CHAPTER 59-01 General Provisions [Repealed]

[Repealed by S.L. 2007, ch. 549, § 27]

59-01-01. Trusts — Classification. [Repealed]

Repealed by S.L. 2007, ch. 549, § 27.

59-01-02. Express trust — Definition. [Repealed]

Repealed by S.L. 2007, ch. 549, § 27.

59-01-03. Purpose for which express trust may be created. [Repealed]

Repealed by S.L. 2007, ch. 549, § 27.

59-01-04. Express trust — How created. [Repealed]

Repealed by S.L. 2007, ch. 549, § 27.

59-01-05. Implied trust — Definition. [Repealed]

Repealed by S.L. 2007, ch. 549, § 27.

59-01-06. Implied trust — How created. [Repealed]

Repealed by S.L. 2007, ch. 549, § 27.

59-01-07. Trustor, trustee, beneficiary — Definition. [Repealed]

Repealed by S.L. 2007, ch. 549, § 27.

59-01-08. One assuming relation of personal confidence is trustee. [Repealed]

Repealed by S.L. 2007, ch. 549, § 27.

59-01-09. Good faith required of trustee. [Repealed]

Repealed by S.L. 2007, ch. 549, § 27.

59-01-10. Trustee shall not profit by use of property. [Repealed]

Repealed by S.L. 2007, ch. 549, § 27.

59-01-11. Transactions adverse to beneficiary prohibited — Exceptions. [Repealed]

Repealed by S.L. 2007, ch. 549, § 27.

59-01-12. Use of influence for own advantage prohibited. [Repealed]

Repealed by S.L. 2007, ch. 549, § 27.

59-01-13. Adverse trust prohibited. [Repealed]

Repealed by S.L. 2007, ch. 549, § 27.

59-01-14. Adverse interest. [Repealed]

Repealed by S.L. 2007, ch. 549, § 27.

59-01-15. Violation is a fraud against beneficiary. [Repealed]

Repealed by S.L. 2007, ch. 549, § 27.

59-01-16. Presumption against trustee. [Repealed]

Repealed by S.L. 2007, ch. 549, § 27.

59-01-17. Liability for mingling property. [Repealed]

Repealed by S.L. 2007, ch. 549, § 27.

59-01-18. Liability of trustee for unauthorized use of trust property. [Repealed]

Repealed by S.L. 2007, ch. 549, § 27.

59-01-19. Liability for acts of cotrustees. [Repealed]

Repealed by S.L. 2007, ch. 549, § 27.

59-01-20. Liability of third persons dealing with trustee. [Repealed]

Repealed by S.L. 2007, ch. 549, § 27.

CHAPTER 59-02 Trusts for the Benefit of Third Persons [Repealed]

[Repealed by S.L. 2007, ch. 549, § 27]

59-02-01. Application of chapter. [Repealed]

Repealed by S.L. 2007, ch. 549, § 27.

59-02-02. Mutual consent of trustor and trustee necessary. [Repealed]

Repealed by S.L. 2007, ch. 549, § 27.

59-02-03. When court trustor. [Repealed]

Repealed by S.L. 2007, ch. 549, § 27.

59-02-04. Declaration of nature of trust. [Repealed]

Repealed by S.L. 2007, ch. 549, § 27.

59-02-05. Trustee shall obey declaration of trust. [Repealed]

Repealed by S.L. 2007, ch. 549, § 27.

59-02-05.1. Investment of trust funds in mutual funds. [Repealed]

Repealed by S.L. 2007, ch. 549, § 27.

59-02-06. Ordinary care by trustee required. [Repealed]

Repealed by S.L. 1973, ch. 257, § 82.

59-02-07. Appointment of successor to trustee. [Repealed]

Repealed by S.L. 2007, ch. 549, § 27.

59-02-08. Investment of trust funds — Prudent investor rule. [Repealed]

Repealed by S.L. 1997, ch. 508, § 3.

59-02-08.1. Prudent investor rule. [Repealed]

Repealed by S.L. 2007, ch. 549, § 27.

59-02-08.2. Standard of care — Portfolio strategy — Risk and return objectives. [Repealed]

Repealed by S.L. 2007, ch. 549, § 27.

59-02-08.3. Diversification. [Repealed]

Repealed by S.L. 2007, ch. 549, § 27.

59-02-08.4. Duties at inception of trusteeship. [Repealed]

Repealed by S.L. 2007, ch. 549, § 27.

59-02-08.5. Loyalty. [Repealed]

Repealed by S.L. 2007, ch. 549, § 27.

59-02-08.6. Impartiality. [Repealed]

Repealed by S.L. 2007, ch. 549, § 27.

59-02-08.7. Investment costs. [Repealed]

Repealed by S.L. 2007, ch. 549, § 27.

59-02-08.8. Reviewing compliance. [Repealed]

Repealed by S.L. 2007, ch. 549, § 27.

59-02-08.9. Delegation of investment and management functions. [Repealed]

Repealed by S.L. 2007, ch. 549, § 27.

59-02-08.10. Language invoking standard of sections 59-02-08.1 through 59-02-08.11. [Repealed]

Repealed by S.L. 2007, ch. 549, § 27.

59-02-08.11. Application to existing trusts. [Repealed]

Repealed by S.L. 2007, ch. 549, § 27.

59-02-09. Claims purchased by trustee not enforceable. [Repealed]

Repealed by S.L. 2007, ch. 549, § 27.

59-02-10. Authority of trustee. [Repealed]

Repealed by S.L. 2007, ch. 549, § 27.

59-02-11. All cotrustees must act in unity. [Repealed]

Repealed by S.L. 2007, ch. 549, § 27.

59-02-12. Discretionary power of trustee — How exercised. [Repealed]

Repealed by S.L. 2007, ch. 549, § 27.

59-02-13. Instruments executed by trustee in representative capacity — Effect. [Repealed]

Repealed by S.L. 2007, ch. 549, § 27.

59-02-14. Trustee’s expenses paid out of trust estate. [Repealed]

Repealed by S.L. 2007, ch. 549, § 27.

59-02-15. Compensation of trustee. [Repealed]

Repealed by S.L. 2007, ch. 549, § 27.

59-02-16. No compensation to implied trustees. [Repealed]

Repealed by S.L. 2007, ch. 549, § 27.

59-02-17. Trusts — How terminated. [Repealed]

Repealed by S.L. 2007, ch. 549, § 27.

59-02-17.1. Suspension of power of alienation — Rule against perpetuities — Exception. [Repealed]

Repealed by S.L. 2007, ch. 549, § 27.

59-02-18. Trust not revocable — Exception. [Repealed]

Repealed by S.L. 2007, ch. 549, § 27.

59-02-19. Office of trustee — How vacated. [Repealed]

Repealed by S.L. 2007, ch. 549, § 27.

59-02-20. Discharge of trustee. [Repealed]

Repealed by S.L. 2007, ch. 549, § 27.

59-02-21. Trust survives to cotrustees. [Repealed]

Repealed by S.L. 2007, ch. 549, § 27.

59-02-22. Private foundations — Charitable trusts — Split-interest trusts. [Repealed]

Repealed by S.L. 2007, ch. 549, § 27.

CHAPTER 59-03 Trusts Relating to Realty [Repealed]

[Repealed by S.L. 2007, ch. 549, § 27]

59-03-01. Application of chapter. [Repealed]

Repealed by S.L. 2007, ch. 549, § 27.

59-03-02. Purposes for which express trusts created. [Repealed]

Repealed by S.L. 2007, ch. 549, § 27.

59-03-03. Requisites of trust relating to real property. [Repealed]

Repealed by S.L. 2007, ch. 549, § 27.

59-03-03.1. Trustee to convey and transfer real estate. [Repealed]

Repealed by S.L. 2007, ch. 549, § 27.

59-03-04. Direct transfer of realty necessary. [Repealed]

Repealed by S.L. 2007, ch. 549, § 27.

59-03-05. Legal estate deemed vested in person with right to possession and profits. [Repealed]

Repealed by S.L. 2007, ch. 549, § 27.

59-03-06. Trusts valid if connected with power. [Repealed]

Repealed by S.L. 2007, ch. 549, § 27.

59-03-07. Implied trusts not affected by foregoing provisions. [Repealed]

Repealed by S.L. 2007, ch. 549, § 27.

59-03-08. Innocent purchaser protected against implied trust. [Repealed]

Repealed by S.L. 2007, ch. 549, § 27.

59-03-09. Protection of creditors and purchasers without notice of trust. [Repealed]

Repealed by S.L. 2007, ch. 549, § 27.

59-03-10. When creditors of beneficiary may reach trust profits. [Repealed]

Repealed by S.L. 2007, ch. 549, § 27.

59-03-11. Power in trust not prohibited. [Repealed]

Repealed by S.L. 2007, ch. 549, § 27.

59-03-12. When devise valid as power in trust. [Repealed]

Repealed by S.L. 2007, ch. 549, § 27.

59-03-13. When trust valid as power in trust — Realty passes. [Repealed]

Repealed by S.L. 2007, ch. 549, § 27.

59-03-14. Whole estate vests in trustees. [Repealed]

Repealed by S.L. 2007, ch. 549, § 27.

59-03-15. Trustor may prescribe disposition if trust fails or ends. [Repealed]

Repealed by S.L. 2007, ch. 549, § 27.

59-03-16. Estate of grantee. [Repealed]

Repealed by S.L. 2007, ch. 549, § 27.

59-03-17. Disposition of estates not embraced in trust. [Repealed]

Repealed by S.L. 2007, ch. 549, § 27.

59-03-18. Beneficiary restrained from disposing of interest. [Repealed]

Repealed by S.L. 2007, ch. 549, § 27.

59-03-19. When transfer of trustee void. [Repealed]

Repealed by S.L. 2007, ch. 549, § 27.

59-03-20. When estate of trustee ceases. [Repealed]

Repealed by S.L. 2007, ch. 549, § 27.

CHAPTER 59-04 Administration of Trusts [Repealed]

[Repealed by S.L. 2007, ch. 549, § 27]

59-04-01. Procedure and administration of trusts. [Repealed]

Repealed by S.L. 1973, ch. 257, § 82.

59-04-02. Commencement of trust proceedings. [Repealed]

Repealed by S.L. 2007, ch. 549, § 27.

59-04-03. Form of title in trust administration proceeding. [Repealed]

Repealed by S.L. 2007, ch. 549, § 27.

59-04-04. Requisites of petition. [Repealed]

Repealed by S.L. 2007, ch. 549, § 27.

59-04-05. Notice — Service. [Repealed]

Repealed by S.L. 1973, ch. 257, § 82.

59-04-06. Requisites of notice of hearing. [Repealed]

Repealed by S.L. 1973, ch. 257, § 82.

59-04-07. Notice of hearing — Form. [Repealed]

Repealed by S.L. 1973, ch. 257, § 82.

59-04-08. Appearance — Waiver of notice — Admission of service. [Repealed]

Repealed by S.L. 2007, ch. 549, § 27.

59-04-09. Proof of service of notice of hearing and order. [Repealed]

Repealed by S.L. 1973, ch. 257, § 82.

59-04-10. Effect of court orders. [Repealed]

Repealed by S.L. 2007, ch. 549, § 27.

59-04-11. Representation of minors and incompetents. [Repealed]

Repealed by S.L. 2007, ch. 549, § 27.

59-04-12. Resident agent. [Repealed]

Repealed by S.L. 1973, ch. 257, § 82.

59-04-13. Adoption of orders and decrees of foreign courts. [Repealed]

Repealed by S.L. 1973, ch. 257, § 82.

59-04-14. Bond of trustee. [Repealed]

Repealed by S.L. 1975, ch. 257, § 82.

59-04-15. Powers and duties of trustee. [Repealed]

Repealed by S.L. 2007, ch. 549, § 27.

59-04-16. Hearing may be had on several accounts, reports, or petitions — Order allowing required. [Repealed]

Repealed by S.L. 2007, ch. 549, § 27.

59-04-17. Reports of trustee. [Repealed]

Repealed by S.L. 2007, ch. 549, § 27.

59-04-18. Removal of trustee. [Repealed]

Repealed by S.L. 2007, ch. 549, § 27.

59-04-19. Vacancy in trust. [Repealed]

Repealed by S.L. 2007, ch. 549, § 27.

59-04-20. Vouchers shall accompany account — Exception. [Repealed]

Repealed by S.L. 1991, ch. 695, § 3.

59-04-21. Expenses and attorney’s fees allowed. [Repealed]

Repealed by S.L. 2007, ch. 549, § 27.

59-04-22. Subsequent notice and hearings — Procedure. [Repealed]

Repealed by S.L. 2007, ch. 549, § 27.

59-04-23. When court order required. [Repealed]

Repealed by S.L. 2007, ch. 549, § 27.

59-04-24. Correction of mistakes — Relief from default — Copy of record furnished. [Repealed]

Repealed by S.L. 2007, ch. 549, § 27.

59-04-25. Appeals. [Repealed]

Repealed by S.L. 2007, ch. 549, § 27.

59-04-26. Appeal — How taken. [Repealed]

Repealed by S.L. 2007, ch. 549, § 27.

59-04-27. Stay of proceedings. [Repealed]

Repealed by S.L. 2007, ch. 549, § 27.

59-04-28. Notice of appeal. [Repealed]

Repealed by S.L. 2007, ch. 549, § 27.

59-04-29. Procedure on appeal. [Repealed]

Repealed by S.L. 2007, ch. 549, § 27.

59-04-30. Transmission of record — Briefs. [Repealed]

Repealed by S.L. 2007, ch. 549, § 27.

59-04-31. Demand for change of judge — Disqualification of judge. [Repealed]

Repealed by S.L. 2007, ch. 549, § 27.

CHAPTER 59-04.1 Uniform Principal and Income Act [Repealed]

[Repealed by S.L. 1999, ch. 532, § 2]

CHAPTER 59-04.2 Uniform Principal and Income Act

59-04.2-01. (102) Definitions.

In this chapter:

  1. “Accounting period” means a calendar year unless another twelve-month period is selected by a fiduciary. The term includes a portion of a calendar year or other twelve-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. “Fiduciary” means a personal representative or a trustee. The term includes an executor, administrator, successor personal representative, special administrator, and a person performing substantially the same function.
  4. “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 sections 59-04.2-09 through 59-04.2-23.
  5. “Income beneficiary” means a person to whom net income of a trust is or may be payable.
  6. “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.
  7. “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.
  8. “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 this chapter to or from income during the period.
  9. “Principal” means property held in trust for distribution to a remainder beneficiary when the trust terminates.
  10. “Remainder beneficiary” means a person entitled to receive principal when an income interest ends.
  11. “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.
  12. “Trustee” includes an original, additional, or successor trustee, whether or not appointed or confirmed by a court.

Source: S.L. 1999, ch. 532, § 1.

Collateral References.

Power of trustee of noncharitable trust to make gift of trust property, 21 A.L.R.3d 801.

Language of will or other trust instrument as implying right to invade principal on behalf of life beneficiary, 31 A.L.R.3d 309.

Propriety of considering beneficiary’s other means under trust provision authorizing invasion of principal for beneficiary’s support, 41 A.L.R.3d 255.

Payment or distribution under invalid instruction as breach of trustee’s duty, 6 A.L.R.4th 1196.

59-04.2-02. (103) Fiduciary duties — General principles.

  1. In allocating receipts and disbursements to or between principal and income, and with respect to any matter within the scope of sections 59-04.2-04 through 59-04.2-08, 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 this chapter.
    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 this chapter.
    3. Shall administer a trust or estate in accordance with this chapter 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.
    4. Shall add a receipt or charge a disbursement to principal to the extent that the terms of the trust and this chapter do not provide a rule for allocating the receipt or disbursement to or between principal and income.
  2. In exercising a discretionary power of administration regarding a matter within the scope of this chapter, whether granted by the terms of a trust, a will, or this chapter, 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 an intention that the fiduciary shall or may favor one or more of the beneficiaries. A determination in accordance with this chapter is presumed to be fair and reasonable to all of the beneficiaries.

Source: S.L. 1999, ch. 532, § 1.

59-04.2-03. (104) Trustee’s power to adjust.

  1. A trustee may adjust between principal and income to the extent the trustee considers necessary if the trustee invests and manages trust assets as a prudent investor, the terms of the trust describe the amount that may or must be distributed to a beneficiary by referring to the trust’s income, and the trustee determines, after applying the rules in subsection 1 of section 59-04.2-02 that the trustee is unable to comply with subsection 1 of section 59-04.2-02.
    1. The discretionary power of a trustee to adjust under this section may not be interpreted to include an obligation to evaluate a trust for possible adjustment between principal and income.
    2. A trustee’s inaction is presumed to be a good faith determination not to exercise the power to adjust.
  2. In deciding whether and to what extent to exercise the power conferred by subsection 1, a trustee may consider all factors relevant to the trust and its beneficiaries, including the following factors to the extent relevant:
    1. The nature, purpose, size, and expected duration of the trust;
    2. The intent of the settlor;
    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, the extent to which they consist of financial assets, interests in closely held enterprises, tangible and intangible personal property, or real property; the extent to which an asset is used by a beneficiary; and whether an asset was purchased by the trustee or received from the settlor;
    6. The net amount allocated to income under the other sections of this chapter and the increase or decrease in the value of the principal assets, which the trustee may estimate as to assets for which market values are not readily available;
    7. Whether and to what extent the terms of the trust give the trustee the power to invade principal or accumulate income or prohibit the trustee from invading principal or accumulating income, and the extent to which the trustee has exercised a power from time to time to invade principal or accumulate income;
    8. The actual and anticipated effect of economic conditions on principal and income and effects of inflation and deflation; and
    9. The anticipated tax consequences of an adjustment.
  3. A trustee may 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 trustee 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 a beneficiary as a fixed annuity or a fixed fraction of the value of the trust assets;
    4. From an 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 for income tax purposes, and the individual would not be treated as the owner if the trustee 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 assets to be included for estate tax purposes in the estate of an individual who has the power to remove a trustee or appoint a trustee, or both, and the assets would not be included in the estate of the individual if the trustee did not possess the power to make an adjustment;
    7. If the trustee is a beneficiary of the trust; or
    8. If the trustee is not a beneficiary, but the adjustment would benefit the trustee directly or indirectly.
  4. If subdivisions e, f, g, or h of subsection 3 apply to a trustee and there is more than one trustee, a cotrustee to whom the provision does not apply may make the adjustment unless the exercise of the power by the remaining trustee or trustees is not permitted by the terms of the trust.
  5. A trustee may release the entire power conferred by subsection 1 or may release only the power to adjust from income to principal or the power to adjust from principal to income if the trustee is uncertain about whether possessing or exercising the power will cause a result described in subdivision a through f, or h of subsection 3 or if the trustee 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 subsection 3. The release may be permanent or for a specified period, including a period measured by the life of an individual.
  6. Terms of a trust that limit the power of a trustee 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 that the terms are intended to deny the trustee the power of adjustment conferred by subsection 1.

Source: S.L. 2017, ch. 416, § 2, effective August 1, 2017.

59-04.2-03.1. Judicial control of discretionary power.

  1. The court may not order a fiduciary to change a decision to exercise or not to exercise a discretionary power conferred by this chapter unless the court determines that the decision was not made in good faith or was an abuse of the fiduciary’s discretion. A fiduciary’s decision is not an abuse of discretion merely because the court would have exercised the power in a different manner or would not have exercised the power.
  2. The decisions to which subsection 1 applies include:
    1. A decision under subsection 1 of section 59-04.2-03 as to whether and to what extent an amount should be transferred from principal to income or from income to principal.
    2. A decision regarding the factors that are relevant to the trust and its beneficiaries, the extent to which the factors are relevant, and the weight, if any, to be given to those factors, in deciding whether and to what extent to exercise the discretionary power conferred by subsection 1 of section 59-04.2-03.
  3. If the court determines a fiduciary has abused the fiduciary’s discretion, the court may place the income and remainder beneficiaries in the positions they would have occupied if the discretion had not been abused, according to the following rules:
    1. To the extent the abuse of discretion has resulted in no distribution to a beneficiary or in a distribution that is too small, the court shall order the fiduciary to distribute from the trust to the beneficiary an amount that the court determines will restore the beneficiary, in whole or in part, to the beneficiary’s appropriate position.
    2. To the extent the abuse of discretion has resulted in a distribution to a beneficiary which is too large, the court shall place the beneficiaries, the trust, or both, in whole or in part, in their appropriate positions by ordering the fiduciary to withhold an amount from one or more future distributions to the beneficiary who received the distribution that was too large or ordering that beneficiary to return some or all of the distribution to the trust.
    3. To the extent the court is unable, after applying subdivisions a and b to place the beneficiaries, the trust, or both, in the positions they would have occupied if the discretion had not been abused, the court may order the fiduciary to pay an appropriate amount from its own funds to one or more of the beneficiaries or the trust or both.
  4. Upon petition by the fiduciary, the court having jurisdiction over a trust or estate shall determine whether a proposed exercise or nonexercise by the fiduciary of a discretionary power conferred by this chapter will result in an abuse of the fiduciary’s discretion. If the petition describes the proposed exercise or nonexercise of the power and contains sufficient information to inform the beneficiaries of the reasons for the proposal, the facts upon which the fiduciary relies, and an explanation of how the income and remainder beneficiaries will be affected by the proposed exercise or nonexercise of the power, then a beneficiary who challenges the proposed exercise or nonexercise has the burden of establishing that it will result in an abuse of discretion.

Source: S.L. 2017, ch. 416, § 3, effective August 1, 2017.

59-04.2-04. (201) 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 sections 59-04.2-06 through 59-04.2-29 which apply to trustees and the rules in subsection 5. 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 sections 59-04.2-06 through 59-04.2-29 which 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 of 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.
    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 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 in the manner described in section 59-04.2-05 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 may not reduce principal or income receipts from property described in subsection 1 because of a payment described in section 59-04.2-24 or 59-04.2-25 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.

Source: S.L. 1999, ch. 532, § 1.

59-04.2-05. (202) Distribution to residuary and remainder beneficiaries.

  1. Each beneficiary described in subsection 4 of section 59-04.2-04 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 distribution of assets to beneficiaries to whom this section applies, each beneficiary, including one who does 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 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 must 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 must be calculated on the basis of the aggregate value of those assets as of the distribution date without reducing the value by any 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.

Source: S.L. 1999, ch. 532, § 1.

59-04.2-06. (301) 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 subsection 4, 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.

Source: S.L. 1999, ch. 532, § 1.

59-04.2-07. (302) 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 subsection 1 of section 59-04.2-04 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 must 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 must be allocated to principal and the balance must 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 this chapter. Distributions to shareholders or other owners from an entity to which section 59-04.2-09 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 must be paid at regular intervals under a lease or an obligation to pay interest or if an entity customarily makes distributions at regular intervals.

Source: S.L. 1999, ch. 532, § 1.

59-04.2-08. (303) 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 does 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 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 must 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.

Source: S.L. 1999, ch. 532, § 1.

59-04.2-09. (401) Character of receipts.

  1. In this section, “entity” means a corporation, partnership, limited liability company, 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 section 59-04.2-10 applies, a business or activity to which section 59-04.2-11 applies, or an asset-backed security to which section 59-04.2-23 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 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.
    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 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 subdivision b of subsection 4, to the extent that it does not exceed the amount of income tax that a trustee or beneficiary must 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.

Source: S.L. 1999, ch. 532, § 1.

59-04.2-10. (402) 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, section 59-04.2-09 or 59-04.2-23 applies to a receipt from the trust.

Source: S.L. 1999, ch. 532, § 1.

59-04.2-11. (403) Business and other activities conducted by trustee.

  1. If a trustee who conducts a business or other activity determines that it is in the best interest of all the beneficiaries to account separately for the business or activity instead of accounting for it as part of the trust’s general accounting records, the trustee may maintain separate accounting records for its transactions, whether or not its assets are segregated from other trust assets.
  2. A trustee who accounts separately for a business or other activity may determine the extent to which its net cash receipts must be retained for working capital, the acquisition or replacement of fixed assets, and other reasonably foreseeable needs of the business or activity, and the extent to which the remaining net cash receipts are accounted for as principal or income in the trust’s general accounting records. If a trustee sells assets of the business or other activity, other than in the ordinary course of the business or activity, the trustee shall account for the net amount received as principal in the trust’s general accounting records to the extent the trustee determines that the amount received is no longer required in the conduct of the business.
  3. Activities for which a trustee may maintain separate accounting records include retail, manufacturing, service, and other traditional business activities; farming; raising and selling livestock and other animals; management of rental properties; extraction of minerals and other natural resources; timber operations; and activities to which section 59-04.2-22 applies.

