CHAPTER 802c* TRUSTS (source: www.cga.ct.gov) *See Sec. 52-321 re spendthrift trust provisions. Annotations to former chapter 780 (Sec. 45-79 et seq.): Probate court has only powers expressly given or necessarily implied; cannot order trust terminated; may construe trust when. 93 C. 405. National bank can act as trustee whenever a state bank could. 94 C. 651. Table of Contents Sec. 45a-471.* (Formerly Sec. 45-213c). Trustee to receive proceeds of pension, retirement, death benefit and profit-sharing plans. Sec. 45a-472. Trustee to receive proceeds of pension, retirement, death benefit and profit-sharing plans. Sec. 45a-473. (Formerly Sec. 45-83). Bonds of testamentary trustees. Sec. 45a-474. (Formerly Sec. 45-84). Vacancies in office of trustee. Sec. 45a-475. (Formerly Sec. 45-85). Filling of vacancy in town or county trusteeship. Duties of town's successor trustee. Sec. 45a-476. (Formerly Sec. 45-86). Legal title vests in trustee appointed to fill vacancy. Sec. 45a-477. (Formerly Sec. 45-90). Foreign trustee's custody of trust estate. Jurisdiction of Probate Court over trusts created by nondomiciliaries. Sec. 45a-478. (Formerly Sec. 45-87). Appointment of trustee when person has disappeared. Trustee's rights and duties. Procedure if person reappears. Sec. 45a-479. (Formerly Sec. 45-92). Suspension of fiduciary powers during armed forces service. Sec. 45a-480. (Formerly Sec. 45-91). Income from property acquired by trustee by conveyance or foreclosure when mortgage formerly held by trustee. Sec. 45a-481. (Formerly Sec. 45-93). Distribution by testamentary trustee upon completion of trust. Sec. 45a-482. (Formerly Sec. 45-93a). Distribution of assets of inoperative trust. Sec. 45a-483. (Formerly Sec. 45-94). Settlement of trust estate when beneficiary has been absent seven years. Sec. 45a-484. (Formerly Sec. 45-79c). Termination of small trusts. Sec. 45a-485. Superior Court or Probate Court jurisdiction to reform instrument to ensure allowance of marital deduction. Qualified domestic trust. Sec. 45a-486. Termination of inter vivos trust when settlor or spouse is an applicant for or recipient of medical assistance. Sec. 45a-487. Powers of trustees who are trust beneficiaries. Sec. 45a-487a. Beneficiary interests in trust matters: Definitions. Sec. 45a-487b. Representation by holder of power of appointment. Sec. 45a-487c. Representation by court-appointed conservator or guardian, agent, trustee, executor or administrator, or parent. Sec. 45a-487d. Representation of minor, incapacitated or unborn individual or person whose identity or location is unknown. Sec. 45a-487e. Appointment of guardian ad litem by court, when. Powers. Sec. 45a-487f. Notice and consent re representation and binding another person. Sec. 45a-488. Division of trust for benefit of beneficiaries. Approval by beneficiaries required. Sec. 45a-489. Title and beneficial interest in property held in trust not merged nor trust invalidated, when. Sec. 45a-490. Short title: Uniform Statutory Rule Against Perpetuities.

