HSB 37

This bill establishes the Iowa uniform custodial trust Act and provides definitions. The Iowa uniform custodial trust Act is a statutory standby inter vivos trust for individuals represented by attorneys engaged in general rather than specialized probate practice. The bill allows persons, competent to transfer property, to create custodial trusts for the benefit of themselves or others, with the beneficial interest in custodial trust property in the beneficiary and not in the custodial trustee. The bill allows any kind of property, real or personal, tangible or intangible, to be made the subject of a transfer to a custodial trustee for the benefit of a beneficiary. A person may create a custodial trust by a written transfer of the property to another person, evidenced by registration or by other instrument of transfer executed and naming as beneficiary an individual who may be the transferor, in which the transferee is designated as custodial trustee, or a person may create a custodial trust of property by a written declaration, evidenced by registration of the property or by other instrument of declaration executed and describing the property and naming as beneficiary an individual other than the declarant, in which the declarant as titleholder is designated, in substance, as custodial trustee. _____ registration or other declaration of trust for the sole benefit of the declarant is not a valid custodial trust. Title is given to the custodial trustee and the beneficial interest is given to the beneficiary. A nonincapacitated beneficiary or legal representative of an incapacitated beneficiary may terminate a custodial trust by delivering the custodial trustee a written notice declaring termination. A successor custodial trustee may be designated in the trust document and any person may augment the trust property by the addition of other property. The bill provides how the custodial trustee may make future payment or transfer the position of custodial trustee. A person who is able to designate the recipient of property payable or transferable upon a future event may create a custodial trust by designating in writing the recipient. A designation of successor trustee may be made in a will, a trust, a multiple-party account, an insurance policy, an instrument exercising a power of appointment, or a writing designating a beneficiary of contractual rights. The designation can also be delivered or registered to the fiduciary, payor, insurer, or obligor of the future right. The bill provides a form and effect of receipt and acceptance by custodial trustee. The form provides the name of the custodial trustee, the name of the beneficiary, the property the trust consists of, and date and signature of the custodial trustee. It also provides that upon accepting custodial trust property, the custodial trustee is subjected to personal jurisdiction of the court with respect to any matter relating to the custodial trust. _____ incapacitated individual. If the value of the property or the debt exceeds $50,000, the transfer is not effective unless authorized by the court. A signed written acknowledgment of delivery by a custodial trustee is a sufficient receipt and discharge for property transferred to the custodial trustee. The bill provides that a custodial trust cannot create beneficial interests for multiple beneficiaries. The bill provides that all custodial property held by the same custodial trustee for a single beneficiary may be administered as a single custodial trust.123 if there is not clear directives from the beneficiary prior to being incapacitated; retaining any custodial trust property received from the transferor; and controlling, collecting, holding, managing, investing, and reinvesting custodial trust property. The bill provides that if a custodial trustee has a special skill or expertise or is named custodial trustee on the basis of representation of a special skill or expertise, the custodial trustee shall use that skill or expertise in making decisions for the custodial trust property. The bill provides that a custodial trustee at all times shall keep custodial trust property of which the custodial trustee has control separate from all other property in a manner sufficient to identify it clearly as custodial trust property of the beneficiary. The bill provides that a custodial trustee shall keep records of all transactions with respect to custodial trust property, including information necessary for the preparation of tax returns, and shall make the records and information available at reasonable times to the beneficiary or legal representative of the beneficiary. _____ Furthermore, the exercise of a durable power of attorney for an incapacitated beneficiary is not effective to terminate or direct the administration or distribution of a custodial trust. The bill provides that the custodial trustee has all the rights and powers over custodial trust property which a person has over individually owned property which may only be exercised in a fiduciary capacity. The bill provides how the custodial trust may be used. If the beneficiary is not incapacitated, the custodial trustee shall pay or expend for the beneficiary’s use or benefit the amount of the custodial trust property at the beneficiary’s directive. If the beneficiary is incapacitated, the custodial trustee shall be allowed to distribute the amount of the custodial trust property as deemed advisable for the use and benefit of the beneficiary and individuals who are entitled to support by the beneficiary. The custodial trustee has discretion in determining the manner, when, and to the extent that the expenditures are made without court order and without regard to other support, income, or property of the beneficiary. The bill provides that a custodial trustee may determine a beneficiary incapacitated relying upon previous direction or authority given by the beneficiary while not incapacitated including direction or authority pursuant to a durable power of attorney; written documentation from the beneficiary’s physician; on the petition of the beneficiary, the custodial trustee, or other interested person in the custodial trust property, the court may determine whether the beneficiary is incapacitated; or other persuasive evidence. The bill also provides that if a custodial