Source: S.L. 1999, ch. 532, § 1.

59-04.2-12. (404) Principal receipts.

A trustee shall allocate to principal:

  1. To the extent not allocated to income under this chapter, 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 realized profit, subject to sections 59-04.2-09 through 59-04.2-23.
  3. Amounts recovered from third parties to reimburse the trust because of disbursements described in subdivision g of subsection 1 of section 59-04.2-25 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 must distribute income.
  6. Other receipts as provided in sections 59-04.2-16 through 59-04.2-23.

Source: S.L. 1999, ch. 532, § 1.

59-04.2-13. (405) Rental property.

To the extent that a trustee accounts for receipts from rental property pursuant to 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 to be applied as rent for future periods, must 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.

Source: S.L. 1999, ch. 532, § 1.

59-04.2-14. (406) Obligation to pay money.

  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, must 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 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 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 must be allocated to income.
  3. This section does not apply to an obligation to which section 59-04.2-17, 59-04.2-18, 59-04.2-19, 59-04.2-20, 59-04.2-22, or 59-04.2-23 applies.

Source: S.L. 1999, ch. 532, § 1.

59-04.2-15. (407) Insurance policies and similar contracts.

  1. Except as otherwise provided in subsection 2, 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, subject to section 59-04.2-11, loss of profits from a business.
  3. This section does not apply to a contract to which section 59-04.2-17 applies.

Source: S.L. 1999, ch. 532, § 1.

59-04.2-16. (408) Insubstantial allocations not required.

Reserved.

59-04.2-17. (409) Deferred compensation, annuities, and similar payments.

  1. In this section, “payment” means a payment that a trustee may receive over a fixed number of years or during the life of one 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, the term includes any payment from a separate fund, regardless of the reason for the payment. In this section, “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, a dividend, or a payment made in lieu of interest or a dividend, a trustee shall allocate the payment 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 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, subsections 6 and 7 apply, and subsections 2 and 3 do not apply, in determining the allocation of a payment made from a separate fund to a trust to which an election to qualify for marital deduction under section 2056(b)(7) of the Internal Revenue Code of 1986, as amended, has been made or to a trust that qualified for the marital deduction under section 2056(b)(5) of the Internal Revenue Code of 1986, as amended.
  5. Subsections 4, 6, and 7 do not apply if and to the extent that the series of payments would, without application of subsection 4, qualify for the marital deduction under section 2056(b)(7)(C) of the Internal Revenue Code of 1986, as amended.
  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 this chapter. Upon request of the surviving spouse, the trustee shall demand of the persons administering the separate fund that this internal income be distributed 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 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 a separate fund, the internal income of the separate fund is deemed to equal four percent 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 section 7520 of the Internal Revenue Code of 1986, as amended, for the month preceding the accounting period for which the computation is made.
  8. This section does not apply to a payment to which section 59-04.2-18 applies.

Source: S.L. 1999, ch. 532, § 1; 2009, ch. 586, § 1.

59-04.2-18. (410) Liquidating asset.

  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 year under an arrangement that does not provide for the payment of interest on the unpaid balance. The term does not include a payment subject to section 59-04.2-17, resources subject to section 59-04.2-19, timber subject to section 59-04.2-20, an activity subject to section 59-04.2-22, an asset subject to section 59-04.2-23, or any asset for which the trustee establishes a reserve for depreciation under section 59-04.2-26.
  2. A trustee shall allocate to income ten percent of the receipts from a liquidating asset and the balance to principal.

Source: S.L. 1999, ch. 532, § 1.

59-04.2-19. (411) 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 must be allocated to income.
    2. If received from a production payment, a receipt must 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 must 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, fifteen percent must be allocated to principal and the balance to income.
    4. If an amount is received from a working interest or any other interest not provided for in subdivision a, b, or c, fifteen percent of the net amount received must be allocated to principal and the balance to income.
  2. An amount received on account of an interest in water that is renewable must be allocated to income. If the water is not renewable, ninety percent of the amount must be allocated to principal and the balance to income.
  3. This chapter applies 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 has not received receipts from an interest in minerals, water, or other natural resources  before August 1, 2015, the trustee shall allocate receipts from interests in minerals, water, or other natural resources as provided in this section.
  5. If a trust has received receipts from an interest in minerals, water, or other natural resources before August 1, 2015, the trustee shall allocate receipts from interests in minerals, water, or other natural resources as follows:
    1. If the trust acquired an interest in minerals, water, or other natural resources before August 1, 1999, the trustee may allocate receipts in the manner used by the trustee before August 1, 1999, or as required by law in effect on August 1, 1999.
    2. If the trust acquired an interest in minerals, water, or other natural resources after August 1, 1999, and before August 1, 2015, the trustee shall allocate receipts in the manner required by law in effect on August 1, 1999.
  6. The trustee may petition the court to permanently modify the manner used to allocate receipts under this section. In deciding whether and to what extent to modify the manner used to allocate receipts, the court may consider any factors relevant to the trust and its beneficiaries; including the following factors to the extent they are relevant:
    1. The nature, purpose, and expected duration of the trust;
    2. The intent of the settlor;
    3. The identity and circumstances of the beneficiaries;
    4. The need for liquidity, regularity of income, and preservation and appreciation of capital;
    5. The assets held in the trust; the extent to which they consist of financial assets, interests in closely held enterprises, tangible and intangible personal property, or real property; the extent to which an asset is used by a beneficiary; and whether an asset was purchased by the trustee or received from the settlor;
    6. The net amount allocated to income under the other sections of this chapter and the increase or decrease in the value of the principal assets;
    7. Whether and to what extent the terms of the trust give the trustee the power to invade principal or accumulate income or prohibit the trustee from invading principal or accumulating income, and the extent to which the trustee has exercised a power from time to time to invade principal or accumulate income;
    8. The actual and anticipated effect of economic conditions on principal and income and effects of inflation and deflation; and
    9. The anticipated tax consequences of a modification.

Source: S.L. 1999, ch. 532, § 1; 2015, ch. 468, § 1, effective August 1, 2015.

59-04.2-20. (412) 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 subdivisions a and b; or
    4. To principal to the extent that advance payments, bonuses, and other payments are not allocated pursuant to subdivision a, b, or c.
  2. In determining net receipts to be allocated pursuant to subsection 1, a trustee shall deduct and transfer to principal a reasonable amount for depletion.
  3. This chapter applies 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 August 1, 1999, the trustee may allocate net receipts from the sale of timber and related products as provided in this chapter or in the manner used by the trustee before August 1, 1999. If the trust acquires an interest in timberland after August 1, 1999, the trustee shall allocate net receipts from the sale of timber and related products as provided in this chapter.

Source: S.L. 1999, ch. 532, § 1.

59-04.2-21. (413) Property not productive of income.

Reserved.

59-04.2-22. (414) Derivatives and options.

  1. In this section, “derivative” means a contract or financial instrument or a combination of contracts and financial instruments which gives a trust the right or obligation to participate in some or all changes in the price of a tangible or intangible asset or group of assets, or changes in a rate, an index of prices or rates, or other market indicator for an asset or a group of assets.
  2. To the extent that a trustee does not account under section 59-04.2-11 for transactions in derivatives, the trustee shall allocate to principal receipts from and disbursements made in connection with those transactions.
  3. 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 must be allocated to principal. An amount paid to acquire the option must 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, must be allocated to principal.

Source: S.L. 1999, ch. 532, § 1.

59-04.2-23. (415) Asset-backed securities.

  1. In this section, “asset-backed security” means an asset whose value is based upon the right it gives the owner to receive distributions from the proceeds of financial assets that provide collateral for the security. The term includes an asset that gives the owner the right to receive from the collateral financial assets only the interest or other current return or only the proceeds other than interest or current return. The term does not include an asset to which section 59-04.2-09 or 59-04.2-17 applies.
  2. If a trust receives a payment from interest or other current return and from other proceeds of the collateral financial assets, the trustee shall allocate to income the portion of the payment which the payer identifies as being from interest or other current return and shall allocate the balance of the payment to principal.
  3. If a trust receives one or more payments in exchange for the trust’s entire interest in an asset-backed security in one accounting period, the trustee shall allocate the payments to principal. If a payment is one of a series of payments that will result in the liquidation of the trust’s interest in the security over more than one accounting period, the trustee shall allocate ten percent of the payment to income and the balance to principal.

Source: S.L. 1999, ch. 532, § 1.

59-04.2-24. (501) Disbursements from income.

A trustee shall make the following disbursements from income to the extent that they are not disbursements to which subdivision b or c of subsection 2 of section 59-04.2-04 applies:

  1. One-half of the regular compensation of the trustee and of any person providing investment advisory or custodial services to the trustee.
  2. One-half 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.
  4. Recurring premiums on insurance covering the loss of a principal asset or the loss of income from or use of the asset.

Source: S.L. 1999, ch. 532, § 1.

59-04.2-25. (502) Disbursements from principal.

  1. A trustee shall make the following disbursements from principal:
    1. The remaining one-half of the disbursements described in subsections 1 and 2 of section 59-04.2-24;
    2. 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;
    3. Payments on the principal of a trust debt;
    4. Expenses of a proceeding that concerns primarily principal, including a proceeding to construe the trust or to protect the trust or its property;
    5. Premiums paid on a policy of insurance not described in subsection 4 of section 59-04.2-24 of which the trust is the owner and beneficiary;
    6. Estate, inheritance, and other transfer taxes, including penalties, apportioned to the trust; and
    7. 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.

Source: S.L. 1999, ch. 532, § 1.

59-04.2-26. (503) 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 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 may 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;
    2. During the administration of a decedent’s estate; or
    3. Under this section if the trustee is accounting under section 59-04.2-11 for the business or activity in which the asset is used.
  3. An amount transferred to principal need not be held as a separate fund.

Source: S.L. 1999, ch. 532, § 1.

59-04.2-27. (504) 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 or more accounting periods to reimburse principal or to provide a reserve for future principal disbursements.
  2. Principal disbursements to which subsection 1 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 subdivision g of subsection 1 of section 59-04.2-25.
  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.

Source: S.L. 1999, ch. 532, § 1.

59-04.2-28. (505) Income taxes.

  1. A tax required to be paid by a trustee based on receipts allocated to income must be paid from income.
  2. A tax required to be paid by a trustee based on receipts allocated to principal must 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 must be paid:
    1. From income to the extent that receipts from the entity are allocated to income;
    2. From principal to the extent that receipts from the entity are allocated only to principal;
    3. Proportionately from principal and income to the extent that receipts from the entity are allocated to both income and principal; and
    4. From principal to the extent that the tax exceeds the total receipts from the entity.
  4. After applying subsections 1 through 3, the trustee shall adjust income or principal receipts to the extent that the trust’s taxes are reduced because the trust receives a deduction for payments made to a beneficiary.

Source: S.L. 1999, ch. 532, § 1; 2009, ch. 586, § 2.

59-04.2-29. (506) Adjustments between principal and income because of taxes.

  1. A fiduciary may 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, 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 must 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 must be the same as its proportionate share of the total decrease in income tax. An estate or trust shall reimburse principal from income.

Source: S.L. 1999, ch. 532, § 1.

59-04.2-30. Certain charitable remainder unitrusts.

  1. Notwithstanding any other provision of this chapter, unless the trust instrument directs otherwise, an increase in the value of the obligations described in this subsection owned by a charitable remainder unitrust of the type authorized in section 664(d)(3) of the Internal Revenue Code [26 U.S.C. 664(d)(3)] or its successor provisions is distributable as income when it becomes available for distribution:
    1. A zero coupon bond;
    2. An annuity contract before annuitization;
    3. A life insurance contract before the death of the insured;
    4. An interest in a common trust fund as defined in section 584 of the Internal Revenue Code [26 U.S.C. 584] or its successor provisions;
    5. An interest in a partnership as defined in section 7701 of the Internal Revenue Code [26 U.S.C. 7701] or its successor provisions; and
    6. Any other obligation for the payment of money that is payable at a future time in accordance with a fixed, variable, or discretionary schedule of appreciation in excess of the price at which it was issued.
  2. The increase in value of the obligations described in subsection 1 is distributable to the beneficiary who was the income beneficiary at the time of the increase.
  3. For purposes of this section, the increase in value of an obligation described in subsection 1 is available for distribution only when the trustee receives cash on account of the obligation. If the obligation is surrendered or liquidated partially, the cash available must be attributed first to the increase.

Source: S.L. 1999, ch. 532, § 1.

CHAPTER 59-05 Powers in Relation to Real Property [Repealed]

[Repealed by S.L. 2007, ch. 549, § 27]

59-05-01. What powers permitted. [Repealed]

Repealed by S.L. 2007, ch. 549, § 27.

59-05-02. Power — Definition. [Repealed]

Repealed by S.L. 2007, ch. 549, § 27.

59-05-03. Power of attorney excluded. [Repealed]

Repealed by S.L. 2007, ch. 549, § 27.

59-05-04. Author of a power — Definition. [Repealed]

Repealed by S.L. 2007, ch. 549, § 27.

59-05-05. Holder of a power — Definition. [Repealed]

Repealed by S.L. 2007, ch. 549, § 27.

59-05-06. Powers — Classification. [Repealed]

Repealed by S.L. 2007, ch. 549, § 27.

59-05-07. General power — Definition. [Repealed]

Repealed by S.L. 2007, ch. 549, § 27.

59-05-08. Special powers — Definition. [Repealed]

Repealed by S.L. 2007, ch. 549, § 27.

59-05-09. Beneficial powers — Definition. [Repealed]

Repealed by S.L. 2007, ch. 549, § 27.

59-05-10. Power in trust — Definition. [Repealed]

Repealed by S.L. 2007, ch. 549, § 27.

59-05-11. General power in trust. [Repealed]

Repealed by S.L. 2007, ch. 549, § 27.

59-05-12. Special power in trust. [Repealed]

Repealed by S.L. 2007, ch. 549, § 27.

59-05-13. Capacity to create a power. [Repealed]

Repealed by S.L. 2007, ch. 549, § 27.

59-05-14. Creation of a power. [Repealed]

Repealed by S.L. 2007, ch. 549, § 27.

59-05-15. Power vests in whom. [Repealed]

Repealed by S.L. 2007, ch. 549, § 27.

59-05-16. Reservation of power by grantor. [Repealed]

Repealed by S.L. 2007, ch. 549, § 27.

59-05-17. When power is irrevocable. [Repealed]

Repealed by S.L. 2007, ch. 549, § 27.

59-05-18. When power is a lien. [Repealed]

Repealed by S.L. 2007, ch. 549, § 27.

59-05-19. When power deemed part of security. [Repealed]

Repealed by S.L. 2007, ch. 549, § 27.

59-05-20. Who cannot execute power. [Repealed]

Repealed by S.L. 2007, ch. 549, § 27.

59-05-21. How power executed. [Repealed]

Repealed by S.L. 2007, ch. 549, § 27.

59-05-22. Execution — By all of several — By survivors. [Repealed]

Repealed by S.L. 2007, ch. 549, § 27.

59-05-23. Execution by will. [Repealed]

Repealed by S.L. 2007, ch. 549, § 27.

59-05-24. Execution by grant. [Repealed]

Repealed by S.L. 2007, ch. 549, § 27.

59-05-25. Execution by insufficient instrument not void. [Repealed]

Repealed by S.L. 2007, ch. 549, § 27.

59-05-26. Observance of superfluous formalities not necessary. [Repealed]

Repealed by S.L. 2007, ch. 549, § 27.

59-05-27. Nominal conditions disregarded. [Repealed]

Repealed by S.L. 2007, ch. 549, § 27.

59-05-28. Binding conditions — Court may supply defective execution. [Repealed]

Repealed by S.L. 2007, ch. 549, § 27.

59-05-29. Consent of third person — How expressed. [Repealed]

Repealed by S.L. 2007, ch. 549, § 27.

59-05-30. Survivors’ consent. [Repealed]

Repealed by S.L. 2007, ch. 549, § 27.

59-05-31. Execution valid without recital of power. [Repealed]

Repealed by S.L. 2007, ch. 549, § 27.

59-05-32. Requisites for a conveyance — Exceptions. [Repealed]

Repealed by S.L. 2007, ch. 549, § 27.

59-05-33. Disposition or charge beyond authority valid. [Repealed]

Repealed by S.L. 2007, ch. 549, § 27.

59-05-34. Conditions at creation determine legality. [Repealed]

Repealed by S.L. 2007, ch. 549, § 27.

59-05-35. Grantor reserving revocation deemed owner as to creditors and purchasers. [Repealed]

Repealed by S.L. 2007, ch. 549, § 27.

59-05-36. Time runs from creation of power. [Repealed]

Repealed by S.L. 1991, ch. 484, § 6.

59-05-37. Relief of purchasers for valuable consideration. [Repealed]

Repealed by S.L. 2007, ch. 549, § 27.

59-05-38. Effect of fraud. [Repealed]

Repealed by S.L. 2007, ch. 549, § 27.

59-05-39. Estates changed into fee. [Repealed]

Repealed by S.L. 2007, ch. 549, § 27.

59-05-40. Estates — When absolute fee. [Repealed]

Repealed by S.L. 2007, ch. 549, § 27.

59-05-41. Estates not limited by a remainder. [Repealed]

Repealed by S.L. 2007, ch. 549, § 27.

59-05-42. To devise inheritance is an absolute fee. [Repealed]

Repealed by S.L. 2007, ch. 549, § 27.

59-05-43. Power absolute — Disposition during lifetime. [Repealed]

Repealed by S.L. 2007, ch. 549, § 27.

59-05-44. Special or beneficial powers valid during life estate. [Repealed]

Repealed by S.L. 2007, ch. 549, § 27.

59-05-45. Power to lease void as to excess term. [Repealed]

Repealed by S.L. 2007, ch. 549, § 27.

59-05-46. When power to lease transferable. [Repealed]

Repealed by S.L. 2007, ch. 549, § 27.

59-05-47. Release by owner — Time of extinguishment of power. [Repealed]

Repealed by S.L. 2007, ch. 549, § 27.

59-05-48. Powers enforceable for parties interested. [Repealed]

Repealed by S.L. 2007, ch. 549, § 27.

59-05-49. Mortgage does not extinguish power — Effects. [Repealed]

Repealed by S.L. 2007, ch. 549, § 27.

59-05-50. When power subject to creditors’ claims. [Repealed]

Repealed by S.L. 2007, ch. 549, § 27.

59-05-51. Powers not specified or defined herein void. [Repealed]

Repealed by S.L. 2007, ch. 549, § 27.

59-05-52. Equal shares when no allotment specification. [Repealed]

Repealed by S.L. 2007, ch. 549, § 27.

59-05-53. Discretionary power. [Repealed]

Repealed by S.L. 2007, ch. 549, § 27.

59-05-54. Death of trustee. [Repealed]

Repealed by S.L. 2007, ch. 549, § 27.

59-05-55. District court acts if testator omits to designate trustee. [Repealed]

Repealed by S.L. 2007, ch. 549, § 27.

59-05-56. Transferable interest — Judgment for creditors or assignees. [Repealed]

Repealed by S.L. 2007, ch. 549, § 27.

59-05-57. Execution of power defective — How defect cured. [Repealed]

Repealed by S.L. 2007, ch. 549, § 27.

59-05-58. Application of other laws. [Repealed]

Repealed by S.L. 2007, ch. 549, § 27.

59-05-59. Subsequent grant is revocation of power. [Repealed]

Repealed by S.L. 2007, ch. 549, § 27.

CHAPTER 59-06 Uniform Trust Receipts Act [Repealed]

[Redesignated as chapter 41-18; repealed by S.L. 1965, ch. 296, § 32]

CHAPTER 59-07 Powers of Attorney [Repealed]

[Repealed by S.L. 1973, ch. 495, § 1]

CHAPTER 59-08 Trusts for Individuals With Disabilities

59-08-01. Definitions.

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

  1. “Individual with a disability” means an individual who, before creation of a third-party special needs trust or a self-settled special needs trust for that individual’s benefit, is considered to be an individual with a disability as defined in 42 U.S.C. 1382c(a)(3).
  2. “Self-settled special needs trust” means a trust created by an individual with a disability after August 10, 1993, which qualifies under 42 U.S.C. 1396p(d)(4).
  3. “Third-party special needs trust” means a trust that does not make an individual with a disability ineligible for publicly funded benefits while maintaining assets in that trust and which is created for the benefit of an individual with a disability and funded by someone other than the trust beneficiary, the beneficiary’s spouse, a parent of a minor beneficiary, or anyone obligated to pay any sum for damages or any other purpose to or for the benefit of the trust beneficiary under the terms of a settlement agreement or judgment.

Source: S.L. 2003, ch. 545, § 1; 2007, ch. 549, § 13.

59-08-02. Third-party special needs trusts under state law.

  1. A third-party special needs trust must provide for the living expenses and other needs of an individual with a disability when publicly funded benefits are not sufficient to provide adequately for those needs. A third-party special needs trust must limit distributions in a manner and for purposes that supplement or complement publicly funded benefits for an individual with a disability. A third-party special needs trust may not have the effect of replacing, reducing, or substituting for publicly funded benefits otherwise available to a beneficiary with a disability or rendering a beneficiary with a disability ineligible for publicly funded benefits.
  2. This section applies to any third-party special needs trust that complies with the requirements of this chapter, regardless of the date on which the trust was created or funded. Notwithstanding any other provision of the law, this chapter does not disqualify any beneficiary of a third-party special needs trust from receiving publicly funded benefits if the trust did not disqualify that individual under previous law.

Source: S.L. 2003, ch. 545, § 2.

59-08-03. Self-settled special needs trusts.

The district court may authorize the creation and funding of self-settled special needs trusts.

Source: S.L. 2003, ch. 545, § 3.

59-08-04. Interpretation or enforcement — Reformation — Unenforceable trust provisions.

  1. This chapter does not require the submission of a third-party special needs trust or a self-settled special needs trust to a court for interpretation or enforcement.
  2. A third-party special needs trust may not disqualify a recipient of publicly funded benefits solely because a contingent beneficiary is named to receive the net balance of the trust estate upon the death of a beneficiary with a disability, or upon other termination of the trust.
  3. The trustee or the grantor of any trust intended to be a third-party special needs trust or a self-settled special needs trust may seek court reformation of the trust to accomplish the purpose of a third-party special needs trust or a self-settled special needs trust.
  4. Except for self-settled special needs trusts and third-party special needs trusts, a provision in a trust which provides for the suspension, termination, limitation, or diversion of the principal, income, or beneficial interest of a beneficiary if the beneficiary applies for, is determined eligible for, or receives publicly funded benefits is unenforceable as against the public policy of this state, without regard to the irrevocability of the trust or the purpose for which the trust was created.

Source: S.L. 2003, ch. 545, § 4.

59-08-05. Conflicts with other chapters.

If any provision of this chapter conflicts with chapter 59-09, 59-10, 59-11, 59-12, 59-13, 59-14, 59-15, 59-16, 59-17, 59-18, or 59-19, the provision of this chapter takes precedence.

Source: S.L. 2007, ch. 549, § 14.

CHAPTER 59-09 General Provisions and Definitions

59-09-01. (101) Short title.

Chapters 59-09, 59-10, 59-11, 59-12, 59-13, 59-14, 59-15, 59-16, 59-17, 59-18, and 59-19 may be cited as the North Dakota Uniform Trust Code.

Source: S.L. 2007, ch. 549, § 15.

Law Reviews.

Article: Improving the Law Through Codification: Adoption of the Uniform Trust Code in North Dakota, see 86 N.D. L. Rev. 321 (2010).

