§ 18-9.2-2. Definitions.
As used in this chapter:
(1) "Claim� means a right to payment, whether or not the right is reduced to judgment,
liquidated, unliquidated, fixed, contingent, matured, unmatured, disputed, undisputed,
legal equitable, secured or unsecured.
(2) "Creditor� means, with respect to a transferor, a person who has claim.
(3) "Debt� means liability on a claim.
(4) "Disposition� means a transfer, conveyance or assignment of property (including a
change in the legal ownership of property occurring upon the substitution of one trustee
for another or the addition of one or more new trustees), or the exercise of a power
so as to cause a transfer of property, to a trustee or trustees, but shall not include
the release or relinquishment of an interest that theretofore was the subject of a
qualified disposition.
(5) "Property� includes real property, personal property, and interests in real or personal
property.
(6) "Qualified disposition� means a disposition by or from a transferor to a trustee,
with or without consideration, by means of a trust instrument.
(7) "Spouse� and "former spouse� means only persons to whom the transferor was married
at, or before the time the qualified disposition is made.
(8) "Transferor� means a natural person who, or entity which, as an owner of property
or as a holder of a general power of appointment, which authorizes the holder to appoint
in favor of the holder, the holder's creditors, the holder's estate or the creditors
of the holder's estate, or as a trustee, directly or indirectly, makes a disposition
or causes a disposition to be made.
(9) "Qualified trustee � means a person who:
(i) In the case of natural person, is a resident of this state other than the transferor,
or, in all other cases, is authorized by the provisions of the general or public laws
to act as a trustee, and whose activities are subject to supervision by the department
of business regulation, The Federal Deposit Insurance Corporation, the Comptroller
of the Currency, or the Office of Thrift Supervision, or any successor to them; and
(ii) Maintains or arranges for custody in this state of some or all of the property that
is the subject of the qualified disposition, maintains records for the trust on an
exclusive or nonexclusive basis, prepares or arranges for the preparation of fiduciary
income tax returns for the trust, or otherwise materially participates in the administration
of the trust.
(iii) For the purposes of this chapter, neither the transferor nor any other natural person
who is a nonresident of this state nor an entity that is not authorized by the law
of this state to act as a trustee or whose activities are not subject to supervision
as provided in subparagraph (I) of this subsection shall be considered a qualified
trustee; however, nothing in this chapter shall preclude a transferor from appointing
one or more advisors, including, but not limited to:
(A) Advisors who have authority under the terms of the trust instrument to remove and
appoint qualified trustees or trust advisors; and
(B) Advisors who have authority under the terms of the trust instrument to direct, consent
to or disapprove distributions from the trust. For purposes of this section, the term
"advisor� includes a trust "protector� or any other person who, in addition to a qualified
trustee, holds one or more trust powers.
(iv) A person may serve as an advisor, notwithstanding that such person is the transferor
of the qualified disposition, but such a person may not otherwise serve as advisor
of a trust that is a qualified disposition except with respect to the retention of
the veto right permitted by subsection (10)(ii) of this section.
(v) In the event that a qualified trustee of a trust ceases to meet the requirements of
subparagraph (I) of this subsection, and there remains no trustee that meets such
requirements, such qualified trustee shall be deemed to have resigned as of the time
of such cessation, and thereupon the successor qualified trustee provided for in the
trust instrument shall become a qualified trustee of the trust, or in the absence
of any successor qualified trustee provided for in the trust amendment, the superior
court shall, upon application of any interested party, appoint a successor qualified
trustee.
(vi) In the case of a disposition to more than one trustee, a disposition that is otherwise
a qualified disposition shall not be treated as other than a qualified disposition
solely because not all of the trustees are qualified trustees.
