§ 18-4-31. Power to invade principal in trust.
(a) Unless the trust instrument expressly provides otherwise or unless the trust is a
"Special Needs Trust� or "Supplemental Needs Trust� created in accordance with 42 United States Code section 1396p(d)(4)(A), a trustee who has authority under the terms of a trust to invade the principal of
the trust, referred to in this section as the "first trust,� to make distributions
to or for the benefit of one or more persons, may instead exercise such authority
by appointing all or part of the principal of the trust subject to the power in favor
of a trustee of another trust, referred to in this section as the "second trust,�
for the current benefit of one or more of such persons under the same trust instrument
or under a different trust instrument, provided:
(1) The beneficiaries of the second trust may include only beneficiaries of the first
trust;
(2) The second trust may not reduce any fixed income, annuity or unitrust interest in
the assets of the first trust; and
(3) If any contribution to the first trust qualified for a marital or charitable deduction
for federal income, gift or estate tax purposes under the Internal Revenue Code of
1986, as amended 26 U.S.C. § 1, et seq., the second trust shall not contain any provisions which, if included in
the first trust, would have prevented the first trust from qualifying for such a deduction
or would have reduced the amount of such deduction.
(b) The exercise of a power to invade principal under subsection (a) shall be by an instrument
in writing, signed and acknowledged by the trustee, and filed with the records of
the first trust.
(c) The exercise of a power to invade principal under subsection (a) shall be considered
the exercise of a power of appointment, other than a power to appoint to the trustee,
the trustee's creditors, the trustee's estate, or the creditors of the trustee's estate.
(d) The trustee shall notify all Qualified Beneficiaries (as hereinafter defined) of the
first trust, in writing, of the manner in which the trustee intends to exercise the
power, such notice to be at least sixty (60) days prior to the effective date of the
trustee's exercise of the trustee's power to invade principal. A copy of the proposed
instrument exercising the power shall satisfy the trustee's notice obligation under
this subsection. If all Qualified Beneficiaries waive the notice period by signed
written instrument delivered to the trustee, the trustee's power to invade principal
shall be exercisable immediately. The trustee's notice under this subsection shall
not limit the right of any beneficiary to object to the exercise of the trustee's
power to invade principal except as provided in other applicable provisions of this
title.
(e) "Qualified Beneficiary� means a living beneficiary who, on the date the beneficiary's
qualifications is determined:
(1) Is a distributee or permissible distribute of trust income or principal;
(2) Would be a distribute or permissible distribute of trust income or principal if the
interests of the distributes described in subsection (a) terminated on that date without
causing the trust to terminate; or
(3) Would be a distributee or permissible distribute of trust income or principal if the
trust terminated in accordance with its terms on that date.
(f) The exercise of the power to invade principal under subsection (a) is not prohibited
by a spendthrift clause or by a provision in the trust instrument that prohibits amendment
or revocation of the trust.
(g) Nothing in this section is intended to create or imply a duty to exercise a power
to invade principal, and no inference of impropriety shall be made as a result of
a trustee not exercising the power to invade principal conferred under subsection
(a).
(h) The provisions of this section shall not be construed to abridge the right of any
trustee who has a power of invasion to appoint property in further trust that arises
under the terms of the first trust or under any other section of this title or under
another provisions of law or under common law.