SENATE COMMERCE COMMITTEE

 

STATEMENT TO

 

SENATE, No. 982

 

STATE OF NEW JERSEY

 

DATED: MAY 2, 1996

 

      The Senate Commerce Committee reports favorably Senate Bill No. 982.

      This bill supplements New Jersey's probate code and addresses situations in which trustees are also beneficiaries of the trust.

      The bill prohibits a trustee/beneficiary from:

      a. making discretionary distributions of either principal or income for his own benefit unless the power is limited by an ascertainable standard relating to the trustee's health, education, support or maintenance, or the power is exercisable only with the consent of a person having a substantial interest in the trust;

      b. making discretionary allocations in the trustee's personal favor of receipts or expenses as between income and principal;

      c. making distributions of either principal or income to discharge his personal legal obligations; and

      d. exercising powers for a beneficiary other than the trustee to the extent that such beneficiary could exercise a similar power for the trustee.

      The bill does not affect the power given to an independent trustee. The bill provides that if there is no trustee who can exercise the power of invasion, a court can appoint a special trustee. The provisions of the bill do not apply while a trust is revocable or amendable by the grantor. The provisions of the bill apply to any trust created under a governing instrument executed 90 days or more after the effective date of the bill, unless the governing instrument expressly provides that the bill does not apply, and does apply to governing instruments executed prior to that time, unless all interested parties affirmatively elect on or before three years after the effective date of the bill not to be subject to the application of the provisions of the bill.