§ 30-4-10-49 — Applicable rules

Indiana § 30-4-10-49

• Jurisdiction: Indiana
• Art. 4: TRUST CODE
• Ch. 10: Uniform Trust Decanting Act

Text

(a) As used in this section, "grantor trust"
means a trust as to which a settlor of a first trust is considered the
owner under 26 U.S.C. 671 through 677, as amended and in effect on
July 1, 2022, or 26 U.S.C. 679, as amended and in effect on July 1,
2022.
(b) As used in this section, "Internal Revenue Code" means the
United States Internal Revenue Code of 1986, as amended and in effect
on July 1, 2022.
(c) As used in this section "nongrantor trust" means a trust that is
not a grantor trust.
(d) As used in this section, "qualified benefits property" means
property subject to the minimum distribution requirements of 26 U.S.C.
401(a)(9), as amended and in effect on July 1, 2022, and any applicable
regulations, or to any similar requirements that refer to 26 U.S.C.
401(a)(9) or the regulations.
(e) An exercise of the decanting power is subject to the following
limitations:
(1) If a first trust contains property that qualified, or would have
qualified but for provisions of this chapter other than this section,
for a marital deduction for purposes of the gift or estate tax under
the Internal Revenue Code or a state gift, estate, or inheritance
tax, the second-trust instrument must not include or omit any term
that, if included in or omitted from the trust instrument for the
trust to which the property was transferred, would have prevented
the transfer from qualifying for the deduction, or would have
reduced the amount of the deduction, under the same provisions
of the Internal Revenue Code or state law under which the
transfer qualified.
(2) If the first trust contains property that qualified, or would have
qualified but for provisions of this chapter other than this section,
for a charitable deduction for purposes of the income, gift, or
estate tax under the Internal Revenue Code or a state income, gift,
estate, or inheritance tax, the second-trust instrument must not
include or omit any term that, if included in or omitted from the
trust instrument for the trust to which the property was
transferred, would have prevented the transfer from qualifying for
the deduction, or would have reduced the amount of the
deduction, under the same provisions of the Internal Revenue
Code or state law under which the transfer qualified.
(3) If the first trust contains property that qualified, or would have
qualified but for provisions of this chapter other than this section,
for the exclusion from the gift tax described in 26 U.S.C. 2503(b),
as amended and in effect on July 1, 2022, the second-trust
instrument must not include or omit a term that, if included in or
omitted from the trust instrument for the trust to which the
property was transferred, would have prevented the transfer from
qualifying under 26 U.S.C. 2503(b), as amended and in effect on
July 1, 2022. If the first trust contains property that qualified, or
would have qualified but for provisions of this chapter other than
this section, for the exclusion from the gift tax described in 26
U.S.C. 2503(b), as amended and in effect on July 1, 2022, by
application of 26 U.S.C. 2503(c), as amended and in effect on
July 1, 2022, the second-trust instrument must not include or omit
a term that, if included in or omitted from the trust instrument for
the trust to which the property was transferred, would have
prevented the transfer from qualifying under 26 U.S.C. 2503(c),
as amended and in effect on July 1, 2022.
(4) If the property of the first trust includes shares of stock in an
S corporation, as defined in 26 U.S.C. 1361, as amended and in
effect on July 1, 2022, and the first trust is, or but for provisions
of this chapter other than this section would be, a permitted
shareholder under any provision of 26 U.S.C. 1361, as amended
and in effect on July 1, 2022, an authorized fiduciary may
exercise the power with respect to part or all of the S corporation
stock only if any second trust receiving the stock is a permitted
shareholder under 26 U.S.C. 1361(c)(2), as amended and in effect
on July 1, 2022. If the property of the first trust includes shares of
stock in an S corporation and the first trust is or, but for
provisions of this chapter other than this section, would be a
qualified subchapter S trust within the meaning of 26 U.S.C.
1361(d), as amended and in effect on July 1, 2022, the
second-trust instrument must not include or omit a term that
prevents the second trust from qualifying as a qualified
subchapter S trust.
(5) If the first trust contains property that qualified, or would have
qualified but for provisions of this chapter other than this section,
for a zero (0) inclusion ratio for purposes of the generation
skipping transfer tax under 26 U.S.C. 2642(c), as amended and in
effect on July 1, 2022, the second-trust instrument must not
include or omit a term that, if included in or omitted from the
first-trust instrument, would have prevented the transfer to the
first trust from qualifying for a zero (0) inclusion ratio under 26
U.S.C. 2642(c), as amended and in effect on July 1, 2022.
(6) If the first trust is directly or indirectly the beneficiary of
qualified benefits property, the second-trust instrument may not
include or omit any term that, if included in or omitted from the
first-trust instrument, would have increased the minimum
distributions required with respect to the qualified benefits
property under 26 U.S.C. 401(a)(9), as amended and in effect on
July 1, 2022, and any applicable regulations, or any similar
requirements that refer to 26 U.S.C. 401(a)(9), as amended and in
effect on July 1, 2022, or the regulations. If an attempted exercise
of the decanting power violates this subdivision, the trustee is
deemed to have held the qualified benefits property and any
reinvested distributions of the property as a separate share from
the date of the exercise of the power and section 52 of this chapter
applies to the separate share.
(7) If the first trust qualifies as a grantor trust because of the
application of 26 U.S.C. 672(f)(2)(A), as amended and in effect
on July 1, 2022, the second trust may not include or omit a term
that, if included in or omitted from the first-trust instrument,
would have prevented the first trust from qualifying under 26
U.S.C. 672(f)(2)(A), as amended and in effect on July 1, 2022.
(8) As used in this subdivision, "tax benefit" means a federal or
state tax deduction, exemption, exclusion, or other benefit not
otherwise listed in this section, except for a benefit arising from
being a grantor trust. Subject to subdivision (9), a second-trust
instrument may not include or omit a term that, if included in or
omitted from the first-trust instrument, would have prevented
qualification for a tax benefit if:
(A) the first-trust instrument expressly indicates an intent to
qualify for the benefit or the first-trust instrument is clearly
designed to enable the first trust to qualify for the benefit; and
(B) the transfer of property held by the first trust or the first
trust qualified or, but for provisions of this chapter other than
this section, would have qualified for the tax benefit.
(9) Subject to subdivision (4):
(A) except as provided in subdivision (7), the second trust may
be a nongrantor trust, even if the first trust is a grantor trust; and
(B) except as otherwise provided in subdivision (10), the
second trust may be a grantor trust, even if the first trust is a
nongrantor trust.
(10) An authorized fiduciary may not exercise the decanting
power if a settlor objects in a signed record delivered to the
fiduciary within the notice period and:
(A) the first trust and a second trust are both grantor trusts, in
whole or in part, the first trust grants the settlor or another
person the power to cause the first trust to cease to be a grantor
trust, and the second trust does not grant an equivalent power
to the settlor or other person; or
(B) the first trust is a nongrantor trust and a second trust is a
grantor trust, in whole or in part, with respect to the settlor,
unless:
(i) the settlor has the power at all times to cause the second
trust to cease to be a grantor trust; or
(ii) the first-trust instrument contains a provision granting the
settlor or another person a power that would cause the first
trust to cease to be a grantor trust and the second-trust
instrument contains the same provision.

Legislative History

As added by P.L.161-2022, SEC.3.