income beneficiary” means a person to whom net income of a trust is or may be payable;
  7. “Income interest” means the right of an income beneficiary to receive all or part of net income, whether the terms of the trust require it to be distributed or authorize it to be distributed in the trustee’s discretion;
  8. “Mandatory income interest” means the right of an income beneficiary to receive net income that the terms of the trust require the fiduciary to distribute;
  9. “Net income” means the total receipts allocated to income during an accounting period minus the disbursements made from income during the period, plus or minus transfers under KRS 386.450 to 386.504 to or from income during the period;
  10. “Notice” means written notice of the time and place for a hearing on the request for District Court approval that is placed postage prepaid in the United States mail at least thirty (30) days prior to the hearing and addressed to the last known address of the party to receive notice, and may be proved by an affidavit of the fiduciary or fiduciary’s counsel filed at the hearing stating the name and address to which notice was mailed postage prepaid and the date of the mailing;
  11. “Principal” means property held in trust for distribution to a remainder beneficiary when the trust terminates;
  12. “Remainder beneficiary” means a person entitled to receive principal when an income interest ends;
  13. “Terms of a trust” means the manifestation of the intent of a settlor or decedent with respect to the trust, expressed in a manner that admits of its proof in a judicial proceeding, whether by written or spoken words or by conduct;
  14. “Trustee” includes an original, additional, or successor trustee, whether or not appointed or confirmed by a court; and
  15. “Unitrust” means both a trust converted into a unitrust KRS 386.454 and a trust initially established as a unitrust. Unless inconsistent with the terms of the trust or will, KRS 386.454 (2)(f), (g), (h), (i), and (m) apply to the unitrust initially so established.

History. Enact. Acts 2004, ch. 158, § 1, effective January 1, 2005; 2010, ch. 21, § 5, effective July 15, 2010; 2012, ch. 59, § 1, effective July 12, 2012; 2014, ch. 25, § 104, effective July 15, 2014.

Research References and Practice Aids

Northern Kentucky Law Review.

Ghassomian and Leonard, Administration of Principal and Income for the Commonwealth: A Survey of the Kentucky Principal and Income Act , 34 N. Ky. L. Rev. 519 (2007).

Treatises

Caldwell’s Kentucky Form Book, 5th Ed., Petition, Order and Consent for Conversion to Total Return Trust, Form 231.06.

Caldwell’s Kentucky Form Book, 5th Ed., Petition, Order and Consent for Conversion to Total Return Trust (Charitable Beneficiary), Form 231.07.

Caldwell’s Kentucky Form Book, 5th Ed., Practice Context for Trusts, § 231.00.

386.452. Fiduciary duties.

  1. In allocating receipts and disbursements to or between principal and income, and with respect to any matter within the scope of Articles 2 and 3 of the Kentucky Principal and Income Act, a fiduciary:
    1. Shall administer a trust or estate in accordance with the terms of the trust or the will, even if there is a different provision in KRS 386.450 to 386.504 ;
    2. May administer a trust or estate by the exercise of a discretionary power of administration given to the fiduciary by the terms of the trust or the will, even if the exercise of the power produces a result different from a result required or permitted by KRS 386.450 to 386.504 ;
    3. Shall administer a trust or estate in accordance with KRS 386.450 to 386.504 if the terms of the trust or the will do not contain a different provision or do not give the fiduciary a discretionary power of administration; and
    4. Shall add a receipt or charge a disbursement to principal to the extent that neither the terms of the trust nor KRS 386.450 to 386.504 provide a rule for allocating the receipt or disbursement to or between principal and income.
  2. In exercising the power to adjust under KRS 386.454(1) or (2) or a discretionary power of administration regarding a matter within the scope of KRS 386.450 to 386.504 , whether granted by the terms of a trust, a will, or KRS 386.450 to 386.504 , a fiduciary shall administer a trust or estate impartially, based on what is fair and reasonable to all of the beneficiaries, except to the extent that the terms of the trust or the will clearly manifest a contrary intention. Except as provided in this subsection, determination in accordance with KRS 386.450 to 386.504 shall be presumed to be fair and reasonable to all of the beneficiaries.

History. Enact. Acts 2004, ch. 158, § 2, effective January 1, 2005; 2014, ch. 25, § 105, effective July 15, 2014.

Research References and Practice Aids

Treatises

Caldwell’s Kentucky Form Book, 5th Ed., Petition, Order and Consent for Conversion to Total Return Trust, Form 231.06.

Caldwell’s Kentucky Form Book, 5th Ed., Petition, Order and Consent for Conversion to Total Return Trust (Charitable Beneficiary), Form 231.07.

386.454. Fiduciary’s election to have certain standards apply to administration of trust or estate — Power to adjust between principal and income — Conversion to unitrust — Powers under previous version of section.

    1. A fiduciary may, after providing notice as required under paragraph (g) of this subsection, adjust between principal and income to the extent the fiduciary considers necessary, the terms of the trust or will describe the amount that may or shall be distributed to a beneficiary by referring to the trust’s or estate’s income, and the fiduciary determines, after applying the rules in KRS 386.452(1), that the fiduciary is unable to comply with KRS 386.452(2). Additionally, a fiduciary may reserve the right to convert the trust to a unitrust under subsection (2) of this section in the future. (1) (a) A fiduciary may, after providing notice as required under paragraph (g) of this subsection, adjust between principal and income to the extent the fiduciary considers necessary, the terms of the trust or will describe the amount that may or shall be distributed to a beneficiary by referring to the trust’s or estate’s income, and the fiduciary determines, after applying the rules in KRS 386.452(1), that the fiduciary is unable to comply with KRS 386.452(2). Additionally, a fiduciary may reserve the right to convert the trust to a unitrust under subsection (2) of this section in the future.
    2. In deciding whether and to what extent to exercise the power conferred by this subsection, a fiduciary shall consider all factors relevant to the trust or estate and its beneficiaries, including the following factors to the extent they are relevant:
      1. The nature, purpose, and expected duration of the trust or estate;
      2. The intent of the settlor or testator;
      3. The identity and circumstances of the beneficiaries;
      4. The needs for liquidity, regularity of income, and preservation and appreciation of capital;
      5. The assets held in the trust or estate and:
        1. The extent to which they consist of financial assets, interests in closely held enterprises, tangible and intangible personal property, or real property;
        2. The extent to which an asset is used by a beneficiary; and
        3. Whether an asset was purchased by the fiduciary or received from the settlor or testator;
      6. The net amount allocated to income under the other sections in this chapter and the increase or decrease in the value of the principal assets, which the fiduciary may estimate as to assets for which market values are not readily available;
      7. Whether and to what extent the terms of the trust or will give the fiduciary the power to invade principal or accumulate income or prohibit the fiduciary from invading principal or accumulating income, and the extent to which the fiduciary has exercised a power from time to time to invade principal or accumulate income;
      8. The actual and anticipated effect of economic conditions and market volatility on principal and income and effects of inflation and deflation; and
      9. The anticipated tax consequences of an adjustment.
    3. A fiduciary shall not make an adjustment:
      1. That diminishes the income interest in a trust that requires all of the income to be paid at least annually to a spouse and for which an estate tax or gift tax marital deduction would be allowed, in whole or in part, if the fiduciary did not have the power to make the adjustment;
      2. That reduces the actuarial value of the income interest in a trust to which a person transfers property with the intent to qualify for a gift tax exclusion;
      3. That changes the amount payable to the beneficiary as a fixed annuity or a fixed fraction of the value of the trust assets;
      4. From any amount that is permanently set aside for charitable purposes under a will or the terms of a trust unless both income and principal are so set aside;
      5. If possessing or exercising the power to make an adjustment causes an individual to be treated as the owner of all or part of the trust or estate for income tax purposes, and the individual would not be treated as the owner if the fiduciary did not possess the power to make an adjustment;
      6. If possessing or exercising the power to make an adjustment causes all or part of the trust or estate assets to be included for estate tax purposes in the estate of an individual who has the power to remove a fiduciary or appoint a fiduciary, or both, and the assets would not be included in the estate of the individual if the fiduciary did not possess the power to make an adjustment;
      7. If the fiduciary is a beneficiary of the trust or estate; or
      8. If the fiduciary is not a beneficiary, but the adjustment would benefit the fiduciary directly or indirectly; except that any effect on the fiduciary’s compensation shall not preclude an adjustment so long as the fiduciary’s fees are reasonable and otherwise comply with the applicable law.
    4. If paragraph (c)5., 6., 7., or 8. of this subsection applies to a fiduciary and there is more than one (1) fiduciary or an additional fiduciary who is appointed by court order, a binding agreement, or otherwise as provided by law, a co-fiduciary to whom the provision does not apply may make an adjustment unless the exercise of the power by the remaining fiduciary or fiduciaries is not permitted by the terms of the trust or will. If paragraph (c)5., 6., 7., or 8. of this subsection restricts all fiduciaries from possessing or exercising a power under this section, the fiduciary may petition the District Court for the court to effect the intended conversion or action.
    5. A fiduciary may release the entire power conferred by this subsection or may release only the power to adjust from income to principal or the power to adjust from principal to income if the fiduciary is uncertain about whether possessing or exercising the power will cause a result described in paragraph (c)1. to 6. of this subsection or if the fiduciary determines that possessing or exercising the power will or may deprive the trust or estate of a tax benefit or impose a tax burden not described in paragraph (c) of this subsection. The release may be permanent or for a specified period, including a period measured by the life of an individual. Further, a fiduciary may divide a trust or estate into one (1) or more fractional shares if the division does not change the beneficial interests.
    6. Terms of a trust or will that limit the power of a fiduciary to make an adjustment between principal and income do not affect the application of this section unless it is clear from the terms of the trust or will that the terms are intended to deny the fiduciary the power of adjustment conferred by this subsection.
    7. A fiduciary shall not make an election or adjustment under this section unless all of the following apply:
      1. A fiduciary shall give written notice of the fiduciary’s intention to make an adjustment to each beneficiary, by certified mail with restricted delivery and return receipt, who, on the date the notice is given:
        1. Is a distributee or permissible distributee of trust income or principal; or
        2. Would be a distributee or permissible distributee of principal if the interests of the distributees described in subparagraph 1.a. of this paragraph terminated and the trust then terminated immediately before the notice was given and if no powers of appointment were exercised;
      2. There is at least one (1) beneficiary under subparagraph 1.a. of this paragraph and at least one (1) other reasonably ascertainable person who is a remainder beneficiary under subparagraph 1.b. of this paragraph; and
      3. Every beneficiary to whom notice was sent pursuant to subparagraph 1. of this paragraph has received the notice as evidenced by the certified mail return receipt and no beneficiary objects to the adjustment or election in writing delivered to the fiduciary within thirty (30) days after the notice is given under subparagraph 1. of this paragraph.
    8. The fiduciary may petition the District Court under this subsection to order an adjustment or an election if any of the following apply:
      1. A beneficiary timely objects to the adjustment or the election, or a beneficiary has not received the notice as evidenced by the certified mail return receipt;
      2. There is no reasonably ascertainable beneficiary under paragraph (g)1.a. of this subsection; or
      3. There is no reasonably ascertainable beneficiary under paragraph (g)1.b. of this subsection.
  1. The following rules shall govern a fiduciary’s conversion of a trust to a unitrust:
    1. Unless expressly prohibited by the terms of a trust, a fiduciary may release the power to make adjustments under subsection (1) of this section and convert to a unitrust as described in this subsection, if all of the following apply:
      1. The fiduciary determines that the conversion will enable the fiduciary better to carry out the intent of the settlor or testator and the purposes of the trust;
      2. The fiduciary gives written notice of the fiduciary’s intention to release the power to adjust and to convert the trust into a unitrust and of how the unitrust will operate, including what initial decisions the fiduciary will make under this subsection, to each beneficiary, by certified mail with restricted delivery and return receipt, who, on the date the notice is given:
        1. Is a distributee or permissible distributee of trust income or principal; or
        2. Would be a distributee or permissible distributee of trust principal if the interests of the distributees described in subparagraph 2.a. of this paragraph terminated and the trust then terminated immediately before the notice was given and if no powers of appointment were exercised;
      3. There is at least one (1) beneficiary under subparagraph 2.a. of this paragraph and at least one (1) other reasonably ascertainable person who is a remainder beneficiary under subparagraph 2.b. of this paragraph; and
      4. Every beneficiary to whom notice was sent pursuant to subparagraph 2. of this paragraph has received the notice as evidenced by the certified mail return receipt and no beneficiary objects to the conversion to a unitrust in a writing delivered to the fiduciary within thirty (30) days after the notice is given under subparagraph 2. of this paragraph;
    2. The fiduciary may petition the District Court under this subsection to order a conversion to a unitrust if any of the following apply:
      1. A party timely objects to the conversion to a unitrust, or a beneficiary has not received the notice as evidenced by the certified mail return receipt;
      2. There is no reasonably ascertainable beneficiary under paragraph (a)2.a. of this subsection; or
      3. There is no reasonably ascertainable beneficiary under paragraph (a)2.b. of this subsection;
    3. Notwithstanding the provisions of paragraph (h) of this subsection, a beneficiary may request a fiduciary to convert to a unitrust. If the fiduciary does not convert, the beneficiary may petition the District Court to order the conversion. The court shall approve the conversion or direct the requested conversion if the court concludes that the conversion will enable the fiduciary to better carry out the intent of the settlor or testator and the purposes of the trust;
    4. In deciding whether to exercise a power to convert to a unitrust under this section, a fiduciary may consider, among other things, the factors set forth in subsection (1)(b) of this section;
    5. After a trust is converted to a unitrust, all of the following provisions shall apply:
      1. The fiduciary shall follow an investment policy seeking a total return for the investments held by the trust, whether the return is to be derived:
        1. From appreciation of principal;
        2. From earnings and distributions from principal; or
        3. From both;
      2. The fiduciary shall make regular distributions in accordance with the terms of the trust, or the terms of the will, as the case may be, construed in accordance with the provisions of this section; and
      3. Unless expressly prohibited by the terms of the trust, the term “income” in the terms of a trust or will means an annual distribution, the “unitrust distribution,” equal to the percentage, the “payout percentage,” that is no less than three percent (3%) and no more than five percent (5%) and that the fiduciary may determine in the fiduciary’s discretion from time to time, or, if the fiduciary makes no determination, that shall be four percent (4%), of the net fair market value of the trust’s assets, whether such assets would be considered income or principal under other provisions of this chapter, averaged over the lesser of:
        1. The three (3) preceding years; or
        2. The period which the trust has been in existence;
    6. The fiduciary may in the fiduciary’s discretion from time to time determine all of the following:
      1. The effective date of a conversion to a unitrust;
      2. The provisions for prorating a unitrust distribution for a short year in which a beneficiary’s right to payments commences or ceases;
      3. The frequency of unitrust distributions during the year;
      4. The effect of other payments from or contributions to the trust on the trust’s valuation;
      5. Whether to value the trust’s assets annually or more frequently;
      6. What valuation dates to use;
      7. How frequently to value nonliquid assets and whether to estimate their value;
      8. Whether to omit from the calculations trust property occupied or possessed by a beneficiary; and
      9. Any other matters necessary for the proper functioning of the unitrust;
    7. The following provisions regarding unitrust distribution shall apply:
      1. Expenses which would be deducted from income if the trust were not a unitrust shall not be deducted from the unitrust distribution;
      2. Unless otherwise provided by the terms of the trust, the unitrust distribution shall be paid from net income, as such term would be determined if the trust were not a unitrust. To the extent net income is insufficient, the unitrust distribution shall be paid from the net realized short-term capital gains. To the extent net income and net realized short-term capital gains are insufficient, the unitrust distribution shall be paid from net realized long-term capital gains. To the extent net income and net realized short-term and long-term capital gains are insufficient, the unitrust distribution shall be paid from the principal of the trust; and
      3. To the extent necessary to cause gains from the sale or exchange of unitrust assets to be treated as income under any federal, state, or local income tax, such as section 643 of the Internal Revenue Code and its regulations, including Treasury Regulation sec. 1.643(b)-1, as amended or renumbered, the fiduciary has the discretionary power to allocate the gains to income, so long as the power is reasonably and impartially exercised;
    8. Notwithstanding any other provision of this section to the contrary, a fiduciary or beneficiary may petition the District Court:
      1. To change the payout percentage;
      2. To provide for a distribution of net income, as would be determined if the trust were not a unitrust, in excess of the unitrust distribution if such distribution is necessary to preserve a tax benefit;
      3. To average the valuation of the trust’s net assets over a period other than three (3) years; and
      4. To reconvert from a unitrust to the preconversion terms of the trust;
    9. Upon a reconversion, the power to adjust under subsection (1) of this section shall be revived, and a trustee shall not be precluded from seeking a later unitrust conversion;
    10. A conversion to a unitrust does not affect a provision in the terms of a trust directing or authorizing the fiduciary to distribute principal or authorizing a beneficiary to withdraw a portion or all of the principal of the trust;
    11. A fiduciary shall not possess or exercise any power under this subsection in any of the following circumstances:
      1. The unitrust distribution would be made from any amount that is permanently set aside for charitable purposes under the terms of a trust and for which a charitable deduction from a federal gift or estate tax has been taken unless both income and principal are so set aside;
      2. The possession or exercise of the power would cause an individual to be treated as the owner of all or part of the trust for federal income tax purposes and the individual would not be treated as the owner if the fiduciary did not possess or exercise the power;
      3. The possession or exercise of the power would cause all or any part of the trust estate to be subject to any federal gift or estate tax with respect to the individual and the trust estate would not be subject to such taxation if the fiduciary did not possess or exercise the power;
      4. The possession or exercise of the power would result in the disallowance of a federal gift or estate tax marital deduction which would be allowed if the fiduciary did not have the power; or
      5. The fiduciary is a beneficiary of the trust;
    12. If paragraph (k)2., 3., or 5. of this subsection applies to a fiduciary and there is more than one (1) fiduciary or an additional fiduciary who is appointed by a court order, binding agreement, or otherwise as provided by law, a co-fiduciary to whom paragraph (k)2., 3., or 5. of this subsection does not apply may possess and exercise the power unless the possession or exercise of the power by the remaining fiduciary or fiduciaries is not permitted by the terms of the trust or will. If paragraph (k)2., 3., or 5. of this subsection restricts all fiduciaries from possessing or exercising a power under this section, the fiduciary may petition the District Court for the court to effect the intended conversion or action; and
    13. A fiduciary may release any power conferred by this section if any of the following applies:
      1. The fiduciary is uncertain about whether possessing or exercising the power will cause a result described in paragraph (k)2., 3., or 5. of this subsection; or
      2. The fiduciary determines that possessing or exercising the power will or may deprive the trust of a tax benefit or impose a tax burden not described in paragraph (k) of this subsection.

        The release may be permanent or for a specified period, including a period measured by the life of an individual.

  2. Unless a beneficiary has requested the fiduciary in writing that the fiduciary consider an adjustment, unitrust conversion, or change in payout percentage, nothing in this section imposes a duty on the fiduciary to make an adjustment, conversion, or change in payout percentage under subsection (2)(e)3. of this section, and the fiduciary is not liable for not considering whether to make an adjustment, conversion, or change in payout percentage under this section.
  3. This section is intended to further describe and clarify the powers previously granted under the immediately preceding version of this section. These clarifications and revisions shall apply to and be available for all applicable and qualifying trusts, including any trust which may have previously sought relief under a prior version of this section.

History. Enact. Acts 2004, ch. 158, § 3, effective January 1, 2005; 2010, ch. 21, § 6, effective July 15, 2010; 2012, ch. 59, § 2, effective July 12, 2012; 2014, ch. 25, § 106, effective July 15, 2014.

Legislative Research Commission Notes.

(7/12/2012). In subsection (2)(a) of this statute, a reference to “paragraph (f)” has been changed to read “paragraph (g).” In subsection (3)(d) of this statute, a reference to “paragraph (a) of subsection (2) of this section” has been changed to read “subsection (2)(b) of this section.” These corrections are clearly required by the context and by examination of changes in paragraph designations that were adopted in successive drafts of 2012 Ky. Acts ch. 59, sec. 2. The Reviser of Statutes has corrected these manifest clerical or technical errors under KRS 7.136(1).

(7/12/2006). 2006 Ky. Acts ch. 247 instructs the Reviser of Statutes to adjust KRS references throughout the statutes to conform with the 2006 renumbering of the Financial Services Code, KRS Chapter 286. Such an adjustment has been made in this statute.

(1/1/2005). In 2004 Ky. Acts ch. 158, sec. 3, subsec. (2), a reference is made to “subsection (1) of this Act.” Because it is clear from the subject matter of ch. 158, sec. 3, subsec. (1), that the reference was intended to be to “subsection (1) of this section” instead, this manifest clerical or typographical error has been corrected during codification by the Reviser of Statutes under KRS 7.136(1).

Research References and Practice Aids

Treatises

Caldwell’s Kentucky Form Book, 5th Ed., Petition, Order and Consent for Conversion to Total Return Trust, Form 231.06.

Caldwell’s Kentucky Form Book, 5th Ed., Petition, Order and Consent for Conversion to Total Return Trust (Charitable Beneficiary), Form 231.07.

Article 2. Decedent’s Estate or Terminating Income Interest

386.456. Determination and distribution of net income.

After a decedent dies, in the case of an estate, or after an income interest in a trust ends, the following rules apply:

  1. A fiduciary of an estate or of a terminating income interest shall determine the amount of net income and net principal receipts received from property specifically given to a beneficiary under the rules in Articles 3, 4, and 5 of the Kentucky Principal and Income Act that apply to trustees and the rules in subsection (5) of this section. The fiduciary shall distribute the net income and net principal receipts to the beneficiary who is to receive the specific property.
  2. A fiduciary shall determine the remaining net income of a decedent’s estate or a terminating income interest under the rules in Articles 3, 4, and 5 of the Kentucky Principal and Income Act that apply to trustees and by:
    1. Including in net income all income from property used to discharge liabilities;
    2. Paying from income or principal, in the fiduciary’s discretion, fees to attorneys, accountants, and fiduciaries; court costs and other expenses of administration; and interest on death taxes, but the fiduciary may pay those expenses from income of property passing to a trust for which the fiduciary claims an estate tax marital or charitable deduction only to the extent that the payment of those expenses from income will not cause the reduction or loss of the deduction; and
    3. Paying from principal all other disbursements made or incurred in connection with the settlement of a decedent’s estate or the winding up of a terminating income interest, including debts, funeral expenses, disposition of remains, family allowances, and death taxes and related penalties that are apportioned to the estate or terminating income interest by the will, the terms of the trust, or applicable law.
  3. A fiduciary shall distribute to a beneficiary who receives a pecuniary amount outright the interest or any other amount provided by the will, the terms of the trust, or applicable law from net income determined under subsection (2) of this section, or from principal to the extent that net income is insufficient. If a beneficiary is to receive a pecuniary amount outright from a trust after an income interest ends and no interest or other amount is provided for by the terms of the trust or applicable law, the fiduciary shall distribute the interest or other amount to which the beneficiary would be entitled under applicable law if the pecuniary amount were required to be paid under a will.
  4. A fiduciary shall distribute the net income remaining after distributions required by subsection (3) of this section in the manner described in KRS 386.458 to all other beneficiaries, including a beneficiary who receives a pecuniary amount in trust, even if the beneficiary holds an unqualified power to withdraw assets from the trust or other presently exercisable general power of appointment over the trust.
  5. A fiduciary shall not reduce principal or income receipts from property described in subsection (1) of this section because of a payment described in KRS 386.490 to the extent that the will, the terms of the trust, or applicable law requires the fiduciary to make the payment from assets other than the property or to the extent that the fiduciary recovers or expects to recover the payment from a third party. The net income and principal receipts from the property are determined by including all of the amounts the fiduciary receives or pays with respect to the property, whether those amounts accrued or became due before, on, or after the date of a decedent’s death or an income interest’s terminating event, and by making a reasonable provision for amounts that the fiduciary believes the estate or terminating income interest may become obligated to pay after the property is distributed.

History. Enact. Acts 2004, ch. 158, § 4, effective January 1, 2005.

386.458. Distribution to residuary and remainder beneficiaries.

  1. Each beneficiary described in KRS 386.456(4) is entitled to receive a portion of the net income equal to the beneficiary’s fractional interest in undistributed principal assets, using values as of the distribution date. If a fiduciary makes more than one (1) distribution of assets to beneficiaries to whom this section applies, each beneficiary, including one (1) who shall not receive part of the distribution, is entitled, as of each distribution date, to the net income the fiduciary has received after the date of the death or terminating event or earlier distribution date but has not distributed as of the current distribution date.
  2. In determining a beneficiary’s share of net income, the following rules apply:
    1. The beneficiary is entitled to receive a portion of the net income equal to the beneficiary’s fractional interest in the undistributed principal assets immediately before the distribution date, including assets that later may be sold to meet principal obligations.
    2. The beneficiary’s fractional interest in the undistributed principal assets shall be calculated without regard to property specifically given to a beneficiary and property required to pay pecuniary amounts not in trust.
    3. The beneficiary’s fractional interest in the undistributed principal assets shall be calculated on the basis of the aggregate value of those assets as of the distribution date without reducing the value by an unpaid principal obligation.
    4. The distribution date for purposes of this section may be the date as of which the fiduciary calculates the value of the assets if that date is reasonably near the date on which assets are actually distributed.
  3. If a fiduciary does not distribute all of the collected but undistributed net income to each person as of a distribution date, the fiduciary shall maintain appropriate records showing the interest of each beneficiary in that net income.
  4. A fiduciary may apply the rules in this section, to the extent that the fiduciary considers it appropriate, to net gain or loss realized after the date of death or terminating event or earlier distribution date from the disposition of a principal asset if this section applies to the income from the asset.

History. Enact. Acts 2004, ch. 158, § 5, effective January 1, 2005.

Article 3. Apportionment at Beginning and End of Income Interest

386.460. When right to income begins and ends.

  1. An income beneficiary is entitled to net income from the date on which the income interest begins. An income interest begins on the date specified in the terms of the trust or, if no date is specified, on the date an asset becomes subject to a trust or successive income interest.
  2. An asset becomes subject to a trust:
    1. On the date it is transferred to the trust in the case of an asset that is transferred to a trust during the transferor’s life;
    2. On the date of a testator’s death in the case of an asset that becomes subject to a trust by reason of a will, even if there is an intervening period of administration of the testator’s estate; or
    3. On the date of an individual’s death in the case of an asset that is transferred to a fiduciary by a third party because of the individual’s death.
  3. An asset becomes subject to a successive income interest on the day after the preceding income interest ends, as determined under subjection (4) of this section, even if there is an intervening period of administration to wind up the preceding income interest.
  4. An income interest ends on the day before an income beneficiary dies or another terminating event occurs, or on the last day of a period during which there is no beneficiary to whom a trustee may distribute income.

History. Enact. Acts 2004, ch. 158, § 6, effective January 1, 2005.

386.462. Apportionment of receipts and disbursements when decedent dies or income interest begins.

  1. A trustee shall allocate an income receipt or disbursement other than one to which KRS 386.456(1) applies to principal if its due date occurs before a decedent dies in the case of an estate or before an income interest begins in the case of a trust or successive income interest.
  2. A trustee shall allocate an income receipt or disbursement to income if its due date occurs on or after the date on which a decedent dies or an income interest begins and it is a periodic due date. An income receipt or disbursement shall be treated as accruing from day to day if its due date is not periodic or it has no due date. The portion of the receipt or disbursement accruing before the date on which a decedent dies or an income interest begins shall be allocated to principal and the balance shall be allocated to income.
  3. An item of income or an obligation is due on the date the payer is required to make a payment. If a payment date is not stated, there is no due date for the purposes of KRS 386.450 to 386.504 . Distributions to shareholders or other owners from an entity to which KRS 386.466 applies are deemed to be due on the date fixed by the entity for determining who is entitled to receive the distribution or, if no date is fixed, on the declaration date for the distribution. A due date is periodic for receipts or disbursements that shall be paid at regular intervals under a lease or an obligation to pay interest or if an entity customarily makes distributions at regular intervals.

History. Enact. Acts 2004, ch. 158, § 7, effective January 1, 2005.

386.464. “Undistributed income” defined — Apportionment when income interest ends.

  1. In this section, “undistributed income” means net income received before the date on which an income interest ends. The term shall not include an item of income or expense that is due or accrued or net income that has been added or is required to be added to principal under the terms of the trust.
  2. When a mandatory income interest ends, the trustee shall pay to a mandatory income beneficiary who survives that date, or the estate of a deceased mandatory income beneficiary whose death causes the interest to end, the beneficiary’s share of the undistributed income that is not disposed of under the terms of the trust unless the beneficiary has an unqualified power to revoke more than five percent (5%) of the trust immediately before the income interest ends. In the latter case, the undistributed income from the portion of the trust that may be revoked shall be added to principal.
  3. When a trustee’s obligation to pay a fixed annuity or a fixed fraction of the value of the trust’s assets ends, the trustee shall prorate the final payment if and to the extent required by applicable law to accomplish a purpose of the trust or its settlor relating to income, gift, estate, or other tax requirements. The settlor may change the charitable beneficiary of a trust by will or through written notice to trustee, or may decline to make a change in like manner, so long as the change does not alter the income, gift, estate, or other tax benefits available under the terms of the trust.

History. Enact. Acts 2004, ch. 158, § 8, effective January 1, 2005.

Article 4. Allocation of Receipts During Administration of Trust

386.466. “Entity” defined — Character of receipts from entities.

  1. In this section, “entity” means a corporation, partnership, limited partnership, limited liability company, statutory or business trust, regulated investment company, real estate investment trust, common trust fund, or any other organization in which a trustee has an interest other than a trust or estate to which KRS 386.468 applies.
  2. Except as otherwise provided in this section, a trustee shall allocate to income money received from an entity.
  3. A trustee shall allocate the following receipts from an entity to principal:
    1. Property other than money;
    2. Money received in one (1) distribution or a series of related distributions in exchange for part or all of a trust’s interest in the entity;
    3. Money received in total or partial liquidation of the entity; and
    4. Money received from an entity that is a regulated investment company or a real estate investment trust, if the money distributed is a capital gain dividend for federal income tax purposes.
  4. Money is received in partial liquidation:
    1. To the extent that the entity, at or near the time of a distribution, indicates that it is a distribution in partial liquidation; or
    2. If the total amount of money and property received in a distribution or series of related distributions is greater than twenty percent (20%) of the entity’s gross assets, as shown by the entity’s year end financial statements immediately preceding the initial receipt.
  5. Money is not received in partial liquidation, nor may it be taken into account under paragraph (b) of subsection (4) of this section to the extent that it does not exceed the amount of income tax that a trustee or beneficiary shall pay on taxable income of the entity that distributes the money.
  6. A trustee may rely upon a statement made by an entity about the source or character of a distribution if the statement is made at or near the time of distribution by the entity’s board of directors or other person or group of persons authorized to exercise powers to pay money or transfer property comparable to those of a corporation’s board of directors.

History. Enact. Acts 2004, ch. 158, § 9, effective January 1, 2005; 2010, ch. 133, § 76, effective July 15, 2010.

Legislative Research Commission Note.

(9/9/2008). The Reviser of Statutes has corrected a manifest clerical or typographical error in subsection (5) of this statute under the authority of KRS 7.136(1)(h) by supplying the inadvertently omitted word “tax” after “the amount of income” to conform with the adopted text of the Uniform Principal and Income Act.

386.468. Distribution from trust or estate.

A trustee shall allocate to income an amount received as a distribution of income from a trust or an estate in which the trust has an interest other than a purchased interest, and shall allocate to principal an amount received as a distribution of principal from such a trust or estate. If a trustee purchases an interest in a trust that is an investment entity, or a decedent or donor transfers an interest in such a trust to a trustee, KRS 386.466 applies to a receipt from the trust.

History. Enact. Acts 2004, ch. 158, § 10, effective January 1, 2005.

386.470. Principal receipts.

A trustee shall allocate to principal:

  1. To the extent not allocated to income under KRS 386.450 to 386.504 , assets received from a transferor during the transferor’s lifetime, a decedent’s estate, a trust with a terminating income interest, or a payer under a contract naming the trust or its trustee as beneficiary;
  2. Money or other property received from the sale, exchange, liquidation, or change in form of a principal asset, including stock splits and realized profit, subject to this article;
  3. Amounts recovered from third parties to reimburse the trust because of disbursements described in KRS 386.492(1)(g) or for other reasons to the extent not based on the loss of income;
  4. Proceeds of property taken by eminent domain, but a separate award made for the loss of income with respect to an accounting period during which a current income beneficiary had a mandatory income interest is income;
  5. Net income received in an accounting period during which there is no beneficiary to whom a trustee may or shall distribute income;
  6. If a trustee grants an option to buy property from the trust, whether or not the trust owns the property when the option is granted, grants an option that permits another person to sell property to the trust, or acquires an option to buy property for the trust or an option to sell an asset owned by the trust, and the trustee or other owner of the asset is required to deliver the asset if the option is exercised, an amount received for granting the option shall be allocated to principal. An amount paid to acquire the option shall be paid from principal. A gain or loss realized upon the exercise of an option, including an option granted to a settlor of the trust for services rendered, shall be allocated to principal; and
  7. Other receipts as provided in KRS 386.478 , 386.480 , 386.482 , 386.484 , 386.486 , and 386.488 .

History. Enact. Acts 2004, ch. 158, § 11, effective January 1, 2005.

386.472. Receipts from rental property.

To the extent that a trustee accounts for receipts from rental property under this section, the trustee shall allocate to income an amount received as rent of real or personal property, including an amount received for cancellation or renewal of a lease. An amount received as a refundable deposit, including a security deposit or a deposit that is applied as rent for future periods, shall be added to principal and held subject to the terms of the lease and is not available for distribution to a beneficiary until the trustee’s contractual obligations have been satisfied with respect to that amount.

History. Enact. Acts 2004, ch. 158, § 12, effective January 1, 2005.

386.474. Receipts from obligation to pay money — Exceptions.

  1. An amount received as interest, whether determined at a fixed, variable, or floating rate, on an obligation to pay money to the trustee, including an amount received as consideration for prepaying principal, shall be allocated to income without any provision for amortization of premium.
  2. A trustee shall allocate to principal an amount received from the sale, redemption, or other disposition of an obligation to pay money to the trustee more than one (1) year after it is purchased or acquired by the trustee, including an obligation whose purchase price or value when it is acquired is less than its value at maturity. If the obligation matures within one (1) year after it is purchased or acquired by the trustee, an amount received in excess of its purchase price or its value when acquired by the trust shall be allocated to income.
  3. This section shall not apply to an obligation to which KRS 386.472 , 386.480 , 386.482 , 386.484 , or 386.486 applies.

History. Enact. Acts 2004, ch. 158, § 13, effective January 1, 2005.

386.476. Receipts from insurance policies and similar contracts — Exception.

  1. Except as otherwise provided in subsection (2) of this section, a trustee shall allocate to principal the proceeds of a life insurance policy or other contract in which the trust or its trustee is named as beneficiary, including a contract that insures the trust or its trustee against loss for damage to, destruction of, or loss of title to a trust asset. The trustee shall allocate dividends on an insurance policy to income if the premiums on the policy are paid from income, and to principal if the premiums are paid from principal.
  2. A trustee shall allocate to income proceeds of a contract that insures the trustee against loss of occupancy or other use by an income beneficiary, loss of income, or loss of profits from a business.
  3. This section shall not apply to a contract to which KRS 386.480 applies.

History. Enact. Acts 2004, ch. 158, § 14, effective January 1, 2005.

386.478. Insubstantial allocations not required — When allocation presumed insubstantial.

If a trustee determines that an allocation between principal and income required by KRS 386.480 , 386.482 , 386.484 , or 386.486 is unsubstantial, the trustee may allocate the entire amount to principal. An allocation is presumed to be insubstantial if:

  1. The amount of the allocation would increase or decrease net income in an accounting period, as determined before the allocation, by less than ten percent (10%); or
  2. The value of the asset producing the receipt for which the allocation would be made is less than ten percent (10%) of the total value of the trust’s assets at the beginning of the accounting period.

History. Enact. Acts 2004, ch. 158, § 15, effective January 1, 2005; 2010, ch. 21, § 13, effective July 15, 2010; 2014, ch. 25, § 107, effective July 15, 2014.

386.480. Receipts from deferred compensation, annuities, and similar payments — Exceptions — Allocations of payments made from a separate fund.

  1. As used in this section:
    1. “Payment” means a payment that a trustee may receive over a fixed number of years or during the life of one (1) or more individuals because of services rendered or property transferred to the payer in exchange for future payments. The term includes a payment made in money or property from the payer’s general assets or from a separate fund created by the payer. For purposes of subsections (4), (5), (6), and (7) of this section, the term also includes any payment from any separate fund, regardless of the reason for the payment; and
    2. “Separate fund” includes a private or commercial annuity, an individual retirement account, and a pension profit-sharing, stock-bonus, or stock-ownership plan.
  2. To the extent that a payment is characterized as interest or a dividend or a payment made in lieu of interest or a dividend, a trustee shall allocate it to income. The trustee shall allocate to principal the balance of the payment and any other payment received in the same accounting period that is not characterized as interest, a dividend, or an equivalent payment.
  3. If no part of a payment is characterized as interest, a dividend, or an equivalent payment and all or part of the payment is required to be made, a trustee shall allocate to income ten percent (10%) of the part that is required to be made during the accounting period and the balance to principal. If no part of a payment is required to be made or the payment received is the entire amount to which the trustee is entitled, the trustee shall allocate the entire payment to principal. For purposes of this subsection, a payment is not “required to be made” to the extent that it is made because the trustee exercises a right of withdrawal.
  4. Except as otherwise provided in subsection (5) of this section, subsections (6) and (7) of this section shall apply, and subsections (2) and (3) of this section shall not apply, in determining the allocation of a payment made from a separate fund to:
    1. A trust to which an election to qualify for a marital deduction under 26 U.S.C. sec. 2056(b)(7) has been made; or
    2. A trust that qualifies for the marital deduction under 26 U.S.C. sec. 2056(b)(5) .
  5. Subsections (4), (6), and (7) of this section shall not apply if and to the extent that the series of payments would, without the application of subsection (4) of this section, qualify for the marital deduction under 26 U.S.C sec. 2056(b)(7)(C).
  6. A trustee shall determine the internal income of each separate fund for the accounting period as if the separate fund were a trust subject to KRS 386.450 to 386.504 . Upon request of the surviving spouse, the trustee shall demand that the person administering the separate fund distribute the internal income to the trust. The trustee shall allocate a payment from the separate fund to income to the extent of the internal income of the separate fund and distribute that amount to the surviving spouse. The trustee shall allocate the balance of the payment to principal. Upon request of the surviving spouse, the trustee shall allocate principal to income to the extent the internal income of the separate fund exceeds payments made from the separate fund to the trust during the accounting period.
  7. If a trustee cannot determine the internal income of a separate fund but can determine the value of the separate fund, the internal income of the separate fund is deemed to equal three percent (3%) of the fund’s value, according to the most recent statement of value preceding the beginning of the accounting period. If the trustee can determine neither the internal income of the separate fund nor the fund’s value, the internal income of the fund is deemed to equal the product of the interest rate and the present value of the expected future payments, as determined under 26 U.S.C. sec. 7520 , for the month preceding the accounting period for which the computation is made.
  8. This section shall not apply to payments to which KRS 386.482 applies.

History. Enact. Acts 2004, ch. 158, § 16, effective January 1, 2005; 2010, ch. 21, § 7, effective July 15, 2010.

Research References and Practice Aids

Kentucky Bench & Bar.

Hargrove, 2010 Changes to the Kentucky Trust & Estate Practice, Vol. 74, No. 5, September 2010, Ky. Bench & Bar 12.

386.482. Receipts from liquidating assets.

  1. In this section, “liquidating asset” means an asset whose value will diminish or terminate because the asset is expected to produce receipts for a period of limited duration. The term includes a leasehold, patent, copyright, royalty right, and right to receive payments during a period of more than one (1) year under an arrangement that shall not provide for the payment of interest on the unpaid balance. The term shall not include an activity subject to KRS 386.470(6), payment subject to KRS 386.480 , resources subject to KRS 386.484 , timber subject to KRS 386.486 , or any asset for which the trustee establishes a reserve for depreciation under KRS 386.494 .
  2. A trustee shall allocate to income ten percent (10%) of the receipts from a liquidating asset and the balance to principal.

History. Enact. Acts 2004, ch. 158, § 17, effective January 1, 2005.

386.484. Receipts from minerals, water, and other natural resources.

  1. To the extent that a trustee accounts for receipts from an interest in minerals or other natural resources pursuant to this section, the trustee shall allocate them as follows:
    1. If received as nominal delay rental or nominal annual rent on a lease, a receipt shall be allocated to income;
    2. If received from a production payment, a receipt shall be allocated to income if and to the extent that the agreement creating the production payment provides a factor for interest or its equivalent. The balance shall be allocated to principal;
    3. If an amount received as a royalty, shut-in-well payment, take-or-pay payment, bonus, or delay rental is more than nominal, ninety percent (90%) shall be allocated to principal and the balance to income; or
    4. If an amount is received from a working interest or any other interest not provided for in paragraph (a), (b), or (c) of this subsection, ninety percent (90%) of the net amount received shall be allocated to principal and the balance to income.
  2. An amount received on account of an interest in water that is renewable shall be allocated to income. If the water is not renewable, ninety percent (90%) of the amount shall be allocated to principal and the balance to income.
  3. KRS 386.450 to 386.504 apply whether or not a decedent or donor was extracting minerals, water, or other natural resources before the interest became subject to the trust.
  4. If a trust owns an interest in minerals, water, or other natural resources on January 1, 2005, the trustee may allocate receipts from the interest as provided in KRS 386.450 to 386.504 or in the manner used by the trustee before January 1, 2005. If the trust acquires an interest in minerals, water, or other natural resources after January 1, 2005, the trustee shall allocate receipts from the interest as provided in KRS 386.450 to 386.504 .
  5. The proceeds from any disposition of an interest specified in this section shall be allocated in the same manner as receipts from the interest.

History. Enact. Acts 2004, ch. 158, § 18, effective January 1, 2005.

386.486. Receipts from timber.

  1. To the extent that a trustee accounts for receipts from the sale of timber and related products pursuant to this section, the trustee shall allocate the net receipts:
    1. To income to the extent that the amount of timber removed from the land does not exceed the rate of growth of the timber during the accounting periods in which a beneficiary has a mandatory income interest;
    2. To principal to the extent that the amount of timber removed from the land exceeds the rate of growth of the timber or the net receipts are from the sale of standing timber;
    3. To or between income and principal if the net receipts are from the lease of timberland or from a contract to cut timber from land owned by a trust, by determining the amount of timber removed from the land under the lease or contract and applying the rules in paragraphs (a) and (b) of this subsection; or
    4. To principal to the extent that advance payments, bonuses, and other payments are not allocated pursuant to paragraphs (a), (b), or (c) of this subsection.
  2. In determining net receipts allocated under subsection (1) of this section, a trustee shall deduct and transfer to principal a reasonable amount for depletion.
  3. KRS 386.450 to 386.504 apply whether or not a decedent or transferor was harvesting timber from the property before it became subject to the trust.
  4. If a trust owns an interest in timberland on January 1, 2005, the trustee may allocate net receipts from the sale of timber and related products as provided in KRS 386.450 to 386.504 or in the manner used by the trustee before January 1, 2005. If the trust acquires an interest in timberland after January 1, 2005, the trustee shall allocate net receipts from the sale of timber and related products as provided in KRS 386.450 to 386.504 .

History. Enact. Acts 2004, ch. 158, § 19, effective January 1, 2005.

386.488. Property not productive of income.

  1. If a marital deduction is allowed for all or part of a trust, the spouse may require the trustee to make the trust income productive.
  2. In cases not governed by subsection (1) of this section, proceeds from the sale or other disposition of an asset are principal without regard to the amount of income the asset produces during any accounting period.

History. Enact. Acts 2004, ch. 158, § 20, effective January 1, 2005.

Article 5. Allocation of Disbursements During Administration of Trust

386.490. Disbursements from income.

A trustee shall make the following disbursements from income to the extent that they are not disbursements to which KRS 386.456(2)(b) or (2)(c) applies:

  1. One-half (1/2) of the regular compensation of the trustee and of any person providing investment advisory or custodial services to the trustee;
  2. One-half (1/2) of all expenses for accountings, judicial proceedings, or other matters that involve both the income and remainder interests;
  3. All of the other ordinary expenses incurred in connection with the administration, management, or preservation of trust property and the distribution of income, including interest, ordinary repairs, regularly recurring taxes assessed against principal, and expenses of a proceeding or other matter that concerns primarily the income interest; and
  4. Recurring premiums on insurance covering the loss of a principal asset or the loss of income from or use of the asset.

History. Enact. Acts 2004, ch. 158, § 21, effective January 1, 2005; 2008, ch. 130, § 1, effective July 15, 2008.

NOTES TO DECISIONS

1.Percentage of Income.

In trust agreement a provision that trustee was to “receive a compensation of three percent of all moneys received and disbursed” was intended to allow him three percent of the trust income only and not of the income and principal both. Camden v. First Nat'l Bank & Trust Co., 311 Ky. 557 , 224 S.W.2d 644, 1949 Ky. LEXIS 1168 ( Ky. 1949 ) (Decided under prior law).

The five percent (now six percent) fee provided by this section is a maximum limit and it is error to award a fee of five percent where it exceeds the reasonable value of the services rendered. Curtis v. Citizens Bank & Trust Co., 384 S.W.2d 328, 1964 Ky. LEXIS 97 ( Ky. 1964 ) (Decided under prior law).

2.Annual Commission.

Where a trustee did not collect the annual fee from principal for a period in excess of 33 years, it had exercised its option to collect the fee from principal upon termination of the trust. First Sec. Nat'l Bank & Trust Co. v. Cognets, 563 S.W.2d 476, 1978 Ky. App. LEXIS 479 (Ky. Ct. App. 1978) (Decided under prior law).

Although this section does not fix a time for the exercise of the trustee’s option, it would appear that it must be exercised within a reasonable time. First Sec. Nat'l Bank & Trust Co. v. Cognets, 563 S.W.2d 476, 1978 Ky. App. LEXIS 479 (Ky. Ct. App. 1978) (Decided under prior law).

3.Extraordinary or Unusual Services.

Upon a showing of extraordinary or unusual service in the handling of the estate in the trustee’s care not normally incident to the care and management of an estate, the court may make such further allowance as he may deem to be fair and reasonable. Netherton v. Bradley, 305 Ky. 427 , 204 S.W.2d 594, 1947 Ky. LEXIS 842 ( Ky. 1947 ) (Decided under prior law).