59-09-02. (102) Scope. [Effective through August 31, 2022]

  1. Except as provided in subsection 2, chapters 59-09, 59-10, 59-11, 59-12, 59-13, 59-14, 59-15, 59-16, 59-17, 59-18, and 59-19 apply to express trusts, whether charitable or noncharitable and testamentary or inter vivos, and to trusts created pursuant to a statute or a judgment or decree that requires the trust to be administered in the manner of an express trust.
  2. Chapters 59-09, 59-10, 59-11, 59-12, 59-13, 59-14, 59-15, 59-16, 59-17, 59-18, and 59-19 do not apply to:
    1. A trust that is part of an employee benefit arrangement or an individual retirement account.
    2. A trust account established under a qualified tuition savings program pursuant to section 6-09-38.
    3. Trust accounts maintained on behalf of clients or customers by licensed service professionals, including trust accounts maintained by attorneys pursuant to the North Dakota Rules of Professional Conduct and by real estate brokers pursuant to chapter 43-23.
    4. An endowment care fund established by a cemetery authority pursuant to chapter 23-21.
    5. Funds maintained by public bodies as defined by chapter 1-07 or other governmental unit entities.
    6. Trust funds held for a single business transaction or an escrow arrangement.
    7. Trusts created by a depository agreement with a financial institution.
    8. An account maintained under the North Dakota Uniform Transfers to Minors Act as contained in chapter 47-24.1.
    9. A fund maintained pursuant to court order in conjunction with a bankruptcy proceeding or a business liquidation.
    10. A voting trust described in chapter 10-19.1.
    11. Funds maintained to manage proceeds from class actions.
    12. A trust created solely to secure the performance of an obligation.
    13. A trust created on behalf of a resident of a residential facility.
    14. A trust managed by a nonprofit association for disabled individuals under 42 U.S.C. 1396p(d)(4), as in effect on the effective date of chapters 59-09, 59-10, 59-11, 59-12, 59-13, 59-14, 59-15, 59-16, 59-17, 59-18, and 59-19 and under the rules adopted by the department of human services.
    15. A resulting or constructive trust.

Source: S.L. 2007, ch. 549, § 15.

59-09-02. (102) Scope. [Effective September 1, 2022]

  1. Except as provided in subsection 2, chapters 59-09, 59-10, 59-11, 59-12, 59-13, 59-14, 59-15, 59-16, 59-17, 59-18, and 59-19 apply to express trusts, whether charitable or noncharitable and testamentary or inter vivos, and to trusts created pursuant to a statute or a judgment or decree that requires the trust to be administered in the manner of an express trust.
  2. Chapters 59-09, 59-10, 59-11, 59-12, 59-13, 59-14, 59-15, 59-16, 59-17, 59-18, and 59-19 do not apply to:
    1. A trust that is part of an employee benefit arrangement or an individual retirement account.
    2. A trust account established under a qualified tuition savings program pursuant to section 6-09-38.
    3. Trust accounts maintained on behalf of clients or customers by licensed service professionals, including trust accounts maintained by attorneys pursuant to the North Dakota Rules of Professional Conduct and by real estate brokers pursuant to chapter 43-23.
    4. An endowment care fund established by a cemetery authority pursuant to chapter 23-21.
    5. Funds maintained by public bodies as defined by chapter 1-07 or other governmental unit entities.
    6. Trust funds held for a single business transaction or an escrow arrangement.
    7. Trusts created by a depository agreement with a financial institution.
    8. An account maintained under the North Dakota Uniform Transfers to Minors Act as contained in chapter 47-24.1.
    9. A fund maintained pursuant to court order in conjunction with a bankruptcy proceeding or a business liquidation.
    10. A voting trust described in chapter 10-19.1.
    11. Funds maintained to manage proceeds from class actions.
    12. A trust created solely to secure the performance of an obligation.
    13. A trust created on behalf of a resident of a residential facility.
    14. A trust managed by a nonprofit association for disabled individuals under 42 U.S.C. 1396p(d)(4), as in effect on the effective date of chapters 59-09, 59-10, 59-11, 59-12, 59-13, 59-14, 59-15, 59-16, 59-17, 59-18, and 59-19 and under the rules adopted by the department of health and human services.
    15. A resulting or constructive trust.

Source: S.L. 2007, ch. 549, § 15; 2021, ch. 352, § 506, effective September 1, 2022.

59-09-03. (103) Definitions.

Any term not specifically defined in this section has the meaning provided in title 30.1. Unless the context otherwise requires, in chapters 59-09, 59-10, 59-11, 59-12, 59-13, 59-14, 59-15, 59-16, 59-17, 59-18, and 59-19:

  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 section 2041(b)(1)(A) or 2514(c)(1) of the Internal Revenue Code.
  3. “Beneficiary” means a person that:
    1. Has a present or future beneficial interest in a trust, vested or contingent, including the owner of an interest by assignment or transfer; or
    2. In a capacity other than that of a trustee, holds a power of appointment over trust property.
  4. “Charitable trust” means a trust, or portion of a trust, created for a charitable purpose described in subsection 1 of section 59-12-05.
  5. “Conservator” is as defined in section 30.1-01-06.
  6. “Distributee” means any person who receives property of a trust from a trustee, other than as a creditor or purchaser.
  7. “Environmental law” means a federal, state, or local law, rule, regulation, or ordinance relating to protection of the environment.
  8. “Guardian” is as defined in section 30.1-01-06.
  9. “Interests of the beneficiaries” means the beneficial interests provided in the terms of the trust.
  10. “Internal Revenue Code” means the Internal Revenue Code of 1986, or corresponding future provisions of federal tax law.
  11. “Irrevocable” means if used in reference to a trust, a trust that is not revocable, including a formerly revocable trust that has become irrevocable, whether by the death of a settlor or otherwise.
  12. “Jurisdiction”, with respect to a geographic area, includes a state or country.
  13. “Permissible distributee” means a beneficiary who is currently eligible to receive distributions of trust income or principal, whether the distribution is mandatory or discretionary.
  14. “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 upon consent of the trustee or a person holding an adverse interest.
  15. “Property” means anything that may be the subject of ownership, whether real or personal, legal or equitable, or any interest therein.
  16. “Qualified beneficiary”:
    1. Means a beneficiary who, on the date the beneficiary’s qualification is determined:
      1. Is a permissible distributee of trust income or principal;
      2. Would be a permissible distributee of trust income or principal if the interests of the distributees described in paragraph 1 terminated on that date without causing the trust to terminate; or
      3. Would be a permissible distributee of trust income or principal if the trust terminated on that date.
    2. Does not include a contingent distributee or a contingent permissible distributee of trust income or principal whose interest in the trust is not reasonably expected to vest.
  17. “Record” means information that is enshrined on a tangible medium or which is stored in an electronic or other medium and is retrievable in perceivable form.
  18. “Revocable”, as applied to a trust, means revocable by the settlor without the consent of the trustee or a person holding an adverse interest.
  19. “Settlor” means a person, including a testator, that creates, or contributes property to a trust and if more than one person creates or contributes property to a trust, each person is a settlor of the portion of the trust property attributable to that person’s contribution except to the extent another person has the power to revoke or withdraw that portion.
  20. “Signed” means:
    1. That the signature of a person, which may be a facsimile affixed, engraved, printed, placed, stamped with indelible ink, transmitted by a facsimile telecommunication or electronically, or in any other manner reproduced on the record, is placed on a record or instrument with the present intention to authenticate the record or instrument.
    2. With respect to a record or instrument required by this chapter to be filed with the clerk of court, that:
      1. The record or instrument has been signed by a person authorized to do so by this chapter or by the trust instrument; and
      2. The signature and the record or instrument are communicated by a method or medium acceptable to the clerk of court.
  21. “Special needs trust” means special needs trust as defined in section 59-08-01.
  22. “Spendthrift provision” means a term of a trust which restrains either the voluntary or involuntary or both the voluntary and involuntary transfer of a beneficiary’s interest and does not include or prevent a disclaimer of an interest of a beneficiary.
  23. “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.
  24. “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.
  25. “Trust instrument” means a record signed by the settlor that contains terms of the trust, including any amendments to the record and any modifications permitted by court order or by binding nonjudicial settlement agreement.
  26. “Trustee” includes an original, additional, and successor trustee, and a cotrustee, whether or not appointed or confirmed by a court.

Source: S.L. 2007, ch. 549, § 15; 2009, ch. 587, § 1.

Notes to Decisions

Beneficiary.

District court erred in ruling this case moot; this action was commenced before the settlor died, and a beneficiary alleged improper gifting of trust property, plus a failure by the trustee to provide annual accountings as called for under the terms of the trust, and the settlor's death did not make it impossible for the court to provide effective relief. Dixon v. Dixon, 2018 ND 25, 905 N.W.2d 748, 2018 N.D. LEXIS 3 (N.D. 2018).

59-09-04. (104) Knowledge.

  1. Subject to subsection 2, a person has knowledge of a fact if the person has actual knowledge of a fact; has received a notice or notification of a fact; or from all the facts and circumstances known to the person at the time in question, has reason to know a fact.
  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 the organization 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 does 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.

Source: S.L. 2007, ch. 549, § 15.

59-09-04.1. Settlor’s capacity.

The capacity required of a settlor is the same as that required to make a will and is required to create, amend, revoke, or add property to a trust, to direct the actions of the trustee where permitted, and to exercise powers and rights, if any, reserved or granted to the settlor under the terms of the trust or applicable law.

Source: S.L. 2017, ch. 416, § 4, effective August 1, 2017.

59-09-05. (105) Default and mandatory rules.

  1. Except as otherwise provided in the terms of the trust, this title 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 title except:
    1. The requirements for creating a trust;
    2. The duty of a trustee to act in good faith and in accordance with the purposes of the trust;
    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 and possible to achieve;
    4. The power of the court to modify or terminate a trust under sections 59-12-10, 59-12-11, 59-12-12, 59-12-13, 59-12-14, 59-12-15, and 59-12-16;
    5. The effect of a spendthrift provision and the rights of certain creditors and assignees to reach a trust as provided in chapter 59-13;
    6. The power of the court under section 59-15-02 to require, dispense with, or modify or terminate a bond;
    7. The power of the court under subsection 2 of section 59-15-08 to adjust a trustee’s compensation specified in the terms of the trust which is unreasonably low or high;
    8. The effect of an exculpatory term under section 59-18-08;
    9. The rights under sections 59-18-10, 59-18-11, 59-18-12, and 59-18-13 of a person other than a trustee or beneficiary;
    10. Periods of limitation for commencing a judicial proceeding;
    11. The power of the court to take such action and exercise such jurisdiction as may be necessary in the interests of justice; and
    12. The subject matter jurisdiction of the court and venue for commencing a proceeding as provided in section 59-10-04.

Source: S.L. 2007, ch. 549, § 15.

59-09-06. (106) Common law of trusts — Principles of equity.

The common law of trusts and principles of equity supplement chapters 59-09, 59-10, 59-11, 59-12, 59-13, 59-14, 59-15, 59-16, 59-17, 59-18, and 59-19, except to the extent modified by chapters 59-09, 59-10, 59-11, 59-12, 59-13, 59-14, 59-15, 59-16, 59-17, 59-18, and 59-19 or another statute of this state.

Source: S.L. 2007, ch. 549, § 15.

DECISIONS UNDER PRIOR LAW

Implied Trusts.

Trial court did not err in deciding that a brother did not hold a farmstead with an implied trust to allow his sister to reside on the property, consequently, the brother’s transfer of the property to his daughter was not in violation of a trust, resulting in any obligation upon the daughter under former N.D.C.C. § 59-01-06(3) [Repealed]. McGhee v. Mergenthal, 2007 ND 120, 735 N.W.2d 867, 2007 N.D. LEXIS 116 (N.D. 2007).

In an action in which plaintiff beneficiary and cotrustee (beneficiary) filed suit against defendants, cotrustee and his wife, alleging wrongful use of trust funds, there was enough evidence to create an implied trust relationship and impose fiduciary duties pursuant to former N.D.C.C. § 59-01-08 (repealed by S.L. 2007, ch. 549, § 27) where (1) defendant cotrustee voluntarily entered into a relationship of personal confidence with the beneficiary pursuant to which he agreed to undertake certain fiduciary responsibilities with regard to her property; and (2) defendant cotrustee not only voluntarily entered into the relationship, he fostered and promoted it, including going so far as to set goals for his administration of the beneficiary’s financial affairs based on his trial testimony. Anderson v. Sullivan, 2007 U.S. Dist. LEXIS 24455 (D.N.D. Mar. 28, 2007).

59-09-07. (107) Governing law.

The meaning and effect of the terms of a trust are determined by the law of the jurisdiction designated in the terms or, 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.

Source: S.L. 2007, ch. 549, § 15.

59-09-08. (108) Principal place of administration.

  1. Without precluding other means for establishing a sufficient connection with the designated jurisdiction, terms of a trust designating the principal place of administration are valid and controlling if a trustee’s principal place of business is located in or a trustee is a resident of the designated jurisdiction, or 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, 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 or a proposed transfer of some or all of the trust property to a successor trustee not less than sixty days before initiating the transfer. The notice of proposed transfer must include the name of the jurisdiction to which the principal place of administration is to be transferred; the address and telephone number at the new location at which the trustee can be contacted; an explanation of the reasons for the proposed transfer; the date on which the proposed transfer is anticipated to occur; and the date, not less than sixty days after the giving of the notice, by which the qualified beneficiary must 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 or a proposed transfer of some or all of the trust property to a successor trustee terminates if a majority of the qualified beneficiaries notify 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 pursuant to section 59-15-04.

Source: S.L. 2007, ch. 549, § 15.

59-09-09. (109) Methods and waiver of notice.

  1. Notice to a person under chapters 59-09, 59-10, 59-11, 59-12, 59-13, 59-14, 59-15, 59-16, 59-17, 59-18, and 59-19 or the sending of a document to a person under chapters 59-09, 59-10, 59-11, 59-12, 59-13, 59-14, 59-15, 59-16, 59-17, 59-18, and 59-19 must 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 chapters 59-09, 59-10, 59-11, 59-12, 59-13, 59-14, 59-15, 59-16, 59-17, 59-18, and 59-19 or a document otherwise required to be sent under chapters 59-09, 59-10, 59-11, 59-12, 59-13, 59-14, 59-15, 59-16, 59-17, 59-18, and 59-19 does not need to be provided to a person whose identity or location is unknown to and not reasonably ascertainable by the trustee.
  3. Notice under chapters 59-09, 59-10, 59-11, 59-12, 59-13, 59-14, 59-15, 59-16, 59-17, 59-18, and 59-19 or the sending of a document under chapters 59-09, 59-10, 59-11, 59-12, 59-13, 59-14, 59-15, 59-16, 59-17, 59-18, and 59-19 may be waived by the person to be notified or sent the document.
  4. Notice of a judicial proceeding must be given as provided in the applicable North Dakota Rules of Civil Procedure or as provided under section 30.1-03-01.

Source: S.L. 2007, ch. 549, § 15.

Cross-References.

Notice and service of judicial proceedings, see N.D.R.Civ.P. 4, 5.

59-09-10. (110) 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 chapters 59-09, 59-10, 59-11, 59-12, 59-13, 59-14, 59-15, 59-16, 59-17, 59-18, and 59-19 if the charitable organization, on the date the charitable organization’s qualification is being determined:
    1. Is a permissible distributee of trust income or principal;
    2. Would be a permissible distributee of trust income or principal upon the termination of the interests of other distributees or permissible distributees then receiving or eligible to receive distributions; or
    3. Would be a permissible distributee of trust income or principal if the trust terminated on that date.
  2. A person appointed to enforce a trust created for the care of an animal or another noncharitable purpose as provided in section 59-12-08 or 59-12-09 has the rights of a qualified beneficiary under chapters 59-09, 59-10, 59-11, 59-12, 59-13, 59-14, 59-15, 59-16, 59-17, 59-18, and 59-19.
  3. The attorney general of this state has the rights of a qualified beneficiary with respect to a charitable trust having its principal place of administration in this state.

Source: S.L. 2007, ch. 549, § 15.

59-09-11. (111) Nonjudicial settlement agreements.

  1. For purposes of this section, “interested persons” means a trustee and persons whose consent would be required in order to achieve a binding settlement were the settlement to be approved by the court.
  2. Except as otherwise provided in subsection 3, interested persons may enter into a binding nonjudicial settlement agreement with respect to any matter involving a trust.
  3. A nonjudicial settlement agreement is valid only to the extent it does not violate a material purpose of the trust and includes terms and conditions that could be properly approved by the court under chapters 59-09, 59-10, 59-11, 59-12, 59-13, 59-14, 59-15, 59-16, 59-17, 59-18, and 59-19 or other applicable law. A spendthrift provision in the terms of a trust is presumed to constitute a material purpose of the trust.
  4. Matters that may be resolved by a nonjudicial settlement agreement include the interpretation or construction of the terms of the trust, the approval of a trustee’s report or accounting, direction to a trustee to refrain from performing a particular act or the grant to a trustee of any necessary or desirable power, the resignation or appointment of a trustee and the determination of a trustee’s compensation, transfer of a trust’s principal place of administration, liability of a trustee for an action relating to the trust, the extent or waiver of bond of a trustee, and the criteria for distribution to a beneficiary where the trustee is given discretion.
  5. Any interested person may request the court to approve a nonjudicial settlement agreement to determine whether the representation as provided in chapter 59-11 was adequate and to determine whether the agreement contains terms and conditions the court could have properly approved.

Source: S.L. 2007, ch. 549, § 15.

Notes to Decisions

Application.

Nonjudicial settlement procedures in this statute were not applicable in a challenge to the validity of a trust because a judicial proceeding was invoked by the filing of a petition. Brakke v. Bell State Bank & Trust (In re Brakke), 2017 ND 34, 890 N.W.2d 549, 2017 N.D. LEXIS 34 (N.D. 2017).

59-09-12. (112) Rules of construction.

The rules of construction that apply to the interpretation of and disposition of property by will or other governing instrument provided for under chapter 30.1-09.1 also apply as appropriate to the interpretation of the terms of a trust and the disposition of the trust property.

Source: S.L. 2007, ch. 549, § 15.

59-09-13. Insurable interest of trustee.

  1. In this section, “settlor” means a person, including a person for which a fiduciary or agent is acting, that executes the trust instrument.
  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 owner if, on the date the policy is issued:
    1. The insured is a settlor of the trust or 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 must be primarily for the benefit of 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. If the trust beneficiaries do not already have an insurable interest under paragraph 1, the trust beneficiaries must be 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 must be stepchildren of the insured.
  3. This section does not authorize any practice that is prohibited by chapter 26.1-33.4.

Source: S.L. 2011, ch. 490, § 1.

CHAPTER 59-10 Judicial Proceedings

59-10-01. (201) 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 and an action to declare rights.

Source: S.L. 2007, ch. 549, § 16.

Notes to Decisions

Appellate Jurisdiction.

Supreme Court of North Dakota had jurisdiction to review issues in a co-trustee’s appeal where the district court had granted the trustee’s petition for supervised administration of the trust and ultimately issued an order granting his petition for approval of the trustee’s final report and accounting. Hogen v. Hogen (In re Curtiss A. Hogen Trust B), 2018 ND 117, 911 N.W.2d 305, 2018 N.D. LEXIS 122 (N.D. 2018).

DECISIONS UNDER PRIOR LAW

Construction.

Plain language of the statute does not require a district court to supervise a trust simply because an interested party requests supervision. Pederson v. Wells Fargo Bank (In re Pederson Trust), 2008 ND 210, 757 N.W.2d 740, 2008 N.D. LEXIS 230 (N.D. 2008)(decided under former N.D.C.C. § 59-04-02).

Supervision Not Warranted.

Trial court properly denied a petition by a settlor’s son for supervised administration of a trust because the son conceded that he did not want the trial court to supervise the trust if it meant that the cost would have to be paid out of the corpus, in the event the income was insufficient to pay for court supervision; the son testified that the trustees had not done anything wrong. Pederson v. Wells Fargo Bank (In re Pederson Trust), 2008 ND 210, 757 N.W.2d 740, 2008 N.D. LEXIS 230 (N.D. 2008)(decided under former N.D.C.C. § 59-04-02).

Law Reviews.

Article: Improving the Law Through Codification: Adoption of the Uniform Trust Code in North Dakota, see 86 N.D. L. Rev. 321 (2010).

59-10-02. (202) Jurisdiction over trustee and beneficiary.

  1. By accepting the trusteeship of a trust having its principal place of administration in this state or by moving the principal place of administration to this state, the trustee submits personally to the jurisdiction of the courts of this state 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 state are subject to the jurisdiction of the courts of this state regarding any matter involving the trust. By accepting a distribution from the trust, the recipient submits personally to the jurisdiction of the courts of this state regarding any matter involving the trust.
  3. This section does not preclude other methods of obtaining jurisdiction over a trustee, beneficiary, or other person receiving property from the trust.

Source: S.L. 2007, ch. 549, § 16.

DECISIONS UNDER PRIOR LAW

Analysis

County Court Construction.

Where a county court construed the provisions of a will as to the duration of a trust created by the will and as to the actions of the trustee after he received the trust funds, such construction was not binding upon the district court in the subsequent administration of the trust. In re Le Page's Trust, 67 N.D. 15, 269 N.W. 53, 1936 N.D. LEXIS 146 (N.D. 1936).

Jurisdiction.

A charitable corporation created by will and to which the testator’s residuary estate was transferred by the county court, as directed by the will to be used for charitable purposes, did not hold the property in trust as contemplated under N.D.C.C. ch. 59-04 and district court had no jurisdiction to supervise the administration thereof. Burgum v. Myra Found., 112 N.W.2d 552 (N.D. 1961).

A district court has jurisdiction over trusts, guardianships and conservatorships. Mangnall v. Adams (In re Mangnall), 1997 ND 19, 559 N.W.2d 221, 1997 N.D. LEXIS 12 (N.D. 1997).

59-10-03. Reserved.

Source: S.L. 2007, ch. 549, § 16.

59-10-04. (204) Venue.

  1. Except as otherwise provided in subsection 2, venue for a judicial proceeding involving a trust is in the county of this state in which the trust’s principal place of administration is or will be located and, if the trust is created by will and the estate is not yet closed, in the county in which the decedent’s estate is being administered.
  2. If a trust has no trustee, venue for a judicial proceeding for the appointment of a trustee is in a county of this state in which a beneficiary resides, in a county in which any trust property is located, and if the trust is created by will, in the county in which the decedent’s estate was or is being administered.

Source: S.L. 2007, ch. 549, § 16.

CHAPTER 59-10.1 Action to Determine Validity of Trust

Source: S.L. 2017, ch. 416, § 5, effective August 1, 2017.

59-10.1-01. Declaratory judgment.

A person seeking to challenge the validity of a trust instrument or amendment may institute a proceeding under this chapter for a declaratory judgment of invalidity.

Source: S.L. 2017, ch. 416, § 5, effective August 1, 2017.

59-10.1-02. Parties — Process.

A settlor who is not a plaintiff, a beneficiary named in the trust, and a settlor’s present intestate successors must be included as parties to the proceeding. For the purposes of this chapter, a beneficiary named in the trust and the settlor’s present intestate successors are deemed to possess inchoate property rights. Service of process upon the parties to the proceeding must be made in accordance with rule 4 of the North Dakota Rules of Civil Procedure.

Source: S.L. 2017, ch. 416, § 5, effective August 1, 2017.

59-10.1-03. Limitation of action.

A proceeding under this chapter may not be commenced later than the earliest of the following:

  1. One hundred twenty days after the date the trustee notified the individual contesting the trust of the trust’s existence or amendment. The notice must include the trustee’s name and address and a copy of the trust instrument with amendments, if any, and must inform the recipient of the time allowed under this section for initiating a proceeding to contest the trust. A trustee may not have any liability under the governing instrument, to a third party, for failure to provide a notice under this subsection. Service of this notice is presumed to have been received upon delivery of the notice to the last known address of the individual to whom the notice is addressed;
  2. Three years after the settlor’s death;
  3. If the trust was revocable immediately before the settlor’s death and the trust was specifically referred to in the settlor’s last will, then the time in which a petition for review of a will could be filed under state law; or
  4. The date an individual’s right to contest was precluded by adjudication, consent, or other limitation.

Source: S.L. 2017, ch. 416, § 5, effective August 1, 2017.

Notes to Decisions

Limitation Period.

