(a)Where discretion is conferred upon the fiduciary with respect to the exercise of a power, its exercise by the fiduciary shall be considered to be proper unless the court determines that the discretion has been abused within the meaning of § 187 of the Restatement (Second) of Trusts, not §§ 50 and 60 of the Restatement (Third) of Trusts.
(b)A beneficiary eligible to receive distributions from a trust in the discretion of a fiduciary has a discretionary interest in the trust. A discretionary interest in a trust is a mere expectancy, not a property right. A beneficiary eligible to receive distributions from a trust in the discretion of a fiduciary, even if subject to an ascertainable standard (as defined in Treas. Reg. § 20.2041-1(c)(2) (26 CFR § 20.2041-1(c)(2)) or any successor provis Free access — add to your briefcase to read the full text and ask questions with AI
(a) Where discretion is conferred upon the fiduciary with respect to the exercise of a power, its exercise by the fiduciary shall be considered to be proper unless the court determines that the discretion has been abused within the meaning of § 187 of the Restatement (Second) of Trusts, not §§ 50 and 60 of the Restatement (Third) of Trusts.
(b) A beneficiary eligible to receive distributions from a trust in the discretion of a fiduciary has a discretionary interest in the trust. A discretionary interest in a trust is a mere expectancy, not a property right. A beneficiary eligible to receive distributions from a trust in the discretion of a fiduciary, even if subject to an ascertainable standard (as defined in Treas. Reg. § 20.2041-1(c)(2) (26 CFR § 20.2041-1(c)(2)) or any successor provision thereto), has a discretionary interest in the trust. An interest that includes mandatory distribution language such as “shall” but is qualified by discretionary distribution language is a discretionary interest. A beneficiary that has a discretionary interest in a trust shall not be deemed to have a right to compel a distribution from the trust. Nothing within this subsection, however, shall be deemed to alter the standard of review of the discretion of the fiduciary under subsection (a) of this section. A creditor may not directly or indirectly compel the distribution of a discretionary interest except to the extent expressly granted by the terms of a governing instrument in accordance with § 3536(a) of this title.
(c) In connection with the exercise of a discretionary power conferred on a trustee or other fiduciary of a trust in the trust’s governing instrument, the trustee’s or other fiduciary’s decision whether or not to consider 1 or more letters of wishes, as defined in § 3301(g) of this title, is subject to the standard of review of the discretion of the trustee or other fiduciary under subsection (a) of this section.
(1) The trustee or other fiduciary may consider 1 or more letters of wishes, whenever created, and whether or not the governing instrument is ambiguous, if the letter of wishes meets all of the following:
a. Has been delivered to a trustee of the trust by or on behalf of the trustor.
b. Reflects the trustor’s intent contemporaneous with the date of execution of the governing instrument, which intent may be reflected in facts and circumstances known to the trustor, or not known to or anticipated by the trustor, as of the date of execution of the governing instrument.
c. Is not inconsistent with any provision of the governing instrument.
(2) A trustee’s or other fiduciary’s decision not to consider a letter of wishes with respect to an unambiguous provision of a governing instrument is not an abuse of discretion under subsection (a) of this section.
(3) A trustee’s or other fiduciary’s decision not to consider a letter of wishes not meeting the requirements of paragraph (c)(1) of this section is not an abuse of discretion under subsection (a) of this section.
(4) A trustee’s or other fiduciary’s decision to consider a letter of wishes meeting the requirements of paragraph (c)(1) of this section, with respect to an ambiguous provision of a governing instrument, is not an abuse of discretion under subsection (a) of this section.
(5) A letter of wishes is not binding on a trustee or other fiduciary under the governing instrument. A trustee or other fiduciary does not have a duty to follow the letter of wishes, and the fact that a trustee or other fiduciary does or does not exercise a discretionary power in accordance with the letter of wishes does not create an inference that the trustee or other fiduciary improperly exercised the power or abused the trustee’s or other fiduciary’s discretion under subsection (a) of this section.
(6) Except as provided under the terms of the governing instrument or by court order, the trustee or other fiduciary does not have a duty to provide any beneficiary a copy of a letter of wishes.