4.— Proof.

Where the administratrix failed to offer any proof of her claim for extraordinary services rendered to her father before his death, the trial court properly disallowed the claim. Rabold v. Roberts, 444 S.W.2d 536, 1969 Ky. LEXIS 210 ( Ky. 1969 ) (Decided under prior law).

It was mandatory upon the administratrix to prove her claim for extraordinary services rendered before her father’s death, not only by her own affidavit but the affidavit of a third person, and in addition to such proof, the claim for extraordinary services had to be allowed by the court before payment. Rabold v. Roberts, 444 S.W.2d 536, 1969 Ky. LEXIS 210 ( Ky. 1969 ) (Decided under prior law).

5.— Appeal.

On appeal from judgment rejecting the administratrix’ claim for extraordinary services rendered to her father before his death, the burden of proving the claim was on the administratrix. Rabold v. Roberts, 444 S.W.2d 536, 1969 Ky. LEXIS 210 ( Ky. 1969 ) (Decided under prior law).

Opinions of Attorney General.

A trustee who elects the statutory option to commission upon distribution of principal is entitled to his commission at the time of each distribution, if more than one, but the commission is based upon only the portion distributed at that time. OAG 83-213 (Decided under prior law).

386.492. Disbursement from principal.

  1. A trustee shall make the following disbursements from principal:
    1. That portion of the regular compensation of the trustee and any person providing investment advisory or custodial services to the trustee not paid from income under KRS 386.490(1);
    2. The remaining one-half (1/2) of the disbursements described in KRS 386.490(2);
    3. All of the trustee’s compensation calculated on principal as a fee for acceptance, distribution, or termination, and disbursements made to prepare property for sale;
    4. Payments on the principal of a trust debt;
    5. Expenses of a proceeding that concerns primarily principal, including a proceeding to construe the trust or to protect the trust or its property;
    6. Premiums paid on a policy of insurance not described in KRS 386.490(4) of which the trust is the owner and beneficiary;
    7. Estate, inheritance, and other transfer taxes, including penalties, apportioned to the trust; and
    8. Disbursements related to environmental matters, including reclamation, assessing environmental conditions, remedying and removing environmental contamination, monitoring remedial activities and the release of substances, preventing future releases of substances, collecting amounts from persons liable or potentially liable for the costs of those activities, penalties imposed under environmental laws or regulations and other payments made to comply with those laws or regulations, statutory or common law claims by third parties, and defending claims based on environmental matters.
  2. If a principal asset is encumbered with an obligation that requires income from that asset to be paid directly to the creditor, the trustee shall transfer from principal to income an amount equal to the income paid to the creditor in reduction of the principal balance of the obligation.

History. Enact. Acts 2004, ch. 158, § 22, effective January 1, 2005.

386.494. Transfers from income to principal for depreciation.

  1. In this section, “depreciation” means a reduction in value due to wear, tear, decay, corrosion, or gradual obsolescence of a fixed asset having a useful life of more than one (1) year.
  2. A trustee may transfer to principal a reasonable amount of the net cash receipts from a principal asset that is subject to depreciation, but shall not transfer any amount for depreciation:
    1. Of that portion of real property used or available for use by a beneficiary as a residence or of tangible personal property held or made available for the personal use or enjoyment of a beneficiary; or
    2. During the administration of a decedent’s estate.
  3. An amount transferred to principal need not be held as a separate fund.

History. Enact. Acts 2004, ch. 158, § 23, effective January 1, 2005.

386.496. Transfers from income to reimburse principal.

  1. If a trustee makes or expects to make a principal disbursement described in this section, the trustee may transfer an appropriate amount from income to principal in one (1) or more accounting periods to reimburse principal or to provide a reserve for future principal disbursements.
  2. Principal disbursements to which subsection (1) of this section applies include the following, but only to the extent that the trustee has not been and does not expect to be reimbursed by a third party:
    1. An amount chargeable to income but paid from principal because it is unusually large, including extraordinary repairs;
    2. A capital improvement to a principal asset, whether in the form of changes to an existing asset or the construction of a new asset, including special assessments;
    3. Disbursements made to prepare property for rental, including tenant allowances, leasehold improvements, and broker’s commissions;
    4. Periodic payments on an obligation secured by a principal asset to the extent that the amount transferred from income to principal for depreciation is less than the periodic payments; and
    5. Disbursements described in KRS 386.492(1)(g).
  3. If the asset whose ownership gives rise to the disbursements becomes subject to a successive income interest after an income interest ends, a trustee may continue to transfer amounts from income to principal as provided in subsection (1) of this section.

History. Enact. Acts 2004, ch. 158, § 24, effective January 1, 2005.

386.498. Payment of income taxes.

  1. A tax required to be paid by a trustee based on receipts allocated to income shall be paid from income.
  2. A tax required to be paid by a trustee based on receipts allocated to principal shall be paid from principal, even if the tax is called an income tax by the taxing authority.
  3. A tax required to be paid by a trustee on the trust’s share of an entity’s taxable income shall be paid proportionately:
    1. From income to the extent that receipts from the entity are allocated to income; and
    2. From principal to the extent that:
      1. Receipts from the entity are allocated to principal; and
      2. The trust’s share of the entity’s taxable income exceeds the total receipts described in paragraph (a) of this subsection and paragraph (b)1. of this subsection.
  4. For purposes of this section, receipts allocated to principal or income shall be reduced by the amount distributed to a beneficiary from principal or income for which the trust receives a deduction in calculating the tax.

History. Enact. Acts 2004, ch. 158, § 25, effective January 1, 2005.

386.500. Adjustments between principal and income because of taxes.

  1. A fiduciary may, with District Court approval, make adjustments between principal and income to offset the shifting of economic interests or tax benefits between income beneficiaries and remainder beneficiaries which arise from:
    1. Elections and decisions, other than those described in subsection (2) of this section, that the fiduciary makes from time to time regarding tax matters;
    2. An income tax or any other tax that is imposed upon the fiduciary or a beneficiary as a result of a transaction involving, or a distribution from, the estate or trust; or
    3. The ownership by an estate or trust of an interest in an entity whose taxable income, whether or not distributed, is includable in the taxable income of the estate, trust, or a beneficiary.
  2. If the amount of an estate tax marital deduction or charitable contribution deduction is reduced because a fiduciary deducts an amount paid from principal for income tax purposes instead of deducting it for estate tax purposes and, as a result, estate taxes paid from principal are increased and income taxes paid by an estate, trust, or beneficiary are decreased, each estate, trust, or beneficiary that benefits from the decrease in income tax shall reimburse the principal from which the increase in estate tax is paid. The total reimbursement shall equal the increase in the estate tax to the extent that the principal used to pay the increase would have qualified for a marital deduction or charitable contribution deduction but for the payment. The proportionate share of the reimbursement for each estate, trust, or beneficiary whose income taxes are reduced shall be the same as its proportionate share of the total decrease in income tax. An estate or trust shall reimburse principal from income.

History. Enact. Acts 2004, ch. 158, § 26, effective January 1, 2005.

386.502. Application of KRS 386.450 to 386.504 to trusts.

The provisions of KRS 386.450 to 386.504 shall apply to all trusts administered under Kentucky law, except as otherwise specifically provided in the instrument creating the trust, regardless of when created.

History. Enact. Acts 2004, ch. 158, § 27, effective January 1, 2005; 2012, ch. 59, § 3, effective July 12, 2012.

Article 6. Miscellaneous

386.504. Short title.

KRS 386.450 to 386.504 may be cited as the “Kentucky Principal and Income Act.”

History. Enact. Acts 2004, ch. 158, § 28, effective January 1, 2005.

Research References and Practice Aids

Treatises

Caldwell’s Kentucky Form Book, 5th Ed., Practice Context for Trusts, § 231.00.

Fiduciary Investment Companies

386.510. Definitions for KRS 386.510 to 386.590.

As used in KRS 386.510 to 386.590 , the following terms shall be construed to have the meaning set forth by this section, unless a contrary meaning clearly appears from the context:

  1. The term “trust institution” means any of the following corporations having trust powers and authorized to act in a fiduciary capacity under the laws of Kentucky: Any state bank or trust company incorporated under the laws of Kentucky and any national banking association incorporated under the laws of the United States and having its principal office in Kentucky;
  2. The term “investment adviser” of a fiduciary investment company means (a) any trust institution which, pursuant to contract with a fiduciary investment company possessing the qualifications provided by KRS 386.510 to 386.590 , regularly furnishes advice to such investment company with respect to the desirability of investing in, purchasing or selling securities or other property or is empowered to determine what securities or other property shall be purchased or sold by such investment company, and (b) any person other than a trust institution, who, pursuant to contract with such trust institution, regularly performs substantially all of the duties undertaken by such trust institution;
  3. The term “fiduciary investment company” means a corporation which is an investment company as defined by the Act of Congress entitled “Investment Company Act of 1940” approved August 22, 1940, as amended, and is incorporated in accordance with the “Kentucky Business Corporation Act” as to constitute a medium for the investment of funds held by trust institutions and foreign trust institutions in a fiduciary capacity, either alone or with one (1) or more cofiduciaries;
  4. The term “supervisory agency” means (a) the comptroller of the currency of the United States with respect to any fiduciary investment company having a national banking association as an investment adviser, and (b) the commissioner of financial institutions of the Commonwealth of Kentucky with respect to any fiduciary investment company having a state bank as an investment adviser. The term shall mean the commissioner of financial institutions of the Commonwealth of Kentucky with respect to any fiduciary investment company which does not have an investment adviser; and
  5. The term “foreign trust institution” means any state bank or trust company organized under the laws of any state other than Kentucky or any national banking association incorporated under the laws of the United States and having its principal office in some state other than Kentucky, which has trust powers and is authorized to act in a fiduciary capacity under the laws under which it was incorporated.

History. Enact. Acts 1974, ch. 300, § 2; 1984, ch. 388, § 16, effective July 13, 1984; 2010, ch. 24, § 1919, effective July 15, 2010.

Compiler’s Notes.

The Kentucky Business Corporation Act, referred to herein, is compiled as KRS 271B.1-010 to 271B.18-060 . The Investment Company Act of 1940 is compiled as 15 USCS §§ 80a-1 — 80a-64.

386.520. Formation of company — Approval — Regulations.

Four (4) or more trust institutions may cause a fiduciary investment company or companies to be organized and incorporated, but no trust institution or foreign trust institution may own an interest in more than seven (7) fiduciary investment companies. A fiduciary investment company shall not begin business except to select an investment advisor, until it is approved by the appropriate supervisory agency. A fiduciary investment company shall be subject to such regulations as its supervisory agency may from time to time prescribe.

History. Enact. Acts 1974, ch. 300, § 3.

386.530. Incorporation.

Any such fiduciary investment company shall be incorporated under and subject to the provisions of the Kentucky Business Corporation Act. The incorporators shall be persons who are officers or directors of the trust institution or institutions causing such fiduciary investment company to be incorporated and the articles of incorporation shall set forth the names of each trust institution participating in such incorporation and the amount of stock originally subscribed for by each, together with such other facts as are required by the Kentucky Business Corporation Act.

History. Enact. Acts 1974, ch. 300, § 4.

386.540. Regulation of investments.

Trust institutions and foreign trust institutions, as defined by KRS 386.510 , acting in a fiduciary capacity and for fiduciary purposes, may, if exercising due care as a prudent investor, and with the consent of any co-fiduciary, invest and reinvest funds held in such fiduciary capacity in the shares of stock of one (1) or more fiduciary investment companies, except where the will, trust indenture or other instrument under which such trust institution or foreign trust institution acts, prohibits such investment, provided the fiduciary investment company shall by its articles of incorporation issued and granted in conformity with the Kentucky Business Corporation Act have and possess the corporate powers required by KRS 386.510 to 386.590 and be subject to the limitations set forth by KRS 386.510 to 386.590 ; provided, further, that no such trust institution or foreign trust institution shall invest in the stock of a fiduciary investment company on behalf of any estate, trust or fund administered by such trust institution or foreign trust institution a sum or amount which would result in such estate, trust or fund having a total investment in such stock in excess of the maximum amount or percentage that might be invested by such estate, trust or fund, under the regulations of the federal or state agency charged with supervising such trust institution or foreign trust institution, in any common trust fund having total assets equal to the total assets of the fiduciary investment company as increased by the proposed investment. No trust institution or foreign trust institution shall invest in the stock of a fiduciary investment company if, immediately after such investment and as a consequence thereof, it would own more than 25 percent of the voting securities of such fiduciary investment company which would then be outstanding.

History. Enact. Acts 1974, ch. 300, § 5.

386.550. Corporate powers — Limitations and restrictions.

Every fiduciary investment company in which a trust institution or foreign trust institution is authorized by KRS 386.510 to 386.590 to own and hold corporate stock or shares, in order to qualify for such investments, shall have such corporate powers as may be granted by the Kentucky Business Corporation Act by virtue of its incorporation under that law and shall, in addition, have the following corporate powers under its articles of incorporation and, by its articles of incorporation or its bylaws, be subject to the limitations and restrictions hereinafter set forth.

  1. The stock of any such fiduciary investment company shall be owned and held only by trust institutions and foreign trust institutions acting as fiduciaries or co-fiduciaries but may be registered in the name of the nominee or nominees of any such institution or foreign trust institution. Such stock shall not be subject to transfer or assignment except to the trust institution or foreign trust institution on whose behalf the stock is held by any such nominee or nominees, or to a fiduciary or co-fiduciary which becomes successor to the shareholder and which is also a trust institution or foreign trust institution qualified to hold such stock.
  2. A fiduciary investment company shall have no less than five (5) directors who need not be shareholders but shall be officers or directors of trust institutions or foreign trust institutions holding stock in such fiduciary investment company; provided, however, no one trust institution or foreign trust institution shall have more than a forty percent (40%) representation on the board of directors of any fiduciary investment company.
  3. In acquiring, investing, reinvesting, exchanging, selling and managing its assets, every fiduciary investment company shall exercise the judgment and care under the circumstances then existing which men of prudence, discretion and intelligence exercise in the management of their own affairs, not in regard to speculation but in regard to the permanent disposition of their funds, considering the probable income as well as the safety of their capital. Within the foregoing limitations, a fiduciary investment company may acquire and retain every kind of investment, specifically including (but not by way of limitation) bonds, debentures and other corporate obligations, corporate stocks, preferred or common, which men of prudence, discretion and intelligence acquire or retain for their own account; provided, a fiduciary investment company shall not at any time:
    1. Invest in real estate, commodities or commodity contracts, except that a fiduciary investment company may invest in securities secured by real estate or interests therein, in securities issued by companies which deal in real estate or investments therein, and in certificates of beneficial interest issued by real estate investment trusts;
    2. Participate on a joint or joint and several basis in any securities trading account;
    3. Invest in companies for the purpose of exercising control or management;
    4. Make loans to any person or persons, except that the purchase of a portion of an issue of debt securities, convertible debt securities, debt securities with warrants, rights or options attached or other similar securities when originally issued or thereafter, of a character commonly distributed publicly shall not be considered the making of a loan;
    5. Purchase or retain the securities of any issuer if immediately after such acquisition and as a result thereof the following requirements would not be met: at least seventy-five percent (75%) of the total assets in the fiduciary investment company taken at market value are represented by (i) cash and cash items, securities issued or guaranteed by the United States or any instrumentality thereof, and (ii) other securities which, as to any one (1) issuer, do not represent more than ten percent (10%) of the voting securities of such issuer or more than five percent (5%) of the value of the total assets of the fiduciary investment company;
    6. Act as underwriter of the securities of other issuers;
    7. Borrow money; or
    8. Engage in margin transactions or short sales, or write, put or call options for the purchase or sale of securities.

History. Enact. Acts 1974, ch. 300, § 6; 1984, ch. 111, § 197, effective July 13, 1984.

386.560. Purchase of own stock — Responsibility and liability — Compliance with regulations of comptroller of currency.

  1. A fiduciary investment company may acquire, purchase or redeem its own stock and shall, by means of contract or by its bylaws, bind itself to acquire, purchase or redeem its own stock, but it shall not vote shares of its own stock theretofore redeemed.
  2. A fiduciary investment company shall not be responsible for ascertaining the investment powers of any fiduciary who may purchase its stock and shall not be liable for accepting funds from a fiduciary in violation of restrictions of the will, trust indenture or other instrument under which such fiduciary is acting in absence of actual knowledge of such violation, and shall be accountable only to the supervisory agency and the fiduciaries who are the owners of its stock.
  3. Every fiduciary investment company having a national bank as investment adviser shall comply with all applicable rules and regulations of the comptroller of the currency.

History. Enact. Acts 1974, ch. 300, § 7.

386.570. Control by commissioner of financial institutions.

The commissioner of financial institutions shall have authority to adopt and issue reasonable and uniform rules and regulations to govern the conduct and management of all fiduciary investment companies having investment advisers other than national banks. The commissioner of financial institutions may, whenever he may deem it necessary or expedient, examine every fiduciary investment company contemplated by KRS 386.510 to 386.590 having an investment adviser which is not a national bank. In every such examination, the commissioner of financial institutions shall make inquiry as to its financial condition, the policies of its management, whether it is complying with the laws of Kentucky, and such other matters as the commissioner of financial institutions may reasonably prescribe. In the enforcement of KRS 386.510 to 386.590 and the restrictions and limitations imposed by their articles of incorporation and bylaws, the commissioner of financial institutions shall have the same powers and authority with respect to fiduciary investment companies having investment advisers other than a national bank as are conferred upon him by the laws of this state with respect to state banks and trust companies to the same extent and in the same manner as if fiduciary investment companies were expressly named in Subtitle 3 of Chapter 286 of the Kentucky Revised Statutes.

History. Enact. Acts 1974, ch. 300, § 8; 2010, ch. 24, § 1920, effective July 15, 2010.

Legislative Research Commission Note.

(7/12/2006). 2006 Ky. Acts ch. 247 instructs the Reviser of Statutes to adjust KRS references throughout the statutes to conform with the 2006 renumbering of the Financial Services Code, KRS Chapter 286. Such an adjustment has been made in this statute.

386.580. Advertising and publicity prohibitions — Exceptions.

Except as may be specifically authorized by rule or regulation of the appropriate supervisory agency, no trust institution or foreign trust institution holding stock in a fiduciary investment company may advertise or publicize its participation in such fiduciary investment company; provided that any trust institution or foreign trust institution holding stock in a fiduciary investment company shall furnish the annual or periodic financial reports of such fiduciary investment company, on request, to any person having a beneficial interest therein, and the fact of the availability of such material may be given publicity in connection with the promotion of the fiduciary services of such trust institution or foreign trust institution.

History. Enact. Acts 1974, ch. 300, § 9.

386.590. Investment adviser’s contract.

No person shall serve or act as investment adviser of a fiduciary investment company except pursuant to a written contract, which contract has been approved by the vote of a majority of the outstanding voting securities of such fiduciary investment company and:

  1. Precisely describes all compensation to be paid thereunder;
  2. Shall continue in effect for a period more than two (2) years from the date of its execution, only so long as such continuance is specifically approved at least annually by the board of directors or by vote of a majority of the outstanding voting securities of such company;
  3. Provides, in substance, that it may be terminated at any time, without the payment of any penalty, by the board of directors of such company or by vote of a majority of the outstanding voting securities of such company on not more than 60 days’ written notice to the investment adviser; and
  4. Provides, in substance, for its automatic termination in the event of its assignment by the investment adviser.

History. Enact. Acts 1974, ch. 300, § 10.

386.600. Title — Citation.

KRS 386.510 to 386.590 may be cited as the “Fiduciary Investment Company Act.”

History. Enact. Acts 1974, ch. 300, § 1.

386.620. Definitions for KRS 386.620 to 386.624.

As used in KRS 386.620 to 386.624 :

  1. “Community property” means property owned by a community property trust during the marriage of the settlor spouses;
  2. “Community property trust” means an express trust that complies with the requirements of KRS 386.622 ;
  3. “Decree” means a judgment or other order of a court;
  4. “Dissolution” means either:
    1. Termination of a marriage by a decree of dissolution, divorce, annulment, or declaration of invalidity; or
    2. Entry of a decree of legal separation;
  5. “During marriage” means a period that begins at marriage and ends at dissolution or the death of a spouse;
  6. “Qualified trustee” means either:
    1. A natural person who is a resident of this state; or
    2. A bank or trust company authorized to act as a trustee within the state; and
  7. “Settlor spouses” means a married couple that establishes a community property trust.

HISTORY: 2020 ch. 25, § 1, effective July 15, 2020.

386.622. Arrangement between spouses involving community property considered a community property trust — Requirements for — Provisions of written agreement — Amendment or revocation of trust — Consideration not required — Classification and distribution of property.

  1. Any arrangement between spouses involving community property shall be considered a community property trust if one (1) or both spouses transfer property to a trust that:
    1. Expressly declares that the trust is a Kentucky community property trust that meets the requirements of KRS 386.620 to 386.624 ;
    2. Has at least one (1) trustee who is a qualified trustee whose powers include or are limited to maintaining records for the trust, on an exclusive or a nonexclusive basis, and preparing or arranging for the preparation of, on an exclusive or a nonexclusive basis, any income tax returns that must be filed by the trust. Both spouses or either spouse may be a trustee;
    3. Is signed by both spouses; and
    4. Contains the following language in capital letters at the beginning of the trust: THE CONSEQUENCES OF THIS TRUST MAY BE VERY EXTENSIVE, INCLUDING BUT NOT LIMITED TO YOUR RIGHTS WITH YOUR SPOUSE BOTH DURING THE COURSE OF YOUR MARRIAGE AND AT THE TIME OF A DIVORCE. ACCORDINGLY, THIS AGREEMENT SHOULD ONLY BE SIGNED AFTER CAREFUL CONSIDERATION. IF YOU HAVE ANY QUESTIONS ABOUT THIS AGREEMENT, YOU SHOULD SEEK COMPETENT ADVICE.
  2. In the agreement establishing a community property trust, spouses may agree on and provide in writing:
    1. The rights and obligations in the property transferred to the trust, notwithstanding when and where the property is acquired or located;
    2. The management and control of the property transferred to the trust;
    3. The disposition of the property transferred to the trust on dissolution, death, or the occurrence or nonoccurrence of another event;
    4. The choice of law governing the interpretation of the trust; and
    5. Any other matter that affects the property transferred to the trust and does not violate public policy or any statute imposing a criminal penalty.
  3. Either spouse may amend a community property trust regarding the disposition of that spouse’s one-half (1/2) share of the community property in the event of a spouse’s death.
  4. Except as provided in subsection (2)(a) of this section, a community property trust may not be amended or revoked unless the agreement itself provides for amendment or revocation.
  5. Whether or not both, one (1), or neither spouse is domiciled in this state, spouses may classify any or all of their property as community property by transferring property to a community property trust and providing in the trust that the property is community property.
  6. A community property trust shall be enforceable without consideration.
  7. All property owned by a community property trust shall be considered community property during marriage and the right to manage and control property that is transferred to a community property trust shall be determined by the terms of the trust.
  8. When property is distributed from a community property trust, it shall no longer constitute community property.

HISTORY: 2020 ch. 25, § 2, effective July 15, 2020.

386.624. Satisfaction of obligation of one or both spouses from community property trust — Distribution of assets upon death of spouse or dissolution of marriage.

  1. An obligation incurred by only one (1) spouse before or during marriage may be satisfied from that spouse’s one-half (1/2) share of a community property trust.
  2. An obligation incurred by both spouses during marriage may be satisfied from a community property trust of the spouses.
  3. Upon the death of a spouse, one-half (1/2) of the aggregate value of the property owned by a community property trust established by the spouses shall reflect the share of the surviving spouse and the other one-half (1/2) shall reflect the share of the decedent. Unless provided otherwise in the trust agreement, the trustee shall have the power to distribute assets of the trust in divided or undivided interests and to adjust resulting differences in valuation. A distribution in kind may be made on the basis of a non-pro rata division of the aggregate value of the trust assets, on the basis of a pro rata division of each individual asset, or by using both methods.
  4. Upon the dissolution of the marriage of the settlor spouses, the community property trust shall terminate, and the trustee shall distribute one-half (1/2) of the trust assets to each spouse, with each spouse receiving one-half (1/2) of each asset, unless otherwise agreed to in writing by both spouses.

HISTORY: 2020 ch. 25, § 3, effective July 15, 2020.

Trust Registration

386.650. “Court” defined. [Repealed.]

Compiler’s Notes.

This section (Enact. Acts 1976, ch. 218, § 1; 1976 (Ex. Sess.), ch. 14, § 328, effective January 2, 1978) was repealed by Acts 2014, ch. 25, § 118, effective July 15, 2014.

386.651. “Trust” defined. [Repealed.]

Compiler’s Notes.

This section (Enact. Acts 1978, ch. 326, § 1, effective June 17, 1978) was repealed by Acts 2014, ch. 25, § 118, effective July 15, 2014.

386.653. Applicability of KRS 386.650 to 386.735 to all trusts. [Repealed.]

Compiler’s Notes.

This section (Enact. Acts 1978, ch. 326, § 2, effective June 17, 1978) was repealed by Acts 2014, ch. 25, § 118, effective July 15, 2014.

386.655. Trust registration — Duty to register. [Repealed.]

Compiler’s Notes.

This section (Enact. Acts 1976, ch. 218, § 2) was repealed by Acts 2014, ch. 25, § 118, effective July 15, 2014.

386.660. Procedures. [Repealed.]

Compiler’s Notes.

This section (Enact. Acts 1976, ch. 218, § 3) was repealed by Acts 2014, ch. 25, § 118, effective July 15, 2014.

386.665. Effect of registration — Notice of proceedings. [Repealed.]

Compiler’s Notes.

This section (Enact. Acts 1976, ch. 218, § 4) was repealed by Acts 2014, ch. 25, § 118, effective July 15, 2014.

386.670. Failure to register. [Repealed.]

Compiler’s Notes.

This section (Enact. Acts 1976, ch. 218, § 5) was repealed by Acts 2014, ch. 25, § 118, effective July 15, 2014.

Judicial Proceedings

386.675. Initiation of judicial proceedings. [Repealed.]

Compiler’s Notes.

This section (Enact. Acts 1976, ch. 218, § 6) was repealed by Acts 2014, ch. 25, § 118, effective July 15, 2014.

NOTES TO DECISIONS

1.Request for Instructions.

After a trustee requested instruction pursuant to KRS 386.675(1), the circuit court did not err in ruling that the trustee acted within its authority under KRS 386.810(3)(s) and complied with its fiduciary duties under KRS 286.3-277 , 386.800(3), 386.810(1) when the trustee opted to keep a mining lease in force despite the lessee’s alleged royalty shortfall and permit violation. There was conflicting evidence as to whether royalties had been underpaid, and the lessee had cured the alleged default by paying the disputed amount while the appeal was pending; moreover, an alleged mining permit violation could not serve as a basis to find the lessee in default absent an agency determination under KRS ch. 350 that such a violation existed. Vander Boegh v. Bank of Okla., 394 S.W.3d 917, 2013 Ky. App. LEXIS 28 (Ky. Ct. App. 2013).

386.680. Venue. [Repealed.]

Compiler’s Notes.

This section (Enact. Acts 1976, ch. 218, § 7) was repealed by Acts 2014, ch. 25, § 118, effective July 15, 2014.

386.685. Proceedings relating to foreign trusts. [Repealed.]

Compiler’s Notes.

This section (Enact. Acts 1976, ch. 218, § 8) was repealed by Acts 2014, ch. 25, § 118, effective July 15, 2014.

386.690. Jurisdiction of litigation involving trusts and third parties. [Repealed.]

Compiler’s Notes.

This section (Enact. Acts 1976, ch. 218, § 9) was repealed by Acts 2014, ch. 25, § 118, effective July 15, 2014.

386.695. Review of agent’s employment and compensation of trustee and employees. [Repealed.]

Compiler’s Notes.

This section (Enact. Acts 1976, ch. 218, § 10) was repealed by Acts 2014, ch. 25, § 118, effective July 15, 2014.

386.700. Filing petition — Notice requirements. [Repealed.]

Compiler’s Notes.

This section (Enact. Acts 1976, ch. 218, § 11) was repealed by Acts 2014, ch. 25, § 118, effective July 15, 2014.

Duties and Liabilities of Trustees

386.705. General duties not limited. [Repealed.]

Compiler’s Notes.

This section (Enact. Acts 1976, ch. 218, § 12) was repealed by Acts 2014, ch. 25, § 118, effective July 15, 2014.

386.710. Standard of care and performance. [Repealed.]

Compiler’s Notes.

This section (Enact. Acts 1976, ch. 218, § 13) was repealed by Acts 2014, ch. 25, § 118, effective July 15, 2014.

386.715. Duty to inform and account to beneficiaries. [Repealed.]

Compiler’s Notes.

This section (Enact. Acts 1976, ch. 218, § 14; 2010, ch. 21, § 8, effective July 15, 2010) was repealed by Acts 2014, ch. 25, § 118, effective July 15, 2014.

NOTES TO DECISIONS

1.Duty to Beneficiaries.

Actions by a bank, as the former trustee of a revocable living trust, in informing charities that they had had interests as beneficiaries under a trust instrument which was revoked under circumstances raising questions of undue influence, amounted to compliance with the bank’s duties owed to beneficiaries under KRS 386.715 , and did not to violate any established duty to others under Kentucky law or under an investment agency agreement between the bank and the executor of the settlor’s estate. JP Morgan Chase Bank, N.A. v. Longmeyer, 275 S.W.3d 697, 2009 Ky. LEXIS 9 ( Ky. 2009 ).

KRS 386.715(2) does not explicitly establish a right of trust beneficiaries to an entire file related to litigation the trustee undertook on behalf of the trust. Anderson v. Old Nat'l Bancorp, 675 F. Supp. 2d 701, 2009 U.S. Dist. LEXIS 116124 (W.D. Ky. 2009 ).

2.Attorneys Fees.

Co-trustees of a decedent’s trust were not entitled to payment of their attorneys’ fees from the trust corpus during the pendency of a breach of fiduciary duty action against them under KRS 386.715 , as such payment would have been premature where it was not yet determined whether they committed a breach. Sierra v. Williamson, 784 F. Supp. 2d 774, 2011 U.S. Dist. LEXIS 30892 (W.D. Ky. 2011 ).

386.720. Duty to provide surety on bond. [Repealed.]

Compiler’s Notes.

This section (Enact. Acts 1976, ch. 218, § 15) was repealed by Acts 2014, ch. 25, § 118, effective July 15, 2014.

386.725. Appropriate place of administration — Deviation. [Repealed.]

Compiler’s Notes.

This section (Enact. Acts 1976, ch. 218, § 16) was repealed by Acts 2014, ch. 25, § 118, effective July 15, 2014.

386.730. Personal liability of trustee to third parties. [Repealed.]

Compiler’s Notes.

This section (Enact. Acts 1976, ch. 218, § 17) was repealed by Acts 2014, ch. 25, § 118, effective July 15, 2014.

386.735. Limitations on proceedings against trustees after final account. [Repealed.]

Compiler’s Notes.

This section (Enact. Acts 1976, ch. 218, § 18; 1998, ch. 196, § 23, effective July 15, 1998) was repealed by Acts 2014, ch. 25, § 118, effective July 15, 2014.

NOTES TO DECISIONS

1.In General.

For purposes of determining whether full disclosure has been made for purposes of KRS 386.735 , the controlling question is always whether the alleged fraud prevented the party from knowing about and presenting his legal rights at trial. Duff v. Duff, 2006 U.S. Dist. LEXIS 6794 (E.D. Ky. Feb. 2, 2006).

2.Action Barred.

A remainderman under a trust agreement had no present interest in the trust, and the termination agreement which completely dissolved her future interest served as a complete final accounting which triggered the statute of limitations under this section; therefore, the action commenced more than three years after the remainderman received her copy of the termination agreement was barred. Cecil v. Cecil, 712 S.W.2d 353, 1986 Ky. App. LEXIS 1119 (Ky. Ct. App. 1986).

Nephew’s claims alleging that his uncle breached the uncle’s fiduciary duties while acting as a trustee of the testamentary trusts of the nephew’s deceased father were time barred under the six-month limitations period in KRS 386.735 where the nephew, despite the uncle’s full disclosure of the transactions he undertook on behalf of the trusts, did not file suit until some 13 years after the trusts were terminated. Duff v. Duff, 2006 U.S. Dist. LEXIS 6794 (E.D. Ky. Feb. 2, 2006).

3.Continuing and Subsisting Trust.

An action against a trustee for breach of fiduciary duty where the trust is continuing and subsisting and no repudiation has occurred may be brought any time during the existence of the trust pursuant to KRS 413.340 and this section. First Ky. Trust Co. v. Christian, 849 S.W.2d 534, 1993 Ky. LEXIS 58 ( Ky. 1993 ).

4.Applicable Period.

In a nephew’s suit alleging that his uncle breached his fiduciary duties while acting as a trustee of the testamentary trusts of the nephew’s deceased father, the six-month period in KRS 386.735 applied because the uncle fully disclosed the details surrounding a stock transaction by giving the nephew valuation information and informing him as to who to contact for further information, and the nephew was aware of the uncle’s own interest in the later stock transaction. Duff v. Duff, 2006 U.S. Dist. LEXIS 6794 (E.D. Ky. Feb. 2, 2006).

5.Accrual of Cause of Action.

In a nephew’s suit alleging that his uncle breached the uncle’s fiduciary duties while acting as a trustee of the testamentary trusts of the nephew’s deceased father, the limitations periods in KRS 386.735 began to run when the trust was terminated, during which proceeding the uncle disclosed the transactions he undertook on behalf of the trusts and gave a final accounting. Duff v. Duff, 2006 U.S. Dist. LEXIS 6794 (E.D. Ky. Feb. 2, 2006).

Research References and Practice Aids

Treatises

Caldwell’s Kentucky Form Book, 5th Ed., Petition and Order for Registration of Trust, Form 231.03.

Caldwell’s Kentucky Form Book, 5th Ed., Statement of Registration of Trust (short form, uncontested), Form 231.04.

386.740. Power of fiduciary to use assets to prevent or remedy environmental violations — Limitation of personal liability of fiduciary. [Repealed.]

Compiler’s Notes.

This section (Enact. Acts 1992, ch. 285, § 2, effective July 14, 1992) was repealed by Acts 2014, ch. 25, § 118, effective July 15, 2014.

Uniform Trustees’ Powers Act

386.800. Definitions. [Repealed.]

Compiler’s Notes.

This section (Enact. Acts 1976, ch. 218, § 44) was repealed by Acts 2014, ch. 25, § 118, effective July 15, 2014.

NOTES TO DECISIONS

1.Applicability.

Kentucky statutory law did not invalidate trust language; the trustee still had a duty to act as a prudent investor, as defined by KRS 386.800(3), but according to the terms of the trust could only be held liable for a bad faith breach of that duty. Anderson v. Old Nat'l Bancorp, 675 F. Supp. 2d 701, 2009 U.S. Dist. LEXIS 116124 (W.D. Ky. 2009 ).

2.Prudent Investor.

After a trustee requested instruction pursuant to KRS 386.675(1), the circuit court did not err in ruling that the trustee acted within its authority under KRS 386.810(3)(s) and complied with its fiduciary duties under KRS 286.3-277 , 386.800(3), 386.810(1) when the trustee opted to keep a mining lease in force despite the lessee’s alleged royalty shortfall and permit violation. There was conflicting evidence as to whether royalties had been underpaid, and the lessee had cured the alleged default by paying the disputed amount while the appeal was pending; moreover, an alleged mining permit violation could not serve as a basis to find the lessee in default absent an agency determination under KRS ch. 350 that such a violation existed. Vander Boegh v. Bank of Okla., 394 S.W.3d 917, 2013 Ky. App. LEXIS 28 (Ky. Ct. App. 2013).

386.805. Powers of trustee conferred by trust or by law. [Repealed.]

Compiler’s Notes.

This section (Enact. Acts 1976, ch. 218, § 45) was repealed by Acts 2014, ch. 25, § 118, effective July 15, 2014.

386.810. Powers of trustees conferred by this chapter. [Repealed.]

Compiler’s Notes.

This section (Enact. Acts 1976, ch. 218, § 46; 2012, ch. 59, § 5, effective July 12, 2012) was repealed by Acts 2014, ch. 25, § 118, effective July 15, 2014.

NOTES TO DECISIONS

1.Applicability.

Pursuant to KRS 386.810(3)(x), a trustee did not have an independent duty to conduct legal research and ascertain the possible success of bringing a lawsuit, but could act upon its attorney’s recommendations. Anderson v. Old Nat'l Bancorp, 675 F. Supp. 2d 701, 2009 U.S. Dist. LEXIS 116124 (W.D. Ky. 2009 ).

2.Claims.

After a trustee requested instruction pursuant to KRS 386.675(1), the circuit court did not err in ruling that the trustee acted within its authority under KRS 386.810(3)(s) and complied with its fiduciary duties under KRS 286.3-277 , 386.800(3), 386.810(1) when the trustee opted to keep a mining lease in force despite the lessee’s alleged royalty shortfall and permit violation. There was conflicting evidence as to whether royalties had been underpaid, and the lessee had cured the alleged default by paying the disputed amount while the appeal was pending; moreover, an alleged mining permit violation could not serve as a basis to find the lessee in default absent an agency determination under KRS ch. 350 that such a violation existed. Vander Boegh v. Bank of Okla., 394 S.W.3d 917, 2013 Ky. App. LEXIS 28 (Ky. Ct. App. 2013).

386.815. Trustee’s office not transferable. [Repealed.]

Compiler’s Notes.

This section (Enact. Acts 1976, ch. 218, § 47) was repealed by Acts 2014, ch. 25, § 118, effective July 15, 2014.

386.820. Power of court to permit deviation and to approve transactions involving conflict of interest.

If the duty of the trustee and his interest as trustee of another trust conflict in the exercise of a trust power, the power may be exercised only by court authorization upon petition of the trustee.

History. Enact. Acts 1976, ch. 218, § 48; 2014, ch. 25, § 108, effective July 15, 2014.

NOTES TO DECISIONS

1.Invasion of Corpus of Trust.

Where a bank was the trustee for two different trusts with the same life income beneficiary but different remaindermen, court authorization was required before the trustee could invade the corpus of one trust to provide funds for the life income beneficiary. Wiggins v. PNC Bank, Inc., 988 S.W.2d 498, 1998 Ky. App. LEXIS 141 (Ky. Ct. App. 1998).

386.825. Powers exercisable by joint trustees — Liability. [Repealed.]

Compiler’s Notes.

This section (Enact. Acts 1976, ch. 218, § 49) was repealed by Acts 2014, ch. 25, § 118, effective July 15, 2014.

386.830. Third persons protected in dealing with trustee. [Repealed.]

Compiler’s Notes.

This section (Enact. Acts 1976, ch. 218, § 50) was repealed by Acts 2014, ch. 25, § 118, effective July 15, 2014.

386.835. Application of KRS 386.805 to 386.840. [Repealed.]

Compiler’s Notes.

This section (Enact. Acts 1976, ch. 218, § 51; 1990, ch. 450, § 3, effective July 13, 1990) was repealed by Acts 2014, ch. 25, § 118, effective July 15, 2014.

386.840. Uniformity of interpretation. [Repealed.]

Compiler’s Notes.

This section (Enact. Acts 1976, ch. 218, § 52) was repealed by Acts 2014, ch. 25, § 118, effective July 15, 2014.

386.845. Short title. [Repealed.]

Compiler’s Notes.

This section (Enact. Acts 1976, ch. 218, § 43) was repealed by Acts 2014, ch. 25, § 118, effective July 15, 2014.

CHAPTER 386A Kentucky Uniform Statutory Trust Act (2012)

Research References and Practice Aids

Northern Kentucky Law Review.

Article: The Kentucky Uniform Statutory Trust Act (2012): A Review, 40 N. Ky. L. Rev. 93 (2013).

Subchapter 1 General Provisions

386A.1-010. Short title.

KRS 386A.1-010 to 386A.10-040 may be cited as the “Kentucky Uniform Statutory Trust Act (2012).”

History. Enact. Acts 2012, ch. 81, § 1, effective July 12, 2012.

386A.1-020. Definitions for chapter.

As used in KRS 386A.1-010 to 386A.10-040 :

  1. “Appropriate court” means the circuit court for the county of the Commonwealth in which the statutory trust maintains its principal office or, if none, the county in which the registered office is located;
  2. “Authorized foreign statutory trust” means a foreign statutory trust that is authorized to transact business in this Commonwealth pursuant to a certificate of authority issued by the Secretary of State;
  3. “Beneficial owner” means the owner of a beneficial interest in a statutory trust or foreign statutory trust;
  4. “Certificate of trust” means the certificate required by KRS 386A.2-010 . The term includes the certificate as amended or restated;
  5. “Common-law trust” means a fiduciary relationship with respect to property arising from a manifestation of intent to create that relationship and subjecting the person that holds title to the property to duties to deal with the property for the benefit of charity or for one (1) or more persons, at least one (1) of which is not the sole trustee, whether the purpose of the trust is donative or commercial. The term includes the type of trust known at common law as a “business trust,” “Massachusetts trust,” or “Massachusetts business trust”;
  6. “Constituent organization” means an organization that is party to a merger;
  7. “Constituent statutory trust” means a constituent organization that is a statutory trust;
  8. “Converted organization” means the organization into which a converting organization converts;
  9. “Converted statutory trust” means a converted organization that is a statutory trust;
  10. “Converting organization” means an organization that converts into another organization;
  11. “Converting statutory trust” means a converting organization that is a statutory trust;
  12. “Covered party” means a trustee, officer, employee, or manager of a statutory trust, a related party of a trustee, officer, employee, manager, and any other person designated pursuant to KRS 386A.1-030 (4)(h);
  13. “Distribution” means a transfer of money or other property from a statutory trust or a series on account of a beneficial interest, and includes redemption or other purchase of a beneficial interest by a statutory trust;
  14. “Entity” has the meaning set forth in KRS 14A.1-070 ;
  15. “Foreign series trust” means a foreign statutory trust that has one (1) or more series that under the laws of its jurisdiction of organization provides rules substantially equivalent to KRS 386A.4-020 (1);
  16. “Foreign entity” has the same meaning as set forth in KRS 14A.1-070 ;
  17. “Foreign statutory trust” means a trust that is formed under the laws of a jurisdiction other than this Commonwealth which would be a statutory trust if formed under the laws of this Commonwealth;
  18. “Governing instrument” means the trust instrument and certificate of trust;
  19. “Governing law” means the law that governs an organization’s internal affairs;
  20. “Jurisdiction,” used to refer to a political entity, means the United States, a state, a foreign country, or a subdivision of a foreign country;
  21. “Organization” means a common-law trust that does not have a predominantly donative purpose; general partnership, including a limited liability partnership; limited partnership, including a limited liability limited partnership; limited liability company; corporation; or foreign statutory trust. The term includes a domestic or foreign organization whether or not organized for profit;
  22. “Organizational documents” means the records that create an organization and determine its internal governance and the relations among the persons that own it, have an interest in it, or are members of it;
  23. “Person” means an individual, profit or nonprofit corporation, statutory trust, estate, partnership, limited partnership, limited liability company, association, joint venture, public corporation, government or governmental subdivision, agency, or instrumentality, or any other legal or commercial entity. The term does not include a common-law trust;
  24. “Principal office” has the same meaning as set forth in KRS 14A.1-070 ;
  25. “Professional service” means the personal services rendered by physicians, osteopaths, optometrists, podiatrists, chiropractors, dentists, nurses, pharmacists, psychologists, occupational therapists, veterinarians, engineers, architects, landscape architects, certified public accountants, public accountants, physical therapists, or attorneys;
  26. “Property” means all property, whether real, personal, or mixed, or tangible or intangible, or any interest therein;
  27. “Record,” used as a noun, means information that is inscribed on a tangible medium or that is stored in an electronic or other medium and is retrievable in perceivable form;
  28. “Related party,” with respect to a party that is a trustee, officer, employee, manager, or beneficial owner, means:
    1. The spouse of the party;
    2. A child, parent, sibling, grandchild, or grandparent of the party, or the spouse of one (1) of them;
    3. An individual having the same residence as the party;
    4. A trust or estate of which a related party described in subparagraphs (a), (b), or (c) of this subsection is a substantial beneficiary;
    5. A trust, estate, legally incapacitated individual, conservatee, or minor for which the party is a fiduciary; or
    6. A person that directly or indirectly controls, is controlled by, or is under common control with, the party;
  29. “Series trust” means a statutory trust that has one (1) or more series created under Subchapter 4 of this chapter;
  30. “Sign” means, with the present intent to authenticate or adopt a record:
    1. To execute or adopt a tangible symbol; or
    2. To attach to or logically associate with the record an electronic symbol, sound, or process;
  31. “State” means a state of the United States, the District of Columbia, Puerto Rico, the United States Virgin Islands, or any territory or insular possession subject to the jurisdiction of the United States;
  32. “Statutory trust,” except in the phrase “foreign statutory trust,” means an entity formed under this chapter;
  33. “Surviving organization” means an organization into which one (1) or more other organizations are merged, whether the surviving organization pre-existed the merger or was created by the merger;
  34. “Trust” includes a common-law trust, statutory trust, and foreign statutory trust;
  35. “Trust instrument” means a record other than the certificate of trust which provides for the governance of the affairs of a statutory trust and the conduct of its business. The term includes a trust agreement, a declaration of trust, and bylaws; and
  36. “Trustee” means a person designated, appointed, or elected as a trustee of a statutory trust or foreign statutory trust in accordance with the governing instrument or applicable law.

History. Enact. Acts 2012, ch. 81, § 2, effective July 12, 2012.

386A.1-030. Governing instrument.