Sec. 45a-491. Statutory rule against perpetuities. Sec. 45a-492. When nonvested property interest or power of appointment created. Sec. 45a-493. Reformation. Sec. 45a-494. Exclusions from statutory rule against perpetuities. Sec. 45a-495. Prospective application. Sec. 45a-496. Uniformity of application and construction. Secs. 45a-497 to 45a-501. Sec. 45a-502. (Formerly Sec. 45-96a). "Majority" defined for trusts executed prior to October 1, 1972. Sec. 45a-503. (Formerly Sec. 45-95). Rule against perpetuities. "Second look" doctrine. Sec. 45a-504. (Formerly Sec. 45-96). Reduction of age contingency to preserve interest. Sec. 45a-505. (Formerly Sec. 45-97). Fee simple determinable or subject to right of entry to become absolute, when. Sec. 45a-506. (Formerly Sec. 45-98). Limitations not invalidated, when. Sec. 45a-507. (Formerly Sec. 45-99). Application of rule. Sec. 45a-508. (Formerly Sec. 45-100). Exemption of certain employees' trust funds from the rule against perpetuities. Secs. 45a-509 to 45a-513. Sec. 45a-514. (Formerly Sec. 45-79). Charitable trusts. Sec. 45a-515. (Formerly Sec. 45-80). Charitable uses determined by trustee, when. Sec. 45a-516. (Formerly Sec. 45-81). Gifts to charitable community trust. Sec. 45a-517. (Formerly Sec. 45-82). Community trustees to render annual accounts. Hearing on adjustment and allowance. Sec. 45a-518. Sec. 45a-519. (Formerly Sec. 45-79a). Superior Court or Probate Court jurisdiction to reform instruments to federal tax requirements. Sec. 45a-520. (Formerly Sec. 45-79b). Termination of charitable trusts. Sec. 45a-521. Superior Court or Probate Court jurisdiction to reform charitable remainder unitrust re payment. Secs. 45a-522 to 45a-525. Sec. 45a-526. (Formerly Sec. 45-100h). Short title: Uniform Management of Institutional Funds Act. Sec. 45a-527. (Formerly Sec. 45-100i). Definitions. Sec. 45a-528. (Formerly Sec. 45-100j). Expenditure of net appreciation, standards. Sec. 45a-529. (Formerly Sec. 45-100k). Exception and restriction on expenditure of net appreciation. Construction. Sec. 45a-529a. Accumulation of annual net income, standards. Sec. 45a-529b. Exception and restriction on accumulation of annual net income. Construction. Sec. 45a-530. (Formerly Sec. 45-100l). Investment of institutional funds. Sec. 45a-531. (Formerly Sec. 45-100m). Delegation of powers of investment. Sec. 45a-532. (Formerly Sec. 45-100n). Standards applicable to actions of governing board. Sec. 45a-533. (Formerly Sec. 45-100o). Release of restriction in gift instrument: Written consent, court order. Limitations. Doctrine of cy pres applicable. Sec. 45a-534. (Formerly Sec. 45-100p). Construction. Secs. 45a-535 to 45a-539. Sec. 45a-540. (Formerly Secs. 45-100a to 45-100c). Powers in trust instruments act. Sec. 45a-541. Short title: Connecticut Uniform Prudent Investor Act. Sec. 45a-541a. Prudent investor rule. Sec. 45a-541b. Standard of care. Portfolio strategy. Risk and return objectives. Sec. 45a-541c. Diversification. Sec. 45a-541d. Duties at inception of trusteeship.

Sec. 45a-541e. Loyalty. Sec. 45a-541f. Impartiality. Sec. 45a-541g. Investment costs. Sec. 45a-541h. Reviewing compliance. Sec. 45a-541i. Delegation of investment and management functions. Sec. 45a-541j. Language invoking standards of act. Sec. 45a-541k. Uniformity of application and construction. Sec. 45a-541l. Applicability. Sec. 45a-542. Short title: Connecticut Principal and Income Act. Sec. 45a-542a. Definitions. Sec. 45a-542b. Fiduciary duties. Sec. 45a-542c. Trustee's power to adjust. Sec. 45a-542d. Determination and distribution of income interest of decedent's estate or in trust after trust ends. Sec. 45a-542e. Distribution to beneficiaries. Sec. 45a-542f. Right to income. Sec. 45a-542g. Apportionment of receipts and disbursements when decedent dies or interest income begins. Sec. 45a-542h. Apportionment when income interest ends. Sec. 45a-542i. Character of receipts. Sec. 45a-542j. Distribution from trust or estate. Sec. 45a-542k. Business and other activities conducted by trustee. Sec. 45a-542l. Principal receipts. Sec. 45a-542m. Rental property. Sec. 45a-542n. Obligation to pay money. Sec. 45a-542o. Insurance policies and similar contracts. Sec. 45a-542p. Insubstantial allocations not required. Sec. 45a-542q. Deferred compensation, annuities and similar payments. Sec. 45a-542r. Liquidating asset. Sec. 45a-542s. Minerals, water and other natural resources. Sec. 45a-542t. Timber. Sec. 45a-542u. Property not productive of income. Sec. 45a-542v. Derivatives and options. Sec. 45a-542w. Asset-backed securities. Sec. 45a-542x. Disbursements from income. Sec. 45a-542y. Disbursements from principal. Sec. 45a-542z. Transfers from income to principal for depreciation. Sec. 45a-542aa. Transfers from income to reimburse principal. Sec. 45a-542bb. Income taxes. Sec. 45a-542cc. Adjustments between principal and income as result of taxes. Sec. 45a-542dd. Uniformity of application and construction. Sec. 45a-542ee. Severability clause. Sec. 45a-542ff. Application to existing trust or decedent's estate. Sec. 45a-543. Determination by court re abuse of discretion by fiduciary. Secs. 45a-544 and 45a-545. PART I TRUSTS AND TRUSTEES IN GENERAL Sec. 45a-471.* (Formerly Sec. 45-213c). Trustee to receive proceeds of pension, retirement, death benefit and profit-sharing plans. (a) As used in this section, "proceeds" means the proceeds paid upon the death of any insured, employee or participant under any thrift plan or trust, savings