trustee deems that a beneficiary’s incapacity has ceased or that the circumstances concerning the beneficiary’s ability to manage the property and business affairs have changed, the custodial trustee may administer the trust as for a beneficiary who is not incapacitated. _____ made, a custodial trustee who has reason to believe that the beneficiary is incapacitated shall administer the custodial trust in accordance with provisions of the bill applicable to an incapacitated beneficiary. A beneficiary being found to be incapacitated does not terminate the custodial trust, any designation of the successor custodial trustee, rights or powers of the custodial trustee, or any immunities of a third-person action on the instructions of the custodial trustee. The bill provides that a third party acting in good faith has no need to determine the custodial trustee’s authority to bind the beneficiary with respect to property and investment matters. The bill generally limits the claims of third parties to recourse against the custodial property, with the beneficiary insulated against personal liability unless the beneficiary is personally at fault and the custodial trustee is similarly insulated unless the custodial trustee is personally at fault or failed to disclose the custodial capacity when entering into a contract. The bill provides for declination, resignation, incapacity, death, or removal of the custodial trustee. A custodial trustee may decline the appointment by notifying the person who made the designation prior to accepting the custodial trust property. If a substitute custodial trustee has not been appointed, the person who made the initial designation may designate a substitute custodial trustee who becomes the custodial trustee. Otherwise, the transferor’s legal representative may designate a substitute custodial trustee. _____ custodial trustee. The bill provides that if the custodial trustee or successor custodial trustee dies, resigns, or becomes incapacitated, the successor custodial trustee designated becomes the custodial trustee. If the successor is not identified, the competent beneficiary or the legal representative of an incapacitated beneficiary may designate a successor custodial trustee. If the beneficiary fails to act in days, the legal representative becomes the custodial trustee. If the incapacitated beneficiary does not have a legal representative or the legal representative fails to act, the resigning custodial trustee may designate a successor custodial trustee. The court may also be petitioned to designate a successor custodial trustee if a successor custodial trustee is not designated. The bill provides that a substitute custodial trustee, the beneficiary, the beneficiary’s legal representative, and if none, a member of the beneficiary’s family, or a person interested in the custodial trust property, may petition the court to remove the custodial trustee for cause and designate a successor custodial trustee, to require the custodial trustee to furnish a bond or other security for the faithful performance of fiduciary duties, or for other appropriate relief. The bill provides means of monitoring and enforcing the custodial trust including provisions requiring the custodial trustee to keep the beneficiary informed, requiring accounting by the custodial trustee, providing protection for the custodial trustee by the statutes of limitation on proceedings against the custodial trustee, and relating to the distribution of the assets on termination of the custodial trust. _____ designated by the court for an incapacitated beneficiary; or upon the death of the beneficiaries as last directed in a writing signed by the beneficiary while not incapacitated and received by the custodial trustee prior to the death, as designated in the instrument that created the custodial trust, or to the estate of the deceased beneficiary. The bill provides the appropriate methods and forms to be used for creating a custodial trust. The bill provides that a custodial trust created under the bill remains subject to the bill despite a subsequent change in the residence of the transferor, the beneficiary, or the custodial trustee or the removal of the custodial trust property from the state of original location.503) and provides that if the court orders termination of a guardianship and the guardian has custody of the assets, the court must order delivery of the assets to the minor or fiduciary acting under one of the following accounts: uniform transfer to minor account established for the minor; a uniform custodial trust account established for the minor; an educational savings plan trust account; or an ABLE savings plan trust account. The bill amends the amount of money that may be transferred by a fiduciary and the small distribution from $25,000 to $50,000. The bill provides that a person is entitled to the small distributions to any of the following: a uniform transfer to minor account established for the minor; a uniform custodial trust account established for the minor; an educational savings plan trust account; or an ABLE savings plan trust account.678 for managing the protected person’s assets by clear and convincing evidence.554 is not satisfied. The bill amends the Code section regarding the delivery of assets upon termination of a conservatorship by including that the delivery shall be made to the following parties as ordered by the court: to a custodian under a uniform transfers to a minor account; to a custodial trustee; to an account owner or participant under a educational savings plan trust account; or an ABLE savings plan trust account owner. Current Code only provides for the assets to the person or persons entitled to them. The bill provides that the order for termination shall direct the conservator to deliver any property remaining after the payment of allowed claims and expenses of administration to the fiduciary acting under one or more of the following accounts: a uniform transfer to minor account established for the minor; a uniform custodial trust account established for the minor; an educational savings plan trust account; or an ABLE savings plan trust account. The bill also increases the threshold at which a court may terminate a conservatorship for having minimal assets of a minor protected person from $25,000 to $50,000.