As a matter of law, receipt of notice, proven through a presumption or otherwise, is required to begin the statutory 120 day limitation period. Herman v. Widmer, 2019 ND 248, 934 N.W.2d 874, 2019 N.D. LEXIS 265 (N.D. 2019).

Rebuttable Presumption.

When a beneficiary sought to contest a trust modification, it was an abuse of discretion to enter summary judgment dismissing the beneficiary’s contest on grounds the 120 day contest period expired before suit was filed without giving the beneficiary an opportunity to conduct discovery because the presumption that the beneficiary received notice of the modification proceedings when delivered to the beneficiary’s last known address was rebuttable, as the presumption was not a statutory conclusive presumption, and the 120 day limitation period did not begin until receipt of notice, so the beneficiary was entitled to conduct discovery on why notice was sent to a prior address, especially since the limitation period was relatively short. Herman v. Widmer, 2019 ND 248, 934 N.W.2d 874, 2019 N.D. LEXIS 265 (N.D. 2019).

59-10.1-04. Findings.

If the court finds the settlor has executed the trust instrument and had the requisite capacity, the court shall declare the trust to be valid. An adjudication that a trust is valid is binding on the parties. If the court finds a trust or amendment to be invalid, the challenged trust or amendment is ineffective as of a date and to the extent determined by the court.

Source: S.L. 2017, ch. 416, § 5, effective August 1, 2017.

59-10.1-05. Distributions by trustee — Return of distribution determined to be invalid.

  1. The trustee may proceed to distribute the trust property in accordance with the terms of the trust. This distribution may be made without liability unless the trustee has actual knowledge of a pending proceeding to contest the validity of the trust, or is notified by a potential contestant of a possible contest, followed by service of process upon the trustee for that proceeding within thirty days of the notification of a possible contest.
  2. The court may order the revocation of a distribution made under the authority of a trust or amendment that is subsequently determined to be invalid and may order the recipient of an invalid distribution to return the distribution.

Source: S.L. 2017, ch. 416, § 5, effective August 1, 2017.

CHAPTER 59-11 Representation

59-11-01. (301) Representation — Basic effect.

  1. Notice to a person who may represent and bind another person under this chapter has the same effect as if notice were given directly to the other person. Notice of a hearing on any petition for a judicial hearing must be given as provided in the North Dakota Rules of Civil Procedure.
  2. The consent of a person who may represent and bind another person under this chapter is binding on the person represented unless the person represented objects to the representation to the trustee or representative before the consent would otherwise have become effective.
  3. Except as otherwise provided in sections 59-12-11 and 59-14-02, a person who under this chapter 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 chapter with respect to the termination or modification of a trust under subsection 1 of section 59-12-11.

Source: S.L. 2007, ch 549, § 17.

Cross-References.

Notice of proceedings under Rules of Civil Procedure, see N.D.R.Civ.P. 4, 5.

Law Reviews.

Article: Improving the Law Through Codification: Adoption of the Uniform Trust Code in North Dakota, see 86 N.D. L. Rev. 321 (2010).

59-11-02. (302) Representation by holder of general power of appointment.

The holder of a presently exercisable general power of appointment and the persons represented with respect to the particular question or dispute may represent and bind persons whose interests, as permissible appointees, takers in default, or otherwise, are subject to the power. The term “presently exercisable general power of appointment” includes a testamentary general power of appointment having no conditions precedent to its exercise other than the death of the holder, the validity of the holder’s last will and testament, and the inclusion of a provision in the will sufficient to exercise this power.

Source: S.L. 2007, ch. 549, § 17.

59-11-03. (303) 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 to the extent of the powers and authority conferred upon conservators generally or by court order.
  2. A guardian may represent and bind the ward if a conservator of the ward’s estate has not been appointed to the extent of the powers and authority conferred upon guardians generally or by court order.
  3. An agent under a power of attorney or having other written 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. If a disagreement arises between parents seeking to represent the same minor child:
    1. The parent who is a beneficiary of the trust that is the subject of the representation is entitled to represent the minor child;
    2. If both parents are beneficiaries of the trust that is the subject of the representation, the parent who is a lineal descendant of the settlor is entitled to represent the minor child;
    3. If neither parent is a beneficiary of the trust that is the subject of the representation, the parent who is a lineal descendant of the settlor is entitled to represent the minor child; and
    4. If neither parent is a beneficiary or a lineal descendant of the settlor of the trust that is the subject of the representation, a guardian ad litem must be appointed to represent the minor child.
  7. A person may represent and bind that person’s unborn issue.

Source: S.L. 2007, ch. 549, § 17.

59-11-04. (304) 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 with respect to the particular question or dispute.

Source: S.L. 2007, ch. 549, § 17.

59-11-05. (305) Appointment of representative.

  1. If the court determines that an interest is not represented under this chapter, or that the otherwise available representation might be inadequate, the court may appoint a representative 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 and not reasonably ascertainable. A representative may be appointed to represent several persons or interests.
  2. A representative may act on behalf of the individual represented with respect to any matter arising under chapters 59-09, 59-10, 59-11, 59-12, 59-13, 59-14, 59-15, 59-16, 59-17, 59-18, and 59-19, whether or not a judicial proceeding concerning the trust is pending.
  3. In making decisions, a representative may consider general benefit accruing to the living members of the individual’s family.

Source: S.L. 2007, ch. 549, § 17.

Cross-References.

Guardians of incapacitated persons, see N.D.C.C. ch. 30.1-28.

Guardians of minors, see N.D.C.C. ch. 30.1-27.

CHAPTER 59-12 Creation, Validity, Modification, and Termination of Trust

59-12-01. (401) Methods of creating trust.

A trust may be created by transfer of property to another person as trustee during the settlor’s lifetime or by will or other disposition taking effect upon the settlor’s death, declaration by the owner of property that the owner holds identifiable property as trustee, or exercise of a power of appointment in favor of a trustee.

Source: S.L. 2007, ch. 549, § 18.

Law Reviews.

Article: Improving the Law Through Codification: Adoption of the Uniform Trust Code in North Dakota, see 86 N.D. L. Rev. 321 (2010).

59-12-02. (402) Requirements for creation.

  1. A trust is created only if the settlor has capacity to create a trust, the settlor indicates an intention to create the trust, the trust has a definite beneficiary or is a charitable trust, a trust for the care of an animal, as provided in section 59-12-08, or a trust for a noncharitable purpose, as provided in section 59-12-09; the trustee has duties to perform; and the same person is not the sole trustee and sole beneficiary.
  2. A beneficiary is definite if the beneficiary can be ascertained now or in the future, subject to any applicable rule against perpetuities.
  3. 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.

Source: S.L. 2007, ch. 549, § 18.

59-12-03. (403) 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 the settlor was domiciled, had a place of abode, or was a national; a trustee was domiciled or had a place of business; or any trust property was located.

Source: S.L. 2007, ch. 549, § 18.

59-12-04. (404) Trust purposes.

A trust may be created only to the extent its purposes are lawful and possible to achieve. A trust and its terms must be for the benefit of its beneficiaries.

Source: S.L. 2007, ch. 549, § 18.

Cross-References.

Noncharitable trust without ascertainable beneficiary, see N.D.C.C.§ 59-12-09.

Trust for care of animal, see N.D.C.C.§ 59-12-08.

Trust for charitable purposes, see N.D.C.C.§ 59-12-05.

Trusts relating to real property, see N.D.C.C.§ 59-12-18.

59-12-05. (405) 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. If the terms of a charitable trust do not indicate a particular charitable purpose or beneficiary, the court may select one or more charitable purposes or beneficiaries. The selection must be consistent with the settlor’s intention to the extent it can be ascertained.
  3. The settlor of a charitable trust or the attorney general, among others, may maintain a proceeding to enforce the trust.
  4. Chapters 59-09, 59-10, 59-11, 59-12, 59-13, 59-14, 59-15, 59-16, 59-17, 59-18, and 59-19 do not impair the rights and powers of the attorney general with respect to any trust.
  5. In all cases of charitable trusts, the attorney general and the state’s attorney of the county in which the trust is located are interested persons with respect to the trust estate.

Source: S.L. 2007, ch. 549, § 18.

Cross-References.

Attorney General’s office, see N.D.C.C ch. 54-12.

Doctrine of Cy Pres, see N.D.C.C.§ 59-12-13.

59-12-06. (406) Creation of trust induced by fraud, duress, or undue influence.

A trust is void or subject to reformation by the court to the extent its creation was induced by fraud, duress, or undue influence.

Source: S.L. 2007, ch. 549, § 18.

Notes to Decisions

No Undue Influence Shown.

Trustee was entitled to summary judgment compelling the trustee’s brother to execute a trust’s purchase option because the facts, viewed most favorably to the brother and other family members, did not show the purchase option provision was the effect of the trustee’s undue influence on the parties’ mother, as (1) the statutory rebuttable influence presumption was not raised, (2) nothing showed the result of the trust appeared to be the effect of undue influence, (3) the purchase option carried over from the parties’ parents’ wills, (4) nothing showed the trustee exerted influence over the mother when the trust document was executed, and, (5) nothing showed what a fair distribution would have been in light of prior testamentary documents. Riskey v. Riskey, 2018 ND 214, 917 N.W.2d 488, 2018 N.D. LEXIS 222 (N.D. 2018).

59-12-07. (407) Evidence of oral trust.

Except as required by section 47-11-02 or a statute other than chapters 59-09, 59-10, 59-11, 59-12, 59-13, 59-14, 59-15, 59-16, 59-17, 59-18, and 59-19, a trust need not be evidenced by a trust instrument, but the creation of an oral trust and its terms, or an amendment or revocation of an oral trust, may be established only by clear and convincing evidence.

Source: S.L. 2007, ch. 549, § 18.

59-12-08. (408) 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 upon the death of the animal or, if the trust was created to provide for the care of more than one animal alive during the settlor’s lifetime, upon 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 must be distributed to the settlor, if then living, otherwise to the settlor’s successors in interest.

Source: S.L. 2007, ch. 549, § 18.

59-12-09. (409) Noncharitable trust without ascertainable beneficiary.

Except as otherwise provided in section 59-12-08 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 court.
  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 must be distributed to the settlor, if then living, otherwise to the settlor’s successors in interest.

Source: S.L. 2007, ch. 549, § 18.

59-12-10. (410) Modification or termination of trust — Proceedings for approval or disapproval.

  1. In addition to the methods of termination prescribed by sections 59-12-11, 59-12-12, 59-12-13, and 59-12-14, 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 or impossible to achieve.
  2. A proceeding to approve or disapprove a proposed modification or termination under sections 59-12-11, 59-12-12, 59-12-13, 59-12-14, 59-12-15, and 59-12-16, or trust combination or division under section 59-12-17, may be commenced by a trustee or beneficiary. The settlor of a charitable trust may maintain a proceeding to modify the trust under section 59-12-13.

Source: S.L. 2007, ch. 549, § 18.

DECISIONS UNDER PRIOR LAW

Termination Not Warranted.

Trial court properly denied a petition by a settlor’s son to terminate a trust because the purpose of the trust, to provide income for a designated individual, was achievable; because the object of the trust could be achieved, its purpose was not frustrated. Pederson v. Wells Fargo Bank (In re Pederson Trust), 2008 ND 210, 757 N.W.2d 740, 2008 N.D. LEXIS 230 (N.D. 2008)(decided under former N.D.C.C. 59-02-17).

59-12-11. (411) Modification or termination of noncharitable irrevocable trust by consent.

  1. 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. An irrevocable trust that is modified under this subsection continues to be irrevocable.
  2. Upon termination of a trust under subsection 1, the trustee shall distribute the trust property as agreed by the beneficiaries.
  3. If not all of the beneficiaries consent to a proposed modification or termination of the trust under subsection 1, the modification or termination may be approved by the court if the court is satisfied that if all of the beneficiaries had consented, the trust could have been modified or terminated under this section and the interests of a beneficiary who does not consent will be adequately protected.

Source: S.L. 2007, ch. 549, § 18; 2009, ch. 588, § 1.

59-12-12. (412) Modification or termination because of unanticipated circumstances or inability to administer trust effectively.

  1. Upon petition by the trustee, the attorney general, or an interested party other than the settlor, 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 must 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.

Source: S.L. 2007, ch. 549, § 18.

59-12-13. (413) Cy pres.

  1. Except as otherwise provided in subsection 2, if a particular charitable purpose becomes unlawful, impracticable, impossible to achieve, or wasteful, the trust does not fail, in whole or in part; the trust property does not revert to the settlor or the settlor’s successors in interest; and 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 to apply cy pres to modify or terminate the trust.

Source: S.L. 2007, ch. 549, § 18.

Cross-References.

Trust for charitable purposes, see N.D.C.C.§ 59-12-05.

59-12-14. (414) Modification or termination of uneconomic trust.

  1. After notice to the qualified beneficiaries, the trustee of a trust consisting of trust property having a total value less than one hundred thousand dollars 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 the court 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 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.

Source: S.L. 2007, ch. 549, § 18.

59-12-15. (415) 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 that both the settlor’s intent and the terms of the trust were affected by a mistake of fact or law, whether in expression or inducement.

Source: S.L. 2007, ch. 549, § 18.

Notes to Decisions

Evidence.

Evidence from the drafting attorney that a specific drafting error occurred and, as a result, the trust language did not conform to the settlors’ true intent, constituted clear and convincing evidence sufficient to warrant reformation of the trust; it was direct evidence of a mistake of fact in expression pursuant to N.D.C.C. § 59-12-15. Agnes M. Gassmann Trust Wells Fargo Bank, N.A. v. Reichert, 2011 ND 169, 802 N.W.2d 889, 2011 N.D. LEXIS 169 (N.D. 2011).

Mistake of Law

Pursuant to N.D.C.C. § 59-12-15, the settlors were entitled to reform two trusts based on a mistake of law where the evidence showed that they were mistaken as to who would become a beneficiary in the event of their grandson’s death under the trust language, and their clear intent was to ensure that only lineal descendants were entitled to the benefits of the trusts. Clairmont v. Larson (In re Matthew Larson Trust Agreement), 2013 ND 85, 831 N.W.2d 388, 2013 N.D. LEXIS 87 (N.D. 2013).

59-12-16. (416) 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.

Source: S.L. 2007, ch. 549, § 18.

59-12-17. (417) Combination and division of trusts.

After notice to the qualified beneficiaries, a trustee may combine two or more trusts into a single trust or divide a trust into two or more separate trusts, if the result does not impair rights of any beneficiary or adversely affect achievement of the purposes of the trust. The terms of each new trust created by a division under this section do not have to be identical if the interest of each beneficiary is substantially the same under the terms of the trust prior to its division and the combined terms of all trusts after the division. Two or more trusts may be combined into a single trust if the interests of each beneficiary in the trust resulting from the combination are substantially the same as the combined interests of the beneficiary in the trusts prior to the combination. The trustee shall determine the terms controlling any trust after its combination as authorized by this section.

Source: S.L. 2007, ch. 549, § 18.

59-12-18. Requisites of trust relating to real property.

A trust in relation to real property is not valid unless the trust is created or declared:

  1. By a written instrument, subscribed by the trustee or by the trustee’s agent thereto authorized in writing;
  2. By the instrument under which the trustee claims the estate affected; or
  3. By operation of law.

Source: S.L. 2007, ch. 549, § 18.

CHAPTER 59-13 Creditor’s Claims — Spendthrift and Discretionary Trusts

59-13-01. (501) Rights of beneficiary’s creditor or assignee.

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. The court may limit the award to such relief as is appropriate under the circumstances.

Source: S.L. 2007, ch. 549, § 19.

Law Reviews.

Article: Improving the Law Through Codification: Adoption of the Uniform Trust Code in North Dakota, see 86 N.D. L. Rev. 321 (2010).

59-13-02. (502) Spendthrift provision.

  1. A spendthrift provision is valid if it restrains either the voluntary or involuntary transfer or both the voluntary and involuntary transfer of a beneficiary’s interest.
  2. A term of a trust providing that the interest of a beneficiary is held subject to a spendthrift trust, or words of similar import, is sufficient to restrain both voluntary and involuntary transfer of the beneficiary’s interest.
  3. A beneficiary may not transfer an interest in a trust in violation of a valid spendthrift provision and, except as otherwise provided in this chapter, a creditor or assignee of the beneficiary may not reach the interest or a distribution by the trustee before its receipt by the beneficiary.

Source: S.L. 2007, ch. 549, § 19.

59-13-03. (503) Exceptions to spendthrift provision.

  1. In this section, “child” includes any person for whom an order or judgment for child support has been entered by a court of competent jurisdiction.
  2. A spendthrift provision is unenforceable against:
    1. A beneficiary’s child, spouse, or former spouse who has a judgment or court order against the beneficiary for support or maintenance;
    2. A judgment creditor who has provided services for the protection of a beneficiary’s interest in the trust; and
    3. A claim of this state or the United States to the extent a statute of this state or federal law so provides.
  3. The exceptions contained in subsection 2 do not apply to a self-settled special needs trust or a third-party special needs trust under chapter 59-08 nor to any trust that meets the qualifications of 42 U.S.C. 1396p(d).
  4. A claimant against which a spendthrift provision cannot be enforced may obtain from a court an order attaching present or future distributions to or for the benefit of the beneficiary. The court may limit the award to such relief as is appropriate under the circumstances. If there is more than one permissible distributee, the court may grant such relief as is equitable.

Source: S.L. 2007, ch. 549, § 19.

Cross-References.

Child support orders, see N.D.C.C. §§ 14-09-08 through 14-09-08.22.

Spousal support orders, see N.D.C.C. § 14-05-24.1.

59-13-04. (504) Discretionary trusts — Effect of standard.

  1. In this section, “child” includes any person for whom an order or judgment for child support has been entered by a court of competent jurisdiction.
  2. Except as otherwise provided in subsection 3, 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 the discretion is expressed in the form of a standard of distribution, or 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, 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, spouse, or former spouse and the court shall direct the trustee to pay the child, spouse, or former 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 does 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 if the beneficiary was not acting as trustee or cotrustee.

Source: S.L. 2007, ch. 549, § 19.

59-13-05. (505) Creditor’s claim against settlor.

  1. The following rules apply whether or not the terms of a trust contain a spendthrift provision. During the lifetime of the settlor, the property of a revocable trust is subject to claims of the settlor’s creditors to the extent that the property would be subject to creditors’ claims if the property had not been placed in the trust. With respect to an irrevocable trust, other than a special needs 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 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. After the death of a settlor, and subject to the settlor’s right to direct the source from which liabilities will be paid, the property of a trust that was revocable immediately before 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. For purposes of this section, “statutory allowances” includes any homestead exception under chapter 47-18 and the allowances included in title 30.1.
  2. For purposes of this section 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, upon the lapse, release, or waiver of the power, the holder is treated as the settlor of the trust only to the extent the value of the property affected by the lapse, release, or waiver exceeds the greater of the amount specified in section 2041(b)(2) or 2514(e) of the Internal Revenue Code of 1986, or section 2503(b) of the Internal Revenue Code of 1986, or corresponding future provisions of federal tax law.

Source: S.L. 2007, ch. 549, § 19.

59-13-06. (506) Overdue distribution.

  1. 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 upon termination of the trust. The term does 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 upon termination of the trust, if the trustee has not made the distribution to the beneficiary within a reasonable time after the designated distribution date.

Source: S.L. 2007, ch. 549, § 19.

59-13-07. (507) Personal obligations of trustee.

Trust property is not subject to personal obligations of the trustee, even if the trustee becomes insolvent or bankrupt.

Source: S.L. 2007, ch. 549, § 19.

CHAPTER 59-14 Revocable Trusts

59-14-01. (601) Capacity of settlor of revocable trust. [Repealed]

Source: S.L. 2007, ch. 549, § 20; repealed by 2017, ch. 416, § 11, effective August 1, 2017.

59-14-02. (602) 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 does not apply to a trust created under an instrument executed before August 1, 2007.
  2. If a revocable trust is created or funded by more than one settlor 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; to the extent the trust consists of property other than community property, each settlor may revoke or amend the trust with regard to the portion of the trust property attributable to that settlor’s contribution; and upon 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 by substantial compliance with a method provided in the terms of the trust or, if the terms of the trust do not provide a method or the method provided in the terms is not expressly made exclusive, by a later will or codicil that expressly refers to the trust or 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, exercised in writing and delivered to the trustee.
  6. A conservator of the settlor or, if no conservator has been appointed, a guardian of the settlor 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 or guardianship.
  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.

Source: S.L. 2007, ch. 549, § 20.

Cross-References.

Guardians and conservators, generally, see N.D.C.C. chs. 30.1-27, 30.1-28, and 30.1-29.

59-14-03. (603) Settlor’s powers — Powers of withdrawal.

  1. While a trust is revocable, 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.

Source: S.L. 2007, ch. 549, § 20.

Notes to Decisions

Waiver.

Settlor waived the privacy benefits afforded by the statutes, given that the trustee was required to render annual accountings; the beneficiary alleged the trustee did not render such accountings, and the settlor's death and the winding up of the trust did not lead to the conclusion that the beneficiary had no entitlement to annual accountings, and the district court erred in concluding otherwise. Dixon v. Dixon, 2018 ND 25, 905 N.W.2d 748, 2018 N.D. LEXIS 3 (N.D. 2018).

59-14-04. (604) Limitation on action contesting validity of revocable trust — Distribution of trust property. [Repealed]

Source: S.L. 2007, ch. 549, § 20; repealed by 2017, ch. 416, § 11, effective August 1, 2017.

59-14-05. Settlor’s powers to direct.

While a trust is revocable, the trustee may follow a direction of the settlor which is contrary to the terms of the trust.

History. S.L. 2017, ch. 416, § 6, effective August 1, 2017.

CHAPTER 59-15 Office of Trustee

59-15-01. (701) Accepting or declining trusteeship.

  1. Except as otherwise provided in subsection 3, a person designated as trustee accepts the trusteeship by substantially complying with a method of acceptance provided in the terms of the trust or, 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 decline the trusteeship. A designated trustee who does not accept the trusteeship within a reasonable time after knowing of the designation is deemed to have declined the trusteeship.
  3. A person designated as trustee, without accepting the trusteeship, may act to preserve the trust property if, within a reasonable time after acting, the person sends a declination of the trusteeship to the settlor or, if the settlor is dead or lacks capacity, to a qualified beneficiary and inspect or investigate trust property to determine potential liability under environmental or other law or for any other purpose.

Source: S.L. 2007, ch. 549, § 21.

Law Reviews.

Article: Improving the Law Through Codification: Adoption of the Uniform Trust Code in North Dakota, see 86 N.D. L. Rev. 321 (2010).

59-15-02. (702) 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 bank or trust company qualified to act as a trustee in this state need not give bond, even if required by the terms of the trust.

Source: S.L. 2007, ch. 549, § 21.

59-15-03. (703) 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 must 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 delegate to a cotrustee the performance of any function other than a function that the terms of the trust expressly require to be performed by the trustees jointly. Unless a delegation was irrevocable, a trustee may revoke a delegation previously made.
  6. Except as otherwise provided in subsection 7, 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 prevent a cotrustee from committing a serious breach of trust and compel a cotrustee to redress a serious 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 serious breach of trust.

Source: S.L. 2007, ch. 549, § 21.

59-15-04. (704) Vacancy in trusteeship — Appointment of successor.

  1. A vacancy in a trusteeship occurs if a person designated as trustee declines the trusteeship, a person designated as trustee cannot be identified, cannot be located, or does not exist, a trustee resigns, a trustee is disqualified or removed, a trustee dies, or a guardian or conservator is appointed for an individual serving as trustee.
  2. If one or more cotrustees remain in office, a vacancy in a trusteeship need not be filled. A vacancy in a trusteeship must be filled if the trust has no remaining trustee.
  3. A vacancy in a trusteeship of a noncharitable trust which is required to be filled must be filled in the following order of priority. First, the vacancy must be filled by a person designated in the terms of the trust or appointed under the terms of the trust to act as successor trustee. Second, the vacancy must be filled by a person appointed by unanimous agreement of the qualified beneficiaries. Finally, the vacancy must be filled by a person appointed by the court.
  4. A vacancy in a trusteeship of a charitable trust which is required to be filled must be filled in the following order of priority. First, the vacancy must be filled by a person designated in the terms of the trust or appointed under the terms of the trust to act as successor trustee. Second, the vacancy must be filled 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. Finally, the vacancy must be filled 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 whenever the court considers the appointment necessary for the administration of the trust.