plan or trust, pension plan or trust, death benefit plan or trust, stock bonus plan or trust including any employee's stock ownership plan or trust; any retirement plan or trust, which includes self-employed retirement plans and individual retirement accounts, annuities and bonds; and the proceeds of any individual, group or industrial life insurance policy, or accident and health insurance policy and any annuity contract, endowment insurance contract or supplemental insurance contract. (b) (1) Proceeds may be made payable to a trustee under a trust agreement or declaration of trust in existence on the date of such designation, and identified in such designation. Such proceeds shall be paid to such trustee and held and disposed of in accordance with the terms of such trust agreement or declaration of trust, including any written amendments thereto in existence on the date of the death of the insured, employee or participant. It shall not be necessary to the validity of any such trust agreement or declaration of trust that it have a trust corpus other than the right of the trustee as beneficiary to receive such proceeds. (2) Proceeds may be made payable to a trustee of a trust to be established by will. Upon issuance of a decree qualifying a trustee so named, such proceeds shall be payable to the trustee to be held and disposed of in accordance with the terms of such will as a testamentary trust. A designation which in substance names as such beneficiary the trustee under the will of the insured, employee or participant, shall be taken to refer to the will of such person actually admitted to probate, whether executed before or after the making of such designation. (c) Such proceeds may be payable in more than one installment. If no qualified trustee claims such proceeds from the insurer or other payor within eighteen months after the death of the insured, employee or participant, or if satisfactory evidence is furnished to the insurer or other payor within such period showing that there is or will be no trustee to receive such proceeds, such proceeds shall be paid by the insurer or other payor to the personal representative or assigns of the insured, employee or participant, unless otherwise provided by agreement with the insurer or other payor during the lifetime of the insured, employee or participant. (d) Except to the extent otherwise provided by the trust agreement, declaration of trust or will, proceeds received by the trustee shall not be subject to the debts of the insured, employee or participant, to any greater extent than if such proceeds were payable to the beneficiaries named in the trust; and for all purposes, including the succession and transfer tax, they shall not be deemed payable to or for the benefit of the estate of the insured, employee or participant. (e) Proceeds so held in trust may be commingled with any other assets which may properly become part of such trust. (f) Nothing in this section shall affect the validity of any designation made prior to October 1, 1978, of the trustee of any trust established under a trust agreement or declaration of trust or by will. (P.A. 78-128.) *Note: In accordance with the provisions of P.A. 87-384, S. 34, this section is applicable with respect to decedents dying before October 1, 1987. History: Sec. 45-213c transferred to Sec. 45a-471 in 1991. (Return to Chapter Table of Contents)