  1. Except as otherwise provided in KRS 386A.1-040 (2), the governing instrument governs:
    1. The management, affairs, and conduct of the business of a statutory trust; and
    2. The rights, interests, duties, obligations, and powers of, and the relations among, the trustees, the beneficial owners, the statutory trust, and other persons.
  2. To the extent the governing instrument does not otherwise provide for a matter described in subsection (1) of this section, this chapter governs the matter.
  3. The governing instrument may include one (1) or more instruments, agreements, declarations, bylaws, or other records and refer to or incorporate any record.
  4. Subject to KRS 386A.1-040 (2), without limiting the terms that may be included in a governing instrument, the governing instrument may:
    1. Provide the means by which beneficial ownership is determined and evidenced;
    2. Limit a beneficial owner’s right to transfer a beneficial interest;
    3. Provide for one (1) or more series under Subchapter 4 of this chapter;
    4. To the extent that voting rights are granted to the beneficial owners or trustees under the governing instrument, include terms relating to:
      1. Notice of the date, time, place, or purpose of any meeting at which any matter is to be voted on;
      2. Waiver of notice;
      3. Action by consent without a meeting;
      4. Establishment of record dates;
      5. Quorum requirements;
      6. Voting:
        1. In person;
        2. By proxy;
        3. By any form of communication that creates a record, telephone, or video conference; or
        4. In any other manner; or
      7. Any other matter with respect to the exercise of the right to vote;
    5. Provide for the creation of one (1) or more classes of trustees, beneficial owners, or beneficial interests having separate rights, powers, or duties;
    6. Provide for any action to be taken without the vote or approval of any particular trustee or beneficial owner, or classes of trustees, beneficial owners, or beneficial interests, including:
      1. Amendment of the governing instrument;
      2. Merger, conversion, or reorganization;
      3. Appointment of trustees;
      4. Sale, lease, exchange, transfer, pledge, or other disposition of all or any part of the property of the statutory trust or the property of any series thereof; and
      5. Dissolution of the statutory trust;
    7. Provide for the creation of a statutory trust, including the creation of a statutory trust to which all or any part of the property, liabilities, profits, or losses of a statutory trust may be transferred or exchanged, and for the conversion of beneficial interests in a statutory trust, or series thereof, into beneficial interests in the new statutory trust or series thereof;
    8. Provide for the appointment, election, or engagement of agents or independent contractors of the statutory trust or delegates of the trustees, or agents, officers, employees, managers, committees, or other persons that may manage the business and affairs of the statutory trust, designate their titles, and specify their rights, powers, and duties;
    9. Provide rights to any person, including a person who is not a beneficial owner or not otherwise a party to the governing instrument, to the extent set forth therein;
    10. Subject to paragraph (k) of this subsection, specify the manner in which the governing instrument may be amended, including, unless waived by all persons for whose benefit the condition or requirement was intended:
      1. A condition that a person that is not a party to the instrument must approve the amendment for it to be effective; and
      2. A requirement that the governing instrument may be amended only as provided in the governing instrument or as otherwise permitted by law;
    11. Provide that a person may comply with paragraph (j) of this subsection by a representative authorized by the person orally, in a record, or by conduct;
    12. Provide that a person becomes a beneficial owner, acquires a beneficial interest, and is bound by the governing instrument if the person complies with the conditions for becoming a beneficial owner set forth in the governing instrument;
    13. Provide that the beneficial interest of any beneficial owner who fails to make any contribution that the beneficial owner is obligated to make or who otherwise violates an obligation undertaken in the governing instrument shall be subject to specified penalties for, or specified consequences of, such failure. Such penalty or consequence may take the form of reducing or eliminating the defaulting beneficial owner’s proportionate interest in the statutory trust, subordinating the beneficial owner’s interest to that of nondefaulting beneficial owners, a forced sale of that beneficial interest, forfeiture of his or her beneficial interest, the lending by other beneficial owners of the amount necessary to meet the defaulting beneficial owner’s commitment, a fixing of the value of his or her beneficial interest by appraisal or by formula and redemption or sale of the beneficial interest at such value, or other penalty or consequence;
    14. Provide that the statutory trust or the trustees, acting for the statutory trust, hold beneficial ownership of any income earned on securities held by the statutory trust that are issued by any business entity formed, organized, or existing under the laws of any jurisdiction;
    15. Provide for the establishment of record dates;
    16. Grant to, or withhold from, a trustee or beneficial owner, or class of trustees or beneficial owners, the right to vote, separately or with any or all other trustees or beneficial owners, or class of trustees or beneficial owners, on any matter;
    17. Provide that neither the power to direct a trustee or other person nor the exercise of the power by any person, including a beneficial owner, causes the person to be a trustee or imposes on the person duties, including fiduciary duties, or liabilities relating to these duties, to a statutory trust or beneficial owner;
    18. Provide that the statutory trust is to act as a beneficial owner associated with a series thereof; or
    19. Provide that each beneficial owner shall be the owner of an undivided beneficial interest in all property of the statutory trust in addition to or including an undivided beneficial interest in all property of or associated with a series of the statutory trust with which the beneficial owner is associated.

History. Enact. Acts 2012, ch. 81, § 3, effective July 12, 2012; 2015 ch. 34, § 60, effective June 24, 2015.

386A.1-040. Mandatory rules.

  1. Except as otherwise provided in subsection (2) of this section, relations among the statutory trust, the beneficial owners, and the trustees are governed by the governing instrument. To the extent the governing instrument does not otherwise provide, KRS 386A.1-010 to 386A.10-040 govern relations among the statutory trust, the beneficial owners, and the trustees.
  2. The governing instrument may not:
    1. Eliminate the obligation of good faith and fair dealing in the governing instrument, but it may prescribe the standards by which the performance of the obligations are to be measured provided the standards are not manifestly unreasonable;
    2. Vary KRS 386A.1-050 (3), (5), or (7);
    3. Vary the requirements of Subchapter 2 of this chapter;
    4. Vary KRS 386A.3-010 ;
    5. Negate KRS 386A.3-030 (2);
    6. Except as provided therein, vary the provisions pertaining to series trusts in Subchapter 4 of this chapter;
    7. Vary KRS 386A.5-010 (2);
    8. Vary KRS 386A.5-020 (2);
    9. Vary KRS 386A.5-030 (3);
    10. Vary the standards of conduct for trustees under KRS 386A.5-050 , but the governing instrument may prescribe the standards by which good faith, best interests of the statutory trust, and care that a person in a similar position would reasonably believe appropriate under similar circumstances are determined, if the standards are not manifestly unreasonable;
    11. Vary KRS 386A.5-070 , but the governing instrument may provide a mechanism for prior approval, upon full disclosure, of a transaction with a covered party by at least two (2) disinterested trustees or the disinterested beneficial owners;
    12. Restrict the right of a trustee to information under KRS 386A.5-080 , but the governing instrument may prescribe the standards for assessing whether information is reasonably related to the trustee’s discharge of the trustee’s duties as trustee, if the standards are not manifestly unreasonable;
    13. Vary KRS 386A.5-100 (2);
    14. Vary KRS 386A.5-110 (3) and (4);
    15. Vary KRS 386A.6-010 (4);
    16. Restrict the right of a judgment creditor of a beneficial owner to seek a charging order under KRS 386A.6-060 ;
    17. Provide indemnification, advancement of expenses, or exoneration for conduct involving bad faith, willful misconduct, self-dealing, reckless indifference, approval or consent to a distribution violating KRS 386A.6-080 , or a transaction from which the trustee derived an improper personal benefit or in which the trustee’s personal financial interest was in conflict with those of the statutory trust;
    18. Permit a trustee to follow a direction that is contrary to the terms of the governing instrument or would constitute a breach of fiduciary duty by the trustee;
    19. Vary KRS 386A.6-080 (3), (4), (6), or (7);
    20. Vary KRS 386A.6-090 ;
    21. Restrict the right of a beneficial owner to information under KRS 386A.6-100 , but the governing instrument may prescribe the standards for assessing whether information is reasonably related to the beneficial owner’s interest, if the standards are not manifestly unreasonable;
    22. Restrict the right of a beneficial owner to bring an action under KRS 386A.6-110 ;
    23. Vary Subchapter 7 of this chapter;
    24. Except to the extent expressly provided therein, vary Subchapter 8 of this chapter;
    25. Vary Subchapter 9 of this chapter; or
    26. Vary Subchapter 10 of this chapter.

History. Enact. Acts 2012, ch. 81, § 4, effective July 12, 2012.

386A.1-050. Applicability of trust and other law.

  1. The law of this Commonwealth pertaining to common-law trusts supplements this chapter.
  2. A governing instrument may supersede or modify application to the statutory trust of any law of this Commonwealth pertaining to common-law trusts.
  3. Unless displaced by particular provisions of this chapter, the principles of law and equity supplement this chapter.
  4. Although this chapter is in derogation of common law, the rule of construction requiring strict construction of statutes which are in derogation of common law shall not apply to its provisions.
  5. Each statutory trust and each foreign statutory trust is subject to KRS Chapter 14A.
  6. If an obligation to pay interest arises under this chapter and the rate is not specified, the rate is that specified in KRS 360.010 .
  7. For purposes of KRS 141.0401 , each statutory trust and foreign statutory trust and each series of a series trust or of a foreign series trust shall be treated as a limited liability pass-through entity.

History. Enact. Acts 2012, ch. 81, § 5, effective July 12, 2012.

386A.1-060. Rule of construction.

  1. It shall be the policy of the Commonwealth through this chapter to give maximum effect to the principles of freedom of contract and the enforceability of governing instruments.
  2. Except to the extent set forth in a governing instrument, a statutory trust is bound by the governing instrument.
  3. Except to the extent set forth in the governing instrument, each trustee of a statutory trust is bound by the governing instrument.
  4. Action validly taken pursuant to one (1) provision of this chapter shall not be deemed invalid solely because it is identical or similar in substance to an action that could have been taken pursuant to some other provision of this chapter but fails to satisfy one (1) or more requirements prescribed by such other provision.
  5. No beneficial owner or other person shall have a vested property right resulting from any provision of the governing instrument which may not be modified by its amendment or as otherwise permitted by law.
  6. Each beneficial owner and trustee and any other party to a governing instrument shall discharge all duties and exercise all rights consistently with the obligation of good faith and fair dealing.
  7. If a governing instrument contains a provision to the effect that any amendment to the governing instrument shall be in writing and adopted in accordance with the provisions of the governing instrument, then the provision shall be enforceable in accordance with its terms, and any agreement as to the conduct of the business and affairs of the statutory trust which is not in writing and adopted in accordance with the provisions of the governing instrument shall not be considered part of the governing instrument and shall be void and unenforceable.
  8. A statutory trust governed by this chapter is subject to any amendment or repeal thereof.
  9. This chapter shall not be construed to impair the obligations of any contract existing when this chapter, or any amendment of it, becomes effective, nor to affect any action or proceeding begun or right accrued before the chapter or amendment takes effect.

History. Enact. Acts 2012, ch. 81, § 6, effective July 12, 2012.

Subchapter 2 Formation — Certificate of Trust and other Filings

386A.2-010. Certificate of trust.

  1. A statutory trust is formed when a certificate of trust that complies with subsection (2) of this section and filed by the Secretary of State is effective as determined under KRS 14A.2-070 .
  2. A certificate of trust must state:
    1. The name of the statutory trust, which must comply with KRS 14A.3-010 ;
    2. The name and business address of each person who, upon formation of the trust, will be a trustee;
    3. The mailing address of the principal office of the trust;
    4. The name and street address of the trust’s initial registered office and registered agent that comply with KRS 14A.4-010 ; and
    5. The name and business address of the person executing the certificate of trust as the organizer thereof.
  3. If the trust may have one (1) or more series, the certificate of trust must contain a statement to that effect as provided in KRS 386A.4-020 (2)(c).
  4. A certificate of trust may contain any term required or permitted to be set forth in the trust instrument.
  5. A filed certificate of trust, statement of cancellation, statement of change or articles of conversion or merger prevail over inconsistent terms of a trust instrument.
  6. That the certificate of trust is on file with the Secretary of State is notice:
    1. That the statutory trust formed by the certificate of trust is a statutory trust formed under the laws of the Commonwealth of Kentucky;
    2. Of all other facts set forth in the certificate which are required to be set forth by subsection (2) of this section; and
    3. Of any statement made pursuant to subsection (3) of this section.

History. Enact. Acts 2012, ch. 81, § 7, effective July 12, 2012.

386A.2-020. Amendment or restatement of certificate of trust.

  1. A statutory trust shall amend its certificate of trust to add or change a provision that is required by this chapter to be included in the certificate of trust. A statutory trust may amend its certificate of trust to add, change, or delete a provision that is permitted to be or that is not required to be in the certificate of trust. The certificate of trust shall be amended if there is a change in any matter required to be set forth in the certificate of trust under KRS 386A.2-010 (2) or (3).
  2. To amend its certificate of trust, a statutory trust must deliver to the Secretary of State for filing an amendment, articles of conversion, or articles of merger stating:
    1. The name of the trust;
    2. The date of filing of its initial certificate; and
    3. The changes to the certificate.
  3. A trustee that knows that any information in a filed certificate of trust was incorrect when the certificate was filed shall promptly:
    1. Cause the certificate to be amended; or
    2. Deliver to the Secretary of State for filing a statement of correction as provided for in KRS 14A.2-090 .
  4. A statutory trust shall promptly deliver to the Secretary of State for filing an amendment to the certificate of trust to reflect any admission, appointment, resignation, or other change in the trustees thereof.
  5. A statutory trust, to change its principal office, shall comply with KRS 14A.5-010 , thereby amending the certificate of trust.
  6. A statutory trust, to change its registered agent, its registered office, or both, shall comply with KRS 14A.4-020 , thereby amending the certificate of trust.
  7. A statutory trust may restate its certificate of trust by delivering to the Secretary of State for filing a restated certificate of trust setting forth the name of statutory trust and the text of the restated certificate. A restated certificate of trust shall supersede the preceding certificate of trust and all amendments thereto. The Secretary of State may certify a restated certificate of trust, with any amendments thereto, as the certificate of trust currently in effect.

History. Enact. Acts 2012, ch. 81, § 8, effective July 12, 2012.

386A.2-030. Signing of records.

  1. A record delivered by a statutory trust to the Secretary of State for filing shall be executed as provided in KRS 14A.2-020 .
  2. It shall not be necessary that the person who as organizer executes the initial certificate of trust be a trustee.

History. Enact. Acts 2012, ch. 81, § 9, effective July 12, 2012.

386A.2-040. Delivery to and filing of records by Secretary of State — Effective time and date.

  1. A record authorized or required to be delivered to the Secretary of State for filing under KRS 386A.1-010 to 386A.10-040 shall satisfy the requirements of this chapter and KRS Chapter 14A.
  2. A record delivered to the Secretary of State for filing under this chapter is effective as provided in KRS 14A.2-070 .

History. Enact. Acts 2012, ch. 81, § 10, effective July 12, 2012.

Legislative Research Commission Note.

(7/12/2012). A reference in 2012 Ky. Acts ch. 81, sec. 10, which created this statute, to “this Act” in subsection (1) has been codified as “KRS 386A.1-010 to 386A.10-040 ” by the Reviser of Statutes to conform with the designation of Sections 1 to 76 of that Acts chapter as the “Kentucky Uniform Statutory Trust Act (2012).”

386A.2-050. Correcting filed record.

A record filed by the Secretary of State may be corrected as provided in KRS 14A.2-090 .

History. Enact. Acts 2012, ch. 81, § 11, effective July 12, 2012.

386A.2-060. Certificate of good standing.

The Secretary of State may, with respect to a statutory trust, issue a certificate of existence as provided in KRS 14A.2-130 .

History. Enact. Acts 2012, ch. 81, § 12, effective July 12, 2012.

386A.2-070. Name of statutory trust.

The name of a statutory trust must satisfy the requirements of KRS 14A.3-010 .

History. Enact. Acts 2012, ch. 81, § 13, effective July 12, 2012.

386A.2-080. Registered office and agent.

A statutory trust shall designate and maintain in this Commonwealth a registered agent and registered office in compliance with KRS 14A.4-010 .

History. Enact. Acts 2012, ch. 81, § 14, effective July 12, 2012.

386A.2-090. Annual report for Secretary of State.

A statutory trust shall file an annual report in compliance with KRS 14A.6-010 .

History. Enact. Acts 2012, ch. 81, § 15, effective July 12, 2012.

Subchapter 3 Governing Law — Authorizations — Duration — Powers

386A.3-010. Governing law.

The laws of this Commonwealth govern the internal affairs of a statutory trust including:

  1. The liability of a beneficial owner as beneficial owner and a trustee as trustee for a debt, obligation, or other liability of a statutory trust or a series thereof;
  2. The enforceability of a debt, obligation, or other liability of the statutory trust against the property of the trust;
  3. The enforceability of a debt, obligation, or other liability of a series of a statutory trust, including recourse against the property of or associated with a series; and
  4. The inspection of the books and records of the statutory trust.

History. Enact. Acts 2012, ch. 81, § 16, effective July 12, 2012.

386A.3-020. Statutory trust as entity.

  1. A statutory trust is a legal entity distinct from its trustees and beneficial owners.
  2. A statutory trust may hold or take title to property in its own name, or in the name of a trustee in the trustee’s capacity as trustee, whether in an active, passive, or custodial capacity.
  3. Property transferred to or otherwise acquired by a statutory trust shall be the property of the trust and not of the beneficial owners or of the trustees. A creditor of a beneficial owner or trustee may not obtain possession of, or otherwise exercise legal or equitable remedies with respect to, the property of a statutory trust or the property of or associated with any series thereof.
  4. The property of a statutory trust is not subject to KRS 381.135(1)(a)1.

History. Enact. Acts 2012, ch. 81, § 17, effective July 12, 2012.

386A.3-030. Permissible purposes.

  1. Except as otherwise provided in subsection (2) of this section, a statutory trust may have any lawful purpose.
  2. A statutory trust may not:
    1. Have a predominantly donative purpose; or
    2. Be organized for the purpose of rendering a professional service.

History. Enact. Acts 2012, ch. 81, § 18, effective July 12, 2012.

386A.3-040. Statutory trust’s liability.

  1. A debt, obligation, or other liability of a statutory trust is solely a debt, obligation, or other liability of the trust.
  2. A debt, obligation, or other liability incurred by or otherwise existing with respect to the property of or associated with a particular series of a statutory trust is solely a debt, obligation, or liability of the particular series for which there is recourse against only the property of or associated with the particular series.
  3. A person is not personally liable, directly or indirectly, by way of indemnification, contribution, assessment, or otherwise, for a debt, obligation, or other liability of the statutory trust solely by reason of being or acting as a trustee, beneficial owner, agent of the trust, or agent of the trustee.
  4. A person is not personally liable, directly or indirectly, by way of indemnification, contribution, assessment, or otherwise, for a debt, obligation, or other liability of a series or against the property of or associated with a series of a statutory trust by reason of being associated with a series as a beneficial owner, trustee, agent of the series, or agent of the trustee.
  5. The property of a statutory trust not associated with a series is subject to attachment and execution to satisfy a debt, obligation, or other liability of the trust. The property of a statutory trust associated with a series is subject to attachment and execution to satisfy a debt, obligation, or other liability incurred by or with respect to the property associated with that series. The property of a series is subject to attachment and execution to satisfy a debt, obligation, or other liability incurred by or with respect to the property associated with that series.
  6. Subsections (3) and (4) of this section shall not affect the liability of any person for his or her own negligence, wrongful acts, or misconduct.

History. Enact. Acts 2012, ch. 81, § 19, effective July 12, 2012.

386A.3-050. Duration.

  1. A statutory trust has perpetual existence.
  2. A statutory trust, or any series thereof, may not be terminated or revoked except in accordance with this chapter or the terms of the governing instrument.
  3. A statutory trust does not terminate because the same person is the sole trustee and sole beneficial owner.
  4. A series of a statutory trust does not terminate because the same person is the sole trustee and the sole beneficial owner associated with the series.
  5. That the same person is the sole trustee and sole beneficial owner of a statutory trust or of a series thereof is not a basis for not applying KRS 386A.3-040 (3) or (4).
  6. The death, incapacity, dissolution, termination, or bankruptcy of a beneficial owner or of a trustee does not result in the termination or dissolution of the statutory trust or any series with which the beneficial owner or trustee has been associated.

History. Enact. Acts 2012, ch. 81, § 20, effective July 12, 2012; 2013, ch. 106, § 9, effective June 25, 2013.

386A.3-060. Power to sue and be sued.

  1. A statutory trust may sue and be sued in its own name.
  2. A beneficial owner or a trustee of a statutory trust shall not be a proper party to a proceeding by or against a statutory trust solely by reason of being a beneficial owner or trustee of the statutory trust except if the object of the proceeding is to enforce a beneficial owner’s or trustee’s right against or liability to the statutory trust or as otherwise provided in a governing instrument.
  3. A beneficial owner or a trustee of a statutory trust shall not be a proper party to a proceeding by or against a series or the property associated therewith solely by reason of being a beneficial owner or trustee associated with the series except if the object of the proceeding is to enforce a beneficial owner’s or trustee’s right against or liability to the series or as otherwise provided in a governing instrument.

History. Enact. Acts 2012, ch. 81, § 21, effective July 12, 2012.

Subchapter 4 Series

386A.4-010. Series.

  1. If a statutory trust complies with KRS 386A.4-020 (2), a governing instrument may establish or provide for the establishment of one (1) or more designated series that:
    1. Has separate rights, powers, or duties with respect to specified property or obligations or profits and losses associated with specified property or obligations; or
    2. Has a separate purpose or investment objective.
  2. A series of a statutory trust is to the degree provided in subsection (4) of this section an entity separate from the statutory trust.
  3. A series of a statutory trust may have a separate purpose from the trust or any other series thereof if the purpose of the series is:
    1. Permitted by KRS 386A.3-030 ; and
    2. Not outside the purpose of the trust.
  4. Unless otherwise provided in the governing instrument, a series established in accordance with subsection (1) of this section shall have the power and capacity to, in its own name, contract, hold title to real, personal, and intangible assets, grant liens and security interests, and sue and be sued.
  5. The registered agent and registered office of a statutory trust that is a series trust shall be the registered agent and registered office of each series thereof.
  6. The governing instrument may provide that one (1) or more trustees shall be associated with a series, in which case they shall be the trustees discharging the obligations of Subchapter 5 of this chapter as to that series. In the absence of such an association, all trustees of the statutory trust shall be trustees associated with a series.
  7. The governing instrument may provide for the means by which beneficial owners are associated with a series. The statutory trust may be associated with a series thereof. In the absence of association as provided in the governing instrument, all beneficial owners of the statutory trust shall be deemed associated with each series.

History. Enact. Acts 2012, ch. 81, § 22, effective July 12, 2012; 2015 ch. 34, § 61, effective June 24, 2015.

386A.4-020. Enforceability of obligations and expenses of series.

  1. Subject to subsection (2) of this section:
    1. A debt, liability, obligation, and expense incurred, contracted for, or otherwise existing with respect to a series, whether in its name or as to the property of or associated therewith, shall be enforceable against the assets of or associated with that series only, and shall not be enforceable against the assets of the statutory trust generally or any assets of or associated with other series thereof; and
    2. None of the debts, liabilities, obligations, and expenses incurred, contracted for, or otherwise existing with respect to the statutory trust generally or any other series thereof shall be enforceable against the assets of or associated with a series.
  2. Subsection (1) of this section applies only if:
    1. The records maintained by the statutory trust account for the assets of or associated with that series separately from the other assets of the statutory trust or of or associated with any other series;
    2. The governing instrument contains a statement to the effect of the limitations provided in subsection (1) of this section; and
    3. The statutory trust’s certificate of trust contains a statement that the statutory trust may have one (1) or more series subject to the limitations provided in subsection (1) of this section.
  3. The statement of limitation on liabilities of a series required by subsection (2)(c) of this section is sufficient regardless of whether:
    1. The statutory trust has established any series under this subchapter when the statement of limitations is contained in the certificate of formation; and
    2. The statement of limitations makes reference to any specific series of the statutory trust.
  4. If the records are maintained in a manner such that the assets of or associated with a series can be reasonably identified by specific listing, category, type, quantity, or computational or allocational formula or procedure, including a percentage or share of any assets, or by any other method in which the identity of the assets can be objectively determined, the records are considered to satisfy the requirements of subsection (2)(a) of this section.
  5. The association, disassociation, or reassociation of property of a statutory trust or a series thereof to or with the trust or a series thereof is deemed to be a transfer between separate persons under the laws of Kentucky governing fraudulent transfers.
  6. A distribution by a series shall be made to the beneficial owners associated with the series.

History. Enact. Acts 2012, ch. 81, § 23, effective July 12, 2012; 2015 ch. 34, § 63, effective June 24, 2015.

386A.4-030. Title to assets of or associated with a series.

Assets of or associated with a series may be held directly or indirectly, including in the name of the series, in the name of the statutory trust, through a nominee, or otherwise.

History. Enact. Acts 2012, ch. 81, § 24, effective July 12, 2012.

386A.4-040. Effect of dissociation from a series.

  1. A person who ceases to be a beneficial owner of a statutory trust shall cease to be associated, as a beneficial owner, with any series thereof.
  2. A trustee who ceases to be a trustee of a statutory trust shall cease to be associated, as a trustee, with any series thereof.
  3. A beneficial owner or trustee associated with a series shall have such right to cease being associated with a series as is provided in the governing instrument.
  4. A person who has dissociated as a beneficial owner associated with a series shall have no right to participate in the activities and affairs of that series and is entitled only to receive the distributions to which that beneficial owner was entitled through the date of dissociation.
  5. A person’s dissociation as a beneficial owner associated with a series does not of itself discharge the person from any debt, obligation, or liability to that series, the statutory trust, or the other beneficial owners that the person incurred while a beneficial owner associated with that series.
  6. A beneficial owner’s dissociation from a series does not of itself cause the beneficial owner to dissociate from any other series or, unless the dissociated beneficial owner was the last remaining beneficial owner associated with the series, require the winding up of the series.
  7. A beneficial owner’s dissociation from a series does not of itself cause the beneficial owner to dissociate from the statutory trust.

History. Enact. Acts 2012, ch. 81, § 25, effective July 12, 2012.

386A.4-050. Dissolution and winding up of a series.

  1. A series may be dissolved and its activities and affairs may be wound up without causing the dissolution of the statutory trust.
  2. The dissolution and winding up of a series does not abate, suspend, or otherwise affect the application of KRS 386A.3-040 .
  3. The dissolution and winding up of a series does not abate, suspend, or otherwise affect the application of KRS 386A.4-020 (1).

History. Enact. Acts 2012, ch. 81, § 26, effective July 12, 2012.

386A.4-060. Events requiring dissolution of a series.

  1. A series shall be dissolved, and it shall commence to wind up its activities and affairs, upon the first to occur of the following:
    1. The dissolution of the statutory trust;
    2. An event or circumstance that the governing instrument states causes dissolution of the series;
    3. Except as otherwise provided in the governing instrument, the consent of all of the beneficial owners associated with the series;
    4. The passage of ninety (90) days after the occurrence of the dissociation of the last remaining beneficial owner associated with the series; or
    5. On application by a beneficial owner associated with the series, the entry by the appropriate court of an order dissolving the series on the grounds that it is not reasonably practicable to carry on the series’s activities in conformity with the governing instrument.
  2. The date of dissolution of a series shall be:
    1. The date of dissolution of the statutory trust;
    2. The effective date of the event or circumstance that the governing instrument states causes dissolution;
    3. The effective date of the consent of the beneficial owners;
    4. The ninety-first day after the dissociation of the last beneficial owner associated with the series; or
    5. The effective date of the decree of dissolution issued by an appropriate court.

History. Enact. Acts 2012, ch. 81, § 27, effective July 12, 2012.

386A.4-070. Effect of dissolution of a series.

  1. A dissolved series continues its existence as a series, but may not carry on any activities except as is appropriate to wind up and liquidate its activities and affairs, including:
    1. Collecting the assets of or associated with the series;
    2. Disposing of the assets of or associated with the series that will not be distributed in kind to beneficial owners associated with the series or the statutory trust;
    3. Discharging or making provision for discharging the liabilities of or associated with the series or the assets of or associated therewith, including entering into new agreements with creditors having claims on assets of or associated with the series for the satisfaction thereof;
    4. Distributing the remaining property of or associated with the series in accordance with KRS 386A.4-110 ; and
    5. Doing every other act necessary to wind up and liquidate the series’s activities and affairs.
  2. Except as otherwise provided in the governing instrument, dissolution of a series shall not:
    1. Transfer title to the property of or associated with the series;
    2. Prevent transfer of a beneficial interest associated with a series;
    3. Subject its trustees associated with the series to standards of conduct different from those applicable prior to the dissolution; or
    4. Amend the governing instrument or terminate contribution obligations existing thereunder.
  3. Dissolution of a series does not:
    1. Prevent the commencement of a proceeding by or against the series in the series’s name;
    2. Abate or suspend a proceeding by or against the series pending on the effective date of dissolution;
    3. Transfer title to property of or associated with the series; or
    4. Terminate, as to the series, the authority of the registered agent of the statutory trust.

History. Enact. Acts 2012, ch. 81, § 28, effective July 12, 2012.

386A.4-080. Right to wind up business and activities of a series.

  1. Subject to subsection (2) of this section, after dissolution of a series, the trustees associated with the series, if any, and if none, the trustees of the statutory trust, shall wind up the series’s activities.
  2. The appropriate court may order judicial supervision of the winding up of a dissolved series, including the appointment of a person to wind up the series’s activities:
    1. On application of a beneficial owner associated with the series, if the applicant establishes good cause; or
    2. In connection with a proceeding under KRS 386A.4-060 (1)(e).

History. Enact. Acts 2012, ch. 81, § 29, effective July 12, 2012.

386A.4-090. Known claims against dissolved series.

  1. Upon dissolution pursuant to KRS 386A.4-060 (1)(b), (c), (d), or (e), a series of a statutory trust shall dispose of the known claims against the property of or associated with it by following the procedures described in this section.
  2. The series shall notify its known claimants in writing of its dissolution at any time after the effective date of dissolution. The written notice shall:
    1. Identify the series by such name or names as it used in transacting business and the name of the statutory trust;
    2. Describe information that must be included in a claim;
    3. Provide a mailing address where a claim may be sent;
    4. State the deadline, which may not be fewer than one hundred twenty (120) days after the date of the written notice, by which the series must receive the claim; and
    5. State that the claim will be barred if not received by the deadline.
  3. A claim against a series shall be barred:
    1. If a claimant who is given written notice under subsection (2) of this section does not deliver the claim to the series by the deadline; or
    2. If a claimant whose claim was rejected by the series does not commence a proceeding to enforce the claim within ninety (90) days after the date of the rejection notice.
  4. For purposes of this section, “claim” shall not include a contingent liability or a claim based on an event occurring after the effective date of dissolution.

History. Enact. Acts 2012, ch. 81, § 30, effective July 12, 2012.

386A.4-100. Other claims against dissolved series.

  1. A dissolved series shall publish notice of its dissolution pursuant to this section.
  2. The notice shall:
    1. Be published once in a newspaper of general circulation in the county where the statutory trust’s principal office, or, if none in this Commonwealth, its registered office, is or was last located;
    2. Set forth the information required by KRS 386A.4-090 (2)(a), (b), or (c); and
    3. State that the claim will be barred unless a proceeding to enforce the claim is commenced within two (2) years after the publication of the notice.
  3. If the dissolved series publishes a newspaper notice in accordance with subsection (2) of this section, the claim of each of the following claimants shall be barred unless the claimant commences a proceeding to enforce the claim against the series within two (2) years after the publication date of the newspaper notice:
    1. A claimant who did not receive written notice under KRS 386A.4-090 ;
    2. A claimant whose claim was timely sent to the series but not rejected; and
    3. A claimant whose claim is contingent or based on an event occurring after the effective date of dissolution.
  4. A claim may be enforced under this section:
    1. Against the series, to the extent of the assets of or associated with the series that remain undistributed; and
    2. To the extent of the assets of or associated with the series that have been distributed in liquidation, against a beneficial owner or the statutory trust to the extent of a pro rata share of the claim, but the total liability of a beneficial owner for all claims under this section shall not exceed the total assets of or associated with the series distributed in liquidation to the beneficial owner.
  5. A dissolved series that published a notice under this section may file an application with the appropriate court for a determination of the amount and form of security to be provided for payment of claims that are contingent or have not been made known to the dissolved series or that are based on an event occurring after the effective date of the dissolution of the series but that, based on the facts known to the dissolved series, are reasonably estimated to arise after the effective date of the dissolution of the series. Provision need not be made for any claim that is or is reasonably anticipated to be barred under subsection (3) of this section.
  6. Within ten (10) days after the filing of the application provided for in subsection (5) of this section, notice of the proceeding shall be given by the dissolved series to each potential claimant as described in KRS 386A.4-090 (2).
  7. The appropriate court may appoint a guardian ad litem to represent all claimants whose identities are unknown in any proceeding brought under this section, including those claimants whose claims are contingent or based upon an event occurring after the effective date of dissolution. The reasonable fees and expenses of the guardian, including all reasonable expert witness fees, shall be paid by the dissolved series.
  8. Provision by the dissolved series for security in the amount and form ordered by the appropriate court under subsection (5) of this section shall satisfy the dissolved series’s obligation with respect to claims that are contingent, have not been made known to the dissolved series, or are based on an event occurring after the effective date of the dissolution of the series, and those claims may not be enforced against a beneficial owner to whom assets of or associated with a dissolved series have been distributed.

History. Enact. Acts 2012, ch. 81, § 31, effective July 12, 2012.

386A.4-110. Application of assets in winding up of series’ activities.

Upon the winding up of a series, the assets of or associated with the series shall be distributed as follows:

  1. First, payment or adequate provisions for payment shall be made to creditors, including, to the extent permitted by law, beneficial owners who are creditors, in satisfaction of liabilities of the series or associated with the properties of or associated with the series;
  2. Second, unless otherwise provided in the governing instrument, to beneficial owners in satisfaction of liabilities for distributions declared but unpaid; and
  3. Third, unless otherwise provided in the governing instrument, to beneficial owners in proportion to their respective rights to share in distributions from the series prior to dissolution.

History. Enact. Acts 2012, ch. 81, § 32, effective July 12, 2012.

Subchapter 5 Trustees and Trust Management

386A.5-010. Management of statutory trust.

  1. The business and affairs of a statutory trust must be managed by or under the authority of its trustees.
  2. If there is at least one (1) trustee that in the discharge of all obligations under the governing instrument and this chapter is obligated to consider the interests of the trust and all series thereof, the governing instrument may provide that one (1) or more other trustees, in discharging their obligations, may consider only the interests of the trust or of one (1) or more series thereof.

History. Enact. Acts 2012, ch. 81, § 33, effective July 12, 2012.

386A.5-020. Trustee powers.

  1. A trustee may exercise:
    1. Powers conferred by the governing instrument;
    2. Except as limited by the governing instrument, any other powers necessary or convenient to carry out the business and affairs of the statutory trust; and
    3. Other powers conferred by this chapter.
  2. Every trustee of a statutory trust, by acceptance of election or appointment as a trustee, including by service, shall be deemed thereby to have consented to the jurisdiction of the courts of the Commonwealth of Kentucky for any action by the statutory trust or a beneficial owner against the trustee.

History. Enact. Acts 2012, ch. 81, § 34, effective July 12, 2012.

386A.5-030. Action by trustees.

  1. On any matter that is to be acted on by trustees:
    1. Each trustee has equal rights in the management and conduct of trust business; and
    2. The trustees act by majority of the trustees.
  2. The trustees may act other than at a meeting of the trustees if the minimum number of trustees necessary to authorize or to take action at a meeting consent in a signed record. Prompt notice of the action taken must be promptly communicated to all trustees.
  3. A trustee may not vote by proxy.

History. Enact. Acts 2012, ch. 81, § 35, effective July 12, 2012.

386A.5-040. Protection of person dealing with trustee.

  1. A person that in good faith assists a trustee, or in good faith and for value deals with a trustee, without knowledge that the trustee is exceeding or improperly exercising the trustee’s power, is protected from liability as if the trustee properly exercised the power.
  2. A person that in good faith deals with a trustee need not inquire into the extent of a trustee’s power or the propriety of the exercise of the power.
  3. A person that in good faith delivers property to a trustee need not ensure its proper use.
  4. A person that in good faith and without knowledge that the trusteeship has terminated assists a former trustee as if the former trustee were still a trustee, or in good faith and for value deals with a former trustee as if the former trustee were still a trustee, is protected from liability as if the former trustee were still a trustee.

History. Enact. Acts 2012, ch. 81, § 36, effective July 12, 2012.

386A.5-050. Trustee duties.

  1. Subject to KRS 386A.5-010 (2), in exercising the powers of trusteeship, a trustee shall act in good faith, on an informed basis, and in a manner the trustee reasonably believes to be in the best interests of the statutory trust.
  2. A trustee shall discharge his or her duties with the care that an ordinarily prudent person in a similar position would reasonably believe appropriate under similar circumstances.

History. Enact. Acts 2012, ch. 81, § 37, effective July 12, 2012.

386A.5-060. Good faith reliance.

  1. A trustee, officer, employee, manager, committee of a statutory trust, or other person designated pursuant to KRS 386A.1-030 (4)(h) shall be entitled to rely on information, opinions, reports, or statements, including financial statements and other financial data, if prepared or presented by:
    1. One (1) or more trustees, employees, or agents of the trust whom the person relying reasonably believes to be reliable and competent in the matters presented;
    2. Legal counsel, public accountants, or other persons as to matters the person relying reasonably believes are within the person’s professional or expert competence; or
    3. A committee of the trustees of which the relying person is not a member, if the relying person reasonably believes the committee to be reliable and competent in the matters presented.
  2. No person shall be considered to be acting reasonably if he or she has knowledge concerning the matter in question that makes reliance otherwise permitted by subsection (1) of this section unwarranted.

History. Enact. Acts 2012, ch. 81, § 38, effective July 12, 2012.

386A.5-070. Interested transactions.

  1. Each trustee and each person designated pursuant to KRS 386A.1-030 (4)(h) owes a duty of loyalty to the statutory trust and any series thereof, including but not limited to the following:
    1. To account to the trust or a series thereof and hold as trustee for it any property, profit, or benefit derived in the conduct and winding up of the trust’s or series’s business or derived from a use of property, including the appropriation of an opportunity, of the trust or a series thereof;
    2. To refrain from dealing with the trust in the conduct or winding up of the trust’s business as or on behalf of a party having an interest adverse to the trust; and
    3. To refrain from competing with the trust or with any series thereof in the conduct of its business before dissolution.
  2. A person subject to subsection (1) of this section who acts through a related party shall be treated as having acted directly.
  3. That a transaction was fair to the statutory trust or a series thereof shall not constitute a defense to the breach of the obligation in subsection (1) of this section.

History. Enact. Acts 2012, ch. 81, § 39, effective July 12, 2012.

386A.5-080. Trustee’s right to information.

A trustee has the right to receive from a statutory trust or another trustee information relating to the affairs of the trust which is reasonably related to the trustee’s discharge of the trustee’s duties as trustee. The trustee may enforce this right to information by summary proceeding in the appropriate court.

History. Enact. Acts 2012, ch. 81, § 40, effective July 12, 2012.

386A.5-090. Indemnification and advancement.

  1. Subject to KRS 386A.1-040 (2)(q), a statutory trust may:
    1. Indemnify and hold harmless a trustee, beneficial owner, or other person with respect to any claim or demand against the person by reason of the person’s relationship with the trust; and
    2. Advance expenses, including reasonable attorney’s fees and costs, incurred by a trustee, beneficial owner, or other person in connection with a claim or demand against the person by reason of the person’s relationship to a trust before the final disposition of the claim or demand, upon an undertaking by or on behalf of the person to repay the trust if the person is ultimately determined not to be entitled to be indemnified under subsection (1) of this section. The terms of the undertaking shall be as set forth in the governing instrument or as approved by the disinterested trustees and shall be in a record.
  2. The decision to indemnify or advance expenses shall be made by a committee of at least two (2) trustees not at that time parties to the proceeding or by the beneficial owners, but beneficial interests owned by or voted under the control of a trustee who are at the time parties to the proceeding shall not be voted on the determination.

History. Enact. Acts 2012, ch. 81, § 41, effective July 12, 2012.

386A.5-100. Direction of trustees.

  1. The governing instrument may authorize any person, including a beneficial owner, to direct a trustee or other person in the management of a statutory trust.
  2. If the governing instrument confers on a person a power to direct actions by a trustee or other person, the trustee or other person shall act in accordance with a direction given, unless the direction is contrary to the terms of the governing instrument or the trustee or other person knows or has reason to know that following the direction would constitute a breach of fiduciary duty.

History. Enact. Acts 2012, ch. 81, § 42, effective July 12, 2012.

386A.5-110. Delegation by trustee.

  1. A trustee may delegate duties and powers, including to a co-trustee. The trustee shall exercise the care that a person in a similar position would reasonably believe appropriate under similar circumstances in:
    1. Selecting an agent;
    2. Establishing the scope and terms of the delegation; and
    3. Periodically reviewing the agent’s actions in order to monitor the agent’s performance and compliance with the terms of the delegation.
  2. In performing a delegated function, an agent of a trustee owes a duty to the statutory trust to comply with the terms of the delegation and to act with the care, competence, and diligence normally exercised by agents in similar circumstances.
  3. A trustee that delegates duties and powers as provided in subsection (1) of this section is responsible to the statutory trust and the beneficial owners for the conduct of the agent in the performance of all delegated duties and powers.
  4. An agent of a trustee submits to the jurisdiction of the courts of this Commonwealth by accepting a delegation of powers or duties from a trustee with respect to a claim related to the agency.

History. Enact. Acts 2012, ch. 81, § 43, effective July 12, 2012.

386A.5-120. Independent trustee in registered investment company.

  1. In this section, “affiliated person” and “interested person” have the meanings set forth in the Investment Company Act of 1940, Pub. L. No. 76-768, as amended, or any successor statute and any regulations issued thereunder.
  2. If a statutory trust is registered as an investment company under the Investment Company Act of 1940, Pub. L. No. 76-768, as amended, or any successor statute and any regulations issued thereunder, a trustee is an independent trustee for all purposes under this chapter if the trustee is not an interested person of the trust. The receipt of compensation does not affect the status of the trustee as an independent trustee under this section if it is for:
    1. Service as an independent trustee of the trust; or
    2. Service as an independent trustee of one (1) or more other investment companies managed by a single investment adviser or an affiliated person of an investment adviser.

History. Enact. Acts 2012, ch. 81, § 44, effective July 12, 2012.

Subchapter 6 Beneficiaries and Beneficial Rights

386A.6-010. Beneficial interest.

  1. A beneficial interest in a statutory trust is personal property regardless of the nature of the property of the trust.
  2. A beneficial interest in a statutory trust is not an interest in specific property of the statutory trust.
  3. A beneficial interest in a statutory trust is freely transferable.
  4. Any limitations upon transfer of a beneficial interest set forth in the governing instrument shall be void if the same person is the sole trustee and sole beneficial owner.
  5. A beneficial owner does not have a preemptive right to subscribe to any additional issue of beneficial interests or any other interest of a statutory trust.

History. Enact. Acts 2012, ch. 81, § 45, effective July 12, 2012.

386A.6-020. Voting or consent by beneficial owners.

  1. The vote of all beneficial owners is required for:
    1. The amendment of the governing instrument;
    2. Compromise of a beneficial owner’s obligation to make a contribution to the statutory trust;
    3. The conversion of the statutory trust;
    4. The merger of the statutory trust;
    5. The extension of the term of the statutory trust beyond that provided for in the governing instrument; and
    6. The dissolution of the statutory trust.
  2. Except as provided in subsection (1) of this section, the beneficial owners act by a majority of the beneficial interests.
  3. A beneficial owner may vote in person or by proxy, but if by proxy, the proxy must be contained in a signed record.

History. Enact. Acts 2012, ch. 81, § 46, effective July 12, 2012.

386A.6-030. Contribution by beneficial owner.

  1. A contribution of a beneficial owner to a statutory trust may be in cash, property, or services rendered or a promissory note or other obligation to contribute cash or property or to perform services. A person may become a beneficial owner of a statutory trust and may receive a beneficial interest in a statutory trust without making or being obligated to make a contribution to the trust.
  2. An obligation of a beneficial owner to make a contribution, whether of cash, property, or services, to the statutory trust shall not be enforceable unless set forth in a writing signed by the beneficial owner.
  3. Unless otherwise provided in a governing instrument, a beneficial owner shall be obligated to the statutory trust to perform any enforceable promise to contribute cash or property or to perform services, even if the beneficial owner is unable to perform because of death, disability, or other reason. If a beneficial owner does not make a required contribution of property or services, then the beneficial owner shall be obligated, at the option of the statutory trust, to contribute cash equal to that portion of value of the stated contribution that has not been made. This obligation is in addition to any other right, including the right to specific performance, that the trust has against the beneficial owner under the governing instrument or applicable law.
  4. Unless otherwise provided in a governing instrument, an obligation of a beneficial owner to make a contribution may be compromised by the beneficial owners. Notwithstanding any compromise, a creditor of a statutory trust who extended credit or otherwise acted in reliance on an obligation after the beneficial owner executed a writing which reflects that obligation and before any such compromise is reached may enforce the original obligation.

History. Enact. Acts 2012, ch. 81, § 47, effective July 12, 2012; 2013, ch. 106, § 10, effective June 25, 2013.

386A.6-040. Distribution to beneficial owner.

  1. Any distribution by a statutory trust before dissolution shall be made in proportion to the beneficial interests.
  2. When a beneficial owner becomes entitled to receive a distribution, the trust’s indebtedness to a beneficial owner shall be at parity with the trust’s indebtedness to its general creditors except to the extent subordinated by agreement.
  3. When a beneficial owner associated with a series becomes entitled to a distribution, the series’s indebtedness to a beneficial owner shall be at parity with the series’s indebtedness to its general creditors except as subordinated by agreement.
  4. Unless otherwise provided in a governing instrument:
    1. A beneficial owner, regardless of the nature of the beneficial owner’s contribution, shall not have a right to demand and receive a distribution in any form other than cash; and
    2. A beneficial owner shall not be compelled to accept a distribution of any asset in kind to the extent that the percentage of the asset distributed to the beneficial owner exceeds the percentage that the beneficial owner would have shared in cash distribution equal to the value of the property at the time of distribution.

History. Enact. Acts 2012, ch. 81, § 48, effective July 12, 2012; 2013, ch. 106, § 11, effective June 25, 2013.

386A.6-050. Redemption of beneficial interest.

On the terms set forth in the governing instrument, a statutory trust may acquire, by purchase, redemption, or otherwise, any beneficial interest in the trust, including a beneficial interest associated with a series thereof. A beneficial interest acquired under this section is canceled.

History. Enact. Acts 2012, ch. 81, § 49, effective July 12, 2012.

386A.6-060. Charging order.