Source: S.L. 2007, ch. 549, § 21.

59-15-05. (705) Resignation of trustee.

  1. A trustee may resign:
    1. Upon at least thirty days’ notice to the settlor, if living, to all cotrustees, and the qualified beneficiaries, except those qualified beneficiaries under a revocable trust that the settlor has the capacity to revoke; 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 is not discharged or affected by the trustee’s resignation.

Source: S.L. 2007, ch. 549, § 21.

59-15-06. (706) 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 the trustee has committed a serious breach of trust; if lack of cooperation among cotrustees substantially impairs the administration of the trust; if 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; or if 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.
  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 subsection 2 of section 59-18-01 as may be necessary to protect the trust property or the interests of the beneficiaries.

Source: S.L. 2007, ch. 549, § 21.

Notes to Decisions

Genuine Issues.

District court conducted a mini-trial on disputed fact issues, and then exercised its discretion to not remove the trustee or to supervise the trust; as genuine issues of material fact prohibited the district court from doing so, the district court erred in dismissing the case on summary judgment. Dixon v. Dixon, 2018 ND 25, 905 N.W.2d 748, 2018 N.D. LEXIS 3 (N.D. 2018).

59-15-07. (707) 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 the property.
  3. Title to all trust property must be owned by and vested in any successor trustee without any conveyance, transfer, or assignment by the prior trustee.

Source: S.L. 2007, ch. 549, § 21.

59-15-08. (708) 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 the duties of the trustee are substantially different from those contemplated when the trust was created or the compensation specified by the terms of the trust would be unreasonably low or high.

Source: S.L. 2007, ch. 549, § 21.

59-15-09. (709) Reimbursement of expenses.

  1. A trustee is entitled to be reimbursed out of the trust property, with interest as appropriate, for expenses that were properly incurred in the administration of the trust and, 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. The lien under this subsection does not apply to a common or collective fund that is exempt under 26 U.S.C. 584.

Source: S.L. 2007, ch. 549, § 21.

CHAPTER 59-16 Duties and Powers of Trustee

59-16-01. (801) Duty to administer trust.

Upon acceptance of a trusteeship, the trustee shall administer the trust in good faith, in accordance with its purposes and in accordance with chapters 59-09, 59-10, 59-11, 59-12, 59-13, 59-14, 59-15, 59-16, 59-17, 59-18, and 59-19.

Source: S.L. 2007, ch. 549, § 22.

DECISIONS UNDER PRIOR LAW

Wrongful Use of Trust Funds.

In an action in which plaintiff beneficiary and cotrustee (beneficiary) filed suit against defendants, cotrustee and his wife, alleging wrongful use of trust funds, defendant cotrustee’s attempt to obtain the beneficiary’s acquiescence with his incomplete and misleading summary presentation of the “outs and ins” violated former N.D.C.C. § 59-01-09 (repealed by S.L. 2007, ch. 549, § 27). Anderson v. Sullivan, 2007 U.S. Dist. LEXIS 24455 (D.N.D. Mar. 28, 2007).

Law Reviews.

Article: Improving the Law Through Codification: Adoption of the Uniform Trust Code in North Dakota, see 86 N.D. L. Rev. 321 (2010).

59-16-02. (802) 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 section 59-18-12, 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 the transaction was authorized by the terms of the trust; the transaction was approved by the court; the beneficiary did not commence a judicial proceeding within the time allowed by section 59-18-05; the beneficiary consented to the trustee’s conduct, ratified the transaction, or released the trustee in compliance with section 59-18-09; or 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 the trustee’s spouse; the trustee’s descendants, siblings, parents, or their spouses; an agent or attorney of the trustee; or 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 complies with the prudent investor rule of chapter 59-17. 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 at least annually shall notify the persons entitled under section 59-16-13 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. If fair to the beneficiaries, an agreement between a trustee and a beneficiary relating to the appointment or compensation of the trustee; payment of reasonable compensation to the trustee; 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; a deposit of trust money in a regulated financial service institution operated by the trustee; or an advance by the trustee of money for the protection of the trust is not precluded by this section.
  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.

Source: S.L. 2007, ch. 549, § 22.

Cross-References.

Liability of trustee, see N.D.C.C. ch. 59-18.

Prudent investor rules, see N.D.C.C. ch. 59-17.

Prudent management of institutional funds, see N.D.C.C. ch. 59-21.

DECISIONS UNDER PRIOR LAW

Analysis

Administrator in Family Settlement Agreement.

Former N.D.C.C. § 59-01-16 had no application to transaction between administrator and heir whereby heir signed family settlement agreement since agreement merely provided for division of property between heirs, and administrator was not party to agreement and received no additional benefits from it. Johnson v. Tomlinson, 160 N.W.2d 49, 1968 N.D. LEXIS 102 (N.D. 1968).

Assignment of Trust Property.

Person holding legal title to oil royalties as trustee for group had no right to assign royalties as his own and his assignments constituted wrongful conversion thereof. Van Sickle v. Olsen, 92 N.W.2d 777, 1958 N.D. LEXIS 97 (N.D. 1958).

Breach of Duty to Restore Trust Property.

Where an election is made to have property replaced, trustee cannot defeat beneficiary’s legal right thereto by refusing to replace or by placing it out of his power to do so, and thus compel beneficiary to accept proceeds; for breach of duty to restore, beneficiary may recover value of property, with interest. Prondzinski v. Garbutt, 10 N.D. 300, 86 N.W. 969, 1901 N.D. LEXIS 37 (N.D. 1901).

Continuing Partnership or Corporate Business.

Obligations of trustees continuing corporate business beyond dissolution are no less than those of surviving partner continuing to use capital supplied by a deceased partner; they are chargeable with proportionate share of profits instead of being liable merely for interest. Langer v. Fargo Mercantile Co., 48 N.D. 545, 186 N.W. 104, 1921 N.D. LEXIS 77 (N.D. 1921).

Fiduciary Duties Not Breached.

Trustee did not breach his fiduciary duties by negotiating a settlement against beneficiary’s interest and by failing to disclose to beneficiary that promisors of trust note did not intend to pay the note in cash, where beneficiary knew that trustee was negotiating for promisors and knew their interests were adverse to beneficiary’s, and where beneficiary did not rely on trustee to interpret the settlement agreement, but rather, relied on his attorney. Meyer v. McCormick, Inc., 445 N.W.2d 21, 1989 N.D. LEXIS 171 (N.D. 1989).

Group Property.

A trustee holding property for a group has no right to assign the property as his own. Waxler v. Dalsted, 529 N.W.2d 176, 1995 N.D. LEXIS 27 (N.D. 1995).

Intermingling Trust Funds.

Fiduciary is not chargeable with interest on trust funds mingled with his own if they are not used by him. Hill v. Hanna, 57 N.D. 412, 222 N.W. 459, 1928 N.D. LEXIS 145 (N.D. 1928).

Labor Charges Against An Incompetent.

Where the trustee-brother of a mentally retarded person charged the beneficiary for labor hired to work on the beneficiary’s land even though there was no agreement that the beneficiary would pay for such labor, and where the beneficiary was working for the trustee during the time such labor charges were accruing against the beneficiary, this section prevented collection by the trustee of such charges. Manikowske v. Manikowske, 136 N.W.2d 457, 1965 N.D. LEXIS 155 (N.D. 1965).

Personal Benefits.

If trustee is permitted to become purchaser of property which he is selling, it is self-evident that there is an interposition of his own self-interest adverse to that of cestui que trust. MacFadden v. Jenkins, 40 N.D. 422, 169 N.W. 151, 1918 N.D. LEXIS 106 (N.D. 1918).

Personal representative clearly breached his fiduciary obligations by engaging in transactions with estate property through which he acquired personal benefits. Thomas by & Through Schmidt v. Thomas (In re Estate of Thomas), 532 N.W.2d 676, 1995 N.D. LEXIS 106 (N.D. 1995).

In an action in which plaintiff beneficiary and cotrustee (beneficiary) filed suit against defendants, cotrustee and his wife, alleging wrongful use of trust funds, it was sufficient to support an award of a share of the profit that defendant cotrustee wrongfully used trust funds in his business. Anderson v. Sullivan, 2007 U.S. Dist. LEXIS 24455 (D.N.D. Mar. 28, 2007)[Decided under former N.D.C.C. § 59-01-10].

Presumption of Undue Influence.

Finding a confidential relationship under former N.D.C.C. § 59-01-08 created a presumption of undue influence against a trustee by triggering application of former N.D.C.C. § 59-01-16 if the trustee in any way obtained an advantage from her beneficiary. Gelking v. Boyeff (In re Estate of Dinnetz), 532 N.W.2d 672, 1995 N.D. LEXIS 104 (N.D. 1995).

Because trustee clearly obtained an advantage over deceased partner’s estate and personal representative by the allowance of his unenforceable claim, a presumption of undue influence arose under former N.D.C.C. § 59-01-16, and no evidence was presented which would rebut this presumption. Thomas by & Through Schmidt v. Thomas (In re Estate of Thomas), 532 N.W.2d 676, 1995 N.D. LEXIS 106 (N.D. 1995).

Trial court was in the best position to weigh conflicting evidence and judge whether decedent had capacity to change bank accounts into joint tenancy accounts, and correctly concluded under former N.D.C.C. § 59-01-08 and former N.D.C.C. § 59-01-16 that change in the accounts was a transaction by which decedent’s son obtained an advantage from decedent which gave rise to a presumption of undue influence and shifted the burden to the son to prove the nonexistence of undue influence. Nelson v. Stebleton (In re Estate of Nelson), 553 N.W.2d 771, 1996 N.D. LEXIS 225 (N.D. 1996).

A relation of personal confidence triggered the presumption of undue influence under former N.D.C.C. § 59-01-16 for any transaction; it did not need to be a contractual relationship. Estate of Wenzel-Mosset by Gaukler v. Nickels, 1998 ND 16, 575 N.W.2d 425, 1998 N.D. LEXIS 5 (N.D. 1998).

The statutory presumption of undue influence under former N.D.C.C. § 59-01-16 applied to a contract authorizing railroad’s agent to lease railroad’s oil and gas rights to itself. Burlington Northern & Sante Fe Ry. v. Burlington Resources Oil & Gas Co., 1999 ND 39, 590 N.W.2d 433, 1999 N.D. LEXIS 41 (N.D. 1999).

In a case in which defendant made unauthorized withdrawals from plaintiff’s bank account and purchased a new pickup truck in plaintiff’s name, the trial court erred in failing to apply the statutory presumption of undue influence under former N.D.C.C. § 59-01-16; defendant violated her fiduciary duties to plaintiff. Allard v. Johnson, 2006 ND 243, 724 N.W.2d 331, 2006 N.D. LEXIS 247 (N.D. 2006).

Taking Part in Transaction.

Where defendant, a personal representative in position as trustee of decedent’s estate, sold land from that estate to his son and lent his son half the purchase price until a loan could be secured, defendant took part in the transaction in violation of this section, absent the consent of court or other interested beneficiaries. Cudworth v. Cudworth, 312 N.W.2d 331, 1981 N.D. LEXIS 408 (N.D. 1981).

59-16-03. (803) Impartiality.

If a trust has two or more beneficiaries, the trustee shall act impartially in investing, managing, and distributing the trust property, giving due regard to the beneficiaries’ respective interests.

Source: S.L. 2007, ch. 549, § 22.

59-16-04. (804) 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.

Source: S.L. 2007, ch. 549, § 22.

Cross-References.

Prudent investor standards, see N.D.C.C. ch. 59-17.

59-16-05. (805) 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.

Source: S.L. 2007, ch. 549, § 22.

59-16-06. (806) 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.

Source: S.L. 2007, ch. 549, § 22.

59-16-07. (807) 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 selecting an agent; establishing the scope and terms of the delegation, consistent with the purposes and terms of the trust; and 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 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 state, an agent submits to the jurisdiction of the courts of this state.

Source: S.L. 2007, ch. 549, § 22.

Notes to Decisions

Conservator.

District court erred in authorizing a limited conservator to assign a father's potential legal claims because it was not clear whether the district court authorized the conservator to assign the legal claims or whether it authorized the conservator to delegate its power to investigate and pursue the claims; it was also not clear what the district court meant by the language stating that the claims were assigned to the children in “equal shares.” P.M. v. V.A.M. (In re Estate of V.A.M.), 2015 ND 247, 870 N.W.2d 201, 2015 N.D. LEXIS 267 (N.D. 2015).

Consideration Not Shown.

District court erred in authorizing a limited conservator to assign a father's potential legal claims because it was not clear whether the district court authorized the conservator to assign the legal claims or whether it authorized the conservator to delegate its power to investigate and pursue the claims; the district court had to consider whether an assignment would conflict with the father's estate plan and clarify what “equal shares” meant if it assigned the claims. P.M. v. V.A.M. (In re Estate of V.A.M.), 2015 ND 247, 870 N.W.2d 201, 2015 N.D. LEXIS 267 (N.D. 2015).

59-16-08. (808) Powers to direct. [Repealed]

Source: S.L. 2007, ch. 549, § 22; repealed by 2017, ch. 416, § 11, effective August 1, 2017.

59-16-09. (809) Control and protection of trust property.

A trustee shall take reasonable steps to take control of and protect the trust property.

Source: S.L. 2007, ch. 549, § 22.

59-16-10. (810) 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, a trustee, other than a trustee granted trust or fiduciary powers from a federal or state authority, 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 or more separate trusts.

Source: S.L. 2007, ch. 549, § 22.

59-16-11. (811) Enforcement and defense of claims.

A trustee shall take reasonable steps to enforce claims of the trust and to defend claims against the trust.

Source: S.L. 2007, ch. 549, § 22.

59-16-12. (812) 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 or other fiduciary.

Source: S.L. 2007, ch. 549, § 22.

59-16-13. (813) Duty to inform and report.

  1. Subject to section 59-14-03, while a trust is revocable or to the extent that trust property in an irrevocable trust is subject to a power of withdrawal, or to the extent that the qualified beneficiary of an irrevocable trust is then unknown because a person holds a power to change the qualified beneficiary, the duty of the trustee as set forth in subsection 2, to inform and report are owed exclusively:
    1. To the settlor, while a trust is revocable;
    2. To the holder of the power of withdrawal to the extent the trust property is subject to the power during the period in which the power may be executed; and
    3. To the holder of the power to change the qualified beneficiary of an irrevocable trust during the period in which the power may be exercised; and
    4. To a qualified beneficiary when the qualified beneficiary is required by law or regulation to provide that information to determine eligibility for benefits or to verify continued eligibility for benefits under title 50.
  2. With respect to trust property in an irrevocable trust which is not subject to a power of withdrawal and which is not subject to a power to change the qualified beneficiary:
    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 beneficiary’s request for information related to the administration of the trust.
    2. A trustee upon written request shall promptly furnish to a qualified beneficiary a copy of the portion of the trust instrument which relates to the interest of a qualified beneficiary.
    3. A trustee within sixty days after accepting a trusteeship shall notify the qualified beneficiaries of the acceptance and of the trustee’s name, address, and telephone number.
    4. A trustee shall notify the qualified beneficiaries of the trust existence, of the identity of the settlor, of the right to request a copy of the trust instrument, and of the right of the trustee’s report as provided in subdivision f within sixty days after the date the trustee acquires knowledge:
      1. Of the creation of an irrevocable trust; or
      2. That a formerly revocable trust has become irrevocable.
    5. A trustee shall notify the qualified beneficiaries of any change in the method or rate of the trustee’s compensation.
    6. A trustee shall send to the distributees or permissible distributees of trust income or principal, and to other qualified beneficiaries who request it, 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 must be sent to the qualified beneficiaries by the former trustee. A personal representative, conservator, or guardian may send the qualified beneficiaries a report on behalf of a deceased or incapacitated trustee.
    7. A beneficiary may waive the right to a trustee’s report or other information otherwise required to be furnished under this section. A beneficiary, with respect to future reports and other information, may withdraw a waiver previously given.
    8. Subdivisions c and d do not apply to a trustee that accepts a trusteeship before August 1, 2007, to an irrevocable trust created before August 1, 2007, or to a revocable trust that becomes irrevocable before August 1, 2007.

Source: S.L. 2007, ch. 549, § 22; 2009, ch. 587, § 2; 2017, ch. 416, § 7, effective August 1, 2017.

Notes to Decisions

Waiver.

Settlor waived the privacy benefits afforded by the statutes, given that the trustee was required to render annual accountings; the beneficiary alleged the trustee did not render such accountings, and the settlor's death and the winding up of the trust did not lead to the conclusion that the beneficiary had no entitlement to annual accountings, and the district court erred in concluding otherwise. Dixon v. Dixon, 2018 ND 25, 905 N.W.2d 748, 2018 N.D. LEXIS 3 (N.D. 2018).

59-16-14. (814) Discretionary powers — Tax savings.

  1. Notwithstanding the breadth of discretion granted to a trustee in the terms of the trust, including the use of such terms as absolute, sole, or uncontrolled, the trustee shall exercise a discretionary power in good faith and in accordance with the purposes of the trust.
  2. Subject to subsection 4, and unless the terms of the trust expressly indicate that a rule in this subsection does 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 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 does 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 section 2056(b)(5) or 2523(e) of the Internal Revenue Code 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 section 2503(c) of the Internal Revenue Code.

Source: S.L. 2007, ch. 549, § 22.

DECISIONS UNDER PRIOR LAW

Analysis

In General.

Trust of discretionary type is valid and enforceable in North Dakota. Brownell v. Leutz, 149 F. Supp. 98, 1957 U.S. Dist. LEXIS 3830 (D.N.D. 1957).

Contracts Against Public Policy.

Contract between fiduciary and some but not all interested parties, which was not made known to the court or other interested parties, was void as against public policy where the terms of the contract required the fiduciary to take certain action rather than exercise his discretionary power in consideration of which the interested parties would not oppose his appointment as fiduciary. Thompson v. First Nat'l Bank, 269 N.W.2d 763, 1978 N.D. LEXIS 162 (N.D. 1978).

59-16-15. (815) General powers of trustee.

A trustee, without authorization by the court, may exercise powers conferred by the terms of the trust and, except as limited by the terms of the trust, all powers over the trust property which an unmarried owner, who is not an incapacitated person, has over individually owned property, any other powers appropriate to achieve the proper investment, management, and distribution of the trust property, and any other powers conferred by chapters 59-09, 59-10, 59-11, 59-12, 59-13, 59-14, 59-15, 59-16, 59-17, 59-18, and 59-19. The exercise of a power is subject to the fiduciary duties prescribed by this chapter.

Source: S.L. 2007, ch. 549, § 22.

59-16-16. (816) Specific powers of trustee.

Without limiting the authority conferred by section 59-16-15, 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.
  4. Deposit or invest trust money in a regulated financial institution, including one operated by the trustee or an affiliate of the trustee.
  5. Borrow money, with or without security from any financial institution, including a financial institution that is serving as a trustee or one of its affiliates, and mortgage or pledge trust property for a period within or extending beyond the duration of the trust.
  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 vote, or give proxies to vote, with or without power of substitution, or enter into or continue a voting trust agreement; 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; pay calls, assessments, and other sums chargeable or accruing against the securities, and sell or exercise stock subscription or conversion rights; and deposit the securities with a depository or other regulated financial service institution.
  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.
  12. Abandon, distribute, 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, 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; 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; 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; compromise claims against the trust which may be asserted for an alleged violation of environmental law; and 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 paying it to the beneficiary’s conservator or, if the beneficiary does not have a conservator, the beneficiary’s guardian; paying it to the beneficiary’s custodian under chapter 47-24.1 and for that purpose, creating a custodianship or custodial trust; 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 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 of the trust’s 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. Purchase and pay from trust principal the premiums on life insurance.
  27. Allocate items of income or expense to either trust income or principal, as provided by law, including creation of reserves out of income for depreciation, obsolescence, or amortization or for depletion in mineral or timber properties.
    1. With respect to the administration of trust assets as one or more trusts to:
      1. Receive and administer additional property as part of the trust estate or as a separate trust having terms identical to the terms of the existing trust;
      2. Sever any trust estate on a fractional basis, before or after a trust is funded, into two or more separate trusts for any reason;
      3. Segregate by allocation to a separate account or trust a specific amount or gift made from any trust to reflect a partial disclaimer, to reflect or result in differences in federal tax attributes, to satisfy any federal tax requirements or elections, or to reduce potential generation, skipping transfer tax liability, in a manner consistent with the rules governing disclaimers, such federal tax attributes, such requirements or elections, or any applicable tax rules or regulations, and any income earned on a segregated amount or gift after segregation occurs passes to the designated taker of such amount or gift; and
      4. Consolidate two or more trusts having substantially similar terms into a single trust.
    2. In managing, investing, administering, and distributing the trust property of any separate account or trust and in making applicable tax elections, consider the differences in federal tax attributes and all other factors the trustee believes pertinent and may make disproportionate distributions from the separate trusts created. A separate account or trust created by severance or segregation must be treated as a separate trust for all purposes from and after the date on which the severance or segregation is effective. The trustee shall hold such separate account or trust on terms and conditions that are substantially equivalent to the terms of the trust from which it was severed or segregated so that the aggregate interests of each beneficiary in the several trusts are substantially equivalent to the beneficiary’s interests in the trust before severance or segregation; provided, however, that any terms of the trust before severance that would affect qualification of the trust for any federal tax deduction, exclusion, election, exemption, or other special federal tax status must remain identical in each of the separate trusts created.
  28. Employ persons, including attorneys, auditors, investment advisers or agents, to advise or assist the trustee in the performance of administrative duties. A trustee may act based on the recommendations of professionals without independently investigating the recommendations.
  29. Deal with the personal representative, trustee, or other representative of any other trust or estate in which a beneficiary of the trust estate has an interest, notwithstanding the fact that the trustee is a personal representative, trustee, or other representative of the other trust or estate.
  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 the property.

Source: S.L. 2007, ch. 549, § 22.

Cross-References.

Duty of impartiality, see N.D.C.C. § 15-16-03.

Duty of loyalty, see N.D.C.C. § 59-16-02.

Liability of trustee, see N.D.C.C. ch. 59-18.

Prudent investor standards, see N.D.C.C. ch. 59-17.

59-16-17. (817) Distribution upon termination.

  1. Upon termination or partial termination of a trust, the trustee may send to the beneficiaries, and the attorney general in the case of a charitable trust, a proposal for distribution. The right of any beneficiary, or the attorney general in the case of a charitable trust, to object to the proposed distribution terminates if the beneficiary, or the attorney general in the case of a charitable trust, does not notify the trustee of an objection within thirty days after the proposal was sent, but only if the proposal informed the beneficiary, or the attorney general in the case of a charitable trust, 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 it was induced by improper conduct of the trustee or 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.

Source: S.L. 2007, ch. 549, § 22.

CHAPTER 59-16.1 Trust Decanting

Source: S.L. 2017, ch. 416, § 8, effective August 1, 2017.

Note.

Section 12 of chapter 416, S.L. 2017 provides, “ RETROACTIVE APPLICATION. Section 8 of this Act is retroactive in application to all trusts governed by the laws of this state, including a trust whose governing law has been changed to the laws of this state.”

59-16.1-01. Consistency with power of attorney provisions.

The provisions of this chapter relating to power of attorney are subject to other provisions of law.

Source: S.L. 2017, ch. 416, § 8, effective August 1, 2017.

Note.

Section 12 of chapter 416, S.L. 2017 provides, “ RETROACTIVE APPLICATION. Section 8 of this Act is retroactive in application to all trusts governed by the laws of this state, including a trust whose governing law has been changed to the laws of this state.”

59-16.1-02. Definitions.