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Sec. 45a-472. Trustee to receive proceeds of pension, retirement, death benefit and profit-sharing plans. (a) As used in this section, "proceeds" means the proceeds paid upon the death of any insured, employee, participant, or beneficiary under: Any thrift plan, savings plan, pension plan, profit-sharing plan, death benefit plan, stock bonus plan including any employee stock ownership plan; any qualified cash or deferred arrangement which is part of a profit-sharing or stock bonus plan; any retirement plan including a self-employed retirement plan; any individual retirement account, annuity and bond or simplified employee pension plan; and the proceeds of any individual, group or industrial life insurance policy, or accident and health insurance policy and any annuity contract, endowment insurance contract or supplemental insurance contract. (b) (1) Proceeds may be made payable to a trustee under a trust agreement or declaration of trust in existence on the date of such designation, and identified in such designation. Such proceeds shall be paid to such trustee and held and disposed of in accordance with the terms of such trust agreement or declaration of trust, including any written amendments thereto in existence on the date of death of the insured, employee or participant. It shall not be necessary to the validity of any such trust agreement or

declaration of trust that it have a trust corpus other than the right of the trustee as beneficiary to receive such proceeds. (2) Proceeds may be made payable to a trustee of a trust to be established by will. Upon issuance of a decree qualifying a trustee so named, such proceeds shall be payable to the trustee to be held and disposed of in accordance with the terms of such will as a testamentary trust. A designation which in substance names as such beneficiary the trustee under the will of the insured, employee or participant, shall be taken to refer to the will of such person actually admitted to probate, whether executed before or after the making of such designation. (c) Such proceeds may be payable in more than one installment. If no qualified trustee claims such proceeds from the insurer or other payor within eighteen months after the death of the insured, employee or participant, or if satisfactory evidence is furnished to the insurer or other payor within such period showing that there is or will be no trustee to receive such proceeds, such proceeds shall be paid by the insurer or other payor to the personal representative or assigns of the insured, employee or participant, unless otherwise provided by agreement with the insurer or other payor during the lifetime of the insured, employee or participant. (d) Except to the extent otherwise provided by the trust agreement, declaration of trust or will, proceeds received by the trustee shall not be subject to the debts of the insured, employee or participant, to any greater extent than if such proceeds were payable to the beneficiaries named in the trust; and for all purposes, including the succession and transfer tax, they shall not be deemed payable to or for the benefit of the estate of the insured, employee or participant. (e) Proceeds so held in trust may be commingled with any other assets which may properly become part of such trust. (f) Nothing in this section shall affect the validity of any designation made prior to October 1, 1978, of the trustee of any trust established under a trust agreement or declaration of trust or by will. (g) The provisions of this section shall be applicable to decedents dying on or after October 1, 1987. (P.A. 89-202, S. 6.) (Return to Chapter Table of Contents)

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Sec. 45a-473. (Formerly Sec. 45-83). Bonds of testamentary trustees. When a testator has appointed a trustee to execute a trust created by his will, the court of probate having jurisdiction of the settlement of his estate shall, unless otherwise provided in the will, require of such trustee a probate bond. If any trustee refuses to give such bond, the refusal shall be deemed a refusal to accept or perform the duties of such trust; but the bond without surety of any public or charitable corporation or cemetery association to which any bequest or devise is made in trust shall be deemed sufficient. Whenever by any will it is provided that the trustee or trustees thereunder shall not be required to give a probate bond, or shall be required to give a bond which in the judgment of the court of probate having jurisdiction is insecure or inadequate, the court may, upon the application of any person interested, require such trustee or trustees at any time to furnish a probate bond in accordance with section 45a-139. (1949 Rev., S. 6887; P.A. 80-227, S. 13, 24; 80-476, S. 213; P.A. 82-472, S. 162, 183.) History: P.A. 80-227 substituted "probate bond ..." for "such bond as the judge of such court deems sufficient", effective July 1, 1981; P.A. 80-476 rephrased provisions; P.A. 82-472 made a technical change; Sec. 45-83 transferred to Sec. 45a-473 in 1991. Annotations to former section 45-83: One named as executor and trustee accepting former presumed to accept latter in absence of renunciation. 12 C. 481; 86 C. 402. Failure to pay funds to successor completes breach of bond. 48 C. 207. Failure to have funds forthcoming on trustee's death makes surety liable. 73 C. 436. Bond covers both real and personal property. 77 C. 74. (Return to Chapter Table of Contents)

