§ 7504 — Certain trustee powers not exercisable

Pennsylvania § 7504

• Jurisdiction: Pennsylvania
• Title 20: DECEDENTS, ESTATES AND FIDUCIARIES
• Ch. 75: LIMITATIONS ON EXERCISE OF TRUSTEE POWERS

Text

(a) General rule.--The following powers conferred by a governing instrument upon a trustee in his or her capacity as a trustee shall not be exercised by that trustee:

(1) The power to make discretionary distributions of either principal or income to or for the benefit of the trustee, the trustee's estate or the creditors of either unless the power is either:

(i) limited by an ascertainable standard relating to the trustee's health, education, support or maintenance within the meaning of 26 U.S.C. §§ 2041 (relating to powers of appointment) and 2514 (relating to powers of appointment); or

(ii) exercisable by the trustee only in conjunction with another person having a substantial interest in the property subject to the power which is adverse to the interest of the trustee within the meaning of 26 U.S.C. § 2041(b)(1)(C)(ii).

(2) The power to make discretionary distributions of either principal or income to satisfy any of the trustee's personal legal obligations for support or other purposes.

(3) The power to make discretionary allocations in the trustee's personal favor of receipts or expenses as between income and principal unless the trustee has no power to enlarge or shift any beneficial interest except as an incidental consequence of the discharge of the trustee's fiduciary duties.

(4) The power to exercise any of the powers proscribed in this subsection with regard to an individual other than the trustee to the extent that the individual could exercise a similar prohibited power in connection with a trust that benefits the trustee.

(b) Limited exercise of prohibited power.--

(1) If a trustee is prohibited by subsection (a)(1) from exercising a power conferred upon the trustee, the trustee nevertheless may exercise that power but shall be limited to distributions for the trustee's health, education, support or maintenance to the extent otherwise permitted by the terms of the trust.

(2) Unless otherwise prohibited by the provisions of this section, a trustee may exercise a power described herein in favor of someone other than the trustee, the trustee's estate or the creditors of either.

(c) Exceptions.--This section shall not apply to:

(1) A trustee who possesses in his individual capacity an unlimited right to withdraw the entire principal of the trust or has a general testamentary power of appointment over the entire principal of the trust.

(2) A trust created under a governing instrument executed on or before March 21, 1999, if no part of the principal of the trust would have been included in the gross estate of the trustee for Federal estate tax purposes if the trustee had died on March 21, 1999, without having exercised the power under the governing instrument to make discretionary distributions of principal or income to or for the benefit of the trustee, the trustee's estate or the creditors of either.

Legislative History

(July 7, 2006, P.L.625, No.98, eff. 60 days) 2006 Amendment.Act 98 added subsec. (c). Cross References.Section 7504 is referred to in section 7505 of this title.