For purposes of this chapter, unless the context otherwise requires:

  1. “Appointed trust” means an irrevocable trust which receives principal from an invaded trust under this chapter, including a trust created by the settlor of the invaded trust, under the terms of the invaded trust or any other trust instrument, or by the trustees, acting in that capacity, of the invaded trust. For purposes of creating another trust, a requirement that a trust instrument be signed by the settlor is deemed satisfied by the signature of the trustee of the appointed trust.
  2. “Authorized trustee” means, as to an invaded trust, a trustee with authority to pay trust principal to or for one or more current beneficiaries other than a trustee who is the settlor, or a beneficiary to whom income or principal must be paid currently or in the future, or who is or will become eligible to receive a distribution of income or principal in the discretion of the trustee, other than by the exercise of a power of appointment held in a nonfiduciary capacity.
  3. “Current beneficiary” or “beneficiaries” means individual, or as to a class, an individual who is or will become members of that class, to whom the trustees may distribute principal at the time of the exercise of the power, provided that the interest of a beneficiary to whom income, but not principal, may be distributed at the discretion of the trustee of the invaded trust, may be continued in the appointed trust.
  4. “Invade” means the power to pay directly to the beneficiary of a trust or make application for the benefit of the beneficiary.
  5. “Invaded trust” means an existing irrevocable inter vivas or testamentary trust whose principal is appointed under this chapter.
  6. “Person or persons interested in the invaded trust” means all qualified beneficiaries as defined in subsection 16 of section 59-09-06.
  7. “Principal” includes the income of the trust at the time of the exercise of the power which is not currently required to be distributed, including accrued and accumulated income.
  8. “Unlimited discretion” means the unlimited power to distribute principal. A power to distribute principal which includes words, such as best interests, welfare, comfort, or happiness may not be considered a limitation of the power to distribute principal.

Source: S.L. 2017, ch. 416, § 8, effective August 1, 2017.

Note.

Section 12 of chapter 416, S.L. 2017 provides, “ RETROACTIVE APPLICATION. Section 8 of this Act is retroactive in application to all trusts governed by the laws of this state, including a trust whose governing law has been changed to the laws of this state.”

59-16.1-03. Power of appointment.

An exercise of a power of appointment is not void if the exercise is:

  1. More extensive than was authorized, but is valid to the extent authorized by the instrument creating its power; or
  2. Less extensive than authorized by the instrument creating the power, unless the donor has manifested a contrary intention.

Source: S.L. 2017, ch. 416, § 8, effective August 1, 2017.

Note.

Section 12 of chapter 416, S.L. 2017 provides, “ RETROACTIVE APPLICATION. Section 8 of this Act is retroactive in application to all trusts governed by the laws of this state, including a trust whose governing law has been changed to the laws of this state.”

59-16.1-04. Authorized trustee with unlimited discretion.

  1. An authorized trustee with unlimited discretion to invade trust principal may appoint part or all of the principal to a trustee of an appointed trust for, and only for the benefit of, one, more than one, or all of the current beneficiaries of the invaded trust, to the exclusion of any one or more of the current beneficiaries. The successor and remainder beneficiaries of the appointed trust may be none, one, more than one, or all of the successor and remainder beneficiaries of the invaded trust.
  2. An authorized trustee exercising the power under subsection 1 of section 59-16.1-04 may grant a discretionary power of appointment in the appointed trust to one or more of the current beneficiaries of the invaded trust, provided that the beneficiary granted a power to appoint may receive principal outright under the terms of the invaded trust.
  3. If the authorized trustee grants a power of appointment, the class of permissible appointees in favor of whom the beneficiary may exercise the power of appointment granted in the appointed trust may be broader or otherwise different from the current, successor, and remainder beneficiaries of the invaded trust.
  4. If the beneficiary or beneficiaries of the invaded trust are described by a class, the beneficiary or beneficiaries of the appointed trust may include present or future members of the class.

Source: S.L. 2017, ch. 416, § 8, effective August 1, 2017.

Note.

Section 12 of chapter 416, S.L. 2017 provides, “ RETROACTIVE APPLICATION. Section 8 of this Act is retroactive in application to all trusts governed by the laws of this state, including a trust whose governing law has been changed to the laws of this state.”

59-16.1-05. Authorized trustee without unlimited discretion.

  1. An authorized trustee with the power to invade trust principal but without unlimited discretion may appoint part or all of the principal of the trust to a trustee of an appointed trust, provided that the current beneficiaries of the appointed trust must be the same as the current beneficiaries of the invaded trust and the successor and remainder beneficiaries must be the same as the successor and remainder beneficiaries of the invaded trust.
  2. If the authorized trustee exercises the power under this section, the appointed trust must include the same language authorizing the trustee to distribute the income or invade the principal of the appointed trust as in the invaded trust.
  3. If the authorized trustee exercises the power under this section to extend the term of the appointed trust beyond the term of the invaded trust, then for any period after the invaded trust would have otherwise terminated under the provisions of the invaded trust, then the appointed trust, in addition to the language required to be included in the appointed trust pursuant to subsection 2 of section 59-16.1-05, also may include language providing the trustee with unlimited discretion to invade the principal of the appointed trust during this extended term.
  4. If the beneficiary or beneficiaries of the invaded trust are described by a class, the beneficiary or beneficiaries of the appointed trust shall include present or future members of the class.
  5. If the authorized trustee exercises the power under this section and if the invaded trust grants a power of appointment to a beneficiary of the trust, the appointed trust shall grant the power of appointment in the appointed trust and the class of permissible appointees must be the same as in the invaded trust.

Source: S.L. 2017, ch. 416, § 8, effective August 1, 2017.

Note.

Section 12 of chapter 416, S.L. 2017 provides, “ RETROACTIVE APPLICATION. Section 8 of this Act is retroactive in application to all trusts governed by the laws of this state, including a trust whose governing law has been changed to the laws of this state.”

59-16.1-06. Special power of appointment.

An exercise of the power to invade trust principal under this chapter is considered to be the exercise of a special power of appointment.

Source: S.L. 2017, ch. 416, § 8, effective August 1, 2017.

Note.

Section 12 of chapter 416, S.L. 2017 provides, “ RETROACTIVE APPLICATION. Section 8 of this Act is retroactive in application to all trusts governed by the laws of this state, including a trust whose governing law has been changed to the laws of this state.”

59-16.1-07. Term of appointed trust.

The appointed trust to which an authorized trustee appoints the assets of the invaded trust may have a term that is longer than the term set forth in the invaded trust, including, a term measured by the lifetime of a current beneficiary.

Source: S.L. 2017, ch. 416, § 8, effective August 1, 2017.

Note.

Section 12 of chapter 416, S.L. 2017 provides, “ RETROACTIVE APPLICATION. Section 8 of this Act is retroactive in application to all trusts governed by the laws of this state, including a trust whose governing law has been changed to the laws of this state.”

59-16.1-08. Unlimited discretion governs.

If an authorized trustee has unlimited discretion to invade the principal of a trust, and the same trustee or another trustee has the power to invade principal under the trust instrument and the power is not subject to unlimited discretion, then the authorized trustee having unlimited discretion may exercise the power of appointment under section 59-16.1-04.

Source: S.L. 2017, ch. 416, § 8, effective August 1, 2017.

Note.

Section 12 of chapter 416, S.L. 2017 provides, “ RETROACTIVE APPLICATION. Section 8 of this Act is retroactive in application to all trusts governed by the laws of this state, including a trust whose governing law has been changed to the laws of this state.”

59-16.1-09. Current need to invade principal.

An authorized trustee may exercise the power to appoint in favor of an appointed trust under sections 59-6.1-04 and 59-16.1-05 whether or not there is a current need to invade principal under the terms of the invaded trust.

Source: S.L. 2017, ch. 416, § 8, effective August 1, 2017.

Note.

Section 12 of chapter 416, S.L. 2017 provides, “ RETROACTIVE APPLICATION. Section 8 of this Act is retroactive in application to all trusts governed by the laws of this state, including a trust whose governing law has been changed to the laws of this state.”

59-16.1-10. Fiduciary duty.

An authorized trustee exercising the power under this chapter has a fiduciary duty to exercise the power in the best interests of one or more proper objects of the exercise of the power and as a prudent person would exercise the power under the prevailing circumstances.

Source: S.L. 2017, ch. 416, § 8, effective August 1, 2017.

Note.

Section 12 of chapter 416, S.L. 2017 provides, “ RETROACTIVE APPLICATION. Section 8 of this Act is retroactive in application to all trusts governed by the laws of this state, including a trust whose governing law has been changed to the laws of this state.”

59-16.1-11. Subsequently discovered assets.

Unless the authorized trustee provides otherwise:

  1. The appointment of all the assets comprising the principal of the invaded trust to an appointed trust must include subsequently discovered assets of the invaded trust and undistributed principal of the invaded trust acquired after the appointment to the appointed trust; and
  2. The appointment of part but not all of the assets comprising the principal of the invaded trust to an appointed trust may not include subsequently discovered assets belonging to the invaded trust and principal paid to or acquired by the invaded trust after the appointment to the appointed trust. These assets must remain the assets of the invaded trust.

Source: S.L. 2017, ch. 416, § 8, effective August 1, 2017.

Note.

Section 12 of chapter 416, S.L. 2017 provides, “ RETROACTIVE APPLICATION. Section 8 of this Act is retroactive in application to all trusts governed by the laws of this state, including a trust whose governing law has been changed to the laws of this state.”

59-16.1-12. Requirements for exercise of power to appoint — Notice.

  1. The exercise of the power to appoint to an appointed trust under sections 59-16.1-04 and 59-16.1-05 must be evidenced by a written instrument that is signed, dated, and acknowledged by the authorized trustee. The exercise of the power is effective sixty days after the date of delivery of notice as specified in subsection 3, unless each individual entitled to notice agrees in writing to an earlier effective date or waives in writing the right to object to the exercise of the power.
  2. An authorized trustee may exercise the power authorized by under sections 59-16.1-04 and 59-16.1-05 without the consent of the settlor or the person interested in the invaded trust and without court approval, provided that the authorized trustee may seek court approval for the exercise with notice to all persons interested in the invaded trust.
  3. A copy of the instrument exercising the power, a copy of the appointed trust, and a copy of the invaded trust must be delivered to:
    1. A person having the right, pursuant to the terms of the invaded trust, to remove or replace the authorized trustee exercising the power under sections 59-16.1-04 and 59-16.1-05; and
    2. A person interested in the invaded trust.
  4. Notice of an exercise of the power must be given in the same manner as provided in section 59-09-09.
  5. The instrument exercising the power shall state whether the appointment is of all the assets comprising the principal of the invaded trust or only a part of the assets comprising the principal of the invaded trust and, if a part, the approximate percentage of the value of the principal of the invaded trust that is subject to the appointment.
  6. An individual entitled to notice may object to the authorized trustee’s exercise of the power under this section by serving a written notice of objection upon the authorized trustee prior to the effective date of the exercise of the power. The failure to object does not constitute consent.
  7. If the authorized trustee does not receive a written objection to the proposed exercise from an individual entitled to notice within the applicable period, the authorized trustee is not liable to a person who received or was deemed to have received the required notice in that person’s personal, representative, or represented capacities for the exercise of the power.
  8. If the authorized trustee receives a written objection within the applicable period, either the authorized trustee or an individual entitled to notice may petition the court to have the proposed exercise of a power performed as proposed, performed with modifications, or denied. In a proceeding, an individual objecting to the proposed exercise has the burden of proof as to whether the authorized trustee’s proposed exercise should not be performed.
    1. A person who has not objected is not estopped from opposing the proposed exercise in the proceeding.
    2. If the authorized trustee decides not to implement the proposed exercise, the trustee shall notify all persons entitled to notice of the decision not to exercise the power and the reason for the decision, and the authorized trustee’s decision not to implement the proposed exercise does not give rise to liability to an individual interested in the invaded trust.
    3. A person entitled to notice may petition the court to have the exercise of a power performed and has the burden of proof as to whether it should be performed.
  9. A copy of the instrument exercising the power and a copy of each of the invaded trust and the appointed trust must be filed with records of the appointed trust and the invaded trust.

Source: S.L. 2017, ch. 416, § 8, effective August 1, 2017.

Note.

Section 12 of chapter 416, S.L. 2017 provides, “ RETROACTIVE APPLICATION. Section 8 of this Act is retroactive in application to all trusts governed by the laws of this state, including a trust whose governing law has been changed to the laws of this state.”

59-16.1-13. Rights of trustee.

This section does not abridge the right of a trustee to appoint property in further trust that arises under the terms of the governing instrument of a trust or under any other provision of law or under common law, or as directed by a court having jurisdiction over the trust.

Source: S.L. 2017, ch. 416, § 8, effective August 1, 2017.

Note.

Section 12 of chapter 416, S.L. 2017 provides, “ RETROACTIVE APPLICATION. Section 8 of this Act is retroactive in application to all trusts governed by the laws of this state, including a trust whose governing law has been changed to the laws of this state.”

59-16.1-14. No duty to exercise a power to invade.

This chapter does not create a duty to exercise a power to invade principal and inference of impropriety may not be made as a result of an authorized trustee not exercising the power conferred under sections 59-16.1-04 and 59-16.1-05.

Source: S.L. 2017, ch. 416, § 8, effective August 1, 2017.

Note.

Section 12 of chapter 416, S.L. 2017 provides, “ RETROACTIVE APPLICATION. Section 8 of this Act is retroactive in application to all trusts governed by the laws of this state, including a trust whose governing law has been changed to the laws of this state.”

59-16.1-15. Power clarified.

A power authorized under sections 59-16.1-04 and 59-16.1-05 may be exercised subject to the provisions of section 59-16.1-10, unless expressly prohibited by the terms of the governing instrument or by the provisions of section 59-16.1-10, but a general prohibition of the amendment or revocation of the invaded trust or a provision that constituting a spendthrift clause does not preclude the exercise of a power under sections 59-16.1-04 and 59-16.1-05.

Source: S.L. 2017, ch. 416, § 8, effective August 1, 2017.

Note.

Section 12 of chapter 416, S.L. 2017 provides, “ RETROACTIVE APPLICATION. Section 8 of this Act is retroactive in application to all trusts governed by the laws of this state, including a trust whose governing law has been changed to the laws of this state.”

59-16.1-16. Prohibitions.

An authorized trustee may exercise a power authorized by this chapter to appoint a trust that is a supplemental needs trust that conforms to chapter 59-08. However, an authorized trustee may not exercise a power authorized by this chapter to effect the following:

  1. To reduce, limit, or modify any beneficiary’s current right to:
    1. A mandatory distribution of income or principal;
    2. A mandatory annuity or unitrust interest;
    3. A current right to withdraw a percentage of the value of the trust; or
    4. A current right to withdraw a specified dollar amount;
  2. Notwithstanding subsection 2 of section 59-18-08, to decrease or indemnify against a trustee’s liability or exonerate a trustee from liability for failure to exercise reasonable care, diligence, and prudence;
  3. To alter or eliminate a provision granting another individual the right to remove or replace the authorized trustee exercising the power under sections 59-16.1-04 or 59-16.1-05, unless notice has been provided to the persons under subsection 3 of section 59-16.1-12, or approval is granted by a court having jurisdiction over the trust;
  4. To make a binding and conclusive fixation of the value of an asset for purposes of distribution, allocation, or otherwise;
  5. To extend the term of the appointed trust beyond a permissible period of the rule against perpetuities of the invaded trust, and an exercise of the power that extends the term of the appointed trust beyond the permissible period of the rule against perpetuities of the invaded trust voids the entire exercise of the power; or
  6. To jeopardize:
    1. The deduction or exclusion originally claimed with respect to a contribution to the invaded trust that qualified for the annual exclusion under section 2503(b) of the Internal Revenue Code; the marital deduction under section 2056(a) or 2523(a) of the Internal Revenue Code; or the charitable deduction under section 170(a), 642(c), 2055(a), or 2522(a) of the Internal Revenue Code.
    2. The qualification of a transfer as a direct skip under section 2642(c) of the Internal Revenue Code; or
    3. Any other specific tax benefit for which a contribution originally qualified for income, gift, estate, or generation-skipping transfer tax purposes under the Internal Revenue Code.

Source: S.L. 2017, ch. 416, § 8, effective August 1, 2017.

Note.

Section 12 of chapter 416, S.L. 2017 provides, “ RETROACTIVE APPLICATION. Section 8 of this Act is retroactive in application to all trusts governed by the laws of this state, including a trust whose governing law has been changed to the laws of this state.”

59-16.1-17. Compensation — Commissions.

For the purposes of this section, unless a court otherwise directs:

  1. An authorized trustee may not exercise a power authorized under sections 59-16.1-04 and 59-16.1-05 to change the provisions regarding the determination of the compensation of a trustee. The commissions or other compensation payable to the trustees of the invaded trust may continue to be paid to the trustees of the appointed trust during the term of the appointed trust and must be determined in the same manner as in the invaded trust.
  2. A trustee may not receive a paying commission or other compensation for appointing of property from the invaded trust to an appointed trust under sections 59-16.1-04 and 59-16.1-05.

Source: S.L. 2017, ch. 416, § 8, effective August 1, 2017.

Note.

Section 12 of chapter 416, S.L. 2017 provides, “ RETROACTIVE APPLICATION. Section 8 of this Act is retroactive in application to all trusts governed by the laws of this state, including a trust whose governing law has been changed to the laws of this state.”

CHAPTER 59-16.2 Directed Trustees

Source: S.L. 2017, ch. 416, § 9, effective August 1, 2017.

59-16.2-01. Consistency with power of attorney provisions.

The provisions of this chapter relating to power of attorney are subject to other provisions of law.

Source: S.L. 2017, ch. 416, § 9, effective August 1, 2017.

59-16.2-02. Definitions.

For purposes of this chapter, unless the context otherwise requires:

  1. “Directing party” means an investment trust advisor, distribution trust advisor, or trust protector as provided in this chapter.
  2. “Distribution trust advisor” means one or more persons given authority by the governing instrument to direct, consent to, veto, or otherwise exercise all or a portion of the distribution powers and discretion of the trust, including authority to make discretionary distributions of income or principal.
  3. “Excluded fiduciary” means a fiduciary that by the governing instrument is directed to act in accordance with the exercise of specified powers by a directing party, in which case the specified powers must be deemed granted not to the fiduciary but to the directing party and the fiduciary must be deemed excluded from exercising the specified powers.
    1. If a governing instrument provides a fiduciary as to one or more specified matters is to act, omit action, or make decisions only with the consent of a directing party, the fiduciary is an excluded fiduciary with respect to those matters.
    2. A person may be an excluded fiduciary even if the person participated in:
      1. The exercise of a power described in section 59-09-11 relating to nonjudicial settlement agreements;
      2. A power described in chapter 59-16.1 relating to decanting;
      3. A permitted trustee amendment; or
      4. A similar power that invokes the provisions of this chapter with respect to any new or existing trust.
  4. “Fiduciary” means any person expressly given one or more fiduciary duties by the governing instrument, including a trustee.
  5. “Governing instrument” means the instrument stating the terms of a trust, including a court order, or nonjudicial settlement agreement establishing, construing, or modifying the terms of the trust in accordance with section 59-09-11, chapter 59-16.1, or other applicable law.
  6. “Investment trust advisor” means one or more persons given authority by the governing instrument to direct, consent to, or veto the exercise of all or a portion of the investment powers of the trust.
  7. “Power” means authority to take or withhold an action or decision, including an expressly specified power, the implied power necessary to exercise a specified power, and authority inherent in a general grant of discretion.
  8. “Trust protector” means one or more persons given one or more of the powers specified in section 59-16.2-05, whether or not designated with the title of trust protector by the governing instrument.

Source: S.L. 2017, ch. 416, § 9, effective August 1, 2017.

59-16.2-03. Designation and powers of investment trust advisor.

  1. An investment trust advisor may be designated in the governing instrument of a trust. The powers of an investment trust advisor may be exercised or not exercised in the sole and absolute discretion of the investment trust advisor, and are binding on all other persons, including each beneficiary, each fiduciary, each excluded fiduciary, and any other party having an interest in the trust.
  2. The governing instrument may use the title “investment trust advisor” or a similar name or description demonstrating the intent to provide for the office and function of an investment trust advisor.
  3. Unless the terms of the governing instrument provide otherwise, the investment trust advisor has the authority to:
    1. Direct the trustee with respect to the retention, purchase, transfer, assignment, sale, or encumbrance of trust property and the investment and reinvestment of principal and income of the trust;
    2. Direct the trustee with respect to all management, control, and voting powers related directly or indirectly to trust assets, including voting proxies for securities held in trust;
    3. Select and determine reasonable compensation of one or more advisors, managers, consultants, or counselors, including the trustee, and to delegate to them any of the powers of the investment trust advisor in accordance with section 59-16-07; and
    4. Determine the frequency and methodology for valuing an asset for which there is no readily available market value.

Source: S.L. 2017, ch. 416, § 9, effective August 1, 2017.

59-16.2-04. Designation and powers of distribution trust advisor.

  1. A distribution trust advisor may be designated in the governing instrument of a trust. The powers of a distribution trust advisor may be exercised or not exercised in the sole and absolute discretion of the distribution trust advisor, and are binding on all other persons, including each beneficiary, each fiduciary, each excluded fiduciary, and any other person having an interest in the trust.
  2. The governing instrument may use the title “distribution trust advisor” or a similar name or description demonstrating the intent to provide for the office and function of a distribution trust advisor.
  3. Unless the terms of the governing instrument provide otherwise, the distribution trust advisor may direct the trustee with regard to all decisions relating directly or indirectly to discretionary distributions to or for one or more beneficiaries.

Source: S.L. 2017, ch. 416, § 9, effective August 1, 2017.

59-16.2-05. Designation and powers of trust protector.

  1. A trust protector may be designated in the governing instrument of a trust.
  2. The powers of a trust protector may be exercised or not exercised in the sole and absolute discretion of the trust protector, and are binding on all other persons, including a beneficiary, an investment trust advisor, a distribution trust advisor, a fiduciary, an excluded fiduciary, and any other person having an interest in the trust.
  3. The governing instrument may use the title “trust protector” or a similar name or description demonstrating the intent to provide for the office and function of a trust protector.
  4. The powers granted to a trust protector by the governing instrument may include authority to do one or more of the following:
    1. Modify or amend the governing instrument to achieve favorable tax status or respond to changes in the Internal Revenue Code, federal laws, state laws, or the rulings and regulations under those laws;
    2. Increase, decrease, or modify the interests of a beneficiary or beneficiaries of the trust;
    3. Modify the terms of a power of appointment granted by the trust provided, the modification or amendment does not grant a beneficial interest to any individual, class of individuals, or other parties not specifically provided for under the trust instrument;
    4. Remove, or appoint, a trustee, investment trust advisor, distribution trust advisor, another directing party, investment committee member, or distribution committee member, including designation of a plan of succession for future holders of that office;
    5. Terminate the trust, including determination of how the trustee is to distribute the trust property to be consistent with the purposes of the trust;
    6. Change the situs of the trust, the governing law of the trust, or both;
    7. Appoint one or more successor trust protectors, including designation of a plan of succession for future trust protectors;
    8. Interpret terms of the trust instrument at the request of the trustee;
    9. Advise the trustee on matters concerning a beneficiary;
    10. Amend or modify the governing instrument to take advantage of laws governing:
      1. Restraints on alienation;
      2. Distribution of trust property; or
      3. Improvement of the administration of the trust;
    11. Veto or direct trust distributions; or
    12. Provide direction regarding notification of qualified beneficiaries.
  5. If a charity is a qualified beneficiary of the trust, a trust protector shall give notice to the attorney general at least sixty days before taking any action authorized under subdivisions b through f of subsection 4. The attorney general may waive this notice requirement.

Source: S.L. 2017, ch. 416, § 9, effective August 1, 2017.

59-16.2-06. Duty and liability of directing party.

  1. A directing party is a fiduciary of the trust subject to the same duties and standards applicable to a trustee of a trust as provided by applicable law unless the governing instrument provides otherwise. However, the governing instrument may not relieve or exonerate a directing party from the duty to act or withhold acting as the directing party in good faith reasonably believes is in the best interests of the trust.
  2. Each directing party must keep the excluded fiduciary and any other directing party reasonably informed regarding the administration of the trust with respect to any specific duty or function being performed by the directing party to the extent the duty or function would normally be performed by the excluded fiduciary or to the extent providing the information to the excluded fiduciary or other directing party is reasonably necessary for the excluded fiduciary or other directing party to perform its duties. The directing party shall provide the information reasonably requested by the excluded fiduciary or other directing party.
  3. Neither the performance nor the failure to perform of a directing party’s duty to inform as provided in this section affects the limitation on the liability of the excluded fiduciary as provided in this section.
  4. The directing party may be made a party to an action or proceeding if issues relate to a decision or action of the directing party, even if investment advisory agreements or other related agreement provide otherwise.