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Sec. 45a-474. (Formerly Sec. 45-84). Vacancies in office of trustee. When any person has been appointed trustee of any estate, or holds as trustee the proceeds of any estate sold, and no provision is made by law or by the instrument under which his appointment is derived for the contingency of his death or incapacity or for his refusal to accept such trust or for his resignation of such trust, or

when a trust has been created by will and no trustee has been appointed in the will or when more than one trustee has been appointed and thereafter a trustee so appointed dies, becomes incapable, refuses to accept or resigns such trust, the court of probate of the district within which the estate is situated, or, when the trust has been created by will, in the district having jurisdiction of such will, may, on the happening of any such contingency, appoint some suitable person to fill such vacancy, taking from him a probate bond, unless in the case of a will it is otherwise provided therein, in which case the provisions of section 45a-473 shall apply. (1949 Rev., S. 6888; P.A. 80-476, S. 214.) History: P.A. 80-476 rephrased provisions and substituted "proceeds" for "avails"; Sec. 45-84 transferred to Sec. 45a-474 in 1991. See Sec. 52-60 re appointment of probate judge as attorney for nonresident fiduciary. Annotations to former section 45-84: Testator impliedly has power to provide manner of filling vacancies. 54 C. 325; 69 C. 708; 84 C. 499. Power to appoint trustees concurrent with superior court. 60 C. 325; 92 C. 473. Does not extend to trust involving personal discretion. 82 C. 198; 83 C. 654. Successor cannot exercise purely discretionary powers given to original trustee. 90 C. 461. Legal incapacity of corporation to accept fund for charitable purposes requires appointment of trustee. Id., 592. Refusal of trustee to act requires appointment of another. 67 C. 237; 71 C. 122; 74 C. 599. If validity of trust is doubtful, probate court should appoint. 77 C. 705. Trustee who has been superseded by another is not a proper party to action de fund. 91 C. 446. Trust will not be allowed to fail for want of a trustee. 106 C. 623. Cited. 132 C. 104; 140 C. 124. (Return to Chapter Table of Contents)

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Sec. 45a-475. (Formerly Sec. 45-85). Filling of vacancy in town or county trusteeship. Duties of town's successor trustee. (a) Whenever the trustee of any trust for the use or benefit of any town or county or for the citizens of any town or county, as such, dies or becomes incapacitated or resigns or refuses to act, and no provision is made for such contingency by the instrument creating such trust, the treasurer of such town on behalf of the town or the State Treasurer on behalf of the county shall thereupon become such trustee, and such treasurer and his successors in office shall act as such trustee, provided the town treasurer shall secure such bond as the selectmen from time to time prescribe. (b) (1) When any town treasurer acts as such trustee, he shall include in his annual statement a report in detail of his account as such trustee, including a list of the securities on hand, the price and date of purchase of all securities purchased since his last statement, the amount, date and source of each item of income received and the names of all banks and depositaries where such trust money is deposited with the amount on deposit in each bank or depositary. (2) Such trust funds held by a town treasurer shall be invested only in the manner prescribed by section 45a-203, unless otherwise directed by vote of a town meeting. (3) All property so held in trust by a town treasurer shall at all times be open to the inspection of the selectmen and to the inspection of the person or persons appointed under the provisions of section 7-392 to audit the accounts of the town. (c) The provisions of section 45a-474 shall not apply to the trusts specified in this section. (1949 Rev., S. 6889; 1959, P.A. 152, S. 63; P.A. 80-476, S. 215.) History: 1959 act deleted all references to county government and empowered state treasurer to act for county as trustee; P.A. 80-476 divided section into Subsecs. and made minor wording changes, i.e. deleting "such" in Subsec. (b) in most instances of its occurrence; Sec. 45-85 transferred to Sec. 45a-475 in 1991. (Return to Chapter Table of Contents)

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Sec. 45a-476. (Formerly Sec. 45-86). Legal title vests in trustee appointed to fill vacancy. When the legal title to any property has vested in a trustee and the trusteeship has become vacant, such legal title shall vest in his successor immediately upon his appointment and qualification. A certificate of the successor's appointment, duly made and recorded in the land records of the town in which the property is situated, shall be evidence that such legal title is vested in the successor trustee. (1949 Rev., S. 6890; P.A. 80-476, S. 216.) History: P.A. 80-476 rephrased provisions and substituted "property" for "estate"; Sec. 45-86 transferred to Sec. 45a-476 in 1991.