  1. If a beneficial interest is not freely transferable by a beneficial owner so that the transferee has all rights of the transferor, this section provides the exclusive remedy by which the judgment creditor of a beneficial owner or a transferee of a beneficial owner may satisfy a judgment out of the judgment debtor’s beneficial interest.
  2. On application to a court of competent jurisdiction by a judgment creditor of a beneficial owner or a beneficial owner’s transferee, a court may charge the judgment debtor’s beneficial interest with payment of the unsatisfied amount of the judgment. To the extent so charged, the judgment creditor shall have no right to participate in the management or to cause the dissolution of the statutory trust. The court may appoint a receiver of the share of the distributions due or to become due to the judgment debtor in respect of the beneficial interest and make all other orders, directions, accounts, and inquiries the judgment creditor might have made or which the circumstances of the case may require to give effect to the charging order.
  3. A charging order constitutes a lien on and the right to receive distributions made with respect to the judgment debtor’s beneficial interest. A charging order does not of itself constitute an assignment of the beneficial interest.
  4. The court may order a foreclosure upon the beneficial interest subject to the charging order at any time. The purchaser of the beneficial interest at the foreclosure sale shall have no right to participate in the management or to cause the dissolution of the statutory trust. Upon foreclosure the beneficial owner shall be dissociated from and cease to be a beneficial owner of the trust. At any time before foreclosure, the charged beneficial interest may be redeemed:
    1. By the judgment debtor;
    2. With property other than statutory trust property, by one (1) or more of the other beneficial owners; and
    3. With statutory trust property, by the statutory trust with the consent of the trustees.
  5. This section does not deprive a beneficial owner or a beneficial owner’s transferee of the benefit of any exemption laws applicable to the beneficial interest.
  6. The statutory trust is not a necessary party to an application for a charging order. Service of the charging order on a statutory trust may be made by the court granting the charging order or as the court should otherwise direct.
  7. This section shall not apply to the enforcement of a judgment by a statutory trust against a beneficial owner of that trust.
  8. This section shall apply to the issuance of a charging order against the beneficial interest of a beneficial owner or assignee of a beneficial owner of a foreign statutory trust.

HISTORY: Enact. Acts 2012, ch. 81, § 50, effective July 12, 2012; 2017 ch. 193, § 21, effective June 29, 2017.

386A.6-070. Transaction with beneficial owner.

Subject to KRS 386A.5-070 , a beneficial owner may lend money to, borrow money from, act as a surety, guarantor, or endorser for, guarantee or assume an obligation of, provide collateral for, or do other business with the statutory trust and, subject to law other than this chapter, has the same rights and obligations with respect to those matters as a person that is not a beneficial owner.

History. Enact. Acts 2012, ch. 81, § 51, effective July 12, 2012.

386A.6-080. Distributions.

  1. Subject to any restriction in the governing instrument and the limitations in subsection (3) of this section, the trustees may authorize and the statutory trust may make distributions to its beneficial owners, including distributions to the beneficial owners associated with a series out of property of or associated with a series.
  2. If there is no record date for determining the beneficial owners entitled to a distribution other than one involving a purchase, redemption, or other acquisition of beneficial interests in the statutory trust, it shall be the date the distribution is authorized.
  3. No distribution shall be made if, after giving it effect:
    1. The statutory trust would not be able to pay its debts as they become due in the usual course of business;
    2. The statutory trust’s total assets would be less than the sum of its total liabilities plus, unless the governing instrument permits otherwise, the amount that would be needed, if the statutory trust were to be dissolved at the time of the distribution, to satisfy the preferential rights upon dissolution of beneficial owners whose preferential rights are superior to those receiving the distribution; or
    3. The distribution is impermissible under the governing instrument.
  4. With respect to any distribution to the beneficial owners associated with a series out of property of or associated with a series, subsection (3) of this section shall be applied with respect to that series and not the statutory trust or any other series thereof.
  5. The trustees may base a determination that a distribution is not prohibited under subsection (3) or (4) of this section either on financial statements prepared on the basis of accounting practices and principles that are reasonable in the circumstances or on a fair valuation or other method that is reasonable in the circumstances.
  6. Except as provided in subsection (7) of this section, for purposes of subsections (3) and (4) of this section, the effect of a distribution shall be measured:
    1. In the case of distribution by purchase, redemption, or other acquisition of the statutory trust’s beneficial interests, as of the earlier of:
      1. The date money or other property is transferred or debt incurred by the statutory trust; or
      2. The date the beneficial owner ceases to be a beneficial owner with respect to the acquired beneficial interests;
    2. In the case of any other distribution of indebtedness, as of the date the indebtedness is distributed; and
    3. In all other cases, as of:
      1. The date the distribution is authorized if the payment occurs within one hundred twenty (120) days after the date of authorization; or
      2. The date the payment is made if it occurs more than one hundred twenty (120) days after the date of authorization.
  7. Indebtedness of a statutory trust or a series thereof, including indebtedness issued as a distribution, shall not be considered a liability for purposes of subsections (3) or (4) of this section if its terms provide that payment of principal and interest are made only if and to the extent that payment of a distribution to beneficial owners could then be made under this section. If the indebtedness is issued as a distribution, each payment of principal or interest shall be treated as a distribution, the effect of which is measured on the date the payment is actually made.

History. Enact. Acts 2012, ch. 81, § 52, effective July 12, 2012.

386A.6-090. Liability for unlawful transactions.

  1. A trustee who votes for or assents to a distribution made in violation of KRS 386A.6-080 shall be personally liable to the statutory trust for the amount of the distribution that exceeds what could have been distributed without violating KRS 386A.6-080 if it is established that the trustee did not perform his or her duties in compliance with KRS 386A.5-050 . In any proceeding commenced under this section, a trustee shall have all of the defenses ordinarily available to a trustee.
  2. A trustee held liable under subsection (1) of this section for an unlawful distribution shall be entitled to contribution:
    1. From every other trustee who could be held liable under subsection (1) of this section for the unlawful distribution; and
    2. From each beneficial owner for the amount the beneficial owner accepted knowing the distribution was made in violation of KRS 386A.6-080 .
  3. A proceeding under this section shall be barred unless it is commenced within two (2) years after the date on which the effect of the distribution was measured under KRS 386A.6-080 (6) and (7).

History. Enact. Acts 2012, ch. 81, § 53, effective July 12, 2012.

386A.6-100. Beneficial owner’s right to information.

  1. A beneficial owner has the right to receive from the statutory trust or a trustee information relating to the affairs of a statutory trust which is reasonably related to the beneficial owner’s interest.
  2. A governing instrument may impose reasonable limitations upon the use of any record of or information with respect to a statutory trust. Except as to limitations set forth in a governing instrument to which a beneficial owner requesting information has assented, the trust bears the burden of proof in demonstrating the reasonableness of any restrictions imposed.

History. Enact. Acts 2012, ch. 81, § 54, effective July 12, 2012.

386A.6-110. Action by beneficial owner.

  1. A beneficial owner may maintain a direct action against a statutory trust or a trustee to redress an injury sustained by, or to enforce a duty owed to, the beneficial owner if the beneficial owner can prevail without showing an injury or breach of duty to the trust.
  2. A beneficial owner may maintain a derivative action to redress an injury sustained by or enforce a duty owed to a statutory trust if:
    1. The beneficial owner first makes a demand on the trustees, requesting that the trustees cause the trust to bring an action to redress the injury or enforce the right, and the trustees do not bring the action within a reasonable time; or
    2. A demand would be futile.
  3. A derivative action on behalf of a statutory trust may be maintained only by a person that is a beneficial owner at the time the action is commenced and who:
    1. Was a beneficial owner when the conduct giving rise to the action occurred; or
    2. Acquired the status as a beneficial owner by operation of law or pursuant to the terms of the governing instrument from a person that was a beneficial owner at the time of the conduct giving rise to the action occurred.
  4. In a derivative action on behalf of the statutory trust, the complaint must state with particularity:
    1. The date and content of the plaintiff’s demand and the trustees’ response to the demand; or
    2. The reason the demand should be excused as futile.
  5. The derivative proceeding shall not be maintained if:
    1. It appears that the person commencing the proceeding does not fairly and adequately represent the interests of the beneficial owners in enforcing the rights of the statutory trust; or
    2. The person commencing the proceeding ceases to be a beneficial owner in the statutory trust.
  6. Except as otherwise provided in subsection (10) of this section:
    1. Any proceeds or other benefits of a derivative action on behalf of a statutory trust, whether by judgment, compromise or settlement, are the property of the trust and not of the plaintiff; and
    2. If the plaintiff receives any proceeds or other benefits, the plaintiff shall immediately remit them to the trust.
  7. A derivative action on behalf of a statutory trust may not be voluntarily dismissed or settled without the court’s approval.
  8. The proper venue for a direct action under subsection (1) of this section or a derivative action in which the action is brought solely against one (1) or more trustees shall be an appropriate court.
  9. A beneficial owner associated with a series, if the series may pursuant to KRS 386A.4-010 (4) be sued in its own name, may bring an action pursuant to subsection (1) or (2) of this section against only that series, the trustees associated with the series, or both. If brought only against a series or the trustees associated with the series, any demand made pursuant to subsection (2)(a) of this section shall be upon the trustees associated with the series.
  10. On termination of the proceeding brought pursuant to this section, the court may:
    1. Require the plaintiff to pay any defendant’s reasonable expenses, including counsel fees, incurred in defending the proceeding to the extent it finds that the proceeding or any portion thereof was commenced without reasonable cause or for an improper purpose; and
    2. Require the statutory trust, or as appropriate a series thereof, to pay the plaintiff’s reasonable expenses, including counsel fees, incurred in the proceeding if it finds that the proceeding has resulted in a substantial benefit to the statutory trust or to a series thereof.

HISTORY: Enact. Acts 2012, ch. 81, § 55, effective July 12, 2012; 2017 ch. 193, § 23, effective June 29, 2017.

Subchapter 7 Mergers and Conversions

386A.7-010. Right of company to merge with other business entities — Exception.

  1. Unless otherwise provided in a governing instrument, and if permitted by any law applicable to entities other than statutory trusts, one (1) or more statutory trusts may merge with or into one (1) or more other entities with the statutory trust or other business entity being the surviving organization.
  2. Unless otherwise provided in a governing instrument, unless prohibited by applicable law, one (1) or more statutory trusts may merge with or into one (1) or more foreign entities with the statutory trust or foreign entity being the surviving organization.

History. Enact. Acts 2012, ch. 81, § 56, effective July 12, 2012.

386A.7-020. Approval of proposed merger — No right of dissent.

  1. With respect to each constituent statutory trust, the plan of merger shall require the approval of the beneficial owners.
  2. Each constituent organization that is not a statutory trust and that is a party to a proposed merger shall approve the plan of merger in the manner and by the vote required by the laws applicable to the constituent organization.
  3. Unless otherwise provided in the governing instrument or a written agreement and plan of merger, no beneficial owner of a statutory trust shall have the right to dissent from a merger.
  4. Each constituent organization shall have the rights to abandon the merger as provided for in the plan of merger or in the laws applicable to the constituent organization.

History. Enact. Acts 2012, ch. 81, § 57, effective July 12, 2012.

386A.7-030. Plan of merger.

  1. Each constituent organization shall enter into a written plan of merger.
  2. The plan of merger shall set forth:
    1. The name of each constituent organization and the name of the constituent organization into which each constituent organization proposes to merge;
    2. The terms and conditions of the proposed merger, including but not limited to a statement which sets forth whether limited liability is retained by the surviving constituent organization;
    3. The manner and basis of converting the beneficial interest in each constituent statutory trust and the interests in each constituent organization into interests, shares, or other securities or obligations, as the case may be, of the surviving constituent organization or of any other business entity, or, in whole or in part, into cash or other property;
    4. The amendments to the organizational documents of the surviving constituent organization as are desired to be effected by the merger, or that no changes are desired; and
    5. Other provisions relating to the proposed merger that are deemed necessary or desirable.

History. Enact. Acts 2012, ch. 81, § 58, effective July 12, 2012.

386A.7-040. Articles of merger.

  1. The surviving constituent organization shall deliver to the Secretary of State for filing articles of merger duly executed by each constituent organization setting forth:
    1. The name and jurisdiction of incorporation, formation, or organization of each constituent organization which is to merge;
    2. The plan of merger;
    3. The name of the surviving constituent organization;
    4. A statement that the plan of merger was duly authorized and approved by each constituent organization in accordance with KRS 386A.7-020 ; and
    5. If the surviving constituent organization is not incorporated, formed, or organized under the laws of this Commonwealth, a statement that the surviving constituent organization:
      1. Agrees that it may be served with process in this Commonwealth in any proceeding for enforcement of any obligation of any constituent organization party to the merger that was incorporated, formed, or organized under the laws of this Commonwealth, as well as for enforcement of any obligation of the surviving constituent organization arising from the merger; and
      2. Appoints the Secretary of State as its agent for service of process in any such proceeding. The surviving constituent organization shall specify the address to which a copy of the process shall be mailed to it by the Secretary of State.
  2. A merger shall take effect upon the effective date and time of the articles of merger as provided in KRS 14A.2-070 .
  3. A plan of merger approved in accordance with KRS 386A.7-020 may effect any amendment to the certificate of trust or governing instrument of a statutory trust if it is the surviving constituent organization. An approved plan of merger may also provide that the governing instrument of any constituent statutory trust to the merger, including a statutory trust formed for the purpose of consummating a merger, shall be the governing instrument of the statutory trust that is the surviving constituent organization. Any amendment to a certificate of trust or governing instrument or adoption of a new governing instrument made pursuant to this subsection shall be effective at the effective date and time of the merger.

History. Enact. Acts 2012, ch. 81, § 59, effective July 12, 2012.

386A.7-050. Effect of merger.

A merger shall have the following effects:

  1. The constituent organizations that are parties to the merger shall be a single entity, which shall be the entity designated in the plan of merger as the surviving constituent organization;
  2. Each constituent organization, except the surviving constituent organization, shall cease to exist;
  3. The surviving constituent organization shall possess all the rights, privileges, immunities, and powers of each constituent organization and shall be subject to all the restrictions, disabilities, and duties of each of the constituent organizations to the extent the rights, privileges, immunities, powers, restrictions, disabilities, and duties are applicable to the type of constituent organization that is the surviving constituent organization;
  4. All property, real, personal, and intangible, and all debts due on whatever account, including promises to make capital contributions and subscriptions for shares, beneficial interests, limited liability company interests or other interests in a constituent organization, and all other choses in action, and all and every other interest of, belonging to, or due to each of the constituent organizations shall be vested in the surviving constituent organization without further act or deed;
  5. The title to all property, whether real, personal, or intangible, and any interest therein, vested in any constituent organization shall not revert or be in any way impaired by reason of the merger;
  6. The surviving constituent organization shall be liable for all liabilities and obligations of each of the constituent organizations merged, and any claim existing or action or proceeding pending by or against any constituent organization may be prosecuted as if the merger had not taken place, or the surviving constituent organization may be substituted in the action;
  7. Neither the rights of creditors nor any liens on the property of any constituent organization shall be impaired by the merger;
  8. The interests in a constituent organization that are to be converted or exchanged into interests, other securities, cash, obligations, or other property under the terms of the plan of merger are so converted, and the former holders thereof are entitled only to the rights provided in the plan of merger or the rights otherwise provided by law; and
  9. A partner or, in the case of a limited partnership, a general partner, who becomes a beneficial owner of a statutory trust as a result of a merger, shall remain liable as a partner or general partner for an obligation incurred by the partnership or limited partnership before the merger takes effect. A limited partner who becomes a beneficial owner as a result of a merger shall remain liable only as a limited partner for an obligation incurred by the limited partnership before the merger takes effect. A partner’s liability for all other obligations of the statutory trust incurred after the merger takes effect shall be that of a beneficial owner as provided in this chapter.

History. Enact. Acts 2012, ch. 81, § 60, effective July 12, 2012.

386A.7-060. Conversion of partnership or limited partnership to statutory trust.

  1. An entity other than a corporation governed as to its internal affairs by KRS Chapter 273 or a nonprofit limited liability company may be converted to a statutory trust pursuant to this section.
  2. The terms and conditions of a conversion shall be approved:
    1. In the case of a partnership or a limited partnership, by all of the partners notwithstanding any provision to the contrary in the partnership agreement;
    2. In the case of a limited liability company, by all of the members notwithstanding any provision to the contrary in the operating agreement; and
    3. In the case of a corporation, by such action of the board of directors as would be required to approve a merger and, notwithstanding any provision to the contrary in the articles of incorporation, bylaws, or other agreement, all of the shareholders.
  3. After the conversion is approved under subsection (2) of this section, the converting organization shall deliver to the Secretary of State for filing a certificate of trust which satisfies the requirements of KRS 386A.2-010 and includes as well:
    1. A statement that the converting organization was converted to a statutory trust;
    2. The former name of the converting organization;
    3. The form of organization of the converting organization prior to the conversion; and
    4. A statement that the conversion was approved in accordance with subsection (2) of this section.
  4. In the case of a converting partnership that has filed a statement of registration as a limited liability partnership in accordance with KRS 362.555 or a statement of qualification in accordance with KRS 362.1-931 , each shall be deemed canceled as of the effective date and time of the certificate of trust as determined in accordance with KRS 14A.2-070 .
  5. In the case of a converting limited partnership, the limited partnership’s certificate of limited partnership shall be deemed canceled as of the effective date and time of the certificate of trust as determined in accordance with KRS 14A.2-070 .
  6. In the case of a converting limited liability company, its articles of organization shall be deemed canceled as of the effective time and date of the certificate of trust as determined in accordance with KRS 14A.2-070 .
  7. In the case of a converting corporation, its articles of incorporation shall be deemed canceled as of the effective time and date of the certificate of trust as determined in accordance with KRS 14A.2-070 .
  8. The conversion shall take effect when the certificate of trust is filed with the office of the Secretary of State or, as provided in KRS 14A.2-070 , at a later date specified in the certificate of trust.
  9. A partner or, in the case of a limited partnership, a general partner, who becomes a beneficial owner of a statutory trust as a result of a conversion shall remain liable as a partner or general partner for an obligation incurred by the partnership or limited partnership before the conversion takes effect.

History. Enact. Acts 2012, ch. 81, § 61, effective July 12, 2012.

386A.7-070. Filings required for merger — Effective date.

  1. A converted statutory trust shall be for all purposes the same entity that existed before the conversion.
  2. When a conversion takes effect:
    1. All property and contract rights owned by, and all rights, privileges, and immunities of the converting organization shall remain vested in the converted statutory trust without assignment, reversion, or impairment;
    2. All obligations of the converting organization shall continue as obligations of the converted statutory trust;
    3. An action or proceeding pending against the converting organization may be continued as if the conversion had not occurred, and the name of the converted statutory trust may be substituted in any pending action or proceeding for the name of the converting organization; and
    4. The governing instrument of the converted statutory trust shall be binding upon each person who becomes a beneficial owner or trustee of the converted statutory trust.

History. Enact. Acts 2012, ch. 81, § 62, effective July 12, 2012.

386A.7-080. Provisions not exclusive.

This subchapter does not preclude an organization from being merged or converted under law other than this chapter.

History. Enact. Acts 2012, ch. 81, § 63, effective July 12, 2012.

Subchapter 8 Dissolution and Winding Up

386A.8-010. Events causing dissolution.

A statutory trust is dissolved by:

  1. Administrative dissolution under Subchapter 7 of KRS Chapter 14A;
  2. The filing of articles of dissolution under KRS 386A.8-020 :
    1. On the occurrence of an event or circumstance that the governing instrument states causes dissolution; or
    2. With the approval of the beneficial owners;
  3. Having no beneficial owners for ninety (90) days; or
  4. Judicial dissolution in accordance with KRS 386A.8-030 .

History. Enact. Acts 2012, ch. 81, § 64, effective July 12, 2012.

386A.8-020. Articles of dissolution.

  1. If dissolution of a statutory trust is authorized under KRS 386A.8-010 (2) or (3), the trust shall deliver to the Secretary of State for filing articles of dissolution setting forth:
    1. The name of the trust; and
    2. The date of the event or circumstance causing the dissolution.
  2. Except as otherwise provided in KRS 14A.2-070 , a statutory trust is dissolved when articles of dissolution that comply with subsection (1) of this section are filed by the Secretary of State.

History. Enact. Acts 2012, ch. 81, § 65, effective July 12, 2012.

386A.8-030. Judicial dissolution.

  1. The appropriate court may dissolve a statutory trust in a proceeding by a beneficial owner if it is established that:
    1. It is not reasonably practicable to carry on the business of the statutory trust in conformity with the governing instrument; or
    2. The trust has been without a trustee for ninety (90) days and no successor trustee has been appointed or designated in accordance with the governing agreement.
  2. The clerk of the court shall deliver a certified copy of the decree of dissolution to the Secretary of State, who shall file it. The dissolution shall be effective upon the latter of the date specified by the court or the filing of the decree of dissolution by the Secretary of State.
  3. After entering the decree of dissolution, the appropriate court shall direct the winding up and liquidation of the business and affairs of the statutory trust in accordance with KRS 386A.8-040 and 386A.8-050 and the notification of claimants in accordance with KRS 386A.8-060 and 386A.8-070 .

History. Enact. Acts 2012, ch. 81, § 66, effective July 12, 2012.

386A.8-040. Winding up.

  1. After dissolution, a statutory trust continues its existence as a statutory trust, but may not carry on any activities except as is appropriate to wind up and liquidate its activities and affairs, including:
    1. Collecting the assets of the trust;
    2. Disposing of the properties of the trust that will not be distributed in kind to beneficial owners of the trust;
    3. Discharging or making provision for discharging the liabilities of the trust, including entering into agreements with creditors for the satisfaction thereof;
    4. Distributing the remaining property of the trust in accordance with KRS 386A.8-080 ; and
    5. Doing every other act necessary to wind up and liquidate the trust’s activities and affairs.
  2. In winding up a statutory trust’s activities, a trust may:
    1. Preserve the trust’s activities and property as a going concern for a reasonable time;
    2. Prosecute, defend, or settle actions or proceedings whether civil, criminal, or administrative, including by mediation or arbitration; and
    3. Transfer the property of the trust.
  3. The dissolution of a statutory trust does not:
    1. Prevent the commencement of a proceeding by or against the trust in its name;
    2. Abate or suspend a proceeding by or against the trust pending on the effective date of dissolution;
    3. Transfer title to the trust’s property;
    4. Terminate the authority of the registered agent of the statutory trust;
    5. Abate or suspend KRS 386A.3-040 ; or
    6. Abate or suspend KRS 386A.4-020 .

History. Enact. Acts 2012, ch. 81, § 67, effective July 12, 2012.

386A.8-050. Supervision of winding up and liquidation.

  1. Subject to KRS 386A.8-030 (3), after dissolution of a statutory trust, the trustee or trustees shall wind up the trust’s activities.
  2. The appropriate court may order judicial supervision of the winding up of a statutory trust, including the appointment of a person to wind up the trust’s activities:
    1. On application of a beneficial owner, if the applicant establishes good cause; or
    2. In connection with a proceeding under KRS 386A.8-030 .

History. Enact. Acts 2012, ch. 81, § 68, effective July 12, 2012.

386A.8-060. Known claims against dissolved trust.

  1. Upon dissolution, a statutory trust may, and a series trust shall, dispose of the known claims against it by following the procedures described in this section.
  2. The statutory trust shall notify its known claimants, as well as all known claimants of any series or against the assets of or associated with a series, in writing of the dissolution at any time after the effective date of dissolution. The written notice shall:
    1. Provide the name of the trust and, if a series trust, the name under which each series has transacted business;
    2. Describe the information that must be included in a claim;
    3. Provide a mailing address where a claim may be sent;
    4. State the deadline, which may not be fewer than one hundred twenty (120) days after the date of the written notice, by which the trust must receive the claim; and
    5. State that the claim against the trust, or in the case of a series trust a claim against a series or against the property of or associated with a series, will be barred if not received by the deadline.
  3. A claim shall be barred:
    1. If a claimant who is given written notice under subsection (2) of this section does not deliver the claim to the trust by the deadline; or
    2. If a claimant whose claim was rejected by the trust does not commence a proceeding to enforce the claim within ninety (90) days after the date of the rejection notice.
  4. For purposes of this section, “claim” shall not include a contingent liability or a claim based on an event occurring after the effective date of dissolution.

History. Enact. Acts 2012, ch. 81, § 69, effective July 12, 2012.

386A.8-070. Other claims against dissolved trust.

  1. A statutory trust may, and a series trust shall, publish notice of its dissolution pursuant to this section.
  2. The notice shall:
    1. Be published once in a newspaper of general circulation in the county where the statutory trust’s principal office, or, if none in this Commonwealth, its registered office, is or was last located;
    2. Provide the name of the statutory trust and, if a series statutory trust, the name or names under which each series has transacted business;
    3. Describe the information that must be included in a claim and provide a mailing address where the claim may be sent; and
    4. State that a claim against the trust, or in the case of a series trust a claim against a series or against the property of or associated with a series, will be barred unless a proceeding to enforce the claim is commenced within two (2) years after the publication of the notice.
  3. If the statutory trust publishes a newspaper notice in accordance with subsection (2) of this section, the claim of each of the following claimants shall be barred unless the claimant commences a proceeding to enforce the claim within two (2) years after the publication date of the newspaper notice:
    1. A claimant who did not receive written notice under KRS 386A.8-060 ;
    2. A claimant whose claim was timely sent to the trust but not acted on; and
    3. A claimant whose claim is contingent or based on an event occurring after the effective date of dissolution.
  4. A claim may be enforced under this section:
    1. Against the statutory trust, to the extent of the assets of the trust that remain undistributed;
    2. To the extent of assets of the statutory trust that have been distributed in liquidation, against a beneficial owner to the extent of a pro rata share of the claim, but the total liability of a beneficial owner for all claims under this section shall not exceed the total assets of the statutory trust, or the assets of or associated with a series dissolved with the statutory trust, distributed in liquidation to the beneficial owner; and
    3. For claims against a series or against the property of or associated with a series, as provided in KRS 386A.4-100 (4).
  5. A statutory trust that published a notice under this section may file an application with the appropriate court for a determination of the amount and form of security to be provided for payment of claims that are contingent or have not been made known to the trust or that are based on an event occurring after the effective date of the dissolution of the trust but that, based on the facts known to the trust, are reasonably estimated to arise after the effective date of the dissolution of the trust. Provision need not be made for any claim that is or is reasonably anticipated to be barred under subsection (3) of this section.
  6. Within ten (10) days after the filing of the application provided for in subsection (5) of this section, notice of the proceeding shall be given by the statutory trust to each claimant described in KRS 386A.8-060 (2).
  7. The appropriate court may appoint a guardian ad litem to represent all claimants whose identities are unknown in any proceeding brought under this section, including those claimants whose claims are contingent or based upon an event occurring after the effective date of dissolution. The reasonable fees and expenses of the guardian, including all reasonable expert witness fees, shall be paid by the statutory trust.
  8. Provision by the statutory trust for security in the amount and the form ordered by the appropriate court under subsection (5) of this section shall satisfy the trust’s obligation with respect to claims that are contingent, have not been made known to the trust, or are based on an event occurring after the effective date of the trust’s dissolution, and those claims may not be enforced against a beneficial owner to whom assets of the trust have been distributed.

History. Enact. Acts 2012, ch. 81, § 70, effective July 12, 2012.

386A.8-080. Application of assets in winding up.

  1. Upon the winding up of a statutory trust, the assets of the trust shall be distributed as follows:
    1. First, payment or adequate provisions for payment shall be made to creditors, including, to the extent permitted by law, beneficial owners who are creditors in satisfaction of liabilities of the trust;
    2. Second, unless otherwise provided in the governing instrument, to beneficial owners in satisfaction of liabilities for distributions declared but unpaid; and
    3. Third, unless otherwise provided in the governing instrument, to beneficial owners in proportion to their respective rights to share in distributions from the trust prior to dissolution.
  2. Upon the winding up of a series statutory trust, the assets of or associated with a series shall be distributed in accordance with KRS 386A.4-110 .

History. Enact. Acts 2012, ch. 81, § 71, effective July 12, 2012.

Subchapter 9 Foreign Statutory Trusts

386A.9-010. Foreign statutory trusts.

  1. The law of the jurisdiction of formation of a foreign statutory trust governs:
    1. The internal affairs of the trust, including the liability of a beneficial owner as beneficial owner and trustee as trustee for a debt, obligation, or other liability of the trust or a series thereof and the right of a beneficial owner to inspect books and records; and
    2. The enforceability of a debt, obligation, or other liability of the foreign statutory trust or any series thereof against the property of the trust or the property of or associated with a series.
  2. Each foreign statutory trust is subject to KRS Chapter 14A.
  3. The Secretary of State may not deny a foreign statutory trust a certificate of authority because of any difference between the law of its jurisdiction of formation and the laws of this Commonwealth.
  4. A certificate of authority does not authorize a foreign statutory trust to engage in any business or exercise any power that a statutory trust may not engage in or exercise in this Commonwealth.

History. Enact. Acts 2012, ch. 81, § 72, effective July 12, 2012.

Subchapter 10 Miscellaneous Provisions

386A.10-010. Uniformity of application and construction.

In applying and construing this chapter, consideration must be given to the need to promote uniformity of the law with respect to its subject matter among states that enact it.

History. Enact. Acts 2012, ch. 81, § 73, effective July 12, 2012.

386A.10-020. Relation to Electronic Signatures in Global and National Commerce Act.

This chapter does modify, limit, and supersede the federal Electronic Signatures in Global and National Commerce Act, 15 U.S.C. secs. 7001 et seq., but does not modify, limit, or supersede Section 101(c) of that act, 15 U.S.C. sec. 7001(c) , or authorize electronic delivery of any of the notices described in Section 103(b) of that act, 15 U.S.C. sec. 7003(b) .

History. Enact. Acts 2012, ch. 81, § 74, effective July 12, 2012.

386A.10-030. Savings clause.

This chapter does not affect an action commenced, proceeding brought, or right accrued before July 12, 2012.

History. Enact. Acts 2012, ch. 81, § 75, effective July 12, 2012.

386A.10-040. Effective date — Application to business trusts — Application to foreign business trusts.

  1. This chapter does not limit, prohibit, or invalidate the existence, acts, or obligations of any common-law trust created or doing business in this Commonwealth before, on, or after July 12, 2012.
  2. A business trust formed under any statute of this Commonwealth prior to July 12, 2012, until or unless it becomes a statutory trust under this chapter, shall continue to be governed by the provisions of the statute under which it was formed.
  3. The enactment of this chapter shall not impair, or otherwise affect, the organization or the continued existence of a business trust existing on July 12, 2012.
  4. This chapter governs only:
    1. A statutory trust formed on or after July 12, 2012; and
    2. A business trust formed before July 12, 2012, which elects, in the manner provided in its governing instrument or by law for amending the governing instrument, to be subject to this chapter.
  5. A business trust formed under any statute or pursuant to the common law of this Commonwealth prior to July 12, 2012, may elect to become subject to this chapter by a consent sufficient to amend the declaration of trust or in the absence thereof by the unanimous consent of the beneficial owners. Thereafter, the business trust shall file an amended and restated certificate of trust which complies with KRS 386A.2-010 and that further sets forth:
    1. The name of the business trust as set forth on any declaration of trust filed pursuant to KRS 386.420 or predecessor law;
    2. The date of filing of any declaration of trust filed pursuant to KRS 386.420 or predecessor law;
    3. An affirmative election by the business trust to be subject to this chapter; and
    4. An affirmative statement that the election was approved as required by this subsection.
  6. A business or statutory trust formed in a jurisdiction other than the Commonwealth of Kentucky may elect to be subject to this chapter by a consent sufficient to amend the declaration of trust and trust agreement or in the absence thereof by the unanimous consent of the beneficial owners. Thereafter, the business or statutory trust shall file an amended and restated certificate of trust which complies with KRS 386A.2-010 and further sets forth:
    1. The name of the business or statutory trust;
    2. The previous jurisdiction of organization;
    3. An affirmative election by the trust to be subject to this chapter; and
    4. A statement that the election to be governed by this chapter is effective under the law and agreements governing the trust prior to becoming subject to this chapter.
  7. An election pursuant to subsection (5) or (6) of this section is effective upon the effective time and date of the amended and restated certificate of trust as provided in KRS 14A.2-070 .

History. Enact. Acts 2012, ch. 81, § 76, effective July 12, 2012.

CHAPTER 386B Uniform Trust Code

Subchapter 1 General Provisions and Definitions

386B.1-010. Definitions for chapter.

As used in this chapter, unless the context requires otherwise:

  1. “Action” with respect to an act of a trustee, includes a failure to act;
  2. “Ascertainable standard” means a standard relating to an individual’s health, education, support, or maintenance within the meaning of 26 U.S.C. sec. 2041(b)(1) (A) or 26 U.S.C. sec. 2514(c)(1) , as amended;
  3. “Beneficiary” means a person that:
    1. Has a present or future beneficial interest in a trust, vested or contingent; or
    2. In a capacity other than that of trustee, holds a power of appointment over trust property;
  4. “Charitable trust” means a trust, or part of a trust, established for a charitable purpose as described in KRS 386B.4-050 (1);
  5. “Conservator” means a person appointed by the court to administer the estate of a minor or adult individual;
  6. “Environmental law” means a federal, state, or local law, rule, regulation, or ordinance relating to protection of the environment;
  7. “Guardian” means a person appointed by the court, a parent, or a spouse to make decisions regarding the support, care, education, health, and welfare of a minor or adult individual. The term shall not include a guardian ad litem;
  8. “Interests of the beneficiaries” means the beneficial interests provided in the terms of the trust;
  9. “Jurisdiction,” with respect to a geographic area, includes a state or country;
  10. “Person” means any individual or entity as defined in KRS 446.010 ;
  11. “Power of withdrawal” means a presently exercisable general power of appointment other than a power:
    1. Exercisable by a trustee and limited by an ascertainable standard; or
    2. Exercisable by another person only on the consent of the trustee or a person holding an adverse interest;
  12. “Property” means anything that may be the subject of ownership, whether legal or equitable, or any interest therein;
  13. “Qualified beneficiary” means a beneficiary who, on the date the beneficiary’s qualification is determined:
    1. Is a distributee or permissible distributee of trust income or principal;
    2. Would be a distributee or permissible distributee of trust income or principal if the interests of the distributees described in paragraph (a) of this subsection ended on that date without causing the trust to end; or
    3. Would be a distributee or permissible distributee of trust income or principal if the trust ended on that date;
  14. “Revocable,” as applied to a trust, means revocable by the settlor without the consent of the trustee or a person holding an adverse interest;
  15. “Settlor” means a person, including a testator, who creates or contributes property to a trust. If more than one (1) person creates or contributes property to a trust, each person is a settlor of the part of the trust property attributable to that person’s contribution except to the extent another person has the power to revoke or withdraw that part;
  16. “Spendthrift provision” means a term of a trust which restrains both voluntary and involuntary transfer of a beneficiary’s interest;
  17. “State” means a state of the United States, the District of Columbia, Puerto Rico, the United States Virgin Islands, or any territory or insular possession subject to the jurisdiction of the United States. The term includes an Indian tribe or band recognized by federal law or formally acknowledged by a state;
  18. “Terms of a trust” means the manifestation of the settlor’s intent regarding a trust’s provisions as expressed in the trust instrument or as may be established by other evidence that would be admissible in a judicial proceeding;
    1. “Trust” means an express trust established by a trust instrument, including a will, whereby a trustee has the duty to administer a trust asset for the benefit of a named or otherwise described income or principal beneficiary, or both. This definition includes oral trusts. (19) (a) “Trust” means an express trust established by a trust instrument, including a will, whereby a trustee has the duty to administer a trust asset for the benefit of a named or otherwise described income or principal beneficiary, or both. This definition includes oral trusts.
    2. “Trust” does not include a resulting or constructive trust, a business trust which provides for certificates to be issued to the beneficiary, an investment trust, a voting trust, a security instrument, a trust established by the judgment of a court, a liquidation trust, or a trust for the primary purpose of paying dividends, interests, interest coupons, salaries, wages, pensions or profits, or employee benefits of any kind, an instrument in which a person is nominee or escrowee for another, a trust established in deposits in any financial institution, or other trust the nature of which does not admit of general trust administration;
  19. “Trust instrument” means an instrument signed by the settlor that contains terms of the trust, including any amendments thereto; and
  20. “Trustee” includes an original, additional, and successor trustee, and a cotrustee.

History. Enact. Acts 2014, ch. 25, § 1, effective July 15, 2014.

386B.1-020. Knowledge.

  1. Subject to subsection (2) of this section, a person has knowledge of a fact if the person:
    1. Has actual knowledge of it;
    2. Has received a notice or notification of it; or
    3. From all the facts and circumstances known to the person at the time in question, has reason to know it.
  2. An organization that conducts activities through employees has notice or knowledge of a fact involving a trust only from the time the information was received by an employee having responsibility to act for the trust, or would have been brought to the employee’s attention if the organization had exercised reasonable diligence. An organization exercises reasonable diligence if it maintains reasonable routines for communicating significant information to the employee having responsibility to act for the trust and there is reasonable compliance with the routines. Reasonable diligence shall not require an employee of the organization to communicate information unless the communication is part of the individual’s regular duties or the individual knows a matter involving the trust would be materially affected by the information.

History. Enact. Acts 2014, ch. 25, § 2, effective July 15, 2014.

386B.1-030. Default and mandatory rules.

  1. Except as otherwise provided in the terms of the trust, this chapter governs the duties and powers of a trustee, relations among trustees, and the rights and interests of a beneficiary.
  2. The terms of a trust prevail over any provision of this chapter, except:
    1. The requirements for creating a trust;
    2. The duty of a trustee to act in good faith and in the interests of the beneficiaries;
    3. The requirement that a trust and its terms be for the benefit of its beneficiaries, and that the trust have a purpose that is lawful, not contrary to public policy, and possible to achieve;
    4. The power of the court to change or terminate a trust under Subchapter 4 of this chapter;
    5. The effect of a spendthrift provision and the rights of certain creditors and assignees to reach a trust as provided in Subchapter 5 of this chapter;
    6. The power of the court under KRS 386B.7-020 to require, dispense with, or modify or terminate a bond;
    7. The power of the court under KRS 386B.7-080 (2) to adjust a trustee’s compensation as specified in the terms of the trust which is unreasonably low or high;
    8. The duty to notify and report under KRS 386B.8-130 (2);
    9. The effect of an exculpatory term under KRs 386B.10-080 ;
    10. The rights under KRS 386B.10-100 , 386B.10-110 , and 386B.10-120 of a person other than a trustee or beneficiary;
    11. Periods of limitation for commencing a judicial proceeding;
    12. The power of the court to take such action and exercise such jurisdiction as may be necessary in the interests of justice; and
    13. The subject-matter jurisdiction of the court and venue for commencing a proceeding as provided in KRS 386B.2-030 and 386B.2-040 .

History. Enact. Acts 2014, ch. 25, § 3, effective July 15, 2014.

NOTES TO DECISIONS

1.Public Policy.

Life insurance trust’s limitation on a beneficiary’s power of appointment for the benefit of the beneficiary’s adopted children was unlawful because the provision violated Kentucky’s public policy in favor of treating adopted children the same as biological children. Therefore, the provision was stricken as void so that the beneficiary was to be allowed to utilize the beneficiary’s power of appointment under the trust as though the clause prohibiting the power of appointment to benefit the beneficiary’s adopted children never existed. Todd v. Hilliard Lyons Trust Co., LLC, 2021 Ky. App. LEXIS 99 (Ky. Ct. App. Sept. 10, 2021).

386B.1-040. Common law of trusts — Principles of equity.

The common law of trusts and principles of equity supplement this chapter, except to the extent modified by this chapter or another statute of this Commonwealth.

History. Enact. Acts 2014, ch. 25, § 4, effective July 15, 2014.

386B.1-050. Governing law.

The meaning and effect of the terms of a trust governed by this chapter are determined by:

  1. The law of the jurisdiction designated in the terms unless the designation of that jurisdiction’s law is contrary to a strong public policy of the jurisdiction having the most significant relationship to the matter at issue; or
  2. In the absence of a controlling designation in the terms of the trust, the law of the jurisdiction having the most significant relationship to the matter at issue.

History. Enact. Acts 2014, ch. 25, § 5, effective July 15, 2014.

NOTES TO DECISIONS

1.Application.

Kentucky law was applied because Kentucky had a far more significant relationship to the trust at issue than did Ohio. Further, Kentucky had a “strong” enough public policy to overcome the default presumption that Ohio law applied per the terms of the trust's choice of law provision. Osborn v. Griffin, 865 F.3d 417, 2017 FED App. 0168P, 2017 U.S. App. LEXIS 13721 (6th Cir. Ky. 2017 ).

386B.1-060. Principal place of administration.

  1. Without precluding other means for establishing a connection with the designated jurisdiction, terms of a trust designating the principal place of administration are valid and controlling if:
    1. A trustee’s principal place of business is located in or a trustee is a resident of the designated jurisdiction; or
    2. All or part of the administration occurs in the designated jurisdiction.
  2. A trustee is under a continuing duty to administer the trust at a place appropriate to its purposes, its administration, and the interests of the beneficiaries.
  3. Without precluding the right of the court to order, approve, or disapprove a transfer, the trustee, in furtherance of the duty prescribed by subsection (2) of this section, may transfer the trust’s principal place of administration to another state or to a jurisdiction outside of the United States.
  4. The trustee shall notify the qualified beneficiaries of a proposed transfer of a trust’s principal place of administration not less than sixty (60) days before initiating the transfer. The notice of proposed transfer shall include:
    1. The name of the jurisdiction to which the principal place of administration is to be transferred;
    2. The address and telephone number at the new location at which the trustee can be contacted;
    3. An explanation of the reasons for the proposed transfer;
    4. The date on which the proposed transfer is anticipated to occur; and
    5. The date, not less than sixty (60) days after the giving of the notice, by which the qualified beneficiary shall notify the trustee of an objection to the proposed transfer.
  5. The authority of a trustee under this section to transfer a trust’s principal place of administration ends if a qualified beneficiary notifies the trustee of an objection to the proposed transfer on or before the date specified in the notice.
  6. In connection with a transfer of the trust’s principal place of administration, the trustee may transfer some or all of the trust property to a successor trustee designated in the terms of the trust or appointed under KRS 386B.7-040 .
  7. The District Court shall have exclusive jurisdiction over matters under this section.

History. Enact. Acts 2014, ch. 25, § 6, effective July 15, 2014.

NOTES TO DECISIONS

1.Transfer.

Circuit court properly permitted the transfer of the trusts to Delaware because the move to Delaware would provide a significant aggregate tax savings; the circuit court specifically found that the motions under consideration would accomplish the donor's intent to maximize the income to the beneficiaries. Beardmore v. JPMorgan Chase Bank, N.A., 2017 Ky. App. LEXIS 60 (Ky. Ct. App. Mar. 31, 2017), review denied, ordered not published, 2018 Ky. LEXIS 204 (Ky. June 6, 2018).

Circuit court made the requisite certification of jurisdiction to retain a trust administration case and decide it on the merits because the circuit court made sufficient findings on the record related to its certification of jurisdiction, and the record support its findings; a beneficiary was provided with, and took advantage of, the opportunity to argue the jurisdictional issue both orally at the hearing dates and in his court filings. Beardmore v. JPMorgan Chase Bank, N.A., 2017 Ky. App. LEXIS 60 (Ky. Ct. App. Mar. 31, 2017), review denied, ordered not published, 2018 Ky. LEXIS 204 (Ky. June 6, 2018).

386B.1-070. Methods and waiver of notice.

  1. Notice to a person under this chapter or the sending of a document to a person under this chapter shall be accomplished in a manner reasonably suitable under the circumstances and likely to result in receipt of the notice or document. Permissible methods of notice or for sending a document include first-class mail, personal delivery, delivery to the person’s last known place of residence or place of business, or a properly directed electronic message.
  2. Notice otherwise required under this chapter or a document otherwise required to be sent under this chapter need not be provided to a person whose identity or location is unknown to and not reasonably ascertainable by the trustee.
  3. Notice under this chapter or the sending of a document under this chapter may be waived by the person to be notified or sent the document.
  4. Notice of a judicial proceeding shall be given as provided in the applicable rules of civil procedure and, if notice is made by publication, proof of the giving of notice shall be made on or before the hearing and filed in the proceeding as provided in KRS 424.170 .

History. Enact. Acts 2014, ch. 25, § 7, effective July 15, 2014.

386B.1-080. Others treated as qualified beneficiaries.

  1. A charitable organization expressly designated to receive distributions under the terms of a charitable trust has the rights of a qualified beneficiary under this chapter if the charitable organization, on the date the charitable organization’s qualification is being determined:
    1. Is a distributee or permissible distributee of trust income or principal;
    2. Would be a distributee or permissible distributee of trust income or principal on the termination of the interests of other distributees or permissible distributes then receiving or eligible to receive distributions; or
    3. Would be a distributee or permissible distributee of trust income or principal if the trust ended on that date.
  2. A person appointed to enforce a trust established for the care of an animal or another noncharitable purpose under KRS 386B.4-080 or 386B.4-090 , has the rights of a qualified beneficiary under this chapter.
  3. Other than those listed in KRS 386B.7-060 , the Attorney General has the rights of a qualified beneficiary with respect to a charitable trust governed by this chapter.

History. Enact. Acts 2014, ch. 25, § 8, effective July 15, 2014.

386B.1-090. Nonjudicial settlement agreements.

  1. For purposes of this section, “interested persons” means persons whose consent would be required to achieve a binding settlement were the settlement to be approved by the court.
  2. Except as otherwise provided in subsection (3) of this section, interested persons may enter into a binding nonjudicial settlement agreement with respect to any matter involving a trust. This procedure is not intended to foreclose or limit any other avenue of settlement under the laws of this Commonwealth.
  3. A nonjudicial settlement agreement is valid only to the extent it does not violate a material purpose of the trust and includes conditions that could be properly approved by the court under this chapter or other applicable law.
  4. Matters that may be resolved by a nonjudicial settlement agreement include:
    1. The interpretation or construction of the terms of the trust;
    2. The approval of a trustee’s report or accounting;
    3. Direction to a trustee to refrain from performing a particular act or the grant to a trustee of any necessary or desirable power;
    4. The resignation or appointment of a trustee and the determination of a trustee’s compensation;
    5. Transfer of a trust’s principal place of administration; and
    6. Liability of a trustee for an action relating to the trust.
  5. Any interested person may request the court to approve a nonjudicial settlement agreement, to determine whether the representation under Subchapter 3 of this chapter was adequate, and to determine whether the agreement contains conditions the court could have properly approved.
  6. The District Court shall have exclusive jurisdiction over matters under this section.

History. Enact. Acts 2014, ch. 25, § 9, effective July 15, 2014.

386B.1-100. Rules of construction.

The rules of construction that apply in this Commonwealth to the interpretation of and disposition of property by will also apply as appropriate to the interpretation of the terms of a trust and the disposition of the trust property.