Source: S.L. 2017, ch. 416, § 9, effective August 1, 2017.

59-16.2-07. Duty and liability of excluded fiduciary.

  1. The excluded fiduciary shall act in accordance with the governing instrument and comply with the directing party’s exercise of the powers granted to the directing party by the governing instrument.
  2. Unless otherwise provided in the governing instrument, an excluded fiduciary has no duty to monitor, review, inquire, investigate, recommend, evaluate, or warn with respect to a directing party’s exercise of or failure to exercise any power granted to the directing party by the governing instrument, including, any power related to the acquisition, disposition, retention, management, or valuation of any asset or investment.
  3. Except as otherwise provided in this chapter or the governing instrument, an excluded fiduciary is not liable, either individually or as a fiduciary, for an action, inaction, consent, or failure to consent by a directing party, including:
    1. If a governing instrument provides an excluded fiduciary is to follow the direction of a directing party and the excluded fiduciary acts in accordance with this direction, except in cases of willful misconduct on the part of the excluded fiduciary in complying with the direction of the directing party, the excluded fiduciary is not liable for any loss resulting directly or indirectly from following the direction, including compliance regarding the valuation of assets for which there is no readily available market value.
    2. If a governing instrument provides an excluded fiduciary is to act or omit to act only with the consent of a directing party, except in cases of willful misconduct on the part of the excluded fiduciary, the excluded fiduciary is not liable for any loss resulting directly or indirectly from an act taken or omitted as a result of the directing party’s failure to provide consent after having been requested to do so by the excluded fiduciary.
    3. If a governing instrument so provides, or if for any reason, an excluded fiduciary is required to assume the role or responsibilities of a directing party, or if the excluded fiduciary appoints a directing party or successor to a directing party, except in cases of willful misconduct on the part of the excluded fiduciary, the excluded fiduciary is not liable for any loss resulting directly or indirectly from its actions in carrying out the roles and responsibilities of the directing party.
  4. An excluded fiduciary does not have an obligation to review or evaluate a direction from a distribution trust advisor nor to perform investment or suitability reviews, inquiries, or investigations, nor to make recommendations or evaluations with respect to investments to the extent the directing party, custodial account owner, or authorized designee of a custodial account owner had authority to direct the acquisition, disposition, or retention of the investment. If the excluded fiduciary offers communication to the directing party or an investment person selected by the investment trust advisor, the action may not be deemed to constitute an undertaking by the excluded fiduciary to monitor or otherwise participate in actions within the scope of the advisor’s authority or to constitute a duty to do so.
  5. An excluded fiduciary does not have a duty to communicate with, warn, or apprise a beneficiary or third party concerning instances in which the excluded fiduciary would or may have exercised the excluded fiduciary’s own discretion in a manner different from the manner directed by the directing party.
  6. Absent a contrary provision in the governing instrument, the actions of the excluded fiduciary, including any communications with the directing party or others, or carrying out, recording, or reporting actions taken at the directing party’s direction pertaining to matters within the scope of authority of the directing party, must be deemed to be administrative actions taken by the excluded fiduciary solely to allow the excluded fiduciary to perform those duties assigned to the excluded fiduciary under the governing instrument. These administrative actions may not be deemed to constitute an undertaking by the excluded fiduciary to monitor, participate, or otherwise take a fiduciary responsibility for actions within the scope of authority of the directing party.
  7. An excluded fiduciary may obtain and act upon an opinion of counsel on a matter relevant to this section.

Source: S.L. 2017, ch. 416, § 9, effective August 1, 2017.

59-16.2-08. Application.

This chapter applies to:

  1. Existing and future trusts that appoint or provide for a directing party including a party granted power or authority effectively comparable in substance to that of a directing party as provided in this chapter; or
  2. An existing or future trusts that:
    1. Are modified in accordance with applicable law or the terms of the governing instrument to appoint or provide for a directing party; or
    2. Are modified to appoint or provide for a directing party, including a party granted power or authority effectively comparable in substance to that of a directing party, in accordance with a court order, or a nonjudicial settlement agreement whether the order or agreement specifies this chapter governs the responsibilities, actions, and liabilities of persons designated as a directing party or excluded fiduciary.

Source: S.L. 2017, ch. 416, § 9, effective August 1, 2017.

CHAPTER 59-16.3 Total Return Unitrusts

Source: S.L. 2017, ch. 416, § 10, effective August 1, 2017.

59-16.3-01. Definitions.

For purposes of this chapter, unless the context otherwise requires:

  1. “Disinterested person” means a person who is not a related or subordinate party, as defined in section 672(c) of the Internal Revenue Code [26 U.S.C. 1, et seq.], with respect to the person then acting as trustee of the trust and excludes the settlor of the trust and any interested trustee.
  2. “Income trust” means a trust, created by either an inter vivos or a testamentary instrument, which directs or permits the trustee to distribute the net income of the trust to one or more persons, either in fixed proportions, or in amounts, or proportions determined by the trustee. However, a trust that otherwise is an income trust may not qualify if it is subject to taxation under section 2001 or section 2501 of the Internal Revenue Code, until the expiration of the period for filing the return therefor.
  3. “Interested distributee” means a person to whom distributions of income or principal can currently be made who has the power to remove the existing trustee and designate as successor a person who may be a related or subordinate party, as defined in section 672(c) of the Internal Revenue Code, with respect to such distributee.
  4. “Interested trustee” means:
    1. Any individual trustee to whom the net income or principal of the trust can currently be distributed or would be distributed if the trust were then to terminate and be distributed; and
    2. An individual trustee whose legal obligation to support a beneficiary may be satisfied by distributions of income and principal of the trust.
  5. “Total return unitrust” means an income trust that has been converted under and meets the provisions of this chapter.
  6. “Trustee” means all persons acting as trustee of the trust, except where expressly noted otherwise, whether acting in their discretion, or on the direction of one or more persons acting in a fiduciary capacity.
  7. “Settlor” means an individual who created an inter vivos or a testamentary trust.
  8. “Unitrust” means a trust, the terms of which require or permit distribution of a unitrust amount, without regard to whether the trust has been converted to a unitrust in accordance with this chapter, or whether the trust is established by express terms of the governing instrument.
  9. “Unitrust amount” means an amount equal to a percentage of a unitrust’s assets that may, or are required, to be distributed to one or more beneficiaries annually in accordance with the terms of the unitrust. The unitrust amount may be determined by reference to the net fair market value of the unitrust’s assets as of a particular date each year, or as an average determined on a multiple year basis.
  10. “Current valuation year” means the accounting period of the trust for which the unitrust amount is being determined.
  11. “Prior valuation year” means each of the two accounting periods of the trust immediately preceding the current valuation year.

Source: S.L. 2017, ch. 416, § 10, effective August 1, 2017.

59-16.3-02. Trustee’s authority to convert income trust — Conditions.

A trustee, other than an interested trustee, or if two or more persons are acting as trustee, a majority of the trustees who are not an interested trustee, and without the approval of a court, may convert an income trust to a total return unitrust, reconvert a total return unitrust to an income trust, or change the percentage used to calculate the unitrust amount and the method used to determine the fair market value of the trust if:

  1. The trustee adopts a written policy for the trust providing:
    1. In the case of a trust being administered as an income trust, that future distributions from the trust will be unitrust amounts rather than net income;
    2. In the case of a trust being administered as a total return unitrust, that future distributions from the trust will be net income rather than unitrust amounts; or
    3. That the percentage used to calculate the unitrust amount or the method used to determine the fair market value of the trust will be changed as stated in the policy.
  2. The trustee sends written notice of its intention to take that action, along with copies of the written policy and this chapter, to:
    1. The settlor if living;
    2. All living individuals who are currently receiving, or eligible to receive, distributions of income of the trust;
    3. All living individuals who would receive principal of the trust if the trust were to terminate at the time of the giving of such notice, or if the trust does not provide for its termination, all living individuals who would receive, or be eligible to receive, distributions of income or principal of the trust if the persons identified in subdivision b were deceased; and
    4. All individuals acting as adviser or protector of the trust.
  3. At least one person receiving notice under subdivision b and c of subsection 2, to the best information and belief of the trustee, is legally competent;
  4. No individual receiving the notice objects, by written instrument delivered to the trustee, to the proposed action of the trustee within sixty days of receipt of notice.
  5. In deciding whether, and to what extent, to exercise the power conferred under this chapter, a trustee may consider all factors relevant to the trust and its beneficiaries, including the following factors to the extent relevant:
    1. The size, nature, purpose, and expected duration of the trust;
    2. The intent of the settlor;
    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:
      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 trustee or received from the settlor;
    6. The net amount allocated to income under the other sections of this chapter and the increase or decrease in the value of the principal assets, which the trustee may estimate as to assets for which market values are not readily available;
    7. Whether and to what extent the terms of the trust give the trustee the power to invade principal or accumulate income, or prohibit the trustee from invading principal or accumulating income, and the extent to which the trustee has exercised a power from time to time to invade principal or accumulate income;
    8. The actual and anticipated effect of economic conditions on principal and income and effects of inflation and deflation; and
    9. The anticipated tax consequences.

Source: S.L. 2017, ch. 416, § 10, effective August 1, 2017.

59-16.3-03. Interested trustee’s authority over actions enumerated in chapter 59-16.3.

If there is not a trustee of the trust other than an interested trustee, the interested trustee, or if two or more persons are acting as trustee and are interested trustees, a majority of those interested trustees, without the approval of a court, may take such action as provided in so long as the trustee appoints a disinterested person who, in its sole discretion, but acting in a fiduciary capacity, determines for the trustee:

  1. The percentage to be used to calculate the unitrust amount;
  2. The method to be used in determining the fair market value of the trust;
  3. Which assets, if any, are to be excluded in determining the unitrust amount; and
  4. Complies with subsections 1 through 4 of section 59-16.3-02.

Source: S.L. 2017, ch. 416, § 10, effective August 1, 2017.

59-16.3-04. Trustee may petition court — Appointment of disinterested person.

If a trustee desires to convert an income trust to a total return unitrust, reconvert a total return unitrust to an income trust, or change the percentage used to calculate the unitrust amount and the method used to determine the fair market value of the trust, but does not have the ability to, or elects not to do it under sections 59-16.3-02 and 59-16.3-03, or if the trustee receives a written objection within the applicable period, the trustee may petition the court for such order as the trustee deems appropriate. If there is only one trustee of such trust and the trustee is an interested trustee, or if there are two or more trustees of such trust and a majority of them are interested trustees, the court, or on the petition of the trustee or trustees, or any person interested in the trust, may appoint a disinterested person who, acting in a fiduciary capacity, shall present the information to the court as is necessary to enable the court to make its determination.

Source: S.L. 2017, ch. 416, § 10, effective August 1, 2017.

59-16.3-05. Annual valuation of trust required.

The fair market value of the trust must be determined at least annually, using the valuation date, or dates, or averages of valuation dates as are deemed appropriate. Assets for which a fair market value cannot be readily ascertained must be valued using valuation methods that are deemed reasonable and appropriate. If all income received with respect to the assets is distributed to the extent distributable in accordance with the terms of the governing instrument, assets may be excluded from valuation.

Source: S.L. 2017, ch. 416, § 10, effective August 1, 2017.

59-16.3-06. Calculation of unitrust amount.

The unitrust amount is determined as follows:

  1. For the first three accounting periods of the trust, the unitrust amount for a current valuation year of the trust may not be less than three percent, or more than five percent, by the election of the trustee, the disinterested person, or the court, of the net fair market value of the assets held in the trust on the valuation date of the current valuation year;
  2. Beginning with the fourth accounting period of the trust, the unitrust amount for a current valuation year of the trust may not be less than three percent, or more than five percent, by the election of the trustee, the disinterested person, or the court, of the average of the net fair market value of the assets held in the trust on the valuation date of the current valuation year and the net fair market value of the assets held in the trust on the valuation date of each prior valuation year;
  3. The percentage that may be elected by the trustee, the disinterested person, or the court in determining the unitrust amount must be a reasonable current return from the trust, taking into account the intentions of the settlor as expressed in the governing instrument. However, the election by the trustee, the disinterested person, or the court in determining the unitrust amount may not be less than three percent, or more than five percent;
  4. The unitrust amount for the current valuation year must be proportionately reduced for any distribution, in whole or in part, other than distributions of the unitrust amount, and for any payments of expenses, including debts, disbursements, and taxes, from the trust within a current valuation year which the trustee determines to be material and substantial, and must be proportionately increased for the receipt, other than a receipt that represents a return on investment, of any additional property into the trust within a current valuation year;
  5. In the case of a short accounting period, the trustee shall prorate the unitrust amount on a daily basis;
  6. If the net fair market value of an asset held in the trust has been incorrectly determined either in a current valuation year or in a prior valuation year, the unitrust amount must be increased in the case of an undervaluation, or be decreased in the case of an overvaluation, by an amount equal to the difference between the unitrust amount determined based on the correct valuation of the asset and the unitrust amount originally determined;
  7. In determining the net fair market value of the assets held in trust, the determination may not include the value of residential property or tangible personal property that, as of the first business day of the current valuation year, one or more income beneficiaries of the trust have or had the right to occupy, or have or had the right to possess or control, other than in a capacity as trustee, and instead the right of occupancy or the right of possession or control must be deemed to be the unitrust amount with respect to the residential property or the tangible personal property; or any asset to be distributed outright to a beneficiary during the valuation period under the terms of the trust and the return on investment on that asset, which return on investment must be distributed to the beneficiary.

Source: S.L. 2017, ch. 416, § 10, effective August 1, 2017.

59-16.3-07. Unitrust amount as net income.

Following the conversion of an income trust to a total return unitrust, the trustee:

  1. Shall treat the unitrust amount as net income of the trust for purposes of determining the amount available, from time to time, for distributions from the trust;
  2. May allocate to trust income for each taxable year of the trust:
    1. Net short-term capital gain described in section 1222(5) of the Internal Revenue Code for that year, but only to the extent the amounts so allocated together with all other amounts allocate to trust income for that year does not exceed the unitrust amount for that year; and
    2. Net long-term capital gain described in section 1222(7) of the Internal Revenue Code for that year, but only to the extent the amount so allocated together with all other amounts, including amounts described in subdivision a, allocated to trust income for that year does not exceed the unitrust amount for that year.

Source: S.L. 2017, ch. 416, § 10, effective August 1, 2017.

59-16.3-08. Administration of total return unitrust authority — Authority of trustee.

The trustee, in administering a total return unitrust, may determine:

  1. The effective date of the conversion;
  2. The timing of distributions;
  3. Whether distributions are to be made in cash, in kind, or partly in cash and partly in kind;
  4. Which assets are to be excluded in determining the unitrust amount;
  5. If the trust is reconverted to an income trust, the effective date of the reconversion; and
  6. Any other administrative issues as may be necessary or appropriate to carry out the purposes of this chapter.

Source: S.L. 2017, ch. 416, § 10, effective August 1, 2017.

59-16.3-09. Distributions of principal not affected by conversion.

Conversion to a total return unitrust under this chapter does not affect any other provisions of the governing instrument, if any, regarding distributions of principal.

Source: S.L. 2017, ch. 416, § 10, effective August 1, 2017.

59-16.3-10. Spouse may compel reconversion to income trust for certain trusts — Written instrument required.

In the case of a trust for which a marital deduction has been taken for federal tax purpose under sections 2056 and 2523 of the Internal Revenue Code, the spouse otherwise entitled to receive the net income of the trust, by written instrument delivered to the trustee, may compel the reconversion during the spouse’s lifetime of the trust from a total return unitrust to an income trust, notwithstanding contrary provisions in this chapter.

Source: S.L. 2017, ch. 416, § 10, effective August 1, 2017.

59-16.3-11. Applicability of chapter.

This chapter must be construed as pertaining to the administration of a trust and must be available to a trust that is administered in the state under state law unless:

  1. The governing instrument reflects an intention that the current beneficiary or beneficiaries are to receive an amount other than a reasonable current return from the trust;
  2. One or more persons to whom the trustee could distribute income have a power of withdrawal over the trust which is not subject to an ascertainable standard under sections 2041 and 2514 of the Internal Revenue Code, or which can be exercised to discharge a duty of support the person possesses; or
  3. The governing instrument expressly prohibits use of this chapter by specific reference to the chapter. A provision in the governing instrument that “the provisions of this chapter, or any corresponding provision of future law, may not be used in the administration of this trust” are sufficient to preclude use of this chapter.

Source: S.L. 2017, ch. 416, § 10, effective August 1, 2017.

59-16.3-12. Trustee acting in good faith not liable — Remedy.

A trustee or disinterested person who in good faith takes or fails to take any action under this chapter is not liable to any person affected by that action or inaction, regardless of whether the person received written notice as provided in this chapter and regardless of whether the person was under a legal disability at the time of the delivery of the notice. The person’s exclusive remedy is to obtain an order of the court directing the trustee to convert an income trust to a total return unitrust, to reconvert from a total return unitrust to an income trust, or to change the percentage used to calculate the unitrust amount.

Source: S.L. 2017, ch. 416, § 10, effective August 1, 2017.

59-16.3-13. No duty to act created.

This chapter does not create a duty to take action under this chapter, and a trustee is not liable for not considering whether to take action or for choosing not to take action.

Source: S.L. 2017, ch. 416, § 10, effective August 1, 2017.

59-16.3-14. Chapter not applicable to charitable remainder unitrust.

This chapter does not apply to a charitable remainder unitrust as defined by section 664(d) of the Internal Revenue Code.

Source: S.L. 2017, ch. 416, § 10, effective August 1, 2017.

CHAPTER 59-17 Prudent Investor Standards

59-17-01. Prudent investor rule.

  1. Except as otherwise provided in subsection 2, a trustee who invests and manages trust assets owes a duty to the beneficiaries of the trust to comply with the prudent investor rule set forth in sections 59-16-02, 59-16-03, 59-16-05, 59-16-06, and 59-16-07 and in this chapter.
  2. The prudent investor rule, a default rule, may be expanded, restricted, eliminated, or otherwise altered by the provisions of a trust. A trustee is not liable to a beneficiary to the extent that the trustee acted in reasonable reliance on the provisions of the trust.

Source: S.L. 2007, ch. 549, § 23.

Cross-References.

Duty of impartiality, see N.D.C.C. § 59-16-03.

Duty of loyalty, see N.D.C.C. § 59-16-02.

Duty to administer trust as a prudent person, see N.D.C.C. § 59-16-04.

Liability of trustee, see N.D.C.C. ch. 59-18.

Uniform Prudent Management of Institutional Funds Act, see N.D.C.C. ch. 59-21.

Law Reviews.

Article: Improving the Law Through Codification: Adoption of the Uniform Trust Code in North Dakota, see 86 N.D. L. Rev. 321 (2010).

59-17-02. Standard of care — Portfolio strategy — Risk and return objectives.

  1. A trustee shall invest and manage trust assets as a prudent investor would, by considering the purposes, terms, distribution requirements, and other circumstances of the trust. In satisfying this standard, the trustee shall exercise reasonable care, skill, and caution.
  2. A trustee’s investment and management decisions respecting individual assets must be evaluated not in isolation but in the context of the trust portfolio as a whole and as a part of an overall investment strategy having risk and return objectives reasonably suited to the trust.
  3. Among circumstances a trustee shall consider in investing and managing trust assets are any of the following that are relevant to the trust or its beneficiaries:
    1. General economic conditions;
    2. The possible effect of inflation or deflation;
    3. The expected tax consequences of investment decisions or strategies;
    4. The role that each investment or course of action plays within the overall trust portfolio, which may include financial assets, interests in closely held enterprises, tangible and intangible personal property, and real property;
    5. The expected total return from income and the appreciation of capital;
    6. Other resources of the beneficiaries;
    7. Needs for liquidity, regularity of income, and preservation or appreciation of capital; and
    8. An asset’s special relationship or special value, if any, to the purposes of the trust or to one or more of the beneficiaries.
  4. A trustee shall make a reasonable effort to verify facts relevant to the investment and management of trust assets.
  5. A trustee may invest in any kind of property or type of investment consistent with the standards of this title.

Source: S.L. 2007, ch. 549, § 23.

59-17-03. Diversification.

A trustee shall diversify the investments of the trust unless the trustee reasonably determines that, because of special circumstances, the purposes of the trust are better served without diversifying.

Source: S.L. 2007, ch. 549, § 23.

59-17-04. Duties at inception of trusteeship.

Within a reasonable time after accepting a trusteeship or receiving trust assets, a trustee shall review the trust assets and make and implement decisions concerning the retention and disposition of assets, in order to bring the trust portfolio into compliance with the purposes, terms, distribution requirements, and other circumstances of the trust and with the requirements of this chapter.

Source: S.L. 2007, ch. 549, § 23.

59-17-05. Reviewing compliance.

Compliance with the prudent investor rule is determined in light of the facts and circumstances existing at the time of a trustee’s decision or action and not by hindsight.

Source: S.L. 2007, ch. 549, § 23.

59-17-06. Language invoking standard.

The following terms or comparable language in the provisions of a trust, unless otherwise limited or modified, authorizes any investment or strategy permitted under this chapter: investments permissible by law for investment of trust funds, legal investments, authorized investments, using the judgment and care under the circumstances then prevailing that persons 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 probable safety of their capital, prudent man rule, prudent trustee rule, prudent person rule, and prudent investor rule.

Source: S.L. 2007, ch. 549, § 23; 2009, ch. 587, § 3.

CHAPTER 59-18 Trustee Liability and Dealings

59-18-01. (1001) 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 compel the trustee to perform the trustee’s duties; enjoin the trustee from committing a breach of trust; compel the trustee to redress a breach of trust by paying money, restoring property, or other means; order a trustee to account; appoint a special fiduciary to take possession of the trust property and administer the trust; suspend the trustee; remove the trustee as provided in section 59-15-06; reduce or deny compensation to the trustee; subject to section 59-18-12, 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 order any other appropriate relief.

Source: S.L. 2007, ch. 549, § 24.

Cross-References.

Duties of trustees, see N.D.C.C. ch. 59-16.

Law Reviews.

Article: Improving the Law Through Codification: Adoption of the Uniform Trust Code in North Dakota, see 86 N.D. L. Rev. 321 (2010).

Notes to Decisions

Attorney Fees Denied.

Attorney’s fees award was not supported by statutory authority because this statute provided the remedies for a breach of trust, and did not include an award of attorney’s fees. Twete v. Mullin, 2020 ND 264, 952 N.W.2d 91, 2020 N.D. LEXIS 256 (N.D. 2020).

Mootness.

District court erred in ruling this case moot; this action was commenced before the settlor died, and a beneficiary alleged improper gifting of trust property, plus a failure by the trustee to provide annual accountings as called for under the terms of the trust, and the settlor's death did not make it impossible for the court to provide effective relief. Dixon v. Dixon, 2018 ND 25, 905 N.W.2d 748, 2018 N.D. LEXIS 3 (N.D. 2018).

59-18-01.1. Presumption against trustee.

A transaction between a trustee and the trust’s beneficiary during the existence of the trust or while the influence acquired by the trustee remains by which the trustee obtains any advantage from the trust’s beneficiary is presumed to be entered by the trust’s beneficiary without sufficient consideration and under undue influence. This presumption is a rebuttable presumption.

Source: S.L. 2009, ch. 587, § 4.

Effective Date.

This section became effective August 1, 2009.

Notes to Decisions

Due Process.

Appellants were not denied due process as they were provided notice and an opportunity to be heard because the misappropriation claim and the issue about the applicability of the presumption of undue influence were raised throughout the proceedings, and appellants had the opportunity to present evidence rebutting the presumption of undue influence, but failed to do so. Valer v. Bartelson (In re Bartelson), 2019 ND 107, 925 N.W.2d 416, 2019 N.D. LEXIS 94 (N.D. 2019).

Failure to Consider.