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Sec. 45a-477. (Formerly Sec. 45-90). Foreign trustee's custody of trust estate. Jurisdiction of Probate Court over trusts created by nondomiciliaries. (a) When any person not a resident of this state is the owner of a life estate or income during life in any personal property or real property in this state that may thereafter be converted into money, and the child or children of such life tenant or person entitled to such life use or income, residing in the same state as such life tenant or person entitled to such life use or income, are entitled to the remainder upon the termination of such life estate, life use or income, such life tenant having procured the appointment of a trustee or other legal custodian of the property in which he has such interest under the laws of the place of his residence, such custodian may apply in writing to the court of probate in this state which has jurisdiction of the administration of such trust estate for the possession and removal of such property. In such application the trustee or custodian shall allege that he has been legally appointed such custodian in the jurisdiction in which such life tenant resides, and that he has therein given a probate bond valid according to the requirements of such jurisdiction, and security thereon, or an increase in an existing bond and security, in an amount equal to the value of all such estate of such person to be removed from this state. Such bond and the decree of the court appointing such custodian shall provide that if the child or children of such life tenant are for any reason unable to take or receive the property upon the termination of the life estate or estate aforesaid, it is to be held and paid over by such custodian to such persons as the court of probate in this state ordering such removal directs. Upon such custodian filing for record in the Court of Probate an exemplified copy of the record of the court by which he was appointed, it shall, after a hearing upon such notice as the court orders to the person having such estate in custody and after proof that all known debts against it in this state have been paid or satisfied, appoint the applicant to be guardian, conservator or trustee without further bonds, and authorize the person having such estate in his custody to deliver it to the applicant, who may demand, sue for and recover it and remove it from this state. (b) Any one or more of the vested beneficial owners of interests established by a testamentary transfer of real property situated in this state or personal property wherever situated, in trust or under custodianship established and administered outside of this state, who are residents of this state may petition the court of probate in any district in which any such real property or tangible personal property is situated or in which any of such beneficial owners reside to assume jurisdiction of such trust or custodianship. In the petition, such beneficial owner or owners shall allege that it would be in the best interest of some or all of such beneficial owners and not adverse to any of such owners for the trust or custodianship to be administered in a court of probate in this state or that all such beneficial owners consent to the administration of the trust or custodianship in a court of probate in this state. The Court of Probate, after hearing with notice as it directs, including notice to any court having jurisdiction over the trust or custodianship, upon written consent of all such beneficial owners or satisfaction that the allegations in the petition are true and upon proof that such transfer is not prohibited by law, may assume jurisdiction. If a probate bond is required under the laws of the state in which the transferring court is located or this state, such bond shall be given to the Probate Court prior to the assumption of jurisdiction by such court. Upon transfer and assumption of jurisdiction and administration of such trust or custodianship to this state, the record shall be established in the Court of Probate as if the estate were being originally established for administration in this state and the provisions of the general statutes shall govern the trust or custodianship and its administration. (1949 Rev., S. 6895; P.A. 80-227, S. 14, 24; 80-476, S. 217; P.A. 82-115, S. 1, 3.) History: P.A. 80-227 rephrased provision re bond requirement, adding reference to increases in existing bond and security and reducing amount from double the value of the estate "of which such person is entitled to the life use or income" to an amount equaling the value of the estate to be removed from state, effective July 1, 1981; P.A. 80-476 rephrased provisions; P.A. 82-115 added Subsec. (b) allowing probate courts to assume jurisdiction over trusts created by nondomiciliaries; Sec. 45-90 transferred to Sec. 45a-477 in 1991. See Sec. 45a-206

re foreign corporation's right to be executor or trustee. See Sec. 45a-207 re investments held by foreign corporation as executor or trustee. See Sec. 45a-635 re removal by foreign guardian of ward's personal property. See Sec. 52-60 re appointment of probate judge as attorney for nonresident fiduciary. Annotations to former section 45-90: Court in which estate is settled alone has jurisdiction. 58 C. 233. Transfer of funds in ancillary trust here to another jurisdiction is consistent with Connecticut public policy. 28 CS 499. (Return to Chapter Table of Contents)