History. Enact. Acts 2014, ch. 25, § 10, effective July 15, 2014.

386B.1-110. Doctrines of worthier title and reversions not in force as rules of law and as rules of construction.

The doctrine of worthier title and the doctrine of reversions shall not be in force in this Commonwealth as rules of law and as rules of construction. Language in a governing instrument describing the beneficiaries of a disposition as the transferor’s “heirs,” “heirs at law,” “next of kin,” “distributees,” “relatives,” or “family,” or language of similar import, shall not create or presumptively create a reversionary interest in the transferor.

History. Enact. Acts 2014, ch. 25, § 11, effective July 15, 2014.

386B.1-120. Insurable interest of trustee.

  1. As used in this section, “settlor” means a person that executes a trust instrument. The term includes a person for which a fiduciary or agent is acting.
  2. A trustee of a trust has an insurable interest in the life of an individual insured under a life insurance policy that is owned by the trustee of the trust acting in a fiduciary capacity or that designates the trust itself as the owner if, on the date the policy is issued:
    1. The insured is:
      1. A settlor of the trust; or
      2. An individual in whom a settlor of the trust has, or would have had if living at the time the policy was issued, an insurable interest; and
    2. The life insurance proceeds are primarily for the benefit of one (1) or more trust beneficiaries that have:
      1. An insurable interest in the life of the insured; or
      2. A substantial interest engendered by love and affection in the continuation of the life of the insured and, if not already included under subparagraph 1. of this paragraph, who are:
        1. Related within the third degree or closer, as measured by the civil law system of determining degrees of relation, either by blood or law, to the insured; or
        2. Stepchildren of the insured.

History. Enact. Acts 2014, ch. 25, § 12, effective July 15, 2014.

Subchapter 2 Judicial Proceedings

386B.2-010. Role of court in administration of trust.

  1. The court may intervene in the administration of a trust to the extent its jurisdiction is invoked by an interested person or as provided by law.
  2. A trust is not subject to continuing judicial supervision unless ordered by the court.
  3. A judicial proceeding involving a trust may relate to any matter involving the trust’s administration, including a request for instructions, an action to declare rights, and an action to settle the trustee’s accounts.

History. Enact. Acts 2014, ch. 25, § 13, effective July 15, 2014.

386B.2-020. Jurisdiction over trustee and beneficiary.

  1. By accepting the trusteeship of a trust having its principal place of administration in this Commonwealth or by moving the principal place of administration to this Commonwealth, the trustee submits personally to the jurisdiction of the courts of this Commonwealth regarding any matter involving the trust.
  2. With respect to their interests in the trust, the beneficiaries of a trust having its principal place of administration in this Commonwealth are subject to the jurisdiction of the courts of this Commonwealth regarding any matter involving the trust. By accepting a distribution from such a trust, the recipient submits personally to the jurisdiction of the courts of this Commonwealth regarding any matter involving the trust.
  3. This section shall not preclude other methods of obtaining jurisdiction over a trustee, beneficiary, or other person receiving property from the trust, including trust registration under KRS 386B.2-050 .

History. Enact. Acts 2014, ch. 25, § 14, effective July 15, 2014.

386B.2-030. Subject-matter jurisdiction.

Except with regard to matters otherwise provided for by statute:

  1. The District Court and Circuit Court shall have concurrent jurisdiction of any proceedings in this Commonwealth brought by a trustee or beneficiary concerning any trust matter; and
  2. If a proceeding is initially brought in District Court concerning any trust matter, the jurisdiction of the District Court shall become exclusive with respect to such matter unless, within twenty (20) days of receipt of notice of such proceeding, a party files an action in Circuit Court relating to the same trust matter, in which event the District Court shall be divested of jurisdiction and the Circuit Court shall have exclusive jurisdiction over such action.

History. Enact. Acts 2014, ch. 25, § 15, effective July 15, 2014.

NOTES TO DECISIONS

1.Jurisdiction.

Circuit court made the requisite certification of jurisdiction to retain a trust administration case and decide it on the merits because the circuit court made sufficient findings on the record related to its certification of jurisdiction, and the record support its findings; a beneficiary was provided with, and took advantage of, the opportunity to argue the jurisdictional issue both orally at the hearing dates and in his court filings. Beardmore v. JPMorgan Chase Bank, N.A., 2017 Ky. App. LEXIS 60 (Ky. Ct. App. Mar. 31, 2017), review denied, ordered not published, 2018 Ky. LEXIS 204 (Ky. June 6, 2018).

Legislature intended to provide trustees and beneficiaries the right to initiate a circuit court action relating to the same trust matter brought in district court if both courts have concurrent jurisdiction; the circuit court has jurisdiction over matters within the concurrent jurisdiction of the circuit court and district court. Davis v. Davis, 563 S.W.3d 105, 2018 Ky. App. LEXIS 263 (Ky. Ct. App. 2018).

Appellee’s claims for breaches of trust and appropriate remedies, including trustee suspension, were provided for in Ky. Rev. Stat. Ann. ch. 386B, subch. 10 and jurisdiction over those claims was not granted exclusively to the district court, and thus those trust matters fell within the concurrent jurisdiction of the circuit court and the district court and were removable to the circuit court. Davis v. Davis, 563 S.W.3d 105, 2018 Ky. App. LEXIS 263 (Ky. Ct. App. 2018).

Appellant’s claims concerning the marital residence, personal property value, and whether appellee violated the no contest provision were within the concurrent jurisdiction provisions of the statute, and reformation of the terms of the trust also fell within the concurrent jurisdiction of the circuit court and district court. Davis v. Davis, 563 S.W.3d 105, 2018 Ky. App. LEXIS 263 (Ky. Ct. App. 2018).

Circuit court erred in dismissing siblings’ second action against the trustees of their parents’ trust. While the initial district court action arose from inappropriate messaging and distributions, many of the matters in the second action went far and beyond inappropriate messaging and distributions, and therefore the filing in circuit court was appropriate under the circumstances. Hauber v. Hauber, 600 S.W.3d 204, 2020 Ky. LEXIS 124 ( Ky. 2020 ).

2.Construction.

Time-period for removal commences whenever a new matter relating to the trust is filed. Davis v. Davis, 563 S.W.3d 105, 2018 Ky. App. LEXIS 263 (Ky. Ct. App. 2018).

386B.2-040. Venue.

  1. Venue for proceedings under this chapter involving registered trusts is in the place of registration.
  2. Venue for proceedings under this chapter involving trusts not registered in this Commonwealth is in any place where the trust properly could have been registered, and otherwise by the venue statutes of this Commonwealth.

History. Enact. Acts 2014, ch. 25, § 16, effective July 15, 2014.

386B.2-050. Registration of trust.

  1. The trustee of a trust having its principal place of administration in this Commonwealth shall register the trust in the District Court of this Commonwealth at the principal place of administration. Unless otherwise designated in the trust instrument, the principal place of administration of a trust is the trustee’s usual place of business where the records pertaining to the trust are kept, or at the trustee’s residence if he or she has no such place of business. In the case of cotrustees, the principal place of administration, if not otherwise designated in the trust instrument, is:
      1. The usual place of business of the corporate trustee if there is but one (1) corporate cotrustee; or (a) 1. The usual place of business of the corporate trustee if there is but one (1) corporate cotrustee; or
      2. The usual place of business or residence of the individual trustee who is a professional fiduciary if there is but one (1) such person and no corporate cotrustee; and
    1. In all other cases, the usual place of business or residence of any of the cotrustees as agreed on by them.

      The duty to register under this section shall not apply to the trustee of a trust if registration would be inconsistent with the retained jurisdiction of a foreign court from which the trustee cannot obtain release, nor does the duty to register under this section apply to any trust, whether testamentary or inter vivos, revocable or irrevocable, unless the settlor of the trust so directs.

  2. Registration shall be accomplished by filing a statement indicating the name and address of the trustee in which he or she acknowledges the trusteeship. The statement shall indicate whether the trust has been registered elsewhere. The statement shall identify the trust:
    1. In the case of a testamentary trust, by the name of the testator and the date and place of domiciliary probate;
    2. In the case of a written inter vivos trust, by the name of each settlor and the original trustee and the date of the trust instrument; or
    3. In the case of an oral trust, by information identifying the settlor or other source of funds and describing the time and manner of the trust’s creation and the terms of the trust, including the subject matter, beneficiaries, and time of performance.

      If a trust has been registered elsewhere, registration in this Commonwealth is ineffective until the earlier registration is released by order of the court where prior registration occurred, or an instrument signed by the trustee and all beneficiaries is filed with the registration in this state.

    1. By registering a trust, or accepting the trusteeship of a registered trust, the trustee submits personally to the jurisdiction of the court in any proceeding under this chapter relating to the trust that may be initiated by any interested person while the trust remains registered. Notice of any proceeding shall be given pursuant to KRS 386B.1-070 . (3) (a) By registering a trust, or accepting the trusteeship of a registered trust, the trustee submits personally to the jurisdiction of the court in any proceeding under this chapter relating to the trust that may be initiated by any interested person while the trust remains registered. Notice of any proceeding shall be given pursuant to KRS 386B.1-070 .
    2. To the extent of their interests in the trust, all beneficiaries of a trust properly registered in this Commonwealth are subject to the jurisdiction of the court of registration for the purposes of proceedings under this chapter, provided notice is given pursuant to KRS 386B.1-070.
    3. The court for good cause shown may provide for a different method or time of giving notice for any hearing.
  3. A trustee who fails to register a trust in a proper place pursuant to this chapter, for purposes of any proceedings initiated by a beneficiary of the trust prior to registration, is subject to the personal jurisdiction of any court in which the trust could have been registered.

History. Enact. Acts 2014, ch. 25, § 17, effective July 15, 2014.

Subchapter 3 Representation

386B.3-010. Representations — Basic effect.

  1. Notice to a person who may represent and bind another person under this subchapter has the same effect as if notice were given directly to the other person.
  2. The consent of a person who may represent and bind another person under this subchapter is binding on the person represented unless the person represented objects to the representation before the consent would otherwise have become effective.
  3. Except as otherwise provided under KRS 386B.4-110 and 386B.6-020 , a person who under this subchapter may represent a settlor who lacks capacity, may receive notice and give a binding consent on the settlor’s behalf.
  4. A settlor may not represent and bind a beneficiary under this subchapter with respect to the termination or modification of a trust under KRS 386B.4-110 (1).
  5. Provisions of this subchapter shall also be applicable to KRS 386.175 regarding a trustee’s power to appoint principal and income in favor of a trustee of a second trust and KRS 386.454 regarding a trustee’s power to adjust between principal and income and conversion to unitrust.

History. Enact. Acts 2014, ch. 25, § 18, effective July 15, 2014.

386B.3-020. Representation by holder of general testamentary power of appointment.

To the extent there is no conflict of interest between the holder of a general testamentary power of appointment and the persons represented with respect to the particular question or dispute, the holder may represent and bind persons whose interests, as permissible appointees, takers in default, or otherwise, are subject to the power.

History. Enact. Acts 2014, ch. 25, § 19, effective July 15, 2014.

386B.3-030. Representation by fiduciaries and parents.

To the extent there is no conflict of interest between the representative and the person represented or among those being represented with respect to a particular question or dispute:

  1. A conservator may represent and bind the estate that the conservator controls;
  2. A guardian may represent and bind the ward if a conservator of the ward’s estate has not been appointed;
  3. An agent having authority to act with respect to the particular question or dispute may represent and bind the principal;
  4. A trustee may represent and bind the beneficiaries of the trust;
  5. A personal representative of a decedent’s estate may represent and bind persons interested in the estate;
  6. A parent may represent and bind the parent’s minor or unborn child if a conservator or guardian for the child has not been appointed; and
  7. A curator may represent and bind the estate or person that the curator controls.

History. Enact. Acts 2014, ch. 25, § 20, effective July 15, 2014.

386B.3-040. Representation by person having substantially identical interest.

Unless otherwise represented, a minor, incapacitated, or unborn individual, or a person whose identity or location is unknown and not reasonably ascertainable, may be represented by and bound by another having a substantially identical interest with respect to the particular question or dispute, but only to the extent there is no conflict of interest between the representative and the person represented.

History. Enact. Acts 2014, ch. 25, § 21, effective July 15, 2014.

386B.3-050. Appointment of guardian ad litem.

  1. If the court determines that an interest is not represented under this subchapter, or that the otherwise available representation might be inadequate because of conflict or otherwise, the court may appoint a guardian ad litem to receive notice, give consent, and otherwise represent, bind, and act on behalf of a minor, incapacitated, or unborn individual, or a person whose identity or location is unknown. A guardian ad litem may be appointed to represent several persons or interests.
  2. A guardian ad litem may act on behalf of the individual represented with respect to any matter arising under this chapter, whether or not a judicial proceeding concerning the trust is pending.
  3. In making decisions, a guardian ad litem may consider general benefit accruing to the living members of the individual’s family.

History. Enact. Acts 2014, ch. 25, § 22, effective July 15, 2014.

Subchapter 4 Creation, Validity, Modification, and Termination of Trust

386B.4-010. Methods of creating trust.

A trust may be created by:

  1. Transfer of property to another person as trustee during the settlor’s lifetime or by will or other disposition taking effect on the settlor’s death;
  2. Declaration by the owner of property that the owner holds identifiable property as trustee; or
  3. Exercise of a power of appointment in favor of a trustee.

History. Enact. Acts 2014, ch. 25, § 23, effective July 15, 2014.

386B.4-020. Requirements for creation.

  1. A trust is created only if:
    1. The settlor has capacity to create a trust;
    2. The settlor indicates an intention to create the trust;
    3. The trust has a definite beneficiary or is:
      1. A charitable trust;
      2. A trust for the care of an animal under KRS 386B.4-080 ; or
      3. A trust for a noncharitable purpose under KRS 386B.4-090 ;
    4. The trustee has duties to perform; and
    5. The same person is not the sole trustee and sole beneficiary.
  2. A power in a trustee to select a beneficiary from an indefinite class is valid. If the power is not exercised within a reasonable time, the power fails and the property subject to the power passes to the persons who would have taken the property had the power not been conferred.

History. Enact. Acts 2014, ch. 25, § 24, effective July 15, 2014.

386B.4-030. Trusts created in other jurisdictions.

A trust not created by will is validly created if its creation complies with the law of the jurisdiction in which the trust instrument was executed, or the law of the jurisdiction in which, at the time of creation:

  1. The settlor was domiciled, had a place of abode, or was a national;
  2. A trustee was domiciled or had a place of business; or
  3. Any trust property was located.

History. Enact. Acts 2014, ch. 25, § 25, effective July 15, 2014.

386B.4-040. Trust purposes.

A trust may be created only to the extent its purposes are lawful, not contrary to public policy, and possible to achieve. A trust and its terms shall be for the benefit of its beneficiaries.

History. Enact. Acts 2014, ch. 25, § 26, effective July 15, 2014.

386B.4-050. Charitable purposes — Enforcement.

  1. A charitable trust may be created for the relief of poverty, the advancement of education or religion, the promotion of health, governmental or municipal purposes, or other purposes the achievement of which is beneficial to the community.
  2. Except as otherwise provided in KRS 381.260 , if the terms of a charitable trust do not indicate a particular charitable purpose or beneficiary, the court may select one (1) or more charitable purposes or beneficiaries. The selection shall be consistent with the settlor’s intention to the extent it can be ascertained.
  3. The settlor of a charitable trust, among others, may maintain a proceeding to enforce the trust.

History. Enact. Acts 2014, ch. 25, § 27, effective July 15, 2014.

386B.4-060. Creation of trust induced by fraud, duress, or undue influence.

A trust is void to the extent its creation was induced by fraud, duress, or undue influence.

History. Enact. Acts 2014, ch. 25, § 28, effective July 15, 2014.

386B.4-070. Evidence of oral trust.

Except as required by a statute other than those in this chapter, a trust need not be evidenced by a trust instrument, but the creation of an oral trust and its terms may be established only by clear and convincing evidence.

History. Enact. Acts 2014, ch. 25, § 29, effective July 15, 2014.

386B.4-080. Trust for care of animal.

  1. A trust may be created to provide for the care of an animal alive during the settlor’s lifetime. The trust terminates on the death of the animal or, if the trust was created to provide for the care of more than one (1) animal alive during the settlor’s lifetime, on the death of the last surviving animal.
  2. A trust authorized by this section may be enforced by a person appointed in the terms of the trust or, if no person is so appointed, by a person appointed by the court. A person having an interest in the welfare of the animal may request the court to appoint a person to enforce the trust or to remove a person appointed.
  3. Property of a trust authorized by this section may be applied only to its intended use, except to the extent the court determines that the value of the trust property exceeds the amount required for the intended use. Except as otherwise provided in the terms of the trust, property not required for the intended use shall be distributed to the settlor, if then living, otherwise to the settlor’s successors in interest.

History. Enact. Acts 2014, ch. 25, § 30, effective July 15, 2014.

386B.4-090. Noncharitable trust without ascertainable beneficiary.

Except as otherwise provided in KRS 386B.4-080 , KRS 367.952 regarding perpetual care and maintenance trusts for cemeteries, or by another statute, the following rules apply:

  1. A trust may be created for a noncharitable purpose without a definite or definitely ascertainable beneficiary or for a noncharitable but otherwise valid purpose to be selected by the trustee;
  2. A trust authorized by this section may be enforced by a person appointed in the terms of the trust or, if no person is so appointed, by a person appointed by the District Court; and
  3. Property of a trust authorized by this section may be applied only to its intended use, except to the extent the court determines that the value of the trust property exceeds the amount required for the intended use. Except as otherwise provided in the terms of the trust, property not required for the intended use shall be distributed to the settlor, if then living, otherwise to the settlor’s successors in interest.

History. Enact. Acts 2014, ch. 25, § 31, effective July 15, 2014.

386B.4-100. Modification or termination of trust — Proceedings for approval or disapproval.

  1. In addition to the methods of termination prescribed by KRS 386B.4-110 , 386B.4-120 , 386B.4-130 , and 386B.4-140 , a trust terminates to the extent the trust is revoked or expires pursuant to its terms, no purpose of the trust remains to be achieved, or the purposes of the trust have become unlawful, contrary to public policy, or impossible to achieve.
  2. A proceeding to approve or disapprove a proposed modification or termination under KRS 386B.4-110 , 386B.4-120 , 386B.4-130 , 386B.4-140 , 386B.4-150 , and 386B.4-160 , or trust combination or division under KRS 386B.4-170 , may be commenced by a trustee or beneficiary, and a proceeding to approve or disapprove a proposed modification or termination under KRS 386B.4-110 may be commenced by the settlor. The settlor of a charitable trust may maintain a proceeding to modify the trust under KRS 386B.4-130 .

History. Enact. Acts 2014, ch. 25, § 32, effective July 15, 2014.

386B.4-110. Modification or termination of noncharitable irrevocable trust by consent.

  1. Except as otherwise provided in the terms of the trust, a noncharitable irrevocable trust may be modified or terminated upon consent of the settlor and all beneficiaries, without court approval, even if the modification or termination is inconsistent with a material purpose of the trust. A settlor’s power to consent to a trust’s modification or termination may be exercised:
    1. By an agent under a power of attorney only to the extent expressly authorized by the power of attorney and not prohibited by the terms of the trust;
    2. By the settlor’s conservator with the approval of the court supervising the conservatorship if an agent is not so authorized and the conservator is not prohibited by the terms of the trust; or
    3. By the settlor’s guardian with the approval of the court supervising the guardianship if an agent is not so authorized and a conservator has not been appointed and the guardian is not prohibited by the terms of the trust.
  2. A noncharitable irrevocable trust may be terminated upon consent of all of the beneficiaries if the court concludes that continuance of the trust is not necessary to achieve any material purpose of the trust. A noncharitable irrevocable trust may be modified upon consent of all of the beneficiaries if the court concludes that modification is not inconsistent with a material purpose of the trust.
  3. A spendthrift provision in the terms of the trust is not presumed to constitute a material purpose of the trust.
  4. Upon termination of a trust under subsection (1) or (2) of this section, the trustee shall distribute the trust property as agreed by the beneficiaries.
  5. If not all of the beneficiaries consent to a proposed modification or termination of the trust under subsection (1) or (2) of this section, the modification or termination may be approved by the court if the court is satisfied that:
    1. If all of the beneficiaries had consented, the trust could have been modified or terminated under this section; and
    2. The interests of a beneficiary who does not consent will be adequately protected.
  6. Subsection (1) of this section shall not apply to the following types of trusts:
    1. First-party special needs or supplemental trusts created under KRS 387.855 to 387.910 ;
    2. Trusts created under 42 U.S.C. sec. 1396 p(d)(4)(A);
    3. Trusts created under 42 U.S.C. sec. 1396 p(d)(4)(C);
    4. Trusts created under 42 U.S.C. sec. 1396p(c)(2)(B); and
    5. Third-party special needs or supplemental trusts established by a will, trust, or similar document and created under the common law or any other law of the Commonwealth.
  7. The District Court shall have exclusive jurisdiction over matters under subsection (2) of this section.

History. Enact. Acts 2014, ch. 25, § 33, effective July 15, 2014.

NOTES TO DECISIONS

1.Termination Not Proper.

Because termination under Ky. Rev. Stat. Ann. § 386B.4-110 (1) required the settlor’s consent and the unambiguous language of the trust reflected that the settlor had intended to waive her ability to participate in the termination of the trust, the trust sub judice could not be terminated under this statutory section. Garland v. Miller, 611 S.W.3d 275, 2020 Ky. App. LEXIS 90 (Ky. Ct. App. 2020).

Termination of a trust was proper under Ky. Rev. Stat. Ann. § 386B.4-110 (2) where it was undisputed that all beneficiaries consented to terminating the trust, and continuation of the trust was not necessary to achieve the material purpose of the trust. Specifically, the trust did not serve to conveniently administer the settlor’s assets at her death as it deferred to her will for the distribution of her assets. Garland v. Miller, 611 S.W.3d 275, 2020 Ky. App. LEXIS 90 (Ky. Ct. App. 2020).

Ky. Rev. Stat. Ann. § 386B.4-110 (2), governing section two terminations, provides that a noncharitable irrevocable trust may be terminated upon consent of all of the beneficiaries if the court concludes that continuance of the trust is not necessary to achieve any material purpose of the trust. The consent of the settlor is thus irrelevant for a section two termination. Garland v. Miller, 611 S.W.3d 275, 2020 Ky. App. LEXIS 90 (Ky. Ct. App. 2020).

386B.4-120. Modification or termination because of unanticipated circumstances or inability to administer trust effectively.

  1. The court may modify the administrative or dispositive terms of a trust or terminate the trust if, because of circumstances not anticipated by the settlor, modification or termination will further the purposes of the trust. To the extent practicable, the modification shall be made in accordance with the settlor’s probable intention.
  2. The court may modify the administrative terms of a trust if continuation of the trust on its existing terms would be impracticable or wasteful or impair the trust’s administration.
  3. Upon termination of a trust under this section, the trustee shall distribute the trust property in a manner consistent with the purposes of the trust.
  4. The District Court shall have exclusive jurisdiction over matters under this section.

History. Enact. Acts 2014, ch. 25, § 34, effective July 15, 2014.

NOTES TO DECISIONS

1.Jurisdiction.

Circuit court made the requisite certification of jurisdiction to retain a trust administration case and decide it on the merits because the circuit court made sufficient findings on the record related to its certification of jurisdiction, and the record support its findings; a beneficiary was provided with, and took advantage of, the opportunity to argue the jurisdictional issue both orally at the hearing dates and in his court filings. Beardmore v. JPMorgan Chase Bank, N.A., 2017 Ky. App. LEXIS 60 (Ky. Ct. App. Mar. 31, 2017), review denied, ordered not published, 2018 Ky. LEXIS 204 (Ky. June 6, 2018).

Circuit court properly modified trusts to create a directed trust system because the donor could not have anticipated trust administration through a directed trust and various investment strategies since they did not exist when he was alive. Beardmore v. JPMorgan Chase Bank, N.A., 2017 Ky. App. LEXIS 60 (Ky. Ct. App. Mar. 31, 2017), review denied, ordered not published, 2018 Ky. LEXIS 204 (Ky. June 6, 2018).

To the extent appellant sought modification of the trust, that matter fell within the exclusive jurisdiction of the district court. Davis v. Davis, 563 S.W.3d 105, 2018 Ky. App. LEXIS 263 (Ky. Ct. App. 2018).

386B.4-130. Cy pres.

  1. Except as otherwise provided in subsection (2) of this section, if a particular charitable purpose becomes unlawful, impracticable, impossible to achieve, or wasteful:
    1. The trust shall not fail, in whole or in part;
    2. The trust property shall not revert to the settlor or the settlor’s successors in interest; and
    3. The court may apply cy pres to modify or terminate the trust by directing that the trust property be applied or distributed, in whole or in part, in a manner consistent with the settlor’s charitable purposes.
  2. A provision in the terms of a charitable trust that would result in distribution of the trust property to a noncharitable beneficiary prevails over the power of the court under subsection (1) of this section to apply cy pres to modify or terminate the trust only if, when the provision takes effect:
    1. The trust property is to revert to the settlor and the settlor is still living; or
    2. Fewer than twenty-one (21) years have elapsed since the date of the trust’s creation.
  3. The Circuit Court shall have exclusive jurisdiction over actions to identify a charitable beneficiary of a trust.

History. Enact. Acts 2014, ch. 25, § 35, effective July 15, 2014.

386B.4-140. Modification or termination of uneconomic trust.

  1. After notice to the qualified beneficiaries, the trustee of a trust consisting of trust property or a personal representative holding or controlling an amount directed by will to be held in trust, having a total value less than one hundred thousand dollars ($100,000) may terminate the trust if the trustee concludes that the value of the trust property is insufficient to justify the cost of administration.
  2. The court may modify or terminate a trust or remove the trustee and appoint a different trustee if it determines that the value of the trust property is insufficient to justify the cost of administration.
  3. Upon termination of a trust under this section, the trustee or personal representative shall distribute the trust property in a manner consistent with the purposes of the trust.
  4. This section does not apply to an easement for conservation or preservation.
  5. The District Court shall have exclusive jurisdiction over matters under this section.

History. Enact. Acts 2014, ch. 25, § 36, effective July 15, 2014.

386B.4-150. Reformation to correct mistakes.

The court may reform the terms of a trust, even if unambiguous, to conform the terms to the settlor’s intention if it is proved by clear and convincing evidence what the settlor’s intention was and that the terms of the trust were affected by a mistake of fact or law, whether in expression or inducement.

History. Enact. Acts 2014, ch. 25, § 37, effective July 15, 2014.

NOTES TO DECISIONS

1.Jurisdiction.

Appellant’s claims concerning the marital residence, personal property value, and whether appellee violated the no contest provision were within the concurrent jurisdiction provisions of the statute, and reformation of the terms of the trust also fell within the concurrent jurisdiction of the circuit court and district court. Davis v. Davis, 563 S.W.3d 105, 2018 Ky. App. LEXIS 263 (Ky. Ct. App. 2018).

386B.4-160. Modification to achieve settlor’s tax objectives.

To achieve the settlor’s tax objectives, the court may modify the terms of a trust in a manner that is not contrary to the settlor’s probable intention. The court may provide that the modification has retroactive effect. The District Court shall have exclusive jurisdiction over matters under this section.

History. Enact. Acts 2014, ch. 25, § 38, effective July 15, 2014.

NOTES TO DECISIONS

1.Jurisdiction.

Circuit court made the requisite certification of jurisdiction to retain a trust administration case and decide it on the merits because the circuit court made sufficient findings on the record related to its certification of jurisdiction, and the record support its findings; a beneficiary was provided with, and took advantage of, the opportunity to argue the jurisdictional issue both orally at the hearing dates and in his court filings. Beardmore v. JPMorgan Chase Bank, N.A., 2017 Ky. App. LEXIS 60 (Ky. Ct. App. Mar. 31, 2017), review denied, ordered not published, 2018 Ky. LEXIS 204 (Ky. June 6, 2018).

386B.4-170. Combination and division of trusts.

  1. After notice to the qualified beneficiaries, a trustee may combine two (2) or more trusts into a single trust or divide a trust into two (2) or more separate trusts, if the result does not impair rights of any beneficiary or adversely affect achievement of the purposes of the trust.
  2. Any division of a trust shall be made on a fractional basis, and may be funded by a non-pro rata distribution of assets to the separate trusts.
  3. The District Court shall have exclusive jurisdiction over matters under this section.

History. Enact. Acts 2014, ch. 25, § 39, effective July 15, 2014.

Subchapter 5 Creditor’s Claims — Spendthrift and Discretionary Trusts

386B.5-010. Rights of beneficiary’s creditor or assignee.

  1. To the extent a beneficiary’s interest is not subject to a spendthrift provision, the court may authorize a creditor or assignee of the beneficiary to reach the beneficiary’s interest by attachment of present or future distributions to or for the benefit of the beneficiary or other means.
  2. The court may limit the award to such relief as is appropriate under the circumstances.

History. Enact. Acts 2014, ch. 25, § 40, effective July 15, 2014.

386B.5-020. Spendthrift trusts.

  1. As used in this section, unless the context otherwise requires, “spendthrift trust” means a trust in which by the terms of the instrument creating it a valid restraint on the voluntary and involuntary alienation of the interest of a beneficiary is imposed.
  2. Estates of every kind held or possessed in trust shall be subject to the debts and charges of the beneficiaries thereof the same as if the beneficiaries also owned the similar legal interest in the property, unless the trust is a spendthrift trust.
  3. Specific language shall not be necessary to create a spendthrift trust, and it shall be sufficient if the instrument creating the trust manifests an intention to create a spendthrift trust.
  4. If an instrument creating a trust provides that a beneficiary is entitled to receive income of the trust and that his interest shall not be alienable by him and shall not be subject to alienation by operation of law or legal process, the restraint on the voluntary and involuntary alienation of his right to income due and to accrue shall be valid.
  5. If an instrument creating a trust provides that a beneficiary is entitled to receive principal of the trust at a future time and that his interest shall not be alienable by him and shall not be subject to alienation by operation of law or legal process, the restraint on the voluntary and involuntary alienation of his right to principal shall be valid.
  6. Although a trust is a spendthrift trust, the interest of the beneficiary shall be subject to the satisfaction of an enforceable claim against the beneficiary:
    1. By the spouse or child of the beneficiary for support, or by the spouse for maintenance;
    2. If the trust is not a trust described in subsection (7)(b) of this section, by providers of necessary services rendered to the beneficiary or necessary supplies furnished to him; and
    3. By the United States or this Commonwealth for taxes due from him or her on account of his or her interest in the trust or the income therefrom.
    1. If a person creates for his or her own benefit a trust with a provision restraining the voluntary or involuntary alienation of his or her interest, his or her interest nevertheless shall be subject to alienation by operation of law or legal process. (7) (a) If a person creates for his or her own benefit a trust with a provision restraining the voluntary or involuntary alienation of his or her interest, his or her interest nevertheless shall be subject to alienation by operation of law or legal process.
    2. This subsection shall not be construed to subject to alienation any interest in an individual retirement account or annuity, tax-sheltered annuity, simplified employee pension, pension, profit-sharing, stock bonus, or other retirement plan described in the Internal Revenue Code of 1986, as amended, which qualifies for the deferral of current income tax until the date benefits are distributed.
    3. For purposes of this subsection, a person has not created a trust for such person’s own benefit solely because a trustee who is not such person is authorized under the trust instrument to pay or reimburse such person for, or pay directly to the taxing authorities, any tax on trust income or principal that is payable by such person under the law imposing the tax.
    1. For the purposes of this section, amounts and property contributed to the following trusts are not deemed to have been contributed by the settlor of the trust, and a person who would otherwise be treated as a settlor or a deemed settlor of the following trusts shall not be treated as a settlor: (8) (a) For the purposes of this section, amounts and property contributed to the following trusts are not deemed to have been contributed by the settlor of the trust, and a person who would otherwise be treated as a settlor or a deemed settlor of the following trusts shall not be treated as a settlor:
      1. An irrevocable inter vivos marital trust that is treated as qualified terminable interest property under 26 U.S.C. sec. 2523(f) , as amended, if the settlor is a beneficiary of the trust after the death of the settlor’s spouse;
      2. An irrevocable inter vivos marital trust that is treated as a general power of appointment trust under 26 U.S.C. sec. 2523(e) , as amended, if the settlor is a beneficiary of the trust after the death of the settlor’s spouse;
      3. An irrevocable inter vivos trust for the spouse of the settlor that does not qualify for the gift tax marital deduction if the settlor is a beneficiary of the trust only after the death of the settlor’s spouse;
      4. A special needs trust as defined in KRS 387.860 , including a trust established pursuant to judicial action under KRS 387.855 ;
      5. A trust created under 42 U.S.C. sec. 1396 p(d)(4)(A) or (C); and
      6. A trust created under 42 U.S.C. sec. 1396 p(c)(2)(B).
    2. For the purposes of this subsection, a person is a beneficiary whether so named under the initial trust instrument or through the exercise by that person’s spouse or by another person of a limited or general power of appointment.
    3. For the purposes of this section, the settlor shall be any person who:
      1. Created the trust;
      2. Contributed property to the trust; or
      3. Is deemed to have contributed property to the trust.

History. Enact. Acts 2014, ch. 25, § 41, effective July 15, 2014.

386B.5-030. Discretionary trusts — Effect of standard.

  1. As used in this section, “child” includes any person for whom an order or judgment for child support has been entered in this Commonwealth or another state.
  2. Except as otherwise provided in subsection (3) of this subsection, whether or not a trust contains a spendthrift provision, a creditor of a beneficiary may not compel a distribution that is subject to the trustee’s discretion, even if:
    1. The discretion is expressed in the form of a standard of distribution; or
    2. The trustee has abused the discretion.
  3. To the extent a trustee has not complied with a standard of distribution or has abused a discretion:
    1. A distribution may be ordered by the court to satisfy a judgment or court order against the beneficiary for support or maintenance of the beneficiary’s child or spouse; and
    2. The court shall direct the trustee to pay to the child or spouse such amount as is equitable under the circumstances, but not more than the amount the trustee would have been required to distribute to or for the benefit of the beneficiary had the trustee complied with the standard or not abused the discretion.
  4. This section shall not limit the right of a beneficiary to maintain a judicial proceeding against a trustee for an abuse of discretion or failure to comply with a standard for distribution.
  5. If the trustee’s or cotrustee’s discretion to make distributions for the trustee’s or cotrustee’s own benefit is limited by an ascertainable standard, a creditor may not reach or compel distribution of the beneficial interest, except to the extent the interest would be subject to the creditor’s claim were the beneficiary not acting as trustee or cotrustee.

History. Enact. Acts 2014, ch. 25, § 42, effective July 15, 2014.

386B.5-040. Creditor’s claim against settlor.

  1. Subject to the statutory provisions of KRS Chapter 396 regarding claims against decedents’ estates, whether or not the terms of a trust contain a spendthrift provision, the following rules apply:
    1. During the lifetime of the settlor, the property of a revocable trust is subject to claims of the settlor’s creditors;
    2. With respect to an irrevocable trust, a creditor or assignee of the settlor may reach the maximum amount that can be distributed to or for the settlor’s benefit. If a trust has more than one (1) settlor, the amount the creditor or assignee of a particular settlor may reach may not exceed the settlor’s interest in the portion of the trust attributable to that settlor’s contribution; and
    3. After the death of a settlor, and subject to the settlor’s right to direct the source from which liabilities shall paid, the property of a trust that was revocable at the settlor’s death is subject to claims of the settlor’s creditors, costs of administration of the settlor’s estate, the expenses of the settlor’s funeral and disposal of remains, and statutory allowances to a surviving spouse and children to the extent the settlor’s probate estate is inadequate to satisfy those claims, costs, expenses, and allowances, but no property added to a revocable trust on account of the settlor’s death from a source other than the settlor’s estate or another revocable trust created by the settlor shall be subject to claims of the settlor’s creditors, costs of administration of the settlor’s estate, the expenses of the settlor’s funeral and disposal of remains, and statutory allowances to a surviving spouse and children.
  2. For purposes of this section:
    1. During the period the power may be exercised, the holder of a power of withdrawal is treated in the same manner as the settlor of a revocable trust to the extent of the property subject to the power; and
    2. Upon the lapse, release, or waiver of the power, the holder is not treated as the settlor of the trust.

History. Enact. Acts 2014, ch. 25, § 43, effective July 15, 2014.

386B.5-050. Overdue distribution.

  1. As used in this section, “mandatory distribution” means a distribution of income or principal which the trustee is required to make to a beneficiary under the terms of the trust, including a distribution on termination of the trust. The term shall not include a distribution subject to the exercise of the trustee’s discretion even if:
    1. The discretion is expressed in the form of a standard of distribution; or
    2. The terms of the trust authorizing a distribution couple language of discretion with language of direction.
  2. Whether or not a trust contains a spendthrift provision, a creditor or assignee of a beneficiary may reach a mandatory distribution of income or principal, including a distribution on termination of the trust, if the trustee has not made the distribution to the beneficiary within a reasonable time after the designated distribution date.

History. Enact. Acts 2014, ch. 25, § 44, effective July 15, 2014.

386B.5-060. Personal obligations of trustee.

Trust property is not subject to personal obligations of the trustee, even if the trustee becomes insolvent or bankrupt.

History. Enact. Acts 2014, ch. 25, § 45, effective July 15, 2014.

Subchapter 6 Revocable Trusts

386B.6-010. Capacity of settlor of revocable trust.

The capacity required to create, amend, revoke, or add property to a revocable trust, or to direct the actions of the trustee of a revocable trust, is the same as that required to make a will.

History. Enact. Acts 2014, ch. 25, § 46, effective July 15, 2014.

386B.6-020. Revocation or amendment of revocable trust.

  1. Unless the terms of a trust expressly provide that the trust is irrevocable, the settlor may revoke or amend the trust. This subsection shall not apply to a trust created under an instrument signed before July 15, 2014.
  2. If a revocable trust is created or funded by more than one (1) settlor:
    1. To the extent the trust consists of community property, the trust may be revoked by either spouse acting alone but may be amended only by joint action of both spouses;
    2. To the extent the trust consists of property other than community property, each settlor may revoke or amend the trust with regard the portion of the trust property attributable to that settlor’s contribution; and
    3. On the revocation or amendment of the trust by fewer than all of the settlors, the trustee shall promptly notify the other settlors of the revocation or amendment.
  3. The settlor may revoke or amend a revocable trust:
    1. By substantial compliance with a method provided in the terms of the trust; or
    2. If the terms of the trust do not provide a method or the method provided in the terms is not expressly made exclusive, by:
      1. A later will or codicil that expressly refers to the trust or specifically devises property that would otherwise have passed according to the terms of the trust; or
      2. Any other method manifesting clear and convincing evidence of the settlor’s intent.
  4. Upon revocation of a revocable trust, the trustee shall deliver the trust property as the settlor directs.
  5. A settlor’s powers with respect to revocation, amendment, or distribution of trust property may be exercised by an agent under a power of attorney only to the extent expressly authorized by the terms of the trust or the power.
  6. Except as otherwise provided in the terms of the trust, a conservator of the settlor or, if no conservator has been appointed, a guardian of the settlor or, if neither a conservator nor guardian has been appointed, a curator may exercise a settlor’s powers with respect to revocation, amendment, or distribution of trust property only with the approval of the court supervising the conservatorship, guardianship, or curatorship.
  7. A trustee who does not know that a trust has been revoked or amended is not liable to the settlor or settlor’s successors in interest for distributions made and other actions taken on the assumption that the trust had not been amended or revoked.

History. Enact. Acts 2014, ch. 25, § 47, effective July 15, 2014.

386B.6-030. Settlor’s powers — Powers of withdrawal.

  1. While a trust is revocable and, in the reasonable belief of the trustee, the settlor has capacity to revoke the trust, rights of the beneficiaries are subject to the control of, and the duties of the trustee are owed exclusively to, the settlor.
  2. During the period the power may be exercised, the holder of a power of withdrawal has the rights of a settlor of a revocable trust under this section to the extent of the property subject to the power.

History. Enact. Acts 2014, ch. 25, § 48, effective July 15, 2014.

386B.6-040. Limitation on action contesting validity of revocable trust — Distribution of trust property.

  1. A person may commence a judicial proceeding to contest the validity of a trust that was revocable at the settlor’s death within the earlier of:
    1. Two (2) years after the settlor’s death; or
    2. Ninety (90) days after the trustee sent the person a copy of the trust instrument and a notice informing the person of the trust’s existence, of the trustee’s name and address, and of the time allowed for commencing a proceeding.
  2. Upon the death of the settlor of a trust that was revocable at the settlor’s death, the trustee may proceed to distribute the trust property in accordance with the terms of the trust. The trustee is not subject to liability for doing so unless:
    1. The trustee knows of a pending judicial proceeding contesting the validity of the trust; or
    2. A potential contestant has notified the trustee of a possible judicial proceeding to contest the trust and a judicial proceeding is commenced within sixty (60) days after the contestant sent the notification.
  3. A beneficiary of a trust that is determined to have been invalid is liable to return any distribution received.

History. Enact. Acts 2014, ch. 25, § 49, effective July 15, 2014.

Subchapter 7 Office of Trustee

386B.7-010. Accepting or declining trusteeship.

  1. Except as otherwise provided in subsection (3) of this section, a person designated as trustee accepts the trusteeship:
    1. By substantially complying with a method of acceptance provided in the terms of the trust; or
    2. If the terms of the trust do not provide a method or the method provided in the terms is not expressly made exclusive, by accepting delivery of the trust property, exercising powers or performing duties as trustee, or otherwise indicating acceptance of the trusteeship.
  2. A person designated as trustee who has not yet accepted the trusteeship may reject the trusteeship. A designated trustee who does not accept the trusteeship within a reasonable time after knowing of the designation is deemed to have rejected the trusteeship.
  3. A person designated as trustee, without accepting the trusteeship, may:
    1. Act to preserve the trust property if, within a reasonable time after acting, the person sends a rejection of the trusteeship to the settlor or, if the settlor is dead or lacks capacity, to a qualified beneficiary; and
    2. Inspect or investigate trust property to determine potential liability under environmental or other law or for any other purpose.

History. Enact. Acts 2014, ch. 25, § 50, effective July 15, 2014.

386B.7-020. Trustee’s bond.

  1. A trustee shall give bond to secure performance of the trustee’s duties only if the court finds that a bond is needed to protect the interests of the beneficiaries or is required by the terms of the trust and the court has not dispensed with the requirement.
  2. The court may specify the amount of a bond, its liabilities, and whether sureties are necessary. The court may modify or terminate a bond at any time.
  3. A regulated financial institution qualified to do trust business in this Commonwealth need not give bond, even if required by the terms of the trust.

History. Enact. Acts 2014, ch. 25, § 51, effective July 15, 2014.

386B.7-030. Cotrustees.

  1. Cotrustees who are unable to reach a unanimous decision may act by majority decision.
  2. If a vacancy occurs in a cotrusteeship, the remaining cotrustees may act for the trust.
  3. A cotrustee shall participate in the performance of a trustee’s function unless the cotrustee is unavailable to perform the function because of absence, illness, disqualification under other law, or other temporary incapacity or the cotrustee has properly delegated the performance of the function to another trustee.
  4. If a cotrustee is unavailable to perform duties because of absence, illness, disqualification under other law, or other temporary incapacity, and prompt action is necessary to achieve the purposes of the trust or to avoid injury to the trust property, the remaining cotrustee or a majority of the remaining cotrustees may act for the trust.
  5. A trustee may not delegate to a cotrustee the performance of a function the settlor reasonably expected the trustees to perform jointly. Unless a delegation was irrevocable, a trustee may revoke a delegation previously made.
  6. Except as otherwise provided in subsection (7) of this section, a trustee who does not join in an action of another trustee is not liable for the action.
  7. Each trustee shall exercise reasonable care to:
    1. Prevent a cotrustee from committing a breach of trust; and
    2. Compel a cotrustee to redress a breach of trust.
  8. A dissenting trustee who joins in an action at the direction of the majority of the trustees and who notified any cotrustee of the dissent at or before the time of the action is not liable for the action unless the action is a breach of trust.

History. Enact. Acts 2014, ch. 25, § 52, effective July 15, 2014.

386B.7-040. Vacancy in trusteeship — Appointment of successor.

  1. A vacancy in a trusteeship occurs if:
    1. A person designated as trustee rejects the trusteeship;
    2. A person designated as trustee cannot be identified or does not exist;
    3. A trustee resigns;
    4. A trustee is disqualified or removed;
    5. A trustee dies; or
    6. A guardian, conservator, or curator is appointed for an individual serving as trustee.
  2. If one (1) or more cotrustees remain in office, a vacancy in a trusteeship need not be filled. A vacancy in a trusteeship shall be filled if the trust has no remaining trustee.
  3. A vacancy in a trusteeship of a noncharitable trust that is required to be filled shall be filled in the following order of priority:
    1. By a person designated in the terms of the trust to act as successor trustee;
    2. By a person appointed by unanimous agreement of the qualified beneficiaries; or
    3. By a person appointed by the court.
  4. A vacancy in a trusteeship of a charitable trust that is required to be filled shall be filled in the following order of priority:
    1. By a person designated in the terms of the trust to act as successor trustee;
    2. By a person selected by the charitable organizations expressly designated to receive distributions under the terms of the trust if the Attorney General concurs in the selection; or
    3. By a person appointed by the court.
  5. Whether or not a vacancy in a trusteeship exists or is required to be filled, the court may appoint an additional trustee or special fiduciary if the court considers the appointment necessary for the administration of the trust.

History. Enact. Acts 2014, ch. 25, § 53, effective July 15, 2014.

386B.7-050. Resignation of trustee.

  1. A trustee may resign:
    1. Upon at least thirty (30) days’ notice to the qualified beneficiaries and all cotrustees; or
    2. With the approval of the court.
  2. In approving a resignation, the court may issue orders and impose conditions reasonably necessary for the protection of the trust property.
  3. Any liability of a resigning trustee or of any sureties on the trustee’s bond for acts or omissions of the trustee shall not be discharged or affected by the trustee’s resignation.

History. Enact. Acts 2014, ch. 25, § 54, effective July 15, 2014.

386B.7-060. Removal of trustee.

