(1)(a) 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. The parameters for that exercise are
established by the terms and purposes of the trust, the interests of the
beneficiaries, and relevant fiduciary duties. A trustee does not abuse its discretion
if the trustee, following the terms and purposes of the trust and considering the
interests of its beneficiaries, exercises its judgment honestly and with a proper
motive.
(b)Where a trust gives a trustee unlimited discretion, including the use of
such terms as absolute, sole, or uncontrolled, a court may not determine that
a trustee abused its discretion mere
Free access — add to your briefcase to read the full text and ask questions with AI
(1) (a) 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. The parameters for that exercise are
established by the terms and purposes of the trust, the interests of the
beneficiaries, and relevant fiduciary duties. A trustee does not abuse its discretion
if the trustee, following the terms and purposes of the trust and considering the
interests of its beneficiaries, exercises its judgment honestly and with a proper
motive.
(b) Where a trust gives a trustee unlimited discretion, including the use of
such terms as absolute, sole, or uncontrolled, a court may not determine that
a trustee abused its discretion merely because the court would have exercised the
discretion in a different manner or would not have exercised the discretion.
(2) Subject to subsection (4) of this section, and unless the terms of the trust
expressly indicate that a rule in this subsection (2) does not apply:
(a) 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
(b) A trustee may not exercise a power to make discretionary distributions to
satisfy a legal obligation of support that the trustee personally owes another
person.
(3) A power whose exercise is limited or prohibited by subsection (2) of this
section may be exercised by a majority of the remaining trustees whose exercise of
the power is not so limited or prohibited. If the power of all trustees is so limited or
prohibited, the court may appoint a special fiduciary with authority to exercise the
power.
(4) Subsection (2) of this section does not apply to:
(a) 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
federal Internal Revenue Code of 1986, as amended, was previously allowed;
(b) Any trust during any period that the trust may be revoked or amended by
its settlor; or
(c) A trust, if contributions to the trust qualify for the annual exclusion under
section 2503 (c) of the federal Internal Revenue Code of 1986, as amended.