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Sec. 45a-478. (Formerly Sec. 45-87). Appointment of trustee when person has disappeared. Trustee's rights and duties. Procedure if person reappears. (a) When any person having property has disappeared so that after diligent search his whereabouts cannot be ascertained, the court of probate in the district in which he resided or had his domicile at the time of his disappearance or, if such person resided outside of this state, then in the district in which any of his property is situated, upon the application of the spouse, or a relative, creditor or other person interested in the property of such person, or the selectmen of the town where such person last resided, or in which such property is situated, shall, after public notice and a hearing thereon, appoint a trustee of the property of such person. (b) Diligent search shall be deemed to have been made for any person who has disappeared while serving with the armed forces when such person has been reported or listed as missing, missing in action, interned in a neutral country or beleaguered, besieged or captured by an enemy. (c) Such trustee, upon giving a probate bond, shall have charge of such property, and he shall have the same powers, duties and obligations as a conservator of the estate of an incapable person. With the approval of the court of probate, such trustee may use any portion of the income or principal of such property for the support of the spouse and minor children of such person. (d) Upon its own motion or upon the application of any interested person, the court of probate may, after public notice and a hearing thereon, remove, discharge, require an accounting from, or appoint a successor to, such trustee. (e) The court of probate may continue such trustee in office until satisfactory proof of the death of such person is furnished, until proceedings are taken to settle his estate on the presumption of his death under the provisions of section 45a-329, or for a period of seven years from the time of the disappearance of such person if he remains unheard of. (f) In case of the reappearance of such person, the court of probate shall, on his application, after hearing and public notice thereof, order the restoration of such property to the person entitled thereto and the discharge of such trustee, after acceptance of the trustee's account. (1949 Rev., S. 6892; 1953, S. 2909d; P.A. 80-476, S. 218.) History: P.A. 80-476 divided section into Subsecs. and rephrased provisions; Sec. 45-87 transferred to Sec. 45a-478 in 1991. See Sec. 52-60 re appointment of probate judge as attorney for nonresident fiduciary. (Return to Chapter Table of Contents)

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Sec. 45a-479. (Formerly Sec. 45-92). Suspension of fiduciary powers during armed forces service. (a) When any fiduciary of any trust other than a testamentary trust is engaged in service in the armed forces, as defined in section 27-103, which prevents his giving the necessary attention to his duties as the fiduciary, the Superior Court, upon petition of the fiduciary or any person interested in such estate, may, upon such notice as said court deems suitable and after hearing, order the suspension of the powers and duties of the fiduciary for the period of such service and until the further order of said court. (b) The Superior Court may appoint a substitute fiduciary to serve for the period of suspension whether or not there remains any fiduciary to exercise the powers and duties of the fiduciary who is in such service. Said court may decree that the ownership and title to the trust res shall vest in the substitute fiduciary or cofiduciary or both and that the duties and such of the powers and discretions as are not personal to the fiduciary may be exercised by the cofiduciary or substitute fiduciary and may make such further orders as said court deems advisable for the proper protection of such fund or estate. (c) The rules of court with respect to judgments under the Selective Service Act shall not apply to actions under this section. (d) Upon a petition

therefor, the court may order the reinstatement of the fiduciary when his service in the armed forces has terminated. (1949 Rev., S. 6897; 1957, P.A. 163, S. 40; P.A. 80-476, S. 219.) History: P.A. 80-476 divided section into Subsecs. and rephrased provisions; Sec. 45-92 transferred to Sec. 45a-479 in 1991. (Return to Chapter Table of Contents)