  1. The settlor, a cotrustee, or a beneficiary may request the court to remove a trustee, or a trustee may be removed by the court on its own initiative.
  2. The court may remove a trustee if:
    1. The trustee has committed a breach of trust;
    2. Lack of cooperation among cotrustees substantially impairs the administration of the trust;
    3. Because of unfitness, unwillingness, or persistent failure of the trustee to administer the trust effectively, the court determines that removal of the trustee best serves the interests of the beneficiaries;
    4. There has been a substantial change of circumstances or removal is requested by all of the qualified beneficiaries, the court finds that removal of the trustee best serves the interests of all of the beneficiaries and is not inconsistent with a material purpose of the trust, and a suitable cotrustee or successor trustee is available; or
    5. For a wholly charitable trust, removal is requested by all of the qualified beneficiaries, notice is given to the Attorney General, and the court finds that removal of the trustee best serves the interests of all of the beneficiaries. This provision shall not limit the rights of the Attorney General under any common law or statutory law of this Commonwealth.
  3. Pending a final decision on a request to remove a trustee, or in lieu of or in addition to removing a trustee, the court may order such appropriate relief under KRS 386B.10-010 (2) as may be necessary to protect the trust property or the interests of the beneficiaries.

History. Enact. Acts 2014, ch. 25, § 55, effective July 15, 2014.

NOTES TO DECISIONS

Cited in:

Hauber v. Hauber, 600 S.W.3d 204, 2020 Ky. LEXIS 124 ( Ky. 2020 ).

386B.7-070. Delivery of property by former trustee.

  1. Unless a cotrustee remains in office or the court otherwise orders, and until the trust property is delivered to a successor trustee or other person entitled to it, a trustee who has resigned or been removed has the duties of a trustee and the powers necessary to protect the trust property.
  2. A trustee who has resigned or been removed shall proceed expeditiously to deliver the trust property within the trustee’s possession to the cotrustee, successor trustee, or other person entitled to it.

History. Enact. Acts 2014, ch. 25, § 56, effective July 15, 2014.

386B.7-080. Compensation of trustee.

  1. If the terms of a trust do not specify the trustee’s compensation, a trustee is entitled to compensation that is reasonable under the circumstances.
  2. If the terms of a trust specify the trustee’s compensation, the trustee is entitled to be compensated as specified, but the court may allow more or less compensation if:
    1. The duties of the trustee are substantially different from those contemplated when the trust was created; or
    2. The compensation specified by the terms of the trust would be unreasonably low or high.

History. Enact. Acts 2014, ch. 25, § 57, effective July 15, 2014.

NOTES TO DECISIONS

1.Jurisdiction.

Appellee’s claims regarding trustee compensation and for appointment of a special fiduciary were within the district court’s exclusive jurisdiction. Davis v. Davis, 563 S.W.3d 105, 2018 Ky. App. LEXIS 263 (Ky. Ct. App. 2018).

386B.7-090. Reimbursement of expenses.

  1. A trustee is entitled to be reimbursed out of the trust property, with interest as appropriate, for:
    1. Expenses that were properly incurred in the administration of the trust; and
    2. To the extent necessary to prevent unjust enrichment of the trust, expenses that were not properly incurred in the administration of the trust.
  2. An advance by the trustee of money for the protection of the trust gives rise to a lien against trust property to secure reimbursement with reasonable interest.

History. Enact. Acts 2014, ch. 25, § 58, effective July 15, 2014.

386B.7-100. Exclusive jurisdiction of District Court.

The District Court shall have exclusive jurisdiction over matters under this subchapter relating to the office of the trustee.

History. Enact. Acts 2014, ch. 25, § 59, effective July 15, 2014.

NOTES TO DECISIONS

1.Jurisdiction.

Appellee’s claims regarding trustee compensation and for appointment of a special fiduciary were within the district court’s exclusive jurisdiction. Davis v. Davis, 563 S.W.3d 105, 2018 Ky. App. LEXIS 263 (Ky. Ct. App. 2018).

Cited in:

Hauber v. Hauber, 600 S.W.3d 204, 2020 Ky. LEXIS 124 ( Ky. 2020 ).

Subchapter 8 Duties and Powers of Trustee

386B.8-010. Duty to administer trust.

Upon acceptance of a trusteeship, the trustee shall administer the trust in good faith, in accordance with its terms and purposes and the interests of the beneficiaries, and in accordance with this chapter.

History. Enact. Acts 2014, ch. 25, § 60, effective July 15, 2014.

386B.8-020. Duty of loyalty.

  1. A trustee shall administer the trust solely in the interests of the beneficiaries.
  2. Subject to the rights of persons dealing with or assisting the trustee as provided in KRS 386B.10-110 , a sale, encumbrance, or other transaction involving the investment or management of trust property entered into by the trustee for the trustee’s own personal account or which is otherwise affected by a conflict between the trustee’s fiduciary and personal interests is voidable by a beneficiary affected by the transaction unless:
    1. The transaction was authorized by the terms of the trust;
    2. The transaction was approved by the court;
    3. The beneficiary did not commence a judicial proceeding within the time allowed by KRS 386B.10-050 ;
    4. The beneficiary consented to the trustee’s conduct, ratified the transaction, or released the trustee in compliance with KRS 386B.10-090 ; or
    5. The transaction involves a contract entered into or claim acquired by the trustee before the person became or contemplated becoming trustee.
  3. A sale, encumbrance, or other transaction involving the investment or management of trust property is presumed to be affected by a conflict between personal and fiduciary interests if it is entered into by the trustee with:
    1. The trustee’s spouse;
    2. The trustee’s descendants, siblings, parents, or their spouses;
    3. An agent or attorney of the trustee; or
    4. A corporation or other person or enterprise in which the trustee, or a person that owns a significant interest in the trustee, has an interest that might affect the trustee’s best judgment.
  4. A transaction between a trustee and a beneficiary that does not concern trust property but that occurs during the existence of the trust or while the trustee retains significant influence over the beneficiary and from which the trustee obtains an advantage is voidable by the beneficiary unless the trustee establishes that the transaction was fair to the beneficiary.
  5. A transaction not concerning trust property in which the trustee engages in the trustee’s individual capacity involves a conflict between personal and fiduciary interests if the transaction concerns an opportunity properly belonging to the trust.
  6. An investment by a trustee in securities of an investment company or investment trust to which the trustee, or its affiliate, provides services in a capacity other than as trustee is not presumed to be affected by a conflict between personal and fiduciary interests if the investment otherwise complies with KRS 286.3-272 regarding investments in an associated company or trust. In addition to its compensation for acting as trustee, the trustee may be compensated by the investment company or investment trust for providing those services out of fees charged to the trust. If the trustee receives compensation from the investment company or investment trust for providing investment advisory or investment management services, the trustee shall at least annually notify the persons entitled under KRS 386B.8-130 to receive a copy of the trustee’s annual report of the rate and method by which that compensation was determined.
  7. In voting shares of stock or in exercising powers of control over similar interests in other forms of enterprise, the trustee shall act in the best interests of the beneficiaries. If the trust is the sole owner of a corporation or other form of enterprise, the trustee shall elect or appoint directors or other managers who will manage the corporation or enterprise in the best interests of the beneficiaries.
  8. This section shall not preclude the following transactions, if fair to the beneficiaries:
    1. An agreement between a trustee and a beneficiary relating to the appointment or compensation of the trustee;
    2. Payment of reasonable compensation to the trustee;
    3. A transaction between a trust and another trust, decedent’s estate, or conservatorship of which the trustee is a fiduciary or in which a beneficiary has an interest;
    4. A deposit of trust money in a regulated financial institution operated by the trustee;
    5. An advance by the trustee of money for the protection of the trust; or
    6. Any transaction authorized by any other statute under the laws of this Commonwealth.
  9. The court may appoint a special fiduciary to make a decision with respect to any proposed transaction that might violate this section if entered into by the trustee.

History. Enact. Acts 2014, ch. 25, § 61, effective July 15, 2014.

386B.8-030. Impartiality.

If a trust has two (2) or more beneficiaries, the trustee shall act impartially in investing, managing, and distributing the trust property, giving due regard to the beneficiaries’ respective interests.

History. Enact. Acts 2014, ch. 25, § 62, effective July 15, 2014.

386B.8-040. Prudent administration.

A trustee shall administer the trust as a prudent person would, by considering the purposes, terms, distributional requirements, and other circumstances of the trust. In satisfying this standard, the trustee shall exercise reasonable care, skill, and caution.

History. Enact. Acts 2014, ch. 25, § 63, effective July 15, 2014.

386B.8-050. Costs of administration.

In administering a trust, the trustee may incur only costs that are reasonable in relation to the trust property, the purposes of the trust, and the skills of the trustee.

History. Enact. Acts 2014, ch. 25, § 64, effective July 15, 2014.

386B.8-060. Trustee’s skills.

A trustee who has special skills or expertise, or is named trustee in reliance upon the trustee’s representation that the trustee has special skills or expertise, shall use those special skills or expertise.

History. Enact. Acts 2014, ch. 25, § 65, effective July 15, 2014.

386B.8-070. Delegation by trustee.

  1. A trustee may delegate duties and powers that a prudent trustee of comparable skills could properly delegate under the circumstances. The trustee shall exercise reasonable care, skill, and caution in:
    1. Selecting an agent;
    2. Establishing the scope and terms of the delegation, consistent with the purposes and terms of the trust; and
    3. Periodically reviewing the agent’s actions in order to monitor the agent’s performance and compliance with the terms of the delegation.
  2. In performing a delegated function, an agent owes a duty to the trust to exercise reasonable care to comply with the terms of the delegation.
  3. A trustee who complies with subsection (1) of this section is not liable to the beneficiaries or to the trust for an action of the agent to whom the function was delegated.
  4. By accepting a delegation of powers or duties from the trustee of a trust that is subject to the law of this Commonwealth, an agent submits to the jurisdiction of the courts of this state.

History. Enact. Acts 2014, ch. 25, § 66, effective July 15, 2014.

386B.8-080. Powers to direct.

  1. While a trust is revocable, the trustee may follow a direction of the settlor that is contrary to the terms of the trust.
  2. If the terms of a trust confer upon a person other than the settlor of a revocable trust power to direct certain actions of the trustee, the trustee shall act in accordance with an exercise of the power unless the attempted exercise is manifestly contrary to the terms of the trust or the trustee knows the attempted exercise would constitute a breach of a fiduciary duty that the person holding the power owes to the beneficiaries of the trust.
  3. The terms of a trust may confer upon a trustee or other person a power to direct the modification or termination of the trust.
  4. A person, other than a beneficiary, who holds a power to direct is presumptively a fiduciary who, as such, is required to act in good faith with regard to the purposes of the trust and the interests of the beneficiaries. The holder of a power to direct is liable for any loss that results from breach of a fiduciary duty.

History. Enact. Acts 2014, ch. 25, § 67, effective July 15, 2014.

386B.8-090. Control and protection of trust property.

A trustee shall take reasonable steps to take control of and protect the trust property.

History. Enact. Acts 2014, ch. 25, § 68, effective July 15, 2014.

386B.8-100. Recordkeeping and identification of trust property.

  1. A trustee shall keep adequate records of the administration of the trust.
  2. A trustee shall keep trust property separate from the trustee’s own property.
  3. Except as otherwise provided in subsection (4) of this section, a trustee shall cause the trust property to be designated so that the interest of the trust, to the extent feasible, appears in records maintained by a party other than a trustee or beneficiary.
  4. If the trustee maintains records clearly indicating the respective interests, a trustee may invest as a whole the property of two (2) or more separate trusts.

History. Enact. Acts 2014, ch. 25, § 69, effective July 15, 2014.

386B.8-110. Enforcement and defense of claims.

A trustee shall take reasonable steps to enforce claims of the trust and to defend claims against the trust.

History. Enact. Acts 2014, ch. 25, § 70, effective July 15, 2014.

386B.8-120. Collecting trust property.

A trustee shall take reasonable steps to compel a former trustee or other person to deliver trust property to the trustee, and to redress a breach of trust known to the trustee to have been committed by a former trustee.

History. Enact. Acts 2014, ch. 25, § 71, effective July 15, 2014.

386B.8-130. Duty to inform and report.

  1. Except as otherwise provided in the terms of the trust:
    1. A trustee shall keep the qualified beneficiaries of the trust reasonably informed about the administration of the trust and of the material facts necessary for them to protect their interests. Unless unreasonable under the circumstances, a trustee shall promptly respond to a qualified beneficiary’s request for information related to the administration of the trust;
    2. A trustee:
      1. Within sixty (60) days after accepting a trusteeship, shall notify the qualified beneficiaries of the acceptance and of the trustee’s name, address, and telephone number;
      2. Within sixty (60) days after the date the trustee acquires knowledge of the creation of an irrevocable trust, or the date the trustee acquires knowledge that a formerly revocable trust has become irrevocable, whether by the death of the settlor or otherwise, shall notify the qualified beneficiaries of the trust’s existence, of the identity of the settlor or settlors, of the right to request a copy of the trust instrument, and of the right to a trustee’s report as provided in paragraph (c) of this subsection; and
      3. Shall notify the qualified beneficiaries in advance of any change in the method or rate of the trustee’s compensation;
    3. A trustee, upon request of a qualified beneficiary, shall:
      1. Promptly furnish to the qualified beneficiary a copy of the trust instrument; and
      2. Send to the qualified beneficiary, at least annually and at the termination of the trust, a report of the trust property, liabilities, receipts, and disbursements, including the source and amount of the trustee’s compensation, a listing of the trust assets and, if feasible, their respective market values. Upon a vacancy in a trusteeship, unless a cotrustee remains in office, a report shall be sent to the qualified beneficiary by the former trustee. A personal representative, conservator, guardian, or curator may send the qualified beneficiary a report on behalf of a deceased or incapacitated trustee; and
    4. A qualified beneficiary may waive the right to a trustee’s report or other information otherwise required to be furnished under this section. A qualified beneficiary, with respect to future reports and other information, may withdraw a waiver previously given; and
  2. Notwithstanding subsection (1) of this section and regardless of the terms of the trust, the trustee shall have a duty to notify and to report to at least one (1) qualified beneficiary of an irrevocable trust who has attained twenty-five (25) years of age, or a designated person having a fiduciary relationship to a qualified beneficiary, of the existence of the trust, of the identity of the trustee, and of his or her right to request trustee’s reports. If the terms of the trust mandate a trustee to notify no one, then the trustee may designate a qualified beneficiary or person having a fiduciary relationship to a qualified beneficiary to notify and report to, and such designation by the trustee is not subject to any liability for breach of trust or otherwise.
  3. Subsections (1)(b)1. and 2. and (2) of this section do not apply to a trustee who accepts a trusteeship before July 15, 2014, to an irrevocable trust created before July 15, 2014, or to a revocable trust that becomes irrevocable before July 15, 2014.
  4. The District Court shall have exclusive jurisdiction over matters under this section.

History. Enact. Acts 2014, ch. 25, § 72, effective July 15, 2014.

386B.8-140. Discretionary powers — Tax savings.

  1. The judicial standard of review for a discretionary power is that the trustee shall exercise the power reasonably, in good faith, and in accordance with the terms and purposes of the trust and the interests of the beneficiaries, except that a reasonableness standard shall not be applied to the exercise of discretion by the trustee if the terms of the trust so provide. The words “sole,” “absolute,” “uncontrolled,” or words of similar import in the absence of any standards to guide the trustee in exercising its discretion mean that a reasonableness standard will not apply. The greater the grant of discretion by the settlor to the trustee, the broader the range of permissible conduct by the trustee in exercising it.
  2. Subject to subsection (4) of this section, and unless the terms of the trust expressly indicate that a rule in this subsection shall not apply:
    1. A person other than a settlor who is a beneficiary and trustee of a trust that confers on the trustee a power to make discretionary distributions to or for the trustee’s personal benefit may exercise the power only in accordance with an ascertainable standard; and
    2. A trustee may not exercise a power to make discretionary distributions to satisfy a legal obligation of support that the trustee personally owes another person.
  3. A power whose exercise is limited or prohibited by subsection (2) of this section may be exercised by a majority of the remaining trustees whose exercise of the power is not so limited or prohibited. If the power of all trustees is so limited or prohibited, the court may appoint a special fiduciary with authority to exercise the power.
  4. Subsection (2) of this section shall not apply to:
    1. A power held by the settlor’s spouse who is the trustee of a trust for which a marital deduction, as defined in 26 U.S.C. sec. 2056(b)(5) or 2523(e), as in effect on July 15, 2014, or as later amended, was previously allowed;
    2. Any trust during any period that the trust may be revoked or amended by its settlor; or
    3. A trust if contributions to the trust qualify for the annual exclusion under 26 U.S.C. sec. 2503(c) , as in effect on July 15, 2014, or as later amended.

History. Enact. Acts 2014, ch. 25, § 73, effective July 15, 2014.

386B.8-150. General powers of trustee.

  1. A trustee, without authorization by the court, may exercise:
    1. Powers conferred by the terms of the trust; and
    2. Except as limited by the terms of the trust:
      1. All powers over the trust property which an unmarried competent owner has over individually owned property;
      2. Any other powers appropriate to achieve the proper investment, management, and distribution of the trust property; and
      3. Any other powers conferred by this chapter.
  2. The exercise of a power is subject to the fiduciary duties prescribed by this subchapter.

History. Enact. Acts 2014, ch. 25, § 74, effective July 15, 2014.

NOTES TO DECISIONS

1.Trustee Powers.

Trial court erred in denying a subservicer's summary judgment motion because the mortgage trustee executed a limited power of attorney (LPOA) to the mortgage servicer that gave the servicer authority to execute an additional LPOA to the subservicer, the subservicer's documents complied with the technical requirements for recording, and the county clerk's rejection of the deed of release exposed both the subservicer and the underlying mortgage-backed securitized trust to potentially harsh penalties for failure to timely release the mortgage. Select Portfolio Servicing, Inc. v. Blevins, 494 S.W.3d 510, 2016 Ky. App. LEXIS 115 (Ky. Ct. App. 2016).

386B.8-160. Specific powers of trustee.

Without limiting the authority conferred by KRS 386B.8-150 , a trustee may:

  1. Collect trust property and accept or reject additions to the trust property from a settlor or any other person;
  2. Acquire or sell property, for cash or on credit, at public or private sale;
  3. Exchange, partition, or otherwise change the character of trust property, including acquiring an undivided interest;
  4. Deposit trust money in an account in a regulated financial institution;
  5. Borrow money, with or without security, and mortgage or pledge trust property for a period within or extending beyond the duration of the trust, advance money for the protection of the trust, and for all expenses, losses, and liability sustained in the administration of the trust or because of the holding or ownership of any trust assets, for which advances with any interest the trustee has a lien on the trust assets as against the beneficiary;
  6. With respect to an interest in a proprietorship, partnership, limited liability company, business trust, corporation, or other form of business or enterprise, continue the business or other enterprise and take any action that may be taken by shareholders, members, or property owners, including merging, dissolving, or otherwise changing the form of business organization or contributing additional capital;
  7. With respect to stocks or other securities, exercise the rights of an absolute owner, including the right to:
    1. Vote, or give proxies to vote, with or without power of substitution, or enter into or continue a voting trust agreement;
    2. Hold a security in the name of a nominee or in other form without disclosure of the trust so that title may pass by delivery;
    3. Pay calls, assessments, and other sums chargeable or accruing against the securities, and sell or exercise stock subscription or conversion rights;
    4. Deposit the securities with a depositary or other regulated financial institution;
    5. Sell or exchange stock subscription or conversion rights; and
    6. Consent directly or through a committee or other agent, to the reorganization, consolidation, merger, dissolution, or liquidation of a corporation or other business enterprise;
  8. With respect to an interest in real property, construct or make ordinary or extraordinary repairs to, alterations to, or improvements in, buildings or other structures, demolish improvements, raze existing or erect new party walls or buildings, subdivide or develop land, dedicate land to public use or grant public or private easements, and make or vacate plats and adjust boundaries;
  9. Enter into a lease for any purpose as lessor or lessee, including a lease or other arrangement for exploration and removal of natural resources, with or without the option to purchase or renew, for a period within or extending beyond the duration of the trust;
  10. Grant an option involving a sale, lease, or other disposition of trust property or acquire an option for the acquisition of property, including an option exercisable beyond the duration of the trust, and exercise an option so acquired;
  11. Insure the property of the trust against damage or loss and insure the trustee, the trustee’s agents, and beneficiaries against liability arising from the administration of the trust;
  12. Abandon or decline to administer property of no value or of insufficient value to justify its collection or continued administration;
  13. With respect to possible liability for violation of environmental law:
    1. Inspect or investigate property the trustee holds or has been asked to hold, or property owned or operated by an organization in which the trustee holds or has been asked to hold an interest, for the purpose of determining the application of environmental law with respect to the property;
    2. Take action to prevent, abate, or otherwise remedy any actual or potential violation of any environmental law affecting property held directly or indirectly by the trustee, whether taken before or after the assertion of a claim or the initiation of governmental enforcement;
    3. Decline to accept property into trust or disclaim any power with respect to property that is or may be burdened with liability for violation of environmental law;
    4. Compromise claims against the trust which may be asserted for an alleged violation of environmental law; and
    5. Pay the expense of any inspection, review, abatement, or remedial action to comply with environmental law;
  14. Pay or contest any claim, settle a claim by or against the trust, and release, in whole or in part, a claim belonging to the trust;
  15. Pay taxes, assessments, compensation of the trustee and of employees and agents of the trust, and other expenses incurred in the administration of the trust;
  16. Exercise elections with respect to federal, state, and local taxes;
  17. Select a mode of payment under any employee benefit or retirement plan, annuity, or life insurance payable to the trustee, exercise rights thereunder, including exercise of the right to indemnification for expenses and against liabilities, and take appropriate action to collect the proceeds;
  18. Make loans out of trust property, including loans to a beneficiary on terms and conditions the trustee considers to be fair and reasonable under the circumstances, and the trustee has a lien on future distributions for repayment of those loans;
  19. Pledge trust property to guarantee loans made by others to the beneficiary;
  20. Appoint a trustee to act in another jurisdiction with respect to trust property located in the other jurisdiction, confer upon the appointed trustee all of the powers and duties of the appointing trustee, require that the appointed trustee furnish security, and remove any trustee so appointed;
  21. Pay an amount distributable to a beneficiary who is under a legal disability or who the trustee reasonably believes is incapacitated, by paying it directly to the beneficiary or applying it for the beneficiary’s benefit, or by:
    1. Paying it to the beneficiary’s conservator or, if the beneficiary does not have a conservator, the beneficiary’s guardian;
    2. Paying it to the beneficiary’s custodian under KRS 385.022 to 385.242 , the Kentucky Uniform Transfers to Minors Act or custodial trustee under the Uniform Custodial Trust Act, if that Act is subsequently adopted by the Commonwealth, and, for that purpose, creating a custodianship or custodial trust;
    3. If the trustee does not know of a conservator, guardian, custodian, or custodial trustee, paying it to an adult relative or other person having legal or physical care or custody of the beneficiary, to be expended on the beneficiary’s behalf; or
    4. Managing it as a separate fund on the beneficiary’s behalf, subject to the beneficiary’s continuing right to withdraw the distribution;
  22. On distribution of trust property or the division or termination of a trust, make distributions in divided or undivided interests, allocate particular assets in proportionate or disproportionate shares, value the trust property for those purposes, and adjust for resulting differences in valuation;
  23. Resolve a dispute concerning the interpretation of the trust or its administration by mediation, arbitration, or other procedure for alternative dispute resolution;
  24. Prosecute or defend an action, claim, or judicial proceeding in any jurisdiction to protect trust property and the trustee in the performance of the trustee’s duties;
  25. Sign and deliver contracts and other instruments that are useful to achieve or facilitate the exercise of the trustee’s powers;
  26. Take such actions as are necessary to cause gains from the sale or exchange of trust assets, as determined for federal income tax purposes, to be taxed for federal income tax purposes as a part of a distribution of income, including the power to:
    1. Allocate such gains to income for the purpose of making discretionary distributions; and
    2. Allocate such gains to income that has been increased by an adjustment from principal to income pursuant to KRS 386.454 , to a unitrust distribution, or to a distribution of principal to a beneficiary;
  27. Invest and reinvest trust assets in accordance with the provisions of the trust or as provided by law;
  28. Allocate items of income or expense to either trust income or principal, as provided by law;
  29. In addition to the power to delegate under KRS 386B.8-070 , employ persons, including attorneys, auditors, investment advisors, or agents, to:
    1. Advise or assist the trustee in the performance of his administrative duties;
    2. Act without independent investigation upon their recommendations; and
    3. Instead of acting personally, to employ one (1) or more agents to perform any act of administration, whether or not discretionary; and
  30. On termination of the trust, exercise the powers appropriate to wind up the administration of the trust and distribute the trust property to the persons entitled to it within a reasonable amount of time.

History. Enact. Acts 2014, ch. 25, § 75, effective July 15, 2014.

386B.8-170. Distribution upon termination.

  1. Upon termination or partial termination of a trust, the trustee may send to the beneficiaries a proposal for distribution. The right of any beneficiary to object to the proposed distribution terminates if the beneficiary does not notify the trustee of an objection within thirty (30) days after the proposal was sent, but only if the proposal informed the beneficiary of the right to object and of the time allowed for objection.
  2. Upon the occurrence of an event terminating or partially terminating a trust, the trustee shall proceed expeditiously to distribute the trust property to the persons entitled to it, subject to the right of the trustee to retain a reasonable reserve for the payment of debts, expenses, and taxes.
  3. A release by a beneficiary of a trustee from liability for breach of trust is invalid to the extent:
    1. It was induced by improper conduct of the trustee; or
    2. The beneficiary, at the time of the release, did not know of the beneficiary’s rights or of the material facts relating to the breach.

History. Enact. Acts 2014, ch. 25, § 76, effective July 15, 2014.

386B.8-180. Duties of trustee upon termination or upon removal of trustee — Objection.

    1. When a trust terminates pursuant to the terms of the trust, the trustee may follow the requirements for distribution upon termination as provided in KRS 386B.8-170 or, if proceeding under this section, within a reasonable amount of time after such termination, the trustee shall provide to the qualified beneficiaries a statement showing the fair market value of the net assets to be distributed, a trust accounting for the prior five (5) years and an estimate for any items reasonably anticipated but not yet received or disbursed, the amount of any fees, including trustee fees, remaining to be paid, and notice that the trust is terminating. The trustee may also provide such statement and notice to any other person whom the trustee reasonably believes may have an interest in the trust. (1) (a) When a trust terminates pursuant to the terms of the trust, the trustee may follow the requirements for distribution upon termination as provided in KRS 386B.8-170 or, if proceeding under this section, within a reasonable amount of time after such termination, the trustee shall provide to the qualified beneficiaries a statement showing the fair market value of the net assets to be distributed, a trust accounting for the prior five (5) years and an estimate for any items reasonably anticipated but not yet received or disbursed, the amount of any fees, including trustee fees, remaining to be paid, and notice that the trust is terminating. The trustee may also provide such statement and notice to any other person whom the trustee reasonably believes may have an interest in the trust.
    2. If, after receiving the notice and trust information described in paragraph (a) of this subsection, a qualified beneficiary objects to an action or omission disclosed, he or she shall provide written notice of the objection to the trustee within forty-five (45) days of the notice having been sent by the trustee. If no written objection is provided within the forty-five (45) day time period, the information provided pursuant to paragraph (a) of this subsection shall be considered approved by the recipient and the trustee shall, within a reasonable period of time following the expiration of such period, distribute the assets as provided in the trust. If the trustee receives a written objection within the applicable forty-five (45) day time period, the trustee may:
      1. Submit the written objection to the District Court for resolution and charge the expense of commencing such a proceeding to the trust; or
      2. Resolve the objection with the qualified beneficiary, whether by nonjudicial  settlement agreement or otherwise. Any agreement entered into pursuant to this paragraph may include a release, an indemnity clause, or both on the part of the beneficiary against the trustee relating to the trust. If the parties agree to a nonjudicial settlement agreement, any related expenses shall be charged to the trust. Upon a resolution of an objection pursuant to subparagraph 1. or 2. of this paragraph, within a reasonable period of time thereafter the trustee shall distribute the remaining trust assets as provided in the trust.
    3. The trustee may rely upon the written statement of a person receiving notice that such person does not object.
    1. When a trustee is removed or resigns pursuant to the terms of the trust, the trustee may follow the requirements for distribution upon termination as provided in KRS 386B.8-170 or, if proceeding under this section, the trustee, within a reasonable time after such removal or resignation,shall provide to the successor trustee a statement showing the net assets to be distributed, a trust accounting for the prior five (5) years, an estimate for any items reasonably anticipated but not yet received or disbursed, the amount of any fees, including trustee fees, remaining to be paid, and notice that the trustee has resigned or been removed. The trustee may also provide such statement and notice to any other person whom trustee reasonably believes may have an interest in the trust. (2) (a) When a trustee is removed or resigns pursuant to the terms of the trust, the trustee may follow the requirements for distribution upon termination as provided in KRS 386B.8-170 or, if proceeding under this section, the trustee, within a reasonable time after such removal or resignation,shall provide to the successor trustee a statement showing the net assets to be distributed, a trust accounting for the prior five (5) years, an estimate for any items reasonably anticipated but not yet received or disbursed, the amount of any fees, including trustee fees, remaining to be paid, and notice that the trustee has resigned or been removed. The trustee may also provide such statement and notice to any other person whom trustee reasonably believes may have an interest in the trust.
    2. Any person provided notice and trust information as described in paragraph (a) of this subsection who objects to an action or omission disclosed shall provide written notice of the objection to the trustee within forty-five (45) days of the notice having been sent by the trustee. If no written objection is provided within the forty-five (45) day time period, the information provided pursuant to paragraph (a) of this subsection will be considered approved, and the trustee shall, within a reasonable period following the expiration of such forty-five (45) day period, distribute the assets to the successor trustee. If the trustee receives a written objection within the applicable forty-five (45) day time period, the trustee may:
      1. Submit the written objection to the District Court for resolution and charge the expense of commencing such a proceeding to the trust; or
      2. Resolve the objection with the opposing party, whether by nonjudicial settlement agreement or otherwise. Any agreement entered into pursuant to this paragraph may include a release, an indemnity clause, or both on the part of the opposing party against the trustee relating to the trust. If the parties agree to a nonjudicial settlement agreement, any related expenses shall be charged to the trust. Upon a resolution of any objection raised by an opposing party pursuant to subparagraph 1. or 2. of this paragraph, within a reasonable period of time thereafter the trustee shall distribute the remaining trust assets as provided in the trust.
    3. The trustee may rely upon the written statement of a person receiving notice that such person does not object.
  1. When a trustee distributes assets of the trust pursuant to subsection (1) or (2) of this section, the limitations in KRS 386B.6-040 and 386B.10-050 are waived by each person who received notice and either consented or failed to object pursuant to this section, and any such person is barred from bringing a claim against the trustee for breach of trust or challenging the validity of the trust, to the same extent and with the same preclusive effect as if the court had entered a final order approving the trustee’s final account.
  2. Notice provided under subsection (1) or (2) of this section shall clearly warn of the impending bar of claims against a trustee under KRS 386B.6-040 and 386B.10-050 that will result if an objection is not timely made.
  3. No trustee trust shall request that any beneficiary indemnify the trustee against loss in exchange for the trustee forgoing a request to the court to approve its accounts at the time the trust terminates or at the time the trustee is removed or resigns, except as agreed upon by the parties pursuant to paragraph (b)1. or 2. of subsections (1) and (2) of this section.
  4. The District Court shall have exclusive jurisdiction over matters under this section.

History. Enact. Acts 2014, ch. 25, § 77, effective July 15, 2014; 2015 ch. 121, § 2, effective June 24, 2015.

NOTES TO DECISIONS

1.Jurisdiction.

Court of appeals erred in denying in part a trustee’s petition for a writ of prohibition alleging the circuit court lacked subject matter jurisdiction over an attorney-in-fact’s breach of trust claims because the trustee followed proper statutory procedure, and thus, any matters within the circuit court breach of trust action identical to those raised in the trustee’s district court proceedings seeking approval of its statutory notice were exclusively within the district court’s jurisdiction. PNC Bank, N.A. v. Edwards, 590 S.W.3d 818, 2019 Ky. LEXIS 542 ( Ky. 2019 ).

District court possesses exclusive jurisdiction over any breach of trust claims raised in an objection under the statute which is subsequently filed by the trustee in district court for resolution in accordance with the statute; subsection (3)’s waiver provision directly places breach of trust issues arising under a final accounting within the purview of a proceeding under the statute, and a procedure involving a final accounting entailed resolution of all matters involving the trust. PNC Bank, N.A. v. Edwards, 590 S.W.3d 818, 2019 Ky. LEXIS 542 ( Ky. 2019 ).

Where a trustee files its petition for approval of its statutory notice and final accounting in district court, resolution of those matters necessarily encompasses any claims of breach of trust or fiduciary duty, and, further, the legislature has given exclusive jurisdiction to district court. PNC Bank, N.A. v. Edwards, 590 S.W.3d 818, 2019 Ky. LEXIS 542 ( Ky. 2019 ).

Subchapter 9 Uniform Prudent Investor Act

386B.9-010. Trustee to act as prudent investor.

All trustees acting under this chapter with respect to investments shall have the authority and duties as set forth in KRS 286.3-277 to act as a prudent investor.

History. Enact. Acts 2014, ch. 25, § 78, effective July 15, 2014.

Subchapter 10 Liability of Trustees and Rights of Persons Dealing with Trustees

386B.10-010. Remedies for breach of trust.

  1. A violation by a trustee of a duty the trustee owes to a beneficiary is a breach of trust.
  2. To remedy a breach of trust that has occurred or may occur, the court may:
    1. Compel the trustee to perform the trustee’s duties;
    2. Enjoin the trustee from committing a breach of trust;
    3. Compel the trustee to redress a breach of trust by paying money, restoring property, or other means;
    4. Order a trustee to account;
    5. Appoint a special fiduciary to take possession of the trust property and administer the trust;
    6. Suspend the trustee;
    7. Remove the trustee under KRS 386B.7-060 ;
    8. Reduce or deny compensation to the trustee;
    9. Subject to KRS 386B.10-110 , void an act of the trustee, impose a lien or a constructive trust on trust property, or trace trust property wrongfully disposed of and recover the property or its proceeds; or
    10. Order any other appropriate relief.

History. Enact. Acts 2014, ch. 25, § 79, effective July 15, 2014.

386B.10-020. Damages for breach of trust.

  1. A trustee who commits a breach of trust is liable to the beneficiaries affected for the greater of:
    1. The amount required to restore the value of the trust property and trust distributions to what they would have been had the breach not occurred; or
    2. The profit the trustee made by reason of the breach.
  2. Except as otherwise provided in this subsection, if more than one (1) trustee is liable to the beneficiaries for a breach of trust, a trustee is entitled to contribution from the other trustee or trustees. A trustee is not entitled to contribution if the trustee was substantially more at fault than another trustee or if the trustee committed the breach of trust in bad faith or with reckless indifference to the purposes of the trust or the interests of the beneficiaries. A trustee who received a benefit from the breach of trust is not entitled to contribution from another trustee to the extent of the benefit received.

History. Enact. Acts 2014, ch. 25, § 80, effective July 15, 2014.

386B.10-030. Damages in absence of breach.

  1. A trustee is accountable to an affected beneficiary for any profit made by the trustee arising from the administration of the trust, except the reasonable fee charged by the trustee, even absent a breach of trust.
  2. Absent a breach of trust, a trustee is not liable to a beneficiary for a loss or depreciation in the value of trust property or for not having made a profit.

History. Enact. Acts 2014, ch. 25, § 81, effective July 15, 2014.

386B.10-040. Attorney’s fees and costs.

In a judicial proceeding involving the administration of a trust, the court, as justice and equity may require, may award costs and expenses, including reasonable attorney’s fees, to any party, to be paid by another party or from the trust that is the subject of the controversy.

History. Enact. Acts 2014, ch. 25, § 82, effective July 15, 2014.

NOTES TO DECISIONS

1.Applicability.

Ky. Rev. Stat. Ann. § 386B.10-040 was properly applied where the beneficiaries had actual and constructive knowledge when the statute took effect that the bank would seek to recover its attorney fees under the statute, and they nonetheless persisted in vigorously prosecuting their counterclaims, and even amended them after the statute became effective. Boegh v. Bank of Okla., N.A., 2019 Ky. App. LEXIS 53 (Ky. Ct. App. Apr. 5, 2019).

Cited in:

Todd v. Hilliard Lyons Trust Co., LLC, 633 S.W.3d 342, 2021 Ky. App. LEXIS 99 (Ky. Ct. App. 2021).

386B.10-050. Limitation of action against trustee.

  1. For the purposes of this section, a “report” is an account statement or other form of written disclosure made by the trustee to the beneficiary.
  2. A beneficiary may not commence a proceeding against a trustee for breach of trust more than one (1) year after the date the beneficiary or a representative of the beneficiary was sent a report that adequately disclosed the existence of a potential claim for breach of trust and informed the beneficiary of the time allowed for commencing a proceeding.
  3. A report adequately discloses the existence of a potential claim for breach of trust if it provides sufficient information so that the beneficiary or representative knows of the potential claim or should have inquired into its existence.
  4. If subsection (2) of this section does not apply, a judicial proceeding by a beneficiary against a trustee for breach of trust shall be commenced within five (5) years of discovery of an injury by a trustee to the rights of the beneficiary.

HISTORY: Enact. Acts 2014, ch. 25, § 83, effective July 15, 2014; 2015 ch. 121, § 1, effective June 24, 2015.

NOTES TO DECISIONS

1.Applicability.

Limitations period of Ky. Rev. Stat. Ann. § 386B.10-050 (4) did not apply to the stockholders' breach of fiduciary duty claim as no statutory authority extended the discovery rule to claims brought pursuant to Ky. Rev. Stat. Ann. § 413.120(6). Middleton v. Sampey, 522 S.W.3d 875, 2017 Ky. App. LEXIS 248 (Ky. Ct. App. 2017).

386B.10-060. Reliance on trust instrument.

A trustee who acts in reasonable reliance on the terms of the trust as expressed in the trust instrument is not liable to a beneficiary for a breach of trust to the extent the breach resulted from the reliance.

History. Enact. Acts 2014, ch. 25, § 84, effective July 15, 2014.

386B.10-070. Event affecting administration or distribution.

If the happening of an event, including marriage, divorce, performance of educational requirements, or death, affects the administration or distribution of a trust, a trustee who has exercised reasonable care to ascertain the happening of the event is not liable for a loss resulting from the trustee’s lack of knowledge.

History. Enact. Acts 2014, ch. 25, § 85, effective July 15, 2014.

386B.10-080. Exculpation of trustee.

  1. A term of a trust relieving a trustee of liability for breach of trust is unenforceable to the extent that it:
    1. Relieves the trustee of liability for breach of trust committed in bad faith or with reckless indifference to the purposes of the trust or the interests of the beneficiaries; or
    2. Was inserted as the result of an abuse by the trustee of a fiduciary or confidential relationship to the settlor.
  2. An exculpatory term drafted or caused to be drafted by the trustee is invalid as an abuse of a fiduciary or confidential relationship unless the trustee proves that the exculpatory term is fair under the circumstances and that its existence and contents were adequately communicated to the settlor. The requirements of this subsection are satisfied if the settlor was represented by independent counsel at the time the exculpatory term was drafted or caused to be drafted.

History. Enact. Acts 2014, ch. 25, § 86, effective July 15, 2014.

386B.10-090. Beneficiary’s consent, release, or ratification.

A trustee shall not be liable to a beneficiary for breach of trust if the beneficiary, while having capacity, consented to the conduct constituting the breach, released the trustee from liability for the breach, or ratified the transaction constituting the breach, unless:

  1. The consent, release, or ratification of the beneficiary was induced by improper conduct of the trustee; or
  2. At the time of the consent, release, or ratification, the beneficiary did not know of the beneficiary’s rights or of the material facts relating to the breach.

History. Enact. Acts 2014, ch. 25, § 87, effective July 15, 2014.

386B.10-100. Limitation on personal liability of trustee.

  1. Except as otherwise provided in the contract, a trustee is not personally liable on a contract properly entered into in the trustee’s fiduciary capacity in the course of administering the trust if the trustee in the contract disclosed the fiduciary capacity.
  2. A trustee is personally liable for torts committed in the course of administering a trust, or for obligations arising from ownership or control of trust property, including liability for violation of environmental law, only if the trustee is personally at fault.
  3. A claim based on a contract entered into by a trustee in the trustee’s fiduciary capacity, on an obligation arising from ownership or control of trust property, or on a tort committed in the course of administering a trust, may be asserted in a judicial proceeding against the trustee in the trustee’s fiduciary capacity, whether or not the trustee is personally liable for the claim.
  4. The question of liability as between the trust estate and the trustee individually may be determined in a proceeding for accounting, surcharge, or indemnification or other appropriate proceeding.

History. Enact. Acts 2014, ch. 25, § 88, effective July 15, 2014.

386B.10-110. Protection of person dealing with trustee.

  1. A person other than a beneficiary who in good faith assists a trustee, or who in good faith and for value deals with a trustee, without knowledge that the trustee is exceeding or improperly exercising the trustee’s powers is protected from liability as if the trustee properly exercised the power.
  2. A person other than a beneficiary who in good faith deals with a trustee is not required to inquire into the extent of the trustee’s powers or the propriety of their exercise.
  3. A person who in good faith delivers assets to a trustee need not ensure their proper application.
  4. A person other than a beneficiary who in good faith assists a former trustee, or who in good faith and for value deals with a former trustee, without knowledge that the trusteeship has terminated is protected from liability as if the former trustee were still a trustee.
  5. Comparable protective provisions of other laws relating to commercial transactions or transfer of securities by fiduciaries prevail over the protection provided by this section.

History. Enact. Acts 2014, ch. 25, § 89, effective July 15, 2014.

386B.10-120. Certification of trust.

  1. Instead of furnishing a copy of the trust instrument to a person other than a beneficiary, the trustee may furnish to the person a certification of trust containing the following information:
    1. That the trust exists and the date the trust instrument was signed;
    2. The identity of the settlor;
    3. The identity and address of the currently acting trustee;
    4. The powers of the trustee;
    5. The revocability or irrevocability of the trust and the identity of any person holding a power to revoke the trust;
    6. The authority of cotrustees to sign or otherwise authenticate and whether all or less than all are required in order to exercise powers of the trustee; and
    7. The manner of taking title to trust property.
  2. A certification of trust may be signed or otherwise authenticated by any trustee.
  3. A certification of trust shall state that the trust has not been revoked, modified, or amended in any manner that would cause the representations contained in the certification of trust to be incorrect.
  4. A certification of trust need not contain the dispositive terms of a trust.
  5. A recipient of a certification of trust may require the trustee to furnish copies of those excerpts from the original trust instrument and later amendments which designate the trustee and confer upon the trustee the power to act in the pending transaction.
  6. A person who acts in reliance upon a certification of trust without knowledge that the representations contained therein are incorrect is not liable to any person for so acting and may assume without inquiry the existence of the facts contained in the certification. Knowledge of the terms of the trust may not be inferred solely from the fact that a copy of all or part of the trust instrument is held by the person relying upon the certification.
  7. A person who in good faith enters into a transaction in reliance upon a certification of trust may enforce the transaction against the trust property as if the representations contained in the certification were correct.
  8. A person making a demand for the trust instrument in addition to a certification of trust or excerpts is liable for damages if the court determines that the person did not act in good faith in demanding the trust instrument.
  9. This section shall not limit the right of a person to obtain a copy of the trust instrument in a judicial proceeding concerning the trust.
  10. The District Court shall have exclusive jurisdiction over matters under this section.

History. Enact. Acts 2014, ch. 25, § 90, effective July 15, 2014.

Subchapter 11 Miscellaneous Provisions

386B.11-010. Uniformity of application and construction.

In applying and construing the Uniform Trust Code, as enacted in this chapter, consideration shall be given to the need to promote uniformity of the law with respect to its subject matter among states that enact it.

History. Enact. Acts 2014, ch. 25, § 91, effective July 15, 2014.

386B.11-020. Electronic records and signatures.

The provisions of this chapter governing the legal effect, validity, or enforceability of electronic records or electronic signatures, and of contracts formed or performed with the use of such records or signatures, conform to the requirements of Section 102 of the Electronic Signatures in Global and National Commerce Act, 15 U.S.C. sec. 7002 , and supersede, modify, and limit the requirements of the Electronic Signatures in Global and National Commerce Act, 15 U.S.C. secs. 7001 et seq.

History. Enact. Acts 2014, ch. 25, § 92, effective July 15, 2014.

386B.11-030. Severability clause.

If any provision of this chapter or its application to any person or circumstances is held invalid, the invalidity does not affect other provisions or applications of this chapter which can be given effect without the invalid provision or application, and to this end the provisions of this chapter are severable.

History. Enact. Acts 2014, ch. 25, § 93, effective July 15, 2014.

386B.11-040. Application to existing relationships.

  1. Except as otherwise provided in this chapter, on July 15, 2014:
    1. This chapter applies to all trusts created before, on, or after July 15, 2014;
    2. This chapter applies to all judicial proceedings concerning trusts commenced on or after July 15, 2014;
    3. This chapter applies to judicial proceedings concerning trusts commenced before July 15, 2014, unless the court finds that application of a particular provision of this chapter would substantially interfere with the effective conduct of the judicial proceedings or prejudice the rights of the parties, in which case the particular provision of this chapter shall not apply and the superseded law applies;
    4. Any rule of construction or presumption provided in this chapter applies to trust instruments executed before July 15, 2014, unless there is a clear indication of a contrary intent in the terms of the trust; and
    5. An act done before July 15, 2014, is not affected by this chapter.
  2. If a right is acquired, extinguished, or barred upon the expiration of a prescribed period that has commenced to run under any other statute before July 15, 2014, that statute continues to apply to the right even if it has been repealed or superseded.
  3. This chapter shall not apply to trusts created under the following:
    1. KRS 386.510 to 386.590 , the Kentucky Fiduciary Investment Company Act;
    2. KRS 386.370 to 386.440 , the Kentucky Business Trusts Act; and
    3. KRS Chapter 386A, the Kentucky Uniform Statutory Trust Act.

History. Enact. Acts 2014, ch. 25, § 94, effective July 15, 2014.

NOTES TO DECISIONS

1.Jurisdiction.

Circuit court made the requisite certification of jurisdiction to retain a trust administration case and decide it on the merits because the circuit court made sufficient findings on the record related to its certification of jurisdiction, and the record support its findings; a beneficiary was provided with, and took advantage of, the opportunity to argue the jurisdictional issue both orally at the hearing dates and in his court filings. Beardmore v. JPMorgan Chase Bank, N.A., 2017 Ky. App. LEXIS 60 (Ky. Ct. App. Mar. 31, 2017), review denied, ordered not published, 2018 Ky. LEXIS 204 (Ky. June 6, 2018).

386B.11-050. Short title.