District court had to reconsider a denial of a son's petition to remove a personal representative of a father's decedent's estate because the court incorrectly found no basis for the son's misappropriation claims against daughters, as the court did not apply the presumption of undue influence arising when the daughters made withdrawals from the father's checking account, incorrectly presuming the decedent's lucidity at the time barred any finding of undue influence, since the daughters did not successfully rebut the presumption, and the withdrawals were presumably made under undue influence. Valer v. Bartelson (In re Estate of Bartelson), 2015 ND 147, 864 N.W.2d 441, 2015 N.D. LEXIS 157 (N.D. 2015).

Presumption Not Raised.

Trustee was entitled to summary judgment compelling the trustee’s brother to execute a trust’s purchase option because the facts, viewed most favorably to the brother and other family members, did not show the purchase option provision was the effect of the trustee’s undue influence on the parties’ mother, as (1) the statutory rebuttable influence presumption was not raised, (2) nothing showed the result of the trust appeared to be the effect of undue influence, (3) the purchase option carried over from the parties’ parents’ wills, (4) nothing showed the trustee exerted influence over the mother when the trust document was executed, and, (5) nothing showed what a fair distribution would have been in light of prior testamentary documents. Riskey v. Riskey, 2018 ND 214, 917 N.W.2d 488, 2018 N.D. LEXIS 222 (N.D. 2018).

Rebuttal.

Statutory presumption of undue influence is rebutted, as a matter of law, when a beneficiary of a trust, represented by independent counsel, enters into a stipulation with a trustee, and the trust's beneficiary acknowledges in open court he understands the terms of the stipulation. Harris v. Harris (In re Estate of Harris), 2017 ND 35, 890 N.W.2d 561, 2017 N.D. LEXIS 35 (N.D. 2017).

Bill of transfer from the proponent’s parent to the proponent was void because the proponent did not overcome the statutory presumption of undue influence when a significant confidential relationship existed in that the proponent’s parent relied to a significant extent on the proponent for care, transportation, and the management of the parent’s affairs. Evidence showed the proponent’s opportunity to influence the parent, the parent’s susceptibility to undue influence, and the proponent’s disposition to exercise undue influence over the parent. Zundel v. Zundel, 2020 ND 150, 945 N.W.2d 297, 2020 N.D. LEXIS 140 (N.D. 2020).

59-18-02. (1002) Damages for breach of trust.

  1. A trustee who commits a breach of trust is liable to the beneficiaries affected for the greater of 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 the profit the trustee made by reason of the breach.
  2. Except as otherwise provided in this subsection, if more than one 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.

Source: S.L. 2007, ch. 549, § 24.

59-18-03. (1003) Damages in absence of breach.

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.

Source: S.L. 2007, ch. 549, § 24.

59-18-04. Reserved.

Source: S.L. 2007, ch. 549, § 24.

59-18-05. (1005) Limitation of action against trustee.

  1. A beneficiary may not commence a proceeding against a trustee for breach of trust more than one 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 in the report or in a separate notice accompanying the report of the time allowed for commencing a proceeding.
  2. 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.
  3. If subsection 1 does not apply, a judicial proceeding by a beneficiary against a trustee for breach of trust must be commenced within five years after whichever occurs first: the removal, resignation, or death of the trustee; the termination of the beneficiary’s interest in the trust; or the termination of the trust.

Source: S.L. 2007, ch. 549, § 24.

Notes to Decisions

Breach of Fiduciary Duty.

Co-trustee’s argument that the breach of fiduciary duty claims were time-barred was rejected where his argument that the trust terminated upon the surviving spouse’s death had been rejected, he did not assert there were trustee reports to trigger the operation of the statute of limitations under N.D.C.C. § 59-18-05(1), nor had he marshaled a separate argument about when the trustee discovered facts constituting the basis for a claim. Hogen v. Hogen (In re Curtiss A. Hogen Trust B), 2018 ND 117, 911 N.W.2d 305, 2018 N.D. LEXIS 122 (N.D. 2018).

59-18-06. (1006) 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.

Source: S.L. 2007, ch. 549, § 24.

59-18-07. (1007) 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.

Source: S.L. 2007, ch. 549, § 24.

59-18-08. (1008) Exculpation of trustee.

  1. A term of a trust relieving a trustee of liability for breach of trust is unenforceable to the extent that the term relieves the trustee of liability for breach of trust committed in bad faith or with reckless indifference to the purposes of the trust or was inserted as the result of an abuse by the trustee of a fiduciary or confidential relationship to the settlor.
  2. Unless the settlor was represented by an attorney not employed by the trustee with respect to the trust containing the exculpatory term, 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.

Source: S.L. 2007, ch. 549, § 24.

59-18-09. (1009) Beneficiary’s consent, release, or ratification.

A trustee is not liable to a beneficiary for breach of trust if the beneficiary consented to the conduct constituting the breach, released the trustee from liability for the breach, or ratified the transaction constituting the breach, unless the consent, release, or ratification of the beneficiary was induced by improper conduct of the trustee or at the time of the consent, release, or ratification, the beneficiary lacked capacity or did not know of the beneficiary’s rights or of the material facts relating to the breach.

Source: S.L. 2007, ch. 549, § 24.

59-18-10. (1010) 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. The addition of the phrase “trustee” or “as trustee” or a similar designation to the signature of a trustee on a written contract is considered prima facie evidence of a disclosure of a 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. Whenever a trust instrument reserves to the settlor, or vests in an advisory or investment committee, or in any other person, including one or more cotrustees to the exclusion of the trustee or to the exclusion of one or more of several trustees, authority to direct the making or retention of any investment, the excluded trustee or trustees are not liable, either individually or as a fiduciary, for any loss resulting from the making or retention of any investment pursuant to such direction.
  5. In the absence of actual knowledge or information that would cause a reasonable trustee to inquire further, a trustee may not be held liable for failure to take necessary steps to compel the redress of any breach of trust or fiduciary duty by any predecessor personal representative, trustee, or other fiduciary. This section may not be construed to limit the fiduciary liability of any trustee for the acts or omissions of the trustee with respect to the trust estate.

Source: S.L. 2007, ch. 549, § 24.

DECISIONS UNDER PRIOR LAW

Analysis

Proper Recitals.

The addition of the word “trustee” next to a signature is reasonably sufficient notice to allow the trustee to invoke the protection against personal liability. Gerhardt Constr. Co. v. Wachter Real Estate Trust, 306 N.W.2d 223, 1981 N.D. LEXIS 285 (N.D. 1981).

Trustee Protected Against Personal Liability.

This section offers the trustee protection against personal liability only when the trustee executes the instrument “in the course of the administration of a trust”; if the trustee’s act is outside the authority conferred in the instrument of trust, both the common law and this section make the trustee personally liable for any resulting damages. Gerhardt Constr. Co. v. Wachter Real Estate Trust, 306 N.W.2d 223, 1981 N.D. LEXIS 285 (N.D. 1981).

59-18-11. (1011) Interest as general partner.

  1. Except as otherwise provided in subsection 3 or unless personal liability is imposed in the contract, a trustee who holds an interest as a general partner in a general or limited partnership is not personally liable on a contract entered into by the partnership after the trust’s acquisition of the interest if the fiduciary capacity was disclosed:
    1. In the contract;
    2. In a registration of the partnership as a limited liability partnership filed pursuant to chapter 45-22 in which the trustee is listed as a managing partner; or
    3. In a certificate of limited liability limited partnership filed pursuant to chapter 45-23 in which the trustee is listed as a general partner.
  2. Except as otherwise provided in subsection 3, a trustee who holds an interest as a general partner is not personally liable for torts committed by the partnership or for obligations arising from ownership or control of the interest unless the trustee is personally at fault.
  3. The immunity provided by this section does not apply if an interest in the partnership is held by the trustee in a capacity other than that of trustee or is held by the trustee’s spouse or one or more of the trustee’s descendants, siblings, or parents, or the spouse of any of them.
  4. If the trustee of a revocable trust holds an interest as a general partner, the settlor is personally liable for contracts and other obligations of the partnership as if the settlor were a general partner.

Source: S.L. 2007, ch. 549, § 24.

59-18-12. (1012) 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.

Source: S.L. 2007, ch. 549, § 24.

DECISIONS UNDER PRIOR LAW

Judicial Authority.

The scope of a district court’s authority under subsection (4) of former N.D.C.C. § 30.1-34-06 was broad enough for the court to decide all of a trustee’s liabilities and responsibilities to the trust, and related guardianship matters, in a single, supervised administration proceeding. Mangnall v. Adams (In re Mangnall), 1997 ND 19, 559 N.W.2d 221, 1997 N.D. LEXIS 12 (N.D. 1997).

59-18-13. (1013) Certification of trust.

  1. Unless otherwise required by chapter 59-09, 59-10, 59-11, 59-12, 59-13, 59-14, 59-15, 59-16, 59-17, 59-18, or 59-19, the trustee may furnish to the person a certification of trust containing information that includes that the trust exists and the effective date of the trust instrument, the name of the trust, if a name is given, the identity of each settlor, the identity and address of the currently acting trustee, the applicable powers of the trustee, which may make reference to the powers set forth in chapters 59-09, 59-10, 59-11, 59-12, 59-13, 59-14, 59-15, 59-16, 59-17, 59-18, and 59-19, the revocability or irrevocability of the trust and the identity of any person holding a power to revoke the trust, and 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.
  2. A certification of trust may be signed or otherwise authenticated by any trustee.
  3. A certification of trust must 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 does not limit the right of a person to obtain a copy of the trust instrument in a judicial proceeding concerning the trust.

Source: S.L. 2007, ch. 549, § 24.

CHAPTER 59-19 Application and Electronic Records and Signatures

59-19-01. (1102) Electronic records and signatures.

The provisions of chapters 59-09, 59-10, 59-11, 59-12, 59-13, 59-14, 59-15, 59-16, 59-17, 59-18, and 59-19 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. 7002] and supersede, modify, and limit the requirements of the Electronic Signatures in Global and National Commerce Act.

Source: S.L. 2007, ch. 549, § 25.

Law Reviews.

Article: Improving the Law Through Codification: Adoption of the Uniform Trust Code in North Dakota, see 86 N.D. L. Rev. 321 (2010).

59-19-02. (1106) Application to existing relationships.

  1. Except as otherwise provided in chapters 59-09, 59-10, 59-11, 59-12, 59-13, 59-14, 59-15, 59-16, 59-17, 59-18, and 59-19, effective August 1, 2007, these chapters:
    1. Apply to all trusts created after July 31, 2007; and
    2. Apply to all judicial proceedings concerning trusts which are commenced after July 31, 2007.
  2. Except as otherwise provided in chapters 59-09, 59-10, 59-11, 59-12, 59-13, 59-14, 59-15, 59-16, 59-17, 59-18, and 59-19, from August 1, 2007, through July 31, 2009:
    1. A trust created before August 1, 2007, may elect to be subject to chapters 59-09, 59-10, 59-11, 59-12, 59-13, 59-14, 59-15, 59-16, 59-17, 59-18, and 59-19; however, that trust must be in compliance with those chapters by August 1, 2009;
    2. Any rule of construction or presumption provided in chapters 59-09, 59-10, 59-11, 59-12, 59-13, 59-14, 59-15, 59-16, 59-17, 59-18, and 59-19 applies to trust instruments executed before August 1, 2009, unless there is a clear indication of a contrary intent in the terms of the trust;
    3. Chapters 59-09, 59-10, 59-11, 59-12, 59-13, 59-14, 59-15, 59-16, 59-17, 59-18, and 59-19 do not apply to judicial proceedings concerning trusts which are commenced before that date unless the court finds that application of a particular provision of these chapters would not substantially interfere with the effective conduct of the judicial proceedings or prejudice the rights of the parties, in which case the particular provision of these chapters applies and the superseded law does not apply; and
    4. An act done before August 1, 2009, is not affected by chapters 59-09, 59-10, 59-11, 59-12, 59-13, 59-14, 59-15, 59-16, 59-17, 59-18, and 59-19.
  3. 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 August 1, 2007, for those trusts that are subject to subsection 1, or before August 1, 2009, for those trusts that are subject to subsection 2, that statute continues to apply to the right even if it has been repealed or superseded.

Source: S.L. 2007, ch. 549, § 25.

CHAPTER 59-20 Foundations and Charitable and Split-Interest Trusts

59-20-01. Private foundations — Charitable trusts — Split-interest trusts.

  1. Any will or trust instrument creating a trust that is a “private foundation”, as defined in section 509(a) of the Internal Revenue Code of 1954, or a “charitable trust”, as defined in section 4947(a)(1) of the Internal Revenue Code of 1954, or a “split-interest trust”, as defined in section 4947(a)(2) of the Internal Revenue Code of 1954, and any other instrument governing the trustee of any such trust, or the use, retention, or disposition of any of the income or property of such trust, may be deemed to have incorporated within the will, trust instrument, or other governing instrument, with the same effect as though such language were included in the will, trust instrument, or other governing instrument, the following provisions with respect to the trust and the trustee thereof, and, except as the contrary is provided in subsection 2, such provisions govern the administration and distribution of any such trust, irrespective of any provisions of any applicable will, trust instrument, or other governing instrument, statute, or law of this state to the contrary:
    1. The trustee shall distribute for each taxable year of the trust amounts at least sufficient to avoid liability for the tax imposed by section 4942(a) of the Internal Revenue Code of 1954, as now enacted or as hereafter amended.
    2. The trustee may not engage in any act of “self-dealing”, as defined in section 4941(d) of the Internal Revenue Code of 1954, which would give rise to any liability for the tax imposed by section 4941(a) of the Internal Revenue Code of 1954.
    3. The trustee may not retain any “excess business holdings”, as defined in section 4943(c) of the Internal Revenue Code of 1954, which would give rise to any liability for the tax imposed by section 4943(a) of the Internal Revenue Code of 1954.
    4. The trustee may not make any investments that 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 of 1954, so as to give rise to any liability for the tax imposed by section 4944(a) of the Internal Revenue Code of 1954.
    5. The trustee may not make any “taxable expenditure”, as defined in section 4945(d) of the Internal Revenue Code of 1954, which would give rise to any liability for the tax imposed by section 4945(a) of the Internal Revenue Code of 1954.
  2. Subsection 1 does not apply to the extent that a court of competent jurisdiction determines that application would be contrary to the terms of the will, trust instrument, or other governing instrument described in subsection 1 and that such will, trust instrument, or other governing instrument may not be changed to conform to subsection 1.
  3. As used in this section, “trustee” means a corporation, individual, or other legal entity acting as an original, added, or successor trustee of a testamentary or inter vivos trust estate. Any reference to a particular section of the Internal Revenue Code of 1954 includes, as now enacted or as hereafter amended, such section and any provision of federal law as is or may hereafter be applicable, cognate to such section.
  4. This section does not impair the rights and powers of the attorney general or the courts of this state with respect to any trust.

Source: S.L. 2007, ch. 549, § 26.

CHAPTER 59-21 Uniform Prudent Management of Institutional Funds Act

59-21-01. Definitions.

In this chapter:

  1. “Charitable purpose” means the relief of poverty, the advancement of education, the advancement of religion, the promotion of health, or any other purpose the achievement of which is beneficial to the community.
  2. “Endowment fund” means an institutional fund or part thereof that, under the terms of a gift instrument, is not wholly expendable by the institution on a current basis. The term does not include assets that an institution designates as an endowment fund for its own use.
  3. “Gift instrument” means a record, including an institutional solicitation, under which property is granted to, transferred to, or held by an institution as an institutional fund.
  4. “Institution” means:
    1. A person, other than an individual, organized and operated exclusively for charitable purposes;
    2. A government or governmental entity, to the extent that it holds funds exclusively for a charitable purpose; or
    3. A trust that had both charitable and noncharitable interests, after all noncharitable interests have terminated.
  5. “Institutional fund” means a fund held by an institution exclusively for charitable purposes. The term does not include:
    1. Program-related assets;
    2. A fund held for an institution by a trustee that is not an institution;
    3. A fund in which a beneficiary that is not an institution has an interest, other than an interest that could arise upon violation or failure of the purposes of the fund; or
    4. Perpetual trust funds established by article IX of the Constitution of North Dakota.
  6. “Program-related asset” means an asset held by an institution primarily to accomplish a charitable purpose of the institution and not primarily for investment.
  7. “Record” 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.

Source: S.L. 2009, ch. 589, § 1.

59-21-02. Standard of conduct in managing and investing institutional fund.

  1. Subject to the intent of a donor expressed in a gift instrument, an institution, in managing and investing an institutional fund, shall consider the charitable purposes of the institution and the purposes of the institutional fund.
  2. In addition to complying with the duty of loyalty imposed by law other than this chapter, each person responsible for managing and investing an institutional fund shall manage and invest the fund in good faith and with the care an ordinarily prudent person in a like position would exercise under similar circumstances.
  3. In managing and investing an institutional fund, an institution:
    1. May incur only costs that are appropriate and reasonable in relation to the assets, the purposes of the institution, and the skills available to the institution; and
    2. Shall make a reasonable effort to verify facts relevant to the management and investment of the fund.
  4. An institution may pool two or more institutional funds for purposes of management and investment.
  5. Except as otherwise provided by a gift instrument, the following rules apply:
    1. In managing and investing an institutional fund, the following factors, if relevant, must be considered:
      1. General economic conditions;
      2. The possible effect of inflation or deflation;
      3. The expected tax consequences, if any, of investment decisions or strategies;
      4. The role that each investment or course of action plays within the overall investment portfolio of the fund;
      5. The expected total return from income and the appreciation of investments;
      6. Other resources of the institution;
      7. The needs of the institution and the fund to make distributions and to preserve capital; and
      8. An asset’s special relationship or special value, if any, to the charitable purposes of the institution.
    2. Management and investment decisions about an individual asset must be made not in isolation but rather in the context of the institutional fund’s portfolio of investments as a whole and as a part of an overall investment strategy having risk and return objectives reasonably suited to the fund and to the institution.
    3. Except as otherwise provided by law other than this chapter, an institution may invest in any kind of property or type of investment consistent with this section.
    4. An institution shall diversify the investments of an institutional fund unless the institution reasonably determines that, because of special circumstances, the purposes of the fund are better-served without diversification.
    5. Within a reasonable time after receiving property, an institution shall make and carry out decisions concerning the retention or disposition of the property or to rebalance a portfolio, in order to bring the institutional fund into compliance with the purposes, terms, and distribution requirements of the institution as necessary to meet other circumstances of the institution and the requirements of this chapter.
    6. A person that has special skills or expertise, or is selected in reliance upon the person’s representation that the person has special skills or expertise, has a duty to use those skills or that expertise in managing and investing institutional funds.

Source: S.L. 2009, ch. 589, § 2.

59-21-03. Appropriation for expenditure or accumulation of endowment fund — Rules of construction.

  1. Subject to the intent of a donor, as expressed in the gift instrument and subject to subsection 4, an institution may appropriate for expenditure or accumulate so much of an endowment fund as the institution determines is prudent for the uses, benefits, purposes, and duration for which the endowment fund is established. Unless stated otherwise in the gift instrument, the assets in an endowment fund are donor-restricted assets until appropriated for expenditure by the institution. In making a determination to appropriate or accumulate, the institution shall act in good faith, with the care that an ordinarily prudent person in a like position would exercise under similar circumstances, and shall consider, if relevant, the following factors:
    1. The duration and preservation of the endowment fund;
    2. The purposes of the institution and the endowment fund;
    3. General economic conditions;
    4. The possible effect of inflation or deflation;
    5. The expected total return from income and the appreciation of investments;
    6. Other resources of the institution; and
    7. The investment policy of the institution.
  2. To limit the authority to appropriate for expenditure or accumulate under subsection 1, a gift instrument specifically must state the limitation.
  3. Terms in a gift instrument designating a gift as an endowment, or a direction or authorization in the gift instrument to use only income, interest, dividends, or rents, issues, or profits, or to preserve the principal intact, or words of similar import create an endowment fund of permanent duration unless other language in the gift instrument limits the duration or purpose of the fund and do not otherwise limit the authority to appropriate for expenditure or accumulate under subsection 1.
  4. The appropriation for expenditure in any year of an amount greater than seven percent of the fair market value of an endowment fund, calculated on the basis of market values determined at least quarterly and averaged over a period of not less than three years immediately preceding the year in which the appropriation for expenditure is made, creates a rebuttable presumption of imprudence. For an endowment fund in existence for fewer than three years, the fair market value of the endowment fund must be calculated for the period the endowment fund has been in existence. This subsection does not:
    1. Apply to an appropriation for expenditure permitted under law other than this chapter or by the gift instrument; or
    2. Create a presumption of prudence for an appropriation for expenditure of an amount less than or equal to seven percent of the fair market value of the endowment fund.

Source: S.L. 2009, ch. 589, § 3.

59-21-04. Management and investment functions — Delegation.

  1. Except as otherwise provided in a gift instrument or by law other than this chapter, an institution may delegate to an external agent the management and investment of an institutional fund to the extent that an institution could prudently delegate under the circumstances. An institution shall act in good faith, with the care that an ordinarily prudent person in a like position would exercise under similar circumstances, in:
    1. Selecting an agent;
    2. Establishing the scope and terms of the delegation, consistent with the purposes of the institution and the institutional fund; and
    3. Periodically reviewing the agent’s actions in order to monitor the agent’s performance and compliance with the scope and terms of the delegation.
  2. In performing a delegated function, an agent owes a duty to the institution to exercise reasonable care to comply with the scope and terms of the delegation.
  3. An institution that complies with subsection 1 is not liable for the decisions or actions of an agent to which the function was delegated.
  4. By accepting delegation of a management or investment function from an institution that is subject to the laws of this state, an agent submits to the jurisdiction of the courts of this state in all proceedings arising from or related to the delegation or the performance of the delegated function.
  5. An institution may delegate management and investment functions to its committees, officers, or employees as authorized by law.

Source: S.L. 2009, ch. 589, § 4.

59-21-05. Release or modification of restrictions on management, investment, or purpose.

  1. If the donor consents in a record, an institution may release or modify, in whole or in part, a restriction contained in a gift instrument on the management, investment, or purpose of an institutional fund. A release or modification may not allow a fund to be used for a purpose other than a charitable purpose of the institution.
  2. The court, upon application of an institution, may modify a restriction contained in a gift instrument regarding the management or investment of an institutional fund if the restriction has become impracticable or wasteful, if it impairs the management or investment of the fund, or if, because of circumstances not anticipated by the donor, a modification of a restriction will further the purposes of the fund. The institution shall notify the attorney general of the application. The court shall provide the attorney general with the opportunity to be heard. To the extent practicable, any modification must be made in accordance with the donor’s probable intention.
  3. If a particular charitable purpose or a restriction contained in a gift instrument on the use of an institutional fund becomes unlawful, impracticable, impossible to achieve, or wasteful, the court, upon application of an institution, may modify the purpose of the fund or the restriction on the use of the fund in a manner consistent with the charitable purposes expressed in the gift instrument. The institution shall notify the attorney general of the application, and the court shall provide the attorney general with the opportunity to be heard.
  4. If an institution determines that a restriction contained in a gift instrument on the management, investment, or purpose of an institutional fund is unlawful, impracticable, impossible to achieve, or wasteful, the institution, sixty days after notification to the attorney general, may release or modify the restriction, in whole or part, if:
    1. The institutional fund subject to the restriction has a total value of less than twenty-five thousand dollars;
    2. More than twenty years have elapsed since the fund was established; and
    3. The institution uses the property in a manner consistent with the charitable purposes expressed in the gift instrument.

Source: S.L. 2009, ch. 589, § 5.

59-21-06. Compliance — Determination.

Compliance with this chapter is determined in light of the facts and circumstances existing at the time a decision is made or at the time action is taken, and not by hindsight.

Source: S.L. 2009, ch. 589, § 6.

59-21-07. Application to existing institutional funds.

This chapter applies to institutional funds existing on or established after April 22, 2009. As applied to institutional funds existing on April 22, 2009, this chapter governs only decisions made or actions taken on or after that date.

Source: S.L. 2009, ch. 589, § 7.

59-21-08. Relation to Electronic Signatures in Global and National Commerce Act.

This chapter modifies, limits, and supersedes the Electronic Signatures in Global and National Commerce Act [15 U.S.C. 7001 et seq.] but does not modify, limit, or supersede 15 U.S.C. 7001(a) or authorize electronic delivery of any of the notices described in 15 U.S.C. 7003(b).

Source: S.L. 2009, ch. 589, § 8.