(10) "Trust instrument� means an instrument appointing a qualified trustee or qualified
trustees for the property that is the subject of a disposition, which instrument:
(i) Expressly incorporates the general or public laws of this state to govern the validity,
construction, and administration of the trust;
(ii) Is irrevocable; provided, that a trust instrument shall not be deemed revocable due
to its inclusion in one or more of the following:
(A) A transferor's power to veto a distribution from the trust;
(B) A power of appointment (other than a power to appoint to the transferor, the transferor's
creditors, the transferor's estate or the creditors of the transferor's estate) exercisable
by will or other written instrument of the transferor effective only upon the transferor's
death;
(C) The transferor's potential or actual receipt of income, including rights to such income
retained in the trust instrument;
(D) The transferor's potential or actual receipt of income or principal from a charitable
remainder unitrust or charitable remainder annuity trust as such terms are defined
in § 664 of the Internal Revenue Code of 1986 [26 U.S.C. § 664] and any successor provision thereto; and the transferor's right, at any time and
from time to time by written instrument delivered to the trustee, to release such
transferor's retained interest in such a trust, in whole or in part, in favor of a
charitable organization that has or charitable organizations that have a succeeding
beneficial interest in such trust;
(E) The transferor's receipt each year of a percentage (not to exceed five percent (5%))
specified in the trust instrument of the initial value of the trust assets on their
value determined from time to time pursuant to the trust instrument or of a fixed
amount that on an annual basis does not exceed five percent (5%) of the initial value
of the trust assets;
(F) The transferor's potential or actual receipt or use of principal if such potential
or actual receipt or use of principal would be the result of a qualified trustee's
or qualified trustees' acting:
(1) In such qualified trustee's or qualified trustees' discretion;
(2) Pursuant to a standard that governs the distribution of principal and does not confer
upon the transferor a substantially unfettered right to the receipt or use of the
principal; or
(3) At the direction of an adviser described in subsection (9)(iii) of this section who
is acting:
(a) In such advisor's discretion; or
(b) Pursuant to a standard that governs the distribution of principal and does not confer
upon the transferor a substantially unfettered right to the receipt of or use of principal.
For purposes of this subsection, a qualified trustee is presumed to have discretion
with respect to the distribution of principal unless such discretion is expressly
denied to such trustee by the terms of the trust instrument;
(G) The transferor's right to remove a trustee or advisor and to appoint a new trustee
or advisor (other than a person who is a related or subordinate party with respect
to the transferor within the meaning of § 672(c) of the Internal Revenue Code of 1986 [26 U.S.C. § 672(c)] and any successor provision thereto);
(H) The transferor's potential or actual use of real property held under a qualified personal
residence trust within the meaning of such term as described in § 2702(c) of the Internal Revenue Code of 1986 [26 U.S.C. § 2702(c)] and any successor provision thereto or the transferor's possession and enjoyment
of a qualified annuity interest within the meaning of such term as described in Treasury Regulation § 25.2702-5(c)(8) [26 C.F.R. § 25.2502-5(c)(8)] and any successor provision thereto;
(I) The transferor's potential or actual receipt of income or principal to pay, in whole
or in part, income taxes due on income of the trust if such potential or actual receipt
of income or principal is pursuant to a provision in the trust instrument that expressly
provides for the payment of such taxes and if such potential or actual receipt of
income or principal would be the result of a qualified trustee's or qualified trustees'
acting:
(1) In such qualified trustee's or qualified trustees' discretion; or
(2) At the direction of an advisor described in subsection (9)(iii) of this section who
is acting in such advisor's discretion. Distributions to pay income taxes made under
discretion included in a governing instrument pursuant to subparagraph (C), subparagraph
(F) or this subparagraph (I) of subsection (10)(ii) of this section may be made by
direct payment to the taxing authorities.
(iii) Provides that the interest of the transferor or other beneficiary in the trust property
or the income therefrom may not be transferred, assigned, pledged or mortgaged, whether
voluntarily or involuntarily, before the qualified trustee or qualified trustees actually
distribute the property or income therefrom to the beneficiary, and such provision
of the trust instrument shall be deemed to be a restriction on the transfer of the
transferor's beneficial interest in the trust that is enforceable under applicable
nonbankruptcy law within the meaning of § 541(c)(2) of the Bankruptcy Code (11 U.S.C. § 541(c)(2)) or any successor provision thereto; and
(iv) A disposition by a trustee that is not a qualified trustee to a trustee that is a
qualified trustee shall not be treated as other than a qualified disposition solely
because the trust instrument fails to meet the requirements of subparagraph (I) of
this section.