This chapter may be cited as the Uniform Trust Code.

History. Enact. Acts 2014, ch. 25, § 95, effective July 15, 2014.

CHAPTER 387 Guardians — Conservators — Curators of Convicts

387.010. Definitions for KRS 387.010 to 387.280.

As used in KRS 387.010 to 387.280 , unless the context requires otherwise:

  1. “Minor” means any person who has not reached the age of eighteen (18).
  2. “Interested person or entity” means an adult relative or friend of the minor, an official or representative of a public or private agency, corporation, or association concerned with the minor’s welfare, or any other person found suitable by the District Court.
  3. “Guardian” means an individual, agency, or corporation appointed by the District Court to have care, custody, and control of a minor and to manage the minor’s financial resources.
  4. “Limited guardian” means an individual, agency, or corporation appointed by the District Court to have care, custody, and control of a minor without the power to manage the minor’s financial resources.
  5. “Conservator” means an individual, agency, or corporation appointed by the District Court to manage the financial resources of a minor.
  6. “Ward” means a person for whom a guardian, limited guardian, or conservator has been appointed.
  7. “Parent” means a mother or father whose parental rights have not been terminated or suspended by prior court order.

History. 2149: amend. Acts 1968, ch. 100, § 8; 1976, ch. 218, § 39; 1982, ch. 141, § 138, effective July 1, 1982; 1990, ch. 487, § 1, effective July 13, 1990.

Compiler’s Notes.

Acts 1980, ch. 396, § 150 would have repealed this section effective July 1, 1982; however, Acts 1982, ch. 141, § 146, effective July 1, 1982, repealed Acts 1980, ch. 396.

NOTES TO DECISIONS

1.Capacity.

Married seventeen year old minor did not have the capacity to execute a release and enter into a settlement agreement growing out of a personal injury suit. Mitchell by & Through Fee v. Mitchell, 963 S.W.2d 222, 1998 Ky. App. LEXIS 16 (Ky. Ct. App. 1998).

Cited:

Littreal v. Littreal, 253 S.W.2d 247, 1952 Ky. LEXIS 1072 ( Ky. 1952 ); Vitali v. Nolloth, 268 S.W.2d 950, 1954 Ky. LEXIS 940 ( Ky. 1954 ).

Research References and Practice Aids

Cross-References.

Action by ward against guardian, KRS 452.425 .

Administration of trust; legal investments; principal and income, KRS Ch. 386.

Attorneys, SCR, Rules 3.010 to 3.995.

Bank acting as fiduciary, provisions and regulations, KRS 286.3-200 , 286.3-220 .

Child welfare, KRS Ch. 199.

Claims against decedents’ estates, KRS Ch. 396.

Conservator for property of person serving in or present with armed forces, KRS 384.050 to 384.070 .

Curator for estate of absent person, appointment of, KRS 395.410 .

Gifts to minors, KRS Ch. 385.

Mental incompetents, KRS Ch. 202A.

Parent and child, KRS Ch. 405.

Penitentiaries, KRS Ch. 197.

Personal representatives, KRS Ch. 395.

Public administrator and guardian in each county, provisions for, KRS 395.380 to 395.400 .

Public guardian, KRS 395.380 .

Sales of realty of persons under disability, KRS Ch. 389A.

Special legislation on estates of persons under disability, prohibition of, Const., § 59, sixth.

Support of dependents, KRS Ch. 407.

Veteran’s guardianship act, KRS Ch. 388.

Kentucky Bench & Bar.

Wiederstein, Guardianship for Disabled Persons: A Practical Guide, Vol. 70, No. 1, January 2006, Ky. Bench & Bar 18.

Northern Kentucky Law Review.

Schlam, Third-Party Standing in Child Custody Disputes: Will Kentucky’s New “De Facto Guardian” Provision Help?, 27 N. Ky. L. Rev. 368 (2000).

Treatises

Caldwell’s Kentucky Form Book, 5th Ed., Practice Context for Guardian and Ward of Minors, § 261.00.

Petrilli, Kentucky Family Law, Legal Defenses to Dissolution Action, § 22.2.

387.020. Jurisdiction of District Courts over guardians, limited guardians, and conservators — Venue of proceedings.

  1. District Courts shall have exclusive jurisdiction for the appointment and removal of guardians, limited guardians, and conservators for minors, and for the management and settlement of their accounts.
  2. If the minor is a resident of the Commonwealth of Kentucky, venue for all proceedings under KRS 387.010 to 387.280 shall be:
    1. In the county where the will of the minor’s last surviving parent was probated, if that will nominates a guardian, limited guardian, or conservator pursuant to KRS 387.040 ;
    2. In all other cases, in the county where the minor resides.
  3. If the minor is not a resident of the Commonwealth of Kentucky, the venue for all proceedings under KRS 387.010 to 387.280 shall be in the county where the real or personal property of the minor is located, or if the minor has real or personal property in more than one (1) county, then venue shall be in any one (1) of the counties where property of the minor is located and where proceedings are first brought for the appointment of a guardian, limited guardian, or conservator.

History. 2015: amend. Acts 1942, ch. 195, § 1; 1968, ch. 200, § 3; 1976 (Ex. Sess.), ch. 14, § 329, effective January 2, 1978; 1990, ch. 487, § 2, effective July 13, 1990.

NOTES TO DECISIONS

1.Infant’s Domicile.

Domicile of the guardian is not necessarily the domicile of the ward. When the parents are dead, children’s domicile, until changed, continues where parent’s residence was. Louisville v. Sherley, 80 Ky. 71 , 3 Ky. L. Rptr. 566 , 1882 Ky. LEXIS 17 ( Ky. 1882 ) (decided under prior law).

Court of county (now District Court) in which wandering waif, without a home, was injured had jurisdiction to appoint a guardian for the waif, where the county authorities had committed him to an almshouse. Louisivlle & N. R. Co. v. Kimbrough, 115 Ky. 512 , 74 S.W. 229, 24 Ky. L. Rptr. 2409 , 1903 Ky. LEXIS 124 ( Ky. 1903 ).

2.Nonresident Minor.

Where a nonresident minor does not have a guardian, curator, or committee residing in the state or county of his residence, a guardian may be appointed in Kentucky for him and that guardian may properly pursue the minor’s right of action in Kentucky. Wilson v. Brown, 106 F. Supp. 500, 1952 U.S. Dist. LEXIS 4038 (D. Ky. 1952 ).

A right of action is personal property within the meaning of this section so that a guardian could be appointed for a nonresident minor possessing a right of action. Wilson v. Brown, 106 F. Supp. 500, 1952 U.S. Dist. LEXIS 4038 (D. Ky. 1952 ).

3.Jurisdiction.

Jurisdiction over wards and their estate having once attached in a county, continues in that county until surrendered by the county (now district) court or is discharged by law. Havens v. Ahlering, 123 Ky. 713 , 97 S.W. 344, 29 Ky. L. Rptr. 1265 , 1906 Ky. LEXIS 202 ( Ky. 1906 ).

Where infant is not a nonresident owner of real estate, or the appointment of the guardian is not made by parents’ will, only county (now district) court of county where the infant resides has jurisdiction to appoint a guardian. Appointment of guardian by any other county court, and the acts of such guardian, are void (decision prior to 1942 amendment). South C. & C. S. R. Co. v. Lee, 153 Ky. 621 , 156 S.W. 99, 1913 Ky. LEXIS 874 ( Ky. 1913 ).

All controversies between the guardian and relatives of minor children should be adjudicated by courts of the children’s domicile (county). Fitzpatrick's Guardian v. Baker, 227 Ky. 788 , 14 S.W.2d 181, 1929 Ky. LEXIS 983 ( Ky. 1929 ).

4.— Erroneous Order.

Where the guardian appointed by the county (now district) court appeared before the county judge and made oath that he was a resident of Kentucky while the record conclusively showed that he was, and had been, a nonresident, and that his ward, who owned land in the county, was also a nonresident, the order appointing the guardian was erroneous, but not void, since the county court had jurisdiction of the parties and the subject matter. Baker v. Maryland Casualty Co., 274 S.W.2d 784, 1954 Ky. LEXIS 1241 ( Ky. 1954 ).

5.Judgments.

Judgments of county (now District) court appointing and removing guardians of infants and settling their accounts are not subject to collateral attack. Poynter v. Smith, 290 Ky. 169 , 160 S.W.2d 380, 1942 Ky. LEXIS 358 ( Ky. 1942 ).

Applied in

PNC Bank, N.A. v. Edwards, 590 S.W.3d 818, 2019 Ky. LEXIS 542 ( Ky. 2019 ).

Cited:

Estridge v. Estridge, 76 S.W. 1101, 25 Ky. L. Rptr. 1076 (1903); Stuart v. Richardson, 407 S.W.2d 716, 1966 Ky. LEXIS 185 ( Ky. 1966 ).

Opinions of Attorney General.

A surrender of jurisdiction by the court exercising original jurisdiction over the appointment of a guardian should be effected by a proper court order reciting the circumstances under which the court surrenders jurisdiction to another court after which the court assuming jurisdiction can then enter an appropriate order recognizing the appointment. OAG 72-565 .

This section would allow a court exercising original jurisdiction in the appointment of a guardian, in its sound discretion, to surrender jurisdiction to the court of the new residence of guardian and ward provided there is no conflict with the provisions of this section concerning exceptions to the jurisdiction conferred hereunder. OAG 72-565 .

Research References and Practice Aids

Cross-References.

Bank acting as fiduciary, provisions and regulations for, KRS 286.3-200 , 286.3-220 .

Fiduciary, oath required of, KRS 62.030 .

Guardian for child of parent joining religious society, KRS 405.070 .

Order of appointment of fiduciary, reissue if lost, KRS 422.230 .

Public administrator and guardian in each county, provisions for, KRS 395.380 to 395.400 .

Trust company acting as fiduciary, provisions for, KRS 286.3-210 .

Venue of ward’s action to settle accounts, KRS 452.425 .

Treatises

Caldwell’s Kentucky Form Book, 5th Ed., Practice Context for Guardian and Ward of Minors, § 261.00.

Petrilli, Kentucky Family Law, Minors, §§ 30.11, 30.19.

387.025. Application for appointment as guardian, limited guardian, or conservator.

  1. Any interested person or entity may petition the District Court for the appointment of a guardian or limited guardian for an unmarried minor.
  2. Any interested person or entity may petition the District Court for appointment of a conservator for a minor who owns real or personal property, or both, requiring management or protection or who has or may have business interests that may be jeopardized or prevented by minority, or who needs a conservator to settle or compromise claims.
  3. The petition for appointment shall set forth the following:
    1. The name and address of the minor;
    2. The date of birth of the minor;
    3. The name and address of the minor’s spouse, if any;
    4. The names and addresses of the minor’s parents, or if the minor has no living parent, the names and addresses of the minor’s adult next of kin;
    5. The name and address of the individual or facility having custody of the minor;
    6. The facts and reasons supporting the need for a guardianship, limited guardianship, or conservatorship for the minor;
    7. A description and approximation of the value of the minor’s real and personal property and other financial resources, including government benefits, insurance entitlements, and anticipated yearly income;
    8. The name and address of the petitioner;
    9. The name and address of the petitioner’s attorney, if any; and
    10. The name and address of the person or entity desiring appointment as guardian, limited guardian, or conservator.
  4. The petition shall be accompanied by a verified application of the person or entity desiring appointment as guardian, limited guardian, or conservator. The application shall set forth the following:
    1. Name, address, and age of the applicant;
    2. The applicant’s relationship to the minor, if any;
    3. Whether or not the applicant has ever been convicted of a crime; and
    4. The applicant’s qualifications to serve as guardian, limited guardian, or conservator.
  5. The District Court shall appoint a time for hearing the petition and application. Notice of the time and place of the hearing shall be given not less than five (5) days prior to the hearing to the minor, if the minor is more than fourteen (14) years of age, and to each of the persons or entities required to be named in the petition. Proof of notice shall be made in accordance with the provisions of KRS 395.016 . Notice may be waived as provided in KRS 395.016 .

History. Enact. Acts 1942, ch. 167, § 5; 1976, ch. 218, § 41; 1982, ch. 141, § 101, effective July 1, 1982; 1990, ch. 487, § 3, effective July 13, 1990; 2005, ch. 85, § 695, effective June 20, 2005; 2006, ch. 251, § 8, effective July 12, 2006.

Compiler’s Notes.

This section was amended by § 110 of Acts 1980, ch. 396, which would have taken effect July 1, 1982; however, Acts 1982, ch. 141, § 146, effective July 1, 1982, repealed Acts 1980, ch. 396.

NOTES TO DECISIONS

1.Application.

Entry of order appointing guardian without written application for appointment having been made would not make the order void, but only voidable. Hume v. Chenault, 305 Ky. 68 , 202 S.W.2d 1018, 1947 Ky. LEXIS 769 ( Ky. 1947 ).

A mother of a handicapped child had failed to obtain legal authority to fund and manage a trust, which was funded by a settlement received from those allegedly responsible for the child’s condition, as she was not appointed by the District Court, did not obtain approval of the trust, failed to file settlements or accountings, and administered the trust with no court supervision and control; nevertheless, her ex-husband was not entitled to half of the trust funds upon the child’s death under the laws of descent and devise because his parental rights had been previously terminated. Scott v. Montgomery Traders Bank & Trust Co., 956 S.W.2d 902, 1997 Ky. LEXIS 162 ( Ky. 1997 ).

2.Appointment.

Where the plaintiff brought a proceeding to vacate an order of the county court appointing a committee on the grounds that the statutory provisions for notice and hearing had not been complied with, but all the interested parties were before the court and had an opportunity to be heard on the merits on the motion to vacate, the order overruling the motion was equivalent to a re-appointment of the committee and valid. Settle v. Triplett, 426 S.W.2d 423, 1968 Ky. LEXIS 641 ( Ky. 1968 ) (decision prior to 1982 amendment).

3.— Irregularities.

Where the original appointment of a guardian was irregular due to a failure to name the next of kin in the petition and a failure of the court to schedule a hearing on it, the court held a hearing on a motion to set aside the appointment at which the party opposing it could have presented substantive reasons for setting it aside which he declined to do, and the opposing party failed to show where anyone was prejudiced by the irregularities in the appointment, the appointment was affirmed. Logsdon v. Logsdon, 334 S.W.2d 919, 1960 Ky. LEXIS 240 ( Ky. 1960 ).

4.Notice.

The proceeding before the Circuit Court on appeal of a custody suit was de novo, and the failure to comply with the notice provisions of this section before the lower court was immaterial. Quinn v. Franzman, 451 S.W.2d 665, 1970 Ky. LEXIS 418 ( Ky. 1970 ).

Research References and Practice Aids

Cross-References.

Administrator of Veterans’ Affairs is necessary party when beneficiary of Veterans’ Administration is involved, KRS 388.200 .

Form of petition for appointment of guardian or committee for beneficiary of Veterans’ Administration, KRS 388.230 .

Treatises

Caldwell’s Kentucky Form Book, 5th Ed., Application for Appointment as Guardian/Conservator for Minor (AOC 853), Form 261.02.

Caldwell’s Kentucky Form Book, 5th Ed., Petition for Appointment of Guardian/Conservator for Minor (AOC 852), Form 261.01.

Caldwell’s Kentucky Form Book, 5th Ed., Practice Context for Guardian and Ward of Minors, § 261.00.

387.030. Order of precedence for appointment of guardian. [Repealed.]

Compiler’s Notes.

This section (2021: amend. Acts 1976, ch. 113, § 1) was repealed by Acts 1990, ch. 487, § 27, effective July 13, 1990. For present law see KRS 387.032 .

387.032. Matters to be considered by court when making appointment.

In appointing a guardian, limited guardian, or conservator, the District Court shall appoint any person or entity whose appointment would be in the best interest of the minor, taking into consideration the ability of the person or entity to manage and preserve the minor’s estate, and taking into consideration the person or entity nominated pursuant to KRS 387.040 or 387.050 .

History. Enact. Acts 1990, ch. 487, § 4, effective July 13, 1990.

NOTES TO DECISIONS

1.Parents.

If one of the parents is dead, the survivor, if suited to the trust, has a right superior to any other to have the custody, nurture and education of the child. Rallihan v. Motschmann, 179 Ky. 180 , 200 S.W. 358, 1918 Ky. LEXIS 188 ( Ky. 1918 ) (decided under prior law). See Walker v. Crockett, 194 Ky. 531 , 240 S.W. 35, 1922 Ky. LEXIS 191 ( Ky. 1922 ) (decided under prior law).

Parents are primarily given preference to the custody of their children, but the child’s welfare supersedes all claims to its custody. Staggs v. Sparks, 286 Ky. 398 , 150 S.W.2d 690, 1941 Ky. LEXIS 251 ( Ky. 1941 ) (decided under prior law).

2.— Denial of Guardianship.

The burden rests on party seeking to deny parent custody of the child to prove by convincing evidence unfitness of parent. Rallihan v. Motschmann, 179 Ky. 180 , 200 S.W. 358, 1918 Ky. LEXIS 188 ( Ky. 1918 ) (decided under prior law). See Walker v. Crockett, 194 Ky. 531 , 240 S.W. 35, 1922 Ky. LEXIS 191 ( Ky. 1922 ) (decided under prior law).

3.Stepparent.

Where stepmother of infant children had given them every advantage in the way of care, education and devotion, and had supported them and built up a good home and business while their father was in prison, court properly appointed her as guardian, after death of children’s father, in preference to uncle of children, who failed to prove claim that stepmother was of unsuitable morals. The fact that stepmother was making a claim to certain property antagonistic to interests of children did not disqualify her, where the claim could not be established without proof by testimony other than her own. Howard v. Howard, 300 Ky. 60 , 187 S.W.2d 276, 1945 Ky. LEXIS 818 ( Ky. 1945 ) (decided under prior law).

4.Custody Agreements.

Agreements for the custody of children are enforceable between the parties when not prejudicial to the welfare of the child. Staggs v. Sparks, 286 Ky. 398 , 150 S.W.2d 690, 1941 Ky. LEXIS 251 ( Ky. 1941 ) (decided under prior law).

5.Removal.

It was proper to remove grandfather and appoint mother as guardian of child, where grandfather took no interest in child and never paid any attention to her. Davis' Adm'r v. Davis, 162 Ky. 316 , 172 S.W. 665, 1915 Ky. LEXIS 68 ( Ky. 1915 ) (decided under prior law).

Where father of infant is dead and mother has deserted child and is morally unfit to be guardian of child, the court will not upon motion of mother remove suitable guardian, already appointed, and appoint her or permit her to designate another. Herron v. Herron's Guardian, 186 Ky. 483 , 217 S.W. 361, 1920 Ky. LEXIS 51 ( Ky. 1920 ) (decided under prior law).

An appointment made by the county (now district) court was entitled to great weight, especially where it has been approved by the circuit court, and would not be set aside except for good cause. Simmons v. Simmons, 185 Ky. 449 , 215 S.W. 86, 1919 Ky. LEXIS 318 ( Ky. 1919 ) (decided under prior law).

6.De Facto Custodians.

A paternal aunt and uncle could not be considered de facto custodians of a minor child and therefore they had no superior right to the minor in a guardianship proceeding under KRS 387.032 because the de facto custodian statute, KRS 403.270 , did not apply to guardianship proceedings. McCary v. Mitchell, 260 S.W.3d 362, 2008 Ky. App. LEXIS 249 (Ky. Ct. App. 2008).

District Court’s ruling that it was in the best interests of a child that her maternal aunt and uncle rather than her paternal aunt and uncle be named as her co-guardians and co-conservators was supported by substantial evidence; while all of the parties loved the child and wanted to provide for her, the child was in need of a mother figure and the maternal aunt, who was the sister of the child’s mother, was the best choice particularly in light of the fact that the child’s father had murdered the child’s mother. McCary v. Mitchell, 260 S.W.3d 362, 2008 Ky. App. LEXIS 249 (Ky. Ct. App. 2008).

Research References and Practice Aids

Cross-References.

Notice of hearing of application, KRS 395.016 .

Order of preference need not be followed in case of beneficiaries of Veterans’ Administration, KRS 388.230 .

Who may be appointed as fiduciary, KRS 395.005 .

Treatises

Caldwell’s Kentucky Form Book, 5th Ed., Practice Context for Guardian and Ward of Minors, § 261.00.

387.035. Order of precedence for appointment of a committee. [Repealed.]

Compiler’s Notes.

Acts 1980, ch. 396, § 150 would have repealed this section effective July 1, 1982 but such 1980 act was repealed by § 146 of Acts 1982, ch. 141, effective July 1, 1982. Acts 1982, ch. 141, § 146 also repealed this section (Acts 1976, ch.113, § 2) as it existed prior to the repeal by Acts 1980, ch. 396.

387.040. Appointment by will.

The last surviving parent of a minor may by will nominate a guardian, or alternatively a limited guardian, or conservator, or both, for the minor. One (1) person or entity may be nominated to manage the minor’s financial resources and another to have care, custody, and control of the minor.

History. 2016: amend. Acts 1990, ch. 487, § 5, effective July 13, 1990.

NOTES TO DECISIONS

1.Right of Surviving Parent.

One parent may not give or will their infant child to another person so as to deprive the other parent of the rights of parentage. Mason v. Williams, 165 Ky. 331 , 176 S.W. 1171, 1915 Ky. LEXIS 529 ( Ky. 1915 ). See Rallihan v. Motschmann, 179 Ky. 180 , 200 S.W. 358, 1918 Ky. LEXIS 188 ( Ky. 1918 ); Walker v. Crockett, 194 Ky. 531 , 240 S.W. 35, 1922 Ky. LEXIS 191 ( Ky. 1922 ); Addison v. Allen, 293 Ky. 325 , 168 S.W.2d 1005, 1943 Ky. LEXIS 611 ( Ky. 1943 ).

2.Appointment by Will.

No person except a parent can appoint a guardian by will. Bush v. Bush, 63 Ky. 269 , 1865 Ky. LEXIS 64 ( Ky. 1865 ) (decided under prior law).

Research References and Practice Aids

Cross-References.

Parent under eighteen may appoint guardian for child by will, KRS 394.030 .

Parents to have custody and nurture of children, KRS 405.020 .

Treatises

Caldwell’s Kentucky Form Book, 5th Ed., Practice Context for Guardian and Ward of Minors, § 261.00.

387.050. Nomination by minor fourteen years of age or older.

If the minor is fourteen (14) years of age or older, the minor may, in the presence of the District Court, or by a writing signed in the presence of the judge, after privy examination, nominate his own guardian, limited guardian, or conservator, or if the minor be absent from the county, the minor may after privy examination, in the presence of the District Judge of the county where the minor is, or if the minor be in the military or naval services of the United States, after privy examination, in the presence of a superior commanding officer, by a writing signed in the presence of the judge or superior officer nominate his own guardian, limited guardian, or conservator, provided that the judge or the commanding officer certify to the District Judge of the county having jurisdiction to appoint a guardian, limited guardian, or conservator for the minor that the writing was signed by the minor after privy examination in the presence of the judge or officer.

History. 2022: amend. Acts 1942, ch. 81, §§ 1, 2; 1976 (Ex. Sess.), ch. 14, § 330, effective January 2, 1978; 1990, ch. 487, § 6, effective July 13, 1990.

NOTES TO DECISIONS

1.Construction.

Appointment of a guardian for an infant over 14 must be made in the precise manner set out in this section. Garth's Guardian v. Taylor, 115 Ky. 128 , 72 S.W. 777, 24 Ky. L. Rptr. 1963 , 1903 Ky. LEXIS 82 (Ky.), modified, 115 Ky. 132 , 75 S.W. 261 ( Ky. 1903 ).

2.Choice by Ward.

A ward may, after arriving at the age of 14 years, supersede a former guardian appointed for him and nominate one of his own choosing; but unless the guardian selected by the infant meets the approval of the judge, the judge may require the infant to make other choices until he approves the infant’s choice, and after the infant has had one choice approved, he cannot supersede a guardian of his own choice by another, unless the guardian is removed for some other cause. Central Trust Co. v. McCarroll, 141 Ky. 278 , 132 S.W. 541, 1910 Ky. LEXIS 447 ( Ky. 1910 ). See Stringers' Guardian v. Stringer, 263 Ky. 355 , 92 S.W.2d 339, 1936 Ky. LEXIS 171 ( Ky. 1936 ).

This section provides that after a minor reaches the age of 14 years, his wishes are to be regarded in the matter of choosing his legal representative. Kash v. Kash's Guardian, 260 Ky. 377 , 85 S.W.2d 866, 1935 Ky. LEXIS 471 ( Ky. 1935 ).

This section does not make it mandatory upon the judge to appoint the guardian named by the infant, but merely directs that the infant may nominate his own guardian. Hunt v. Irwin, 301 Ky. 726 , 193 S.W.2d 154, 1946 Ky. LEXIS 560 ( Ky. 1946 ).

This section provides that a minor 14 years of age or older may, in the presence of the judge, or by a writing signed in the presence of the judge after privy examination, nominate his own guardian. Hunt v. Irwin, 301 Ky. 726 , 193 S.W.2d 154, 1946 Ky. LEXIS 560 ( Ky. 1946 ).

3.— Persuasion by Others.

Fact that child over 14 years of age was overpersuaded to choose his brother-in-law as guardian, is not reason to void the order. Thomson v. Thompson, 47 S.W. 1088, 20 Ky. L. Rptr. 979 (1898).

4.Erroneous Appointment.

The fact that judge, in appointing father of sixteen-year-old boy as boy’s guardian, acted upon a written request of the boy which was not signed in the presence of the judge, would at most make the appointment erroneous, and not void so as to be subject to collateral attack. Hunt v. Irwin, 301 Ky. 726 , 193 S.W.2d 154, 1946 Ky. LEXIS 560 ( Ky. 1946 ).

5.Liability of First Guardian.

Where ward on arriving at 14 years of age chose a guardian to replace one previously appointed and first guardian paid over ward’s estate to latter one whose appointment was void, first guardian was liable to ward the same as if he had not paid guardian selected by ward and illegally appointed. Mays v. Mays, 10 Ky. Op. 577, 1880 Ky. LEXIS 237 (Ky. Ct. App. Apr. 15, 1880) (decided under prior law).

Cited:

McVaw v. Shelby, 75 S.W. 227, 25 Ky. L. Rptr. 309 (1903); Hume v. Chenault, 305 Ky. 68 , 202 S.W.2d 1018, 1947 Ky. LEXIS 769 ( Ky. 1947 ).

Research References and Practice Aids

Treatises

Caldwell’s Kentucky Form Book, 5th Ed., Nomination of Guardian by Minor, Form 261.04.

Caldwell’s Kentucky Form Book, 5th Ed., Practice Context for Guardian and Ward of Minors, § 261.00.

Petrilli, Kentucky Family Law, Minors, §§ 30.19, 30.21.

387.060. Guardian to control ward and his estate — Compensation. [Repealed.]

Compiler’s Notes.

This section (2032, 4711-a) was repealed by Acts 1990, ch. 487, § 2, effective July 13, 1990. For present law see KRS 387.065 and 387.111 .

387.065. Powers, duties, and responsibilities of guardian.

  1. A guardian of a ward shall have the powers and responsibilities of a parent regarding the ward’s support, care, and education, but a guardian shall not be personally liable for the ward’s expenses and shall not be liable to third persons by reason of the relationship for acts of the ward.
  2. In particular and without qualifying the foregoing, a guardian shall:
    1. Take custody of the person of the ward and establish the ward’s place of abode within the Commonwealth; and
    2. Take reasonable care of the ward’s personal effects.
  3. A guardian may:
    1. Receive money payable for the support of the ward to the ward’s parent, guardian, or custodian under the terms of any statutory benefit or insurance system or any private contract, devise, trust, or custodianship;
    2. Consent to medical or other professional care, treatment, or advice for the ward, without liability by reason of the consent, for injury to the ward resulting from the negligence or acts of third persons unless a parent would have been liable in the circumstances;
    3. Consent to the ward’s marriage, adoption, or enlistment in military service;
    4. Extend funds of the ward’s estate for the support of persons legally dependent on the ward.
  4. A guardian shall expend or distribute income or principal of the ward’s estate without District Court authorization or confirmation for the support, care, and education of the ward. The District Court may limit or restrict the guardian’s exercise of this power.
  5. In performing the guardian’s duties relating to support, care, and education of the ward, a guardian shall consider:
    1. Recommendations relating to the appropriate standard of support, care, and education for the ward made by a parent or limited guardian, if any:
    2. The size of the estate under the guardian’s supervision or control;
    3. The ward’s age, capacities, limitations, needs, opportunities, and physical and mental health;
    4. The likelihood that the ward will be able to labor and earn money when the ward becomes an adult;
    5. The accustomed standard of living of the ward; and
    6. Other funds or sources used for the support of the ward which have not been placed under the control or supervision of the guardian.
  6. A guardian shall not provide for the support, care, or education of a ward which a parent of the ward is legally obligated and financially able to provide.
  7. Funds expended under this section may be paid by a guardian to any person, including the ward, to reimburse for expenditures that the guardian might have made, or in advance for services to be rendered to the ward if it is reasonable to expect the services will be performed and advance payments are customary or reasonably necessary under the circumstances.
  8. When a ward attains age eighteen (18), the guardian, after meeting all claims and expenses of administration, shall pay over and distribute all funds and properties to the ward as soon as possible, unless:
    1. The ward has been determined to be disabled or partially disabled under KRS 387.500 to 387.770 , in which event the ward’s funds and properties shall be paid over and distributed to the guardian, limited guardian, conservator, or limited conservator appointed pursuant to KRS 387.500 to 387.770 ; or
    2. The guardian has reason to believe that the ward is disabled or partially disabled as defined in KRS 387.510 , in which event, the guardian shall institute a proceeding for appointment of a guardian, limited guardian, conservator or limited conservator pursuant to KRS 387.500 to 387.770.

History. Enact. Acts 1990, ch. 487, § 7, effective July 13, 1990.

NOTES TO DECISIONS

1.Malpractice Actions.

Because a ward’s prior guardian retained a lawyer to represent the ward in a tort action, the lawyer’s professional duties extended to the ward, and an attorney-client relationship existed between the lawyer and the ward; thus, a substitute guardian had standing to bring a legal malpractice action against the lawyer based on his representation of the ward in the tort action. Stewart v. Branham, 2007 Ky. App. LEXIS 80 (Ky. Ct. App. Mar. 9, 2007), aff'd, 307 S.W.3d 94, 2010 Ky. LEXIS 45 ( Ky. 2010 ).

2.Authority.

Motion to compel arbitration was properly denied in a negligence case against a health care center because there was no valid arbitration agreement under KRS 417.050 ; a patient was unable to ratify the signature on the arbitration agreement due to incompetence, and the Kentucky Cabinet for Health and Family Services was not a principal based upon its judicial appointment as an agent. The elements of estoppel were not met where it was clear that a power of attorney given to the patient’s son was limited to criminal charges, there was no language of durability, and preemption by the Federal Arbitration Act was not shown based on KRS 417.200 where subject matter jurisdiction was not an issue in the case. Kindred Nursing Ctrs., L.P. v. Leffew, 398 S.W.3d 463, 2013 Ky. App. LEXIS 64 (Ky. Ct. App. 2013).

Research References and Practice Aids

Cross-References.

Apprenticeship of minor, approval by guardian required, KRS 343.060 .

Attorney for fiduciary, designation of, KRS 395.145 .

Bank deposit by a minor, KRS 286.3-380 .

Credit union, minors’ accounts, KRS 286.6-365 .

Voluntary assignments for benefit of creditors — Preferred claims, KRS 379.010 .

Fiduciary must have letters from district court, general duties, KRS 395.105 .

Guardian of a veteran, compensation of, KRS 388.300 .

Investigation of accounts and payment of taxes, before final discharge, KRS 132.510 .

Investment of funds by fiduciary, authorized investments, KRS 286.3-240 , 386.020 , 386.030 , 386.050 , 386.070 .

Liability for income tax on trust estate, return by fiduciary, KRS 141.030 .

Liability for taxes on trust property, KRS 132.190 .

Payment of taxes by fiduciary, KRS 91.440 .

Savings and loan associations, accounts of minors, KRS 286.5-381 .

Treatises

Caldwell’s Kentucky Form Book, 5th Ed., Motion for Expenditure of Ward’s Funds, Form 261.15.

Caldwell’s Kentucky Form Book, 5th Ed., Practice Context for Guardian and Ward of Minors, § 261.00.

387.070. Bonding of guardian or conservator.

  1. Except as provided in subsections (2) and (3) of this section, no guardian or conservator shall act until the guardian or conservator has been appointed by the proper District Court, and given bond to the Commonwealth of Kentucky with good surety, either corporate or personal, approved by the District Court to faithfully discharge the trust of guardian or conservator. The bond shall be carefully kept by the clerk of the District Court in a book to be provided for that purpose.
  2. A limited guardian shall be exempt from the requirements of subsection (1) of this section.
    1. If the person or entity appointed by the District Court as guardian or conservator is a person or entity nominated pursuant to KRS 387.040 , and the will of the parent making the nomination requests no surety on the bond of the guardian or conservator, no surety shall be required on the bond, unless the District Court deems it imprudent to dispense with surety because of a change of circumstances since the will was made or for other good cause. (3) (a) If the person or entity appointed by the District Court as guardian or conservator is a person or entity nominated pursuant to KRS 387.040 , and the will of the parent making the nomination requests no surety on the bond of the guardian or conservator, no surety shall be required on the bond, unless the District Court deems it imprudent to dispense with surety because of a change of circumstances since the will was made or for other good cause.
    2. If the District Court directs that the assets of a ward’s estate be deposited in a restricted account as set out in KRS 387.122 , the guardian or conservator shall be exempt from giving surety on his or her bond.
  3. No master or other commissioner whose duty it is to settle the accounts of a guardian or conservator, nor judge or clerk of a court, or practicing attorney, shall be accepted as surety on the bond of a guardian or conservator.

History. 2017 to 2020: amend. Acts 1976 (Ex. Sess.), ch. 14, § 331, effective January 2, 1978; 1980, ch. 259, § 4, effective July 15, 1980; 1990, ch. 487, § 11, effective July 13, 1990; 1992, ch. 321, § 1, effective July 14, 1992; 2005, ch. 135, § 1, effective June 20, 2005.

NOTES TO DECISIONS

1.Bond Required.

Guardians must execute bonds in penal sums equal to the estimated value of the estates or funds that go into the hands of guardians. Rider's Ex'x v. Sherrard's Guardian, 231 Ky. 112 , 21 S.W.2d 147, 1929 Ky. LEXIS 229 (Ky. Ct. App. 1929).

If a bond is not sufficient to protect from loss those who are interested, the judge must require the guardian to give a new bond. Rider's Ex'x v. Sherrard's Guardian, 231 Ky. 112 , 21 S.W.2d 147, 1929 Ky. LEXIS 229 (Ky. Ct. App. 1929).

2.— Surety.

An action may be maintained against the sureties before judgment is obtained against guardian. Nelms v. Vanmeter, 31 S.W. 874, 17 Ky. L. Rptr. 498 ( Ky. 1895 ).

Nonresident is not a qualified surety. Ridgeway v. Walter, 281 Ky. 140 , 133 S.W.2d 748, 1939 Ky. LEXIS 1 ( Ky. 1939 ).

The surety on a bond required by this section may not be discharged where one property held by the guardian has been sold and the proceeds accounted for, without proof that the guardian has not received other property of the ward. Baker v. Maryland Casualty Co., 274 S.W.2d 784, 1954 Ky. LEXIS 1241 ( Ky. 1954 ).

3.— — Release.

Where bond is attested by the clerk and properly recorded, fact that order appointing guardian is not signed by judge until more than a month afterward does not release the sureties. Wills v. Evans, 38 S.W. 1090, 18 Ky. L. Rptr. 1067 (1897).

Fact that one surety on the bond is released on a plea of infancy does not exonerate the other sureties. Wills v. Evans, 38 S.W. 1090, 18 Ky. L. Rptr. 1067 (1897).

Fact that court has failed to take proper steps to coerce guardian to file an inventory does not release guardian’s sureties. Mahan v. Steele, 109 Ky. 31 , 58 S.W. 446, 22 Ky. L. Rptr. 546 , 1900 Ky. LEXIS 168 ( Ky. 1900 ).

Surety of guardian may obtain relief from bond by causing removal of guardian. Poynter v. Smith, 290 Ky. 169 , 160 S.W.2d 380, 1942 Ky. LEXIS 358 ( Ky. 1942 ).

4.— — Liability.

Guardian and his sureties are liable on his bond to the ward for every obligation resulting from acts which he is legally authorized to perform. Johnson v. Johnson's Heirs, 31 Ky. 364 , 1833 Ky. LEXIS 91 ( Ky. 1833 ) (decided under prior law).

Sureties of guardian appointed in this state are liable on his bond for estate of the ward received by guardian in another state. McDonald v. Meadows, 58 Ky. 507 , 1859 Ky. LEXIS 6 ( Ky. 1859 ) (decided under prior law).

Where guardian is appointed for three wards and acts as guardian for all of them, but only two are named in his bond, sureties are not liable to the ward whose name does not appear in the bond. Greenly v. Daniels, 69 Ky. 41 , 1869 Ky. LEXIS 95 ( Ky. 1869 ) (decided under prior law).

Where successive bonds have been executed the burden is on the sureties, in an action against them, to show when guardian misappropriated the funds. Boyd v. Withers, 103 Ky. 698 , 46 S.W. 13, 20 Ky. L. Rptr. 511 , 1898 Ky. LEXIS 115 ( Ky. 1898 ).

Execution of new bond is cumulative affording additional protection to ward. The liability of all sureties in all bonds is coequal in absence of stipulation to contrary in new bond, and one suit may be maintained against all sureties in same action. Abshire v. Rowe, 112 Ky. 545 , 66 S.W. 394, 23 Ky. L. Rptr. 1854 , 1902 Ky. LEXIS 196 ( Ky. 1902 ).

At oral request of surety, guardian, in surety’s absence, procured a new bond with another surety. Court order on filing of second bond declared surety on first bond was relieved from further liability. Court’s action in permitting giving of second bond was merely equivalent to requiring new bond as additional security, and all sureties on both bonds were equally and jointly liable. Barker v. Boyd, 71 S.W. 528, 24 Ky. L. Rptr. 1389 (1903).

Surety on guardian’s bond is not liable for money collected by guardian pursuant to void sale of ward’s land, because the money is not received in his capacity as guardian. Rudy v. Rudy, 145 Ky. 245 , 140 S.W. 192, 1911 Ky. LEXIS 827 ( Ky. 1911 ).

5.— — Accrual of Action.

In an action by infants against a surety in a bond executed by their father who was their statutory guardian for the sale of land in which the father owned a life estate and the children the reversion in fee, limitation does not begin to run during father’s lifetime. Brooks v. Troutman, 104 Ky. 392 , 47 S.W. 271, 20 Ky. L. Rptr. 640 , 1898 Ky. LEXIS 178 ( Ky. 1898 ).

6.Liability of Judge.

The judge is not an insurer of the solvency of the sureties, and if, after hearing such evidence as would satisfy a person of ordinary judgment that the sureties are solvent, he accepts them, he will not be liable. Burdine v. Pettus, 79 Ky. 240 , 1881 Ky. LEXIS 4 ( Ky. 1881 ) (decided under prior law). See Cosby v. Commonwealth, 91 Ky. 235 , 15 S.W. 514, 12 Ky. L. Rptr. 808 , 1891 Ky. LEXIS 31 ( Ky. 1891 ) (decided under prior law).

A judge will not be liable for failure of a surety when he accepted the surety on the basis of testimony which would have satisfied a person of ordinary judgment. Kimball v. Thurman, 98 Ky. 578 , 33 S.W. 834, 17 Ky. L. Rptr. 1222 , 1896 Ky. LEXIS 5 ( Ky. 1896 ). See Commonwealth v. Tilton, 111 Ky. 341 , 63 S.W. 602, 23 Ky. L. Rptr. 753 , 1901 Ky. LEXIS 198 (Ky. Ct. App. 1901); Commonwealth use of Lee v. Lee, 120 Ky. 433 , 86 S.W. 990, 89 S.W. 731, 27 Ky. L. Rptr. 806 , 28 Ky. L. Rptr. 596 , 1905 Ky. LEXIS 118 (Ky.), modified, 120 Ky. 443 , 89 S.W. 731 ( Ky. 1905 ).

In an action against the judge he cannot rely for defense on the fact that the order appointing guardian and accepting guardian’s bond was never signed by him. Farley v. Lewis, 102 Ky. 234 , 44 S.W. 114, 19 Ky. L. Rptr. 1255 , 1897 Ky. LEXIS 140 ( Ky. 1897 ). See Commonwealth v. Lewis' Adm'r, 39 S.W. 438, 19 Ky. L. Rptr. 170 (1897).

Judge’s merely being satisfied with sufficiency of surety will not exonerate him from liability to the ward for failing to require sufficient surety; he is liable if he accepts insufficient surety without exercising ordinary care to acquaint himself with the solvency of the surety. Commonwealth v. Lee, 27 Ky. L. Rptr. 806 (1905).

The judge is not an insurer of the solvency of the sureties he accepts on guardians’ bonds, and if the evidence before him as to their solvency is such as would satisfy a person of ordinary prudence and judgment, he is not liable for loss occasioned by their insolvency. Commonwealth v. Lee, 27 Ky. L. Rptr. 806 (1905); Commonwealth use of Lee v. Lee, 120 Ky. 433 , 86 S.W. 990, 89 S.W. 731, 27 Ky. L. Rptr. 806 , 28 Ky. L. Rptr. 596 , 1905 Ky. LEXIS 118 (Ky.), modified, 120 Ky. 443 , 89 S.W. 731 ( Ky. 1905 ).

If the judge knows that the surety is insolvent, or if he be ignorant, and fails to exercise reasonable diligence to inform himself, and accepts an insolvent surety, he is clearly liable if loss occurs. Commonwealth use of Lee v. Lee, 120 Ky. 433 , 86 S.W. 990, 89 S.W. 731, 27 Ky. L. Rptr. 806 , 28 Ky. L. Rptr. 596 , 1905 Ky. LEXIS 118 (Ky.), modified, 120 Ky. 443 , 89 S.W. 731 ( Ky. 1905 ); Commonwealth use of Lee v. Lee, 120 Ky. 433 , 86 S.W. 990, 89 S.W. 731, 27 Ky. L. Rptr. 806 , 28 Ky. L. Rptr. 596 , 1905 Ky. LEXIS 118 (Ky.), modified, 120 Ky. 443 , 89 S.W. 731 ( Ky. 1905 ).

Duties of judge under this section are mandatory, and he and his surety are liable for any loss resulting from his negligence or failure to comply with it. American Surety Co. v. Skaggs' Guardian, 247 Ky. 687 , 57 S.W.2d 495, 1933 Ky. LEXIS 427 (Ky. Ct. App. 1933).

Judge, his surety and surety on guardian’s bond are not insurers against losses of ward’s estate, due to depreciation of values. United States Fidelity & Guaranty Co. v. Drinkard, 250 Ky. 695 , 63 S.W.2d 916, 1933 Ky. LEXIS 761 ( Ky. 1933 ).

7.Duty of Judge.

Law providing that court require a bond of a guardian before he can act and that court be certain of the sureties on such bond means that the judge shall have personal knowledge of the sufficiency of the sureties, or, if he is not in possession of such knowledge, it is his duty to institute inquiry as to their sufficiency. Colter v. McIntire, 74 Ky. 565 , 1875 Ky. LEXIS 50 ( Ky. 1875 ) (decided under prior law). See Kinnison v. Carpenter, 72 Ky. 599 , 1873 Ky. LEXIS 12 ( Ky. 1873 ); Cosby v. Commonwealth, 91 Ky. 235 , 15 S.W. 514, 12 Ky. L. Rptr. 808 , 1891 Ky. LEXIS 31 ( Ky. 1891 ).

Cited:

Polk v. American Casualty Co., 816 S.W.2d 178, 1991 Ky. LEXIS 141 ( Ky. 1991 ).

Research References and Practice Aids

Cross-References.

Bond of fiduciary, provisions for, KRS 62.060 to 62.080 .

Bond of guardian under Veterans’ Guardianship Act, KRS 388.270 .

Cost of bonding fiduciary by authorized surety company, a charge against estate, KRS 395.130 .

Joint control of bank deposit, by surety and fiduciary, withdrawal, KRS 386.160 .

Release or indemnity of surety, provisions for, KRS 62.090 to 62.130 .

Kentucky Bench & Bar.

Treece, Powers of Attorney, Volume 54, No. 1, Winter 1990 Ky. Bench & B. 26.

Treatises

Caldwell’s Kentucky Form Book, 5th Ed., Fiduciary Bond (AOC 825), Form 261.07.

Caldwell’s Kentucky Form Book, 5th Ed., Practice Context for Guardian and Ward of Minors, § 261.00.

387.080. Recovery of damages on bond.

  1. Anyone damaged by the act or omission of the ward’s guardian or conservator may sue upon the bond of the guardian or conservator for damages, including reasonable attorney’s fees and costs incurred in collecting damages. With the assent of the District Court, anyone may sue on the bond as next friend of the ward before the ward has attained full age.
  2. If a guardian or conservator commits waste of the ward’s estate, the guardian or conservator and surety for the guardian or conservator shall be liable on the bond to the ward for damages, including reasonable attorney’s fees and costs incurred in collecting damages.

History. 2023, 2333: amend. Acts 1976 (Ex. Sess.), ch. 14, § 332, effective January 2, 1978; 1990, ch. 487, § 12, effective July 13, 1990.

NOTES TO DECISIONS

1.In General.

This section provides that a surety will be liable on the bond for damages including reasonable attorney’s fees and costs incurred in collecting damages. Ohio Cas. Ins. Co. v. Wilson, 923 S.W.2d 904, 1996 Ky. App. LEXIS 26 (Ky. Ct. App. 1996).

2.Stranger as Next Friend.

A stranger shall not be permitted to sue as an infant’s next friend against the wishes of the infant and his statutory guardian. Kash v. Kash's Guardian, 260 Ky. 377 , 85 S.W.2d 866, 1935 Ky. LEXIS 471 ( Ky. 1935 ).

3.Misuse of Ward’s Property.

Surety on guardian’s bond was liable to state where guardian failed to list ward’s property for taxation and transferred it out of the state pending an action to assess it so that assessing judgment could not be satisfied. Webber v. Commonwealth, 265 Ky. 696 , 97 S.W.2d 422, 1936 Ky. LEXIS 542 ( Ky. 1936 ).

Cited:

Polk v. American Casualty Co., 816 S.W.2d 178, 1991 Ky. LEXIS 141 ( Ky. 1991 ).

Research References and Practice Aids

Cross-References.

Action for waste, provisions for, damages, KRS 381.400 to 381.420 .

Bond of fiduciary, obligation, limitation of recovery on, KRS 62.060 to 62.080 .

Contribution among persons in trust or official capacity, KRS 412.050 .

Surety on bond of fiduciary released if no suit within five years after cause of action, KRS 413.230 .

Treatises

Caldwell’s Kentucky Form Book, 5th Ed., Complaint on Guardian’s Bond, Form 261.26.

Caldwell’s Kentucky Form Book, 5th Ed., Fiduciary Bond (AOC 825), Form 261.07.

Caldwell’s Kentucky Form Book, 5th Ed., Practice Context for Guardian and Ward of Minors, § 261.00.

387.090. Removal of guardian, limited guardian or conservator.

  1. The District Court shall remove a guardian, limited guardian, or conservator if:
    1. The guardian, limited guardian, or conservator becomes insane, moves out of the Commonwealth, becomes incapable of discharging the duties of the appointment, or fails for any reason to discharge the duties of the appointment; or
    2. The District Court deems the removal of the guardian, limited guardian, or conservator to be in the best interest of the ward.
  2. The District Court may permit a guardian, limited guardian, or conservator to resign if the guardian, limited guardian, or conservator first files a final settlement and delivers the ward’s estate as directed by the District Court.
  3. When a guardian, limited guardian, or conservator resigns or is removed from office by the District Court, the District Court shall appoint a new person or entity to serve as the ward’s guardian, limited guardian, or conservator.
  4. The District Court may remove a guardian, limited guardian, or conservator for failing to make an account or inventory as required by law, or as may be required by the District Court, or for failing to give additional surety when required.

History. 2024, 2026: amend. Acts 1984, ch. 111, § 154, effective July 13, 1984; 1986, ch. 67, § 1, effective July 15, 1986; 1990, ch. 487, § 14, effective July 13, 1990.

NOTES TO DECISIONS

1.Removal of Guardian.

So long as guardians observe the requisitions of the law and faithfully execute their trusts, they cannot be removed. Dunlap v. Kennedy, 73 Ky. 539 , 1874 Ky. LEXIS 87 ( Ky. 1874 ) (decided under prior law).

Court may remove guardian who moves out of the state or for failure to make settlement of his accounts. Mahan v. Steele, 109 Ky. 31 , 58 S.W. 446, 22 Ky. L. Rptr. 546 , 1900 Ky. LEXIS 168 ( Ky. 1900 ).

Where guardian failed to file inventory within the required period, failed to settle accounts for five years, was extravagant and wasteful in managing the ward’s estate, removal of guardian was justified. Clay's Guardian v. Clay, 89 S.W. 500, 28 Ky. L. Rptr. 398 (1905).

A motion to remove a guardian may be made at the instance of the ward, or another having the right to represent him, or upon the court’s own motion. Clay's Guardian v. Clay, 89 S.W. 500, 28 Ky. L. Rptr. 398 (1905).

When a guardian has been duly appointed and has qualified by taking the oath and executing the bond as required by law, he may not at the mere caprice or whim of the court or some complaining party be removed, but only can be removed for some cause or causes enumerated by statute or recognized by law. Stringers' Guardian v. Stringer, 263 Ky. 355 , 92 S.W.2d 339, 1936 Ky. LEXIS 171 ( Ky. 1936 ).

2.— Notice.

A guardian cannot be removed without notice to him of the proceedings for that purpose. Montgomery v. Smith, 33 Ky. 599 , 1835 Ky. LEXIS 182 ( Ky. 1835 ) (decided under prior law). See Isaacs v. Taylor, 33 Ky. 600 , 1835 Ky. LEXIS 183 ( Ky. 1835 ) (decided under prior law); Mays v. Mays, 10 Ky. Op. 577, 1880 Ky. LEXIS 237 (Ky. Ct. App. Apr. 15, 1880) (decided under prior law); Phillips v. Williams, 118 Ky. 757 , 82 S.W. 379, 26 Ky. L. Rptr. 654 , 1904 Ky. LEXIS 97 ( Ky. 1904 ) (decided under prior law).

3.— Lack of Interest in Ward.

Lack of interest in the ward or his welfare has been held sufficient to authorize removal of a guardian. Davis' Adm'r v. Davis, 162 Ky. 316 , 172 S.W. 665, 1915 Ky. LEXIS 68 ( Ky. 1915 ). See Stringers' Guardian v. Stringer, 263 Ky. 355 , 92 S.W.2d 339, 1936 Ky. LEXIS 171 ( Ky. 1936 ).

Grandfather was properly removed as guardian of child where he took no interest in her, never visited or spoke to her and entertained doubts as to her paternity. Davis' Adm'r v. Davis, 162 Ky. 316 , 172 S.W. 665, 1915 Ky. LEXIS 68 ( Ky. 1915 ).

4.— Claim in Ward’s Property.

Father was not unsuited to trust of guardianship sufficient to warrant removal, though he claimed personal property of wife alleged to belong to children, where children got benefit of such property. Gill v. Riley, 90 S.W. 2, 28 Ky. L. Rptr. 639 (1906).

5.— Surety Relieved from Bond.

Surety of guardian may obtain relief from bond by causing removal of guardian. Poynter v. Smith, 290 Ky. 169 , 160 S.W.2d 380, 1942 Ky. LEXIS 358 ( Ky. 1942 ).

6.Contract to Change Guardian.

Contract by which a guardian, in consideration of certain agreements, resigns so that another may be appointed is against public policy. Cunningham's Devisees v. Cunningham's Heirs, 57 Ky. 19 , 1857 Ky. LEXIS 4 ( Ky. 1857 ) (decided under prior law).

Cited:

Estridge v. Estridge, 76 S.W. 1101, 25 Ky. L. Rptr. 1076 (1903); Central Trust Co. v. McCarroll, 141 Ky. 278 , 132 S.W. 541, 1910 Ky. LEXIS 447 ( Ky. 1910 ); Woods v. Commonwealth, 142 S.W.3d 24, 2004 Ky. LEXIS 187 ( Ky. 2004 ).

Research References and Practice Aids

Cross-References.

Removal for failure to file settlement or account, KRS 395.255 .

Treatises

Caldwell’s Kentucky Form Book, 5th Ed., Practice Context for Guardian and Ward of Minors, § 261.00.

Caldwell’s Kentucky Form Book, 5th Ed., Day Inventory or Supplemental Inventory (AOC 855), Form 261.08.

Caldwell’s Kentucky Form Book, 5th Ed., Order Discharging Guardian, Form 261.23.

387.100. Inventory of ward’s estate.

  1. A guardian or conservator shall, within sixty (60) days after appointment, file with the District Court a true and correct inventory of the ward’s real and personal property and other financial resources, signed by the guardian or conservator and verified by the affidavit of the guardian or conservator. If other property afterward comes to the guardian’s or conservator’s knowledge, the guardian or conservator shall file a supplementary inventory thereof within sixty (60) days from the time of obtaining such knowledge.
  2. The inventory shall describe the real property and where situated, with its probable value, and the probable value of its rent. It shall include a list of all personal property, including debts due the ward, with its probable value.

History. 2027, 2028, 2029: amend. Acts 1942, ch. 167, § 24; 1976 (Ex. Sess.), ch. 14, § 333, effective January 2, 1978; 1990, ch. 487, § 15, effective July 13, 1990.

NOTES TO DECISIONS

1.Failure to File.

Where estate consisted only of cash payments from the government each month in a definite sum, and all the committee was required to do was to receive the sums and deposit them in the bank, failure to file inventory did not constitute grounds for removal. Burton v. Burton's Committee, 262 Ky. 499 , 90 S.W.2d 687, 1936 Ky. LEXIS 46 ( Ky. 1936 ).

2.Right to Accounting.

Residual beneficiary’s assertion that the beneficiary was entitled to an accounting because the executrix failed in the executor’s reporting requirements appeared to have been based solely upon the beneficiary’s perception that the executrix must have written the decedent’s will. As such, the beneficiary’s claim was insufficient to trigger an accounting. Van Meter Boone v. Hoskins, 613 S.W.3d 45, 2020 Ky. App. LEXIS 29 (Ky. Ct. App. 2020).

Research References and Practice Aids

Cross-References.

Inventory of personal property held by fiduciary, for tax purposes, KRS 132.510 .

Penalty for failure to file inventory or account, KRS 395.255 , 395.990 .

Treatises

Caldwell’s Kentucky Form Book, 5th Ed., Day Inventory or Supplemental Inventory (AOC 855), Form 261.08.

Caldwell’s Kentucky Form Book, 5th Ed., Practice Context for Guardian and Ward of Minors, § 261.00.

387.110. Jurisdiction of circuit courts over guardians. [Repealed.]

Compiler’s Notes.

This section (2039) was repealed by Acts 1976 (Ex. Sess.), ch. 14, § 491, effective January 2, 1978.

387.111. Compensation for guardians, limited guardians, and conservators — Reimbursement for expenses.

Guardians, limited guardians, and conservators shall receive reasonable compensation for services rendered and reimbursement for reasonable and necessary expenses incurred in the exercise of their assigned duties and powers, including reimbursement for room, board, and clothing personally provided to the ward and shall not exceed that provided for in KRS 387.760 . The compensation and reimbursement shall be paid from the estate of the ward.

History. Enact. Acts 1990, ch. 487, § 16, effective July 13, 1990; 2008, ch. 130, § 2, effective July 15, 2008; 2010, ch. 28, § 19, effective July 15, 2010.

Research References and Practice Aids

Treatises

Caldwell’s Kentucky Form Book, 5th Ed., Practice Context for Guardian and Ward of Minors, § 261.00.

387.120. Limitation of disbursements for care of minor — Court order to use principal of personalty. [Repealed.]

Compiler’s Notes.

This section (2034, 2039: amend. Acts 1976 (Ex. Sess.), ch. 14, § 334, effective January 2, 1978) was repealed by Acts 1990, ch. 487, § 27, effective July 13, 1990. For present law see KRS 387.122 and 387.125 .

387.122. Certain assets subject to withdrawal only upon authorization of court.

The District Court may direct that all or some part of the assets of a ward’s estate be deposited in a bank, trust company, or insured savings and loan company authorized to transact business in the Commonwealth or in a single-premium deferred annuity, subject to withdrawal by the guardian or conservator only upon authorization of the District Court.

History. Enact. Acts 1990, ch. 487, § 13, effective July 13, 1990.

Research References and Practice Aids

Treatises

Caldwell’s Kentucky Form Book, 5th Ed., Motion for Expenditure of Ward’s Funds, Form 261.15.

Caldwell’s Kentucky Form Book, 5th Ed., Order Authorizing Expenditure of Ward’s Funds, Form 261.17.

Caldwell’s Kentucky Form Book, 5th Ed., Practice Context for Guardian and Ward of Minors, § 261.00.

387.125. Guardian’s duty as to use of ward’s assets.

  1. A guardian shall apply the income or principal of the ward’s estate to the payment of debts, taxes, claims, charges, and expenses of the guardianship and, in accordance with KRS 387.065 , for the support, care, and education of the ward or the ward’s dependents.
  2. A guardian shall take possession of all of the ward’s real and personal property.
  3. A guardian may sell any of the ward’s personal property without District Court authorization or confirmation. To sell any of the ward’s real property, a guardian shall comply with the provisions of KRS Chapter 389A.
  4. A guardian shall invest any of the ward’s money or property which is not required for the ward’s current support, care and education. The investments made of a ward’s funds shall be investments authorized by KRS 386.020 .
  5. A guardian may expend the ward’s funds to repair and maintain the ward’s personal and real property.
  6. A guardian may institute or defend actions, claims, or proceedings in any jurisdiction for the protection of the ward’s estate. Subject to the approval of the court in which the action, claim, or proceeding has been filed, a guardian may settle or compromise the action, claim, or proceeding on behalf of the ward. If the action, claim, or proceeding has not been filed in any court, the District Court of the county where a guardian qualified shall approve the settlement or compromise. Upon approval of a settlement or compromise, a guardian may execute a release on behalf of the ward. A guardian shall receive any proceeds from a settlement for management in accordance with the provisions of this statute.
  7. A guardian may lease any real property of the ward until the ward reaches majority, but no lease shall be made for a term longer than seven (7) years unless otherwise approved by the District Court.
  8. A guardian shall obtain approval from the District Court of the county where the guardian qualified for any of the following made on behalf of the ward:
    1. Any lease of mineral rights;
    2. Any lease of oil and gas rights;
    3. Any sale of timber owned by the ward; or
    4. Any consolidation agreement, as defined by KRS 353.220 . To aid it in making the decision on a proposed sale, lease, or consolidation agreement, the court shall appoint a guardian ad litem for the ward. The guardian ad litem shall report to the court on the suitability of the transaction.
  9. A guardian shall comply with the reporting requirements specified in KRS 387.175 .

History. Enact. Acts 1990, ch. 487, § 8, effective July 13, 1990.

NOTES TO DECISIONS

1.Malpractice Actions.

Because a ward’s prior guardian retained a lawyer to represent the ward in a tort action, the lawyer’s professional duties extended to the ward, and an attorney-client relationship existed between the lawyer and the ward; thus, a substitute guardian had standing to bring a legal malpractice action against the lawyer based on his representation of the ward in the tort action. Stewart v. Branham, 2007 Ky. App. LEXIS 80 (Ky. Ct. App. Mar. 9, 2007), aff'd, 307 S.W.3d 94, 2010 Ky. LEXIS 45 ( Ky. 2010 ).

2.Arbitration.

Guardian has the authority to enter into collateral agreements which may affect the jural rights of her ward, and a guardian’s decision to execute an optional arbitration agreement must be in the ward’s best interest. Therefore, arbitration could have been compelled in a negligence and personal injury case because a guardian had the authority to execute an optional arbitration agreement on behalf of her ward for admission to a long-term care facility. LP Pikeville, LLC v. Wright, 2014 Ky. App. LEXIS 57 (Ky. Ct. App. Apr. 4, 2014).

Research References and Practice Aids

Treatises

Caldwell’s Kentucky Form Book, 5th Ed., Petition and Order for Payment of $10,000 or Less to Custodian of Infant, Form 230.16.

Caldwell’s Kentucky Form Book, 5th Ed., Practice Context for Guardian and Ward of Minors, § 261.00.

387.130. Guardian to pay debts of ward’s ancestor — To collect ward’s claims and represent his interests. [Repealed.]

Compiler’s Notes.

This section (2030) was repealed by Acts 1990, ch. 487, § 27, effective July 13, 1990. For present law see KRS 387.065 and 387.125 .

387.135. Powers and duties of limited guardian.

  1. A limited guardian shall have the powers and duties specified in KRS 387.065(1) to (3).
  2. A limited guardian shall apply any property of the ward made available by the ward’s conservator for the current support, care, and education of the ward.
  3. Any excess property of the ward which is not required for the ward’s current needs shall be paid by the limited guardian to the ward’s conservator.

History. Enact. Acts 1990, ch. 487, § 9, effective July 13, 1990.

Research References and Practice Aids

Treatises

Caldwell’s Kentucky Form Book, 5th Ed., Practice Context for Guardian and Ward of Minors, § 261.00.

387.137. Powers and duties of conservator.

A conservator shall have the powers and duties specified in KRS 387.125 and KRS 387.065(4) to (8).

History. Enact. Acts 1990, ch. 487, § 10, effective July 13, 1990.

Research References and Practice Aids

Treatises

Caldwell’s Kentucky Form Book, 5th Ed., Practice Context for Guardian and Ward of Minors, § 261.00.

387.140. Sale or lease of property by guardian. [Repealed.]

Compiler’s Notes.

This section (2031, 2150a: amend. Acts 1942, ch. 134, §§ 4, 5) was repealed by Acts 1990, ch. 487, § 27, effective July 13, 1990. For present law see KRS 387.125 .

387.150. Leasing of mineral rights by guardian. [Repealed.]

Compiler’s Notes.

This section (2031a-2) was repealed by Acts 1986, ch. 169, § 2, effective July 15, 1986. For present law see KRS 387.125 .

387.160. Procedure for approval of lease — Bond of guardian. [Repealed.]

Compiler’s Notes.

This section (2031a-3, 2031a-4: amend. Acts 1976 (Ex. Sess.), ch. 14, § 335, effective January 2, 1978) was repealed by Acts 1986, ch. 169, § 2, effective July 15, 1986. For present law see KRS 387.125 .

387.170. Accounting and settlement by guardian for income from lease — Assignment of one-half of income from lease to surviving spouse where dower and curtesy is outstanding in mineral rights — Descent of leasehold estate. [Repealed.]

Compiler’s Notes.

This section (2031a-5, 2031a-6: amend. Acts 1956, ch. 19; 1976 (Ex. Sess.), ch. 14, § 336, effective January 2, 1978; 1980, ch. 259, § 5, effective July 15, 1980) was repealed by Acts 1990, ch. 487, § 27, effective July 13, 1990. For present law see KRS 387.175 .

387.175. Accountings of the execution of the trust.

A guardian and conservator shall file accounts of the execution of the guardian’s or conservator’s trust. The accountings shall be subject to the provisions of KRS 395.610 to 395.657 and KRS 395.990 , and shall be made in accordance with those provisions, except as follows:

  1. An accounting of a guardian or conservator shall be filed one (1) year after appointment of the guardian or conservator, and annually thereafter unless the ward’s net estate is five thousand dollars ($5,000) or less, in which case the accounting shall be made on a biennial basis;
  2. Each accounting shall include, in addition to the items specified in KRS 395.610 , a plan for preserving and maintaining the estate under the control or supervision of the guardian or conservator. This subsection shall not be applicable to estates of wards with a net value of five thousand dollars ($5,000) or less.

History. Enact. Acts 1990, ch. 487, § 17, effective July 13, 1990.

Research References and Practice Aids

Treatises

Caldwell’s Kentucky Form Book, 5th Ed., Practice Context for Guardian and Ward of Minors, § 261.00.

Caldwell’s Kentucky Form Book, 5th Ed., Periodic/Final Settlement of Guardian/Conservator for Minor/Disabled Person (AOC 856), Form 261.09.

387.180. Settlement of guardian’s accounts. [Repealed.]

Compiler’s Notes.

This section (2037, 2038: amend. Acts 1970, ch. 92, § 92) was repealed by Acts 1990, ch. 487, § 27, effective July 13, 1990. For present law see KRS 387.175 .

387.185. Powers of foreign guardian or conservator.

  1. A foreign guardian or conservator of a ward who is not a resident of the Commonwealth of Kentucky may sue for, collect, receive, and remove from the Commonwealth the ward’s personal property located in the Commonwealth, if the District Court of the county having venue pursuant to KRS 387.020 , after notice and hearing determines that:
    1. The foreign guardian or conservator was appointed and qualified according to the law of the state where the ward resides;
    2. The foreign guardian or conservator has given bond in the state where the foreign guardian or conservator qualified with sufficient surety to account for all the ward’s estate, including the property to be removed from Kentucky;
    3. Neither the ward nor any of the ward’s creditors shall be prejudiced by removal of the ward’s property from the Commonwealth.
  2. Notice of the time and place of the hearing shall be given not less than ten (10) days prior to the hearing to the ward’s resident guardian, limited guardian, or conservator, if any, or to the ward’s adult next of kin, if there is no guardian, limited guardian, or conservator in this Commonwealth. Proof of notice shall be made in accordance with the provisions of KRS 395.016 . Notice may be waived as provided in KRS 395.016 .

History. Enact. Acts 1990, ch. 487, § 18, effective July 13, 1990.

Research References and Practice Aids

Treatises

Caldwell’s Kentucky Form Book, 5th Ed., Petition by Foreign Guardian for Authority, Form 261.21.

387.190. Nonresident guardian of nonresident ward — Powers. [Repealed.]

Compiler’s Notes.

This section (2041, 2042: amend Acts 1976 (Ex. Sess.), ch. 14, § 337, effective January 2, 1978) was repealed by Acts 1990, ch. 487, § 27, effective July 13, 1990. For present law see KRS 387.185 .

387.200. Removal of property of ward from state.

Resident guardians and conservators shall not remove out of this Commonwealth any of the property of their wards without first obtaining the approval of a District Court of the county in which the guardian or conservator was qualified. The District Court, upon the petition sworn to by the guardian or conservator and such proof as may be deemed necessary, may authorize the removal of the property of the ward out of this Commonwealth, upon terms and conditions that are equitable and just and will secure and protect the rights and interests of the ward. Guardians and conservators may be restrained from the unlawful removal of property of their wards out of this Commonwealth upon the petition of the ward by next friend, or upon the petition of any surety on the bond of the guardian or conservator.

History. 2043: amend. Acts 1990, ch. 487, § 19, effective July 13, 1990.

NOTES TO DECISIONS

1.Investment in Foreign Securities.

The sale by a guardian of stock of the ward in a foreign bank, and the reinvestment of the proceeds in stock in another foreign bank, is not a removal of the property of the ward out of this state in the meaning of this section. Durrett's Guardian v. Commonwealth, 90 Ky. 312 , 14 S.W. 189, 12 Ky. L. Rptr. 207 , 1890 Ky. LEXIS 88 (Ky. Ct. App. 1890) (decided under prior law).

The lending of ward’s money to a nonresident (investment of funds in securities of foreign corporation) is not a removal of ward’s property out of this state in violation of this section. People's State Bank & Trust Co. v. Wade, 269 Ky. 89 , 106 S.W.2d 74, 1937 Ky. LEXIS 546 ( Ky. 1937 ).

2.Sureties Liability.

If a guardian, without the consent of the court, removes from this state the property of his ward, his sureties are liable for any loss sustained by the ward, and the ward is not required to go to another state to secure from the guardian his estate. Lyne v. Perrin's Administrator, 97 Ky. 738 , 31 S.W. 869, 17 Ky. L. Rptr. 504 , 1895 Ky. LEXIS 240 (Ky. Ct. App. 1895), overruled, People's State Bank & Trust Co. v. Wade, 269 Ky. 89 , 106 S.W.2d 74, 1937 Ky. LEXIS 546 ( Ky. 1937 ).

387.210. Jurisdiction of district courts over incompetent persons and their committees — Bond of committee — Waiver of Bond. [Repealed.]

Compiler’s Notes.

Acts 1980, ch. 396, § 150 would have repealed this section effective July 1, 1982 but such 1980 act was repealed by § 146 of Acts 1982, ch. 141, effective July 1, 1982. Acts 1982, ch. 141, § 146 also repealed this section (2149, 2152: amend. Acts 1942, ch. 167, §§ 9, 21; 1976 (Ex. Sess.), ch. 14, § 338, effective January 2, 1978; 1980, ch. 147, § 1, effective July 15, 1980) as it existed prior to the repeal by Acts 1980, ch. 396.

387.220. Inquest required for appointment of committee — Oath to jury — Functions of “visitor.” [Repealed.]

Compiler’s Notes.

Acts 1980, ch. 396, § 150 would have repealed this section effective July 1, 1982 but such 1980 act was repealed by § 146 of Acts 1982, ch. 141, effective July 1, 1982. Acts 1982, ch.141, § 146 also repealed this section (2151, 2155: amend. Acts 1976, ch. 218, § 40; 1976 (Ex. Sess.), ch. 14, § 339, effective January 2, 1978) as it existed prior to the repeal by Acts 1980, ch. 396.

387.230. Powers and duties of committee — Personal charge may be given to another person — Compensation. [Repealed.]

Compiler’s Notes.

Acts 1980, ch. 396, § 150 would have repealed this section effective July 1, 1982 but such 1980 act was repealed by § 146 of Acts 1982, ch. 141, effective July 1, 1982. Acts 1982, ch. 141, § 146 also repealed this section (2153, 4711-a: amend. Acts 1978, ch. 290, § 2, effective June 17, 1978) as it existed prior to the repeal by Acts 1980, ch. 396.

387.240. Sale of real property by committee; distribution of insolvent estate. [Repealed.]

Compiler’s Notes.

This section (2150, 2150a) was repealed by Acts 1942, ch. 137, § 5.

387.250. Leasing of mineral rights by committee. [Repealed.]

Compiler’s Notes.

Acts 1980, ch. 396, § 150 would have repealed this section effective July 1, 1982 but such 1980 act was repealed by § 146 of Acts 1982, ch. 141, effective July 1, 1982. Acts 1982, ch. 141, § 146 also repealed this section (2031a-2 to 2031a-6) as it existed prior to the repeal by Acts 1980, ch. 396.

387.260. Verification of claims against estate. [Repealed.]

Compiler’s Notes.

Acts 1980, ch. 396, § 150 would have repealed this section effective July 1, 1982 but such 1980 act was repealed by § 146 of Acts 1982, ch. 141, effective July 1, 1982. Acts 1982, ch. 141, § 146 also repealed this section (2154) as it existed prior to the repeal by Acts 1980, ch. 396.

387.270. Interest charged guardians or conservators.

  1. If from any source a balance is owing by a guardian or conservator at the end of any year, counting from the time of appointment of the guardian or conservator, which should have been invested for the benefit of the ward in reasonable time but which remains in the guardian’s or conservator’s hands, the guardian or conservator shall be charged with the legal rate of interest compounded annually from the end of the year in which the balance arose.
  2. However, nothing in this section shall prohibit or prevent a guardian or conservator from accounting for or being chargeable with sums in excess of the rates herein fixed realized upon any investment of trust funds made by the guardian or conservator.

History. 2035, 2035a-1: amend. Acts 1980, ch. 259, § 6, effective July 15, 1980; 1982, ch. 141, § 139, effective July 1, 1982; 1990, ch. 487, § 20, effective July 13, 1990.

NOTES TO DECISIONS

1.Interest.

Where the same person is administrator and guardian, after a sufficient time has elapsed to settle up the estate, he will be deemed to hold the fund as guardian and charged with interest as such. Karr's Adm'r v. Karr, 36 Ky. 3 , 1837 Ky. LEXIS 127 ( Ky. 1837 ) (decided under prior law).

Guardians are required to keep the money of the ward out at interest. Higgins v. McClure, 70 Ky. 379 , 1870 Ky. LEXIS 78 ( Ky. 1870 ) (decided under prior law).

When no balance is owing by the guardian at the end of any year he should not be charged interest in biennial rests. Campbell v. Golden, 79 Ky. 544 , 3 Ky. L. Rptr. 355 , 1881 Ky. LEXIS 75 (Ky. Ct. App. 1881) (decided under prior law).

Where part of a ward’s estate consisted of notes bearing 8 percent interest the guardian was chargeable with this rate of interest where he failed to show any account books and failed to disclose the amount of interest actually received. Hedges v. Hedges, 73 S.W. 1112, 24 Ky. L. Rptr. 2220 (1903).

It is not neglect to keep a sum on hand sufficient to meet contingent expenses, or a sum so small that a prudent person would not seek investment, or if by reasonable diligence remunerative investment cannot be found. Goff's Guardian v. Goff, 123 Ky. 73 , 93 S.W. 625, 29 Ky. L. Rptr. 501 , 1906 Ky. LEXIS 119 ( Ky. 1906 ).

Where there was no evidence public administrator and guardian used ward’s money himself or could have found a safe income yielding investment thereof, he was not chargeable with interest until the end of a year from the time of his appointment. American Surety Co. v. Skaggs' Guardian, 247 Ky. 687 , 57 S.W.2d 495, 1933 Ky. LEXIS 427 (Ky. Ct. App. 1933).

2.— When Charged.

Committee may not invest ward’s funds in notes which make it impossible to compound the interest every two years, unless no other safe investment can be made at the time, and where he makes such investment he is liable for such additional interest on the amount of the notes as he could have obtained by collecting and reinvesting interest from time to time. McCreery's Adm'r v. McCreery's Committee, 185 Ky. 445 , 215 S.W. 78, 1919 Ky. LEXIS 317 ( Ky. 1919 ).

Where committee charges ward a commission in excess of what he is entitled to, he is liable not only for the excess but for interest from the end of the year in which excess arose and thereafter for interest upon interest in biennial rests. McCreery's Adm'r v. McCreery's Committee, 185 Ky. 445 , 215 S.W. 78, 1919 Ky. LEXIS 317 ( Ky. 1919 ).

General economic depression did not excuse committee from investing ward’s funds, and committee was chargeable with interest under this section rather than interest paid on time loan at bank. Burton v. Burton's Committee, 262 Ky. 499 , 90 S.W.2d 687, 1936 Ky. LEXIS 46 ( Ky. 1936 ).

Interest should be charged on sums with which committee was chargeable and which should have been available for investment. Fidelity & Casualty Co. v. Downey, 284 Ky. 2 , 284 Ky. 72 , 143 S.W.2d 869, 1940 Ky. LEXIS 444 ( Ky. 1940 ).

3.— When Compounded.

Interest should not be compounded after the marriage of the ward to an adult, nor after the ward arrives at age. Clay v. Clay, 60 Ky. 548 , 1861 Ky. LEXIS 43 ( Ky. 1861 ) (decided under prior law). See Tanner v. Skinner, 74 Ky. 120 , 1874 Ky. LEXIS 16 ( Ky. 1874 ); Finnell v. O'Neal, 76 Ky. 176 , 1877 Ky. LEXIS 25 ( Ky. 1877 ).

Until the ward arrives at age or marries, interest should be compounded every two years. Clay v. Clay, 60 Ky. 548 , 1861 Ky. LEXIS 43 ( Ky. 1861 ) (decided under prior law).

4.— Liability of Surety.

Surety of guardian is liable for interest on the face of the bond from the date when the loss of the fund occurred to the wards. Poynter v. Smith, 290 Ky. 169 , 160 S.W.2d 380, 1942 Ky. LEXIS 358 ( Ky. 1942 ).

A surety on the bond of a guardian is not chargeable with interest from the date of the loss to the estate of the ward when the interest will result in a recovery larger than the face amount of the bond. Polk v. American Casualty Co., 816 S.W.2d 178, 1991 Ky. LEXIS 141 ( Ky. 1991 ).

This section imposes liability for interest only on the guardian and not on the surety. Polk v. American Casualty Co., 816 S.W.2d 178, 1991 Ky. LEXIS 141 ( Ky. 1991 ).

Research References and Practice Aids

Cross-References.

Interest, legal rate, KRS 360.010 .

387.280. Handling amount of not more than $10,000 due to minor or person under disability.

When a minor or other person under disability, having no guardian or conservator, is entitled to receive a sum not exceeding ten thousand dollars ($10,000), exclusive of interest, in any action in which real estate has been sold or in the settlement of any estate or from any other source, the person having custody of the minor or other person under disability may settle or compromise the dollar amount when in the interest of the minor or other person under disability. The court in which the action is pending, or, if the sum does not derive from the action, the District Court, may order the sum to be paid to the person having custody of the minor or other person under disability. Before entering the order, the court shall approve any settlement or compromise and shall be satisfied by affidavit or oral testimony that the minor or other person under disability is in the custody of the person to whom it is proposed to pay the money and the latter, upon withdrawal of the money, shall be under obligation as trustee to expend it, for the support, maintenance, or education of the minor or other person under disability. When the order is made, no bond shall be required of the person having custody of the minor or other person under disability and the purchaser of the real property may pay the share of the minor or other person under disability into court, and no lien shall remain on the property therefor and the money may be withdrawn by the person mentioned in the order without that person giving bond. A release executed by the person to whom the court has ordered the sum paid shall have the same effect as a release by a duly appointed guardian.

History. 3885-1: amend. Acts 1944, ch. 115, § 3; 1950, ch. 102; 1956, ch. 201; 1970, ch. 266, § 1; 1976, ch. 218, § 20; 1976 (Ex. Sess.), ch. 14, § 340, effective January 2, 1978; 1980, ch. 259, § 7, effective July 15, 1980; 1982, ch. 141, § 140, effective July 1, 1982; 1990, ch. 487, § 21, effective July 13, 1990; 1992, ch. 425, § 2, effective July 14, 1992; 1996, ch. 92, § 1, effective July 15, 1996.

NOTES TO DECISIONS

1.Contract.

In light of the limited authority granted to custodians by KRS 405.020 and KRS 387.280 , the Kentucky Court of Appeals cannot conclude they are permitted to contractually bind their wards without formal appointment as guardians. GGNSC Stanford, LLC v. Rowe, 388 S.W.3d 117, 2012 Ky. App. LEXIS 177 (Ky. Ct. App. 2012).

Pre-injury liability waiver signed by a parent on behalf of a minor child was unenforceable under the specific facts of the case; public policy reasons for protecting a child’s civil claim pre-injury are no less present than they are post-injury. E.M. v. House of Boom Ky., LLC (In re Miller), 575 S.W.3d 656, 2019 Ky. LEXIS 211 ( Ky. 2019 ).

As litigation restrictions upon parents have remained a vital piece of the Commonwealth’s civil practice and procedure, the supreme court does not recognize a parent’s fundamental liberty interest to quash their child’s potential tort claim. E.M. v. House of Boom Ky., LLC (In re Miller), 575 S.W.3d 656, 2019 Ky. LEXIS 211 ( Ky. 2019 ).

Cited:

Jones v. Cowan, 729 S.W.2d 188, 1987 Ky. App. LEXIS 477 (Ky. Ct. App. 1987).

Opinions of Attorney General.

Regulations regarding the veterans’ bonus that the application may be signed by a minor who is married or in the armed forces if he has no guardian or committee and that the check may be paid directly to such minor are not contrary to or prohibited by law. OAG 61-998 .

An order of the court may authorize the trustee of trusts for the education of minor children in an amount of less than the statutory maximum to invest the sum due each child in United States government obligations or in an insured savings account. OAG 74-336 .

Where the circumstances in the court’s opinion justify such action, this section can be interpreted to mean that a testamentary trust of less than the statutory maximum can be avoided and the funds paid on county court order to the parent-guardian of minor beneficiaries. OAG 74-336 .

This section does not govern situations wherein the right, title or interest in the real property rests with a person under the age of 18 who has no guardian. OAG 76-342 .

Research References and Practice Aids

Northern Kentucky Law Review.

Brantton, Joint Custody in Kentucky, 8 N. Ky. L. Rev. 553 (1981).

Treatises

Caldwell’s Kentucky Form Book, 5th Ed., Petition and Order for Payment of $10,000 or Less to Custodian, Form 261.29.

Caldwell’s Kentucky Form Book, 5th Ed., Petition and Order for Payment of $10,000 or Less to Custodian of Infant, Form 230.16.

Caldwell’s Kentucky Form Book, 5th Ed., Practice Context for Guardian and Ward of Minors, § 261.00.

387.281. Jurisdiction to appoint special committee to receive funds from governmental agency for support of indigents. [Repealed.]

Compiler’s Notes.

Acts 1980, ch. 396, § 150 would have repealed this section effective July 1, 1982 but such 1980 act was repealed by § 146 of Acts 1982, ch. 141, effective July 1, 1982. Acts 1982, ch. 141, § 146 also repealed this section (Acts 1942, ch. 130, § 1; 1958, ch. 106, § 1; 1966, ch. 134, § 7;1976 (Ex. Sess.), ch. 14, § 341, effective January 2, 1978) as it existed prior to the repeal by Acts 1980, ch. 396.

387.282. Petition for appointment of special committee. [Repealed.]

Compiler’s Notes.

Acts 1980, ch. 396, § 150 would have repealed this section effective July 1, 1982 but such 1980 act was repealed by § 146 of Acts 1982, ch. 141, effective July 1, 1982. Acts 1982, ch. 141, § 146 also repealed this section (Acts 1942, ch. 130, § 2; 1966, ch. 134, § 8; 1968, ch. 200, § 4; 1978, ch. 290, § 3, effective June 17, 1978) as it existed prior to the repeal by Acts 1980, ch. 396.

387.283. Bond of special committee. [Repealed.]

Compiler’s Notes.

Acts 1980, ch. 396, § 150 would have repealed this section effective July 1, 1982 but such 1980 act was repealed by § 146 of Acts 1982, ch. 141, effective July 1, 1982. Acts 1982, ch. 141, § 146 also repealed this section (Acts 1942, ch. 130, § 3) as it existed prior to the repeal by Acts 1980, ch. 396.

387.284. Powers of special committee — Accounts. [Repealed.]

Compiler’s Notes.

Acts 1980, ch. 396, § 150 would have repealed this section effective July 1, 1982 but such 1980 act was repealed by § 146 of Acts 1982, ch. 141, effective July 1, 1982. Acts 1982, ch. 141, § 146 also repealed this section (Acts 1942, ch. 130, § 4) as it existed prior to the repeal by Acts 1980, ch. 396.

387.285. Compensation of special committee — Costs of settlement. [Repealed.]

Compiler’s Notes.

Acts 1980, ch. 396, § 150 would have repealed this section effective July 1, 1982 but such 1980 act was repealed by § 146 of Acts 1982, ch. 141, effective July 1, 1982. Acts 1982, ch. 141, § 146 also repealed this section (Acts 1942, ch. 130, § 5; 1976 (Ex. Sess.), ch. 14, § 342, effective January 2, 1978) as it existed prior to the repeal by Acts 1980, ch. 396.

387.286. Application of other statutes. [Repealed.]

Compiler’s Notes.

Acts 1980, ch. 396, § 150 would have repealed this section effective July 1, 1982 but such 1980 act was repealed by § 146 of Acts 1982, ch. 141, effective July 1, 1982. Acts 1982, ch. 141, § 146 also repealed this section (Acts 1942, ch. 130, § 6) as it existed prior to the repeal by Acts 1980, ch. 396.

387.287. Limited committee for mentally retarded person — Functions — Report. [Repealed.]

Compiler’s Notes.

Acts 1980, ch. 396, § 150 would have repealed this section effective July 1, 1982 but such 1980 act was repealed by § 146 of Acts 1982, ch. 141, effective July 1, 1982. Acts 1982, ch. 141, § 146 also repealed this section (Acts 1978, ch. 171, § 3, effective June 17, 1978) as it existed prior to the repeal by Acts 1980, ch. 396.

387.288. Petition to change or modify committee. [Repealed.]

Compiler’s Notes.

Acts 1980, ch. 396, § 150 would have repealed this section effective July 1, 1982 but such 1980 act was repealed by § 146 of Acts 1982, ch. 141, effective July 1, 1982. Acts 1982, ch. 141, § 146 also repealed this section (Acts 1978, ch. 171, § 3, effective June 17, 1978) as it existed prior to the repeal by Acts 1980, ch. 396.

387.289. Application of KRS 387.010 to 387.280.

  1. The provisions of KRS 387.010 to 387.280 shall apply to:
    1. Any guardian, limited guardian, or conservator appointed after July 13, 1990; and
    2. Any guardian for a minor ward appointed prior to July 13, 1990, unless the guardian was appointed pursuant to KRS 387.500 to 387.770 .
  2. A guardian for a minor ward appointed prior to July 13, 1990, shall have the powers and duties:
    1. Specified in KRS 387.135 , if the guardian was appointed to have care, custody and control of a minor;
    2. Specified in KRS 387.137 , if the guardian was appointed to manage the financial resources of a minor;
    3. Specified in KRS 387.065 and 387.125 , if the guardian was appointed to have care, custody, and control of a minor and to manage the minor’s financial resources.

History. Enact. Acts 1990, ch. 487, § 24, effective July 13, 1990.

387.290. Curator for convict — Appointment — Powers and duties.

  1. The District Court of the county from which the convict was sent to the penitentiary, or of the county of his residence if he had one in this state, may, upon the application of anyone interested, appoint a suitable curator of the estate of any person over the age of twenty-one (21) years confined in the penitentiary.
  2. If the convict has a spouse the District Court shall appoint the spouse curator if the spouse can give satisfactory security, and if not, then the person the spouse selects in person or by written direction to the court.
  3. The curator shall execute a bond similar to that required of curators in a case of contest concerning a will. He shall be clothed with like powers, have like privileges, discharge like duties, and be liable to like responsibilities as are provided in the case of the curator of an estate pending a contest concerning a will, except that he shall, out of the effects held by him, provide for the support of the family and the education of the minor children of the convict. He shall expend in these respects the sum authorized by the District Court, and he shall account with the convict when he is discharged from the penitentiary.

History. 1383 to 1385: amend. Acts 1974, ch. 386, § 71; 1976 (Ex. Sess.), ch. 14, § 343, effective January 2, 1978.

NOTES TO DECISIONS

1. Equity Jurisprudence.

Pursuant to KRS 427.045 , a father was not entitled to half of the proceeds from a forced foreclosure sale, which was initiated to reduce his support arrearage; however, because the father had an appropriate remedy under KRS 387.290(1), (3) for the appointment of a suitable curator, the trial court erred in creating a trust. Reinle v. Commonwealth, 170 S.W.3d 417, 2005 Ky. App. LEXIS 167 (Ky. Ct. App. 2005).

Research References and Practice Aids

Cross-References.

Curator for estate of decedent during contest of will, provisions for, KRS 395.410 , 395.420 , 395.440 .

Treatises

Caldwell’s Kentucky Form Book, 5th Ed., Day Inventory or Supplemental Inventory (AOC 855), Form 15.03.

Caldwell’s Kentucky Form Book, 5th Ed., Procedural Context for Curators, § 15.00.

387.300. Qualifications of persons suing as next friend — Liability for costs.

  1. No person shall sue as next friend unless he reside in this state and be free from disability, nor unless he file his own affidavit showing his right to sue as next friend according to the provisions of this chapter.
  2. A guardian, curator, conservator or next friend who brings or prosecutes an action for a person who is under disability is liable for the costs which accrue during his conduct of the action, unless he be allowed to sue in forma pauperis or by an order of the court.

History. C.C. 37: trans. Acts 1952, ch. 84, § 1, effective July 1, 1953; 1976 (Ex. Sess.), ch. 14, § 344, effective January 2, 1978; 1982, ch. 141, § 141, effective July 1, 1982.

NOTES TO DECISIONS

1.Affidavit.

Where the next friend for infants fails to file the affidavit required by this section, the omission may be waived. Maiden v. Stewart, 163 Ky. 551 , 174 S.W. 5, 1915 Ky. LEXIS 265 ( Ky. 1915 ). See Bartley v. Bigford, 207 Ky. 48 , 268 S.W. 820, 1925 Ky. LEXIS 10 ( Ky. 1925 ).

Where in an action to recover damages for personal injuries, the motion to dismiss action because of the failure of the next friend to file with the petition the affidavit required by the above section was made after the filing of an answer, the motion was made too late. Elkhorn Coal Corp. v. Guttadora, 190 Ky. 770 , 228 S.W. 420, 1921 Ky. LEXIS 502 ( Ky. 1921 ).

2.Costs.

A next friend is liable for costs unless he is allowed to sue in forma pauperis, and when he does not ask to sue in forma pauperis his action may be dismissed upon his failure to execute a bond for costs, if he is insolvent. Davis v. Davis, 182 Ky. 470 , 206 S.W. 623, 1918 Ky. LEXIS 379 ( Ky. 1918 ).

It is contemplated by subsection (2) of this section that when the infant is unable to procure a next friend who will become responsible for costs the court may appoint one and allow him to sue in forma pauperis. McElrath v. Barnett, 274 Ky. 771 , 120 S.W.2d 216, 1938 Ky. LEXIS 327 ( Ky. 1938 ).

If plaintiff who sues as next friend is entitled to attorney’s fee out of the estate, he is also entitled to have other costs paid by the estate as provided by KRS 412.070 , despite this section. Crutcher v. Elliston's Ex'rs, 299 Ky. 613 , 186 S.W.2d 644, 1945 Ky. LEXIS 489 ( Ky. 1945 ).

3.— Bond.

Under the provisions of this section, the court may require a next friend, if insolvent, to execute a bond for cost unless he is allowed to sue in forma pauperis. Davis v. Davis, 182 Ky. 470 , 206 S.W. 623, 1918 Ky. LEXIS 379 ( Ky. 1918 ).

Where the next friend has permission to sue in forma pauperis or is solvent no bond for costs should be required. Davis v. Davis, 182 Ky. 470 , 206 S.W. 623, 1918 Ky. LEXIS 379 ( Ky. 1918 ).

4.Qualifications.

A stranger will not be permitted to assume to represent an infant as a next friend against the wishes of the infant himself and his natural guardian. Kash v. Kash's Guardian, 260 Ky. 377 , 85 S.W.2d 866, 1935 Ky. LEXIS 471 ( Ky. 1935 ).

Where an objection to a party’s incapacity to sue as next friend is not timely made, it may be waived. Louisville & N. R. Co. v. Hooker, 266 Ky. 257 , 98 S.W.2d 922, 1936 Ky. LEXIS 654 ( Ky. 1936 ).

Where an infant is represented by a nonresident as next friend, who was not qualified as such, upon obtaining majority he does not have to commence a new action, but can proceed on the existing action after dropping the next friend from the case. Cozine v. Bonnick, 245 S.W.2d 935, 1952 Ky. LEXIS 608 ( Ky. 1952 ).

5.Sale of Real Estate.

In ex parte proceedings to sell real estate, infants may not be made parties by a next friend. Kidd v. Kidd, 276 Ky. 271 , 124 S.W.2d 66, 1939 Ky. LEXIS 515 ( Ky. 1939 ).

6.Amendment.

Where the cause of action was not changed, it was not error to permit amendments to be filed to the caption so as to join and designate a next friend on behalf of the deceased nonresident minor. Fuson v. Van Bebber, 454 S.W.2d 111, 1970 Ky. LEXIS 271 ( Ky. 1970 ), overruled, Barrett v. Stephany, 510 S.W.2d 524, 1974 Ky. LEXIS 552 ( Ky. 1974 ).

7.Seeking Declaratory Judgment.

The duties of a guardian ad litem appointed in an incompetency proceeding in District Court do not include the bringing of a declaratory judgment lawsuit in Circuit Court on behalf of the ward. Any such action must be brought by a next friend. Sparks v. Boggs, 839 S.W.2d 581, 1992 Ky. App. LEXIS 229 (Ky. Ct. App. 1992).

Cited:

Gore v. Debaryshe, 278 F. Supp. 883, 1968 U.S. Dist. LEXIS 7902 (W.D. Ky. 1968 ); Maiden v. Stewart, 163 Ky. 551 , 174 S.W. 5, 1915 Ky. LEXIS 265 ( Ky. 1915 ); Bowles v. Bowles’ Adm’x, 211 Ky. 250 , 277 S.W. 260, 1925 Ky. LEXIS 857 ( Ky. 1925 ); Clover Folk Coal Co. v. Scoggins, 263 Ky. 424 , 91 S.W.2d 543, 1936 Ky. LEXIS 124 ( Ky. 1936 ); Davis v. Mitchell, 266 Ky. 151 , 98 S.W.2d 474, 1936 Ky. LEXIS 625