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Sec. 45a-480. (Formerly Sec. 45-91). Income from property acquired by trustee by conveyance or foreclosure when mortgage formerly held by trustee. In any case in which a trustee holds a mortgage upon property for the benefit of one or more tenants for life or limited term, with remainder over to another or others, and such trustee acquires title to such property by conveyance or foreclosure, such acquired property shall be a principal asset in lieu of such mortgage, and such tenant or tenants for life or limited term shall be entitled to the net income from such acquired property from the date of its acquisition. (1949 Rev., S. 6896; P.A. 80-476, S. 220.) History: P.A. 80-476 deleted "and become" preceding "a principal asset"; Sec. 45-91 transferred to Sec. 45a-480 in 1991. (Return to Chapter Table of Contents)

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Sec. 45a-481. (Formerly Sec. 45-93). Distribution by testamentary trustee upon completion of trust. The trustee of any testamentary trust which has terminated may, unless the will creating the trust otherwise directs, after settling his final account, deliver the property remaining in his hands to the remainderman upon the order of the Probate Court, without returning the same to the estate of the decedent. (1949 Rev., S. 6886.) History: Sec. 45-93 transferred to Sec. 45a-481 in 1991. Annotation to former section 45-93: Power and duty of probate court to determine all issues involved in ascertainment of money or property that trustee is bound to pay or deliver to the person entitled. 121 C. 391. (Return to Chapter Table of Contents)

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Sec. 45a-482. (Formerly Sec. 45-93a). Distribution of assets of inoperative trust. When the facts at the time of distribution from an estate to a trust or from a testamentary trust to a successive trust are such that no trust would be operative under the terms of the instrument creating such trust or successive trust because of the death of the life tenant, or because the beneficiary has reached a stipulated age, or if such trust would qualify for termination under section 45a-484, or for any other reason, the fiduciary of such estate or prior trust may distribute, with the approval of the court of probate having jurisdiction, directly from the estate or prior trust to the remaindermen of such trust, the corpus of such trust and any income earned during the period of estate administration or administration of the prior trust and distributable to such remaindermen, without the interposition of the establishment of such trust or successive trust. If distribution is based on the fact that the trust would qualify for termination under section 45a-484, reasonable notice shall be provided to all beneficiaries who are known and in being and who have vested or contingent interests in the trust. (P.A. 73-250; P.A. 80-476, S. 221; P.A. 96-255, S. 1.) History: P.A. 80-476 rephrased provisions; Sec. 45-93a transferred to Sec. 45a-482 in 1991; P.A. 96-255 amended section to provide for distribution if trust would qualify for termination under Sec. 45a-484 and require notice to all beneficiaries in such case. (Return to Chapter Table of Contents)

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Sec. 45a-483. (Formerly Sec. 45-94). Settlement of trust estate when beneficiary has been absent seven years. The trustee of any trust for the benefit of any person who has been absent from his home and unheard of for seven years or more may settle his account as such trustee in the court of probate having jurisdiction thereof. Upon the order of the court, the trustee shall distribute such trust estate to the persons entitled to the remainder thereof as determined by the court, and the trustee shall not thereafter be liable to any such absent beneficiary, his heirs, executors,

administrators or assigns in any action for such trust estate or any interest therein or income thereof. A person shall not be entitled to receive any portion of such estate from the trustee until such person has filed in the court of probate a bond with surety to the acceptance of the court, payable to the state, conditioned to return such trust estate to the trustee or his successor on the reappearance of the person presumed to be dead within thirteen years from the date of such order authorizing distribution. After the expiration of such thirteen-year period, such person entitled to the remainder shall not be liable to any such absent beneficiary, his heirs, executors, administrators or assigns in any action for such trust estate or any interest therein or income thereof. (1949 Rev., S. 6891; P.A. 80-476, S. 222.) History: P.A. 80-476 rephrased provisions; Sec. 45-94 transferred to Sec. 45a-483 in 1991. (Return to Chapter Table of Contents)

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Sec. 45a-484. (Formerly Sec. 45-79c). Termination of small trusts. (a) Except as otherwise provided by the trust or section 45a-520 with respect to charitable trusts, a probate court having jurisdiction under this section may terminate a trust, in whole or in part, on application therefor by the trustee, by any beneficiary entitled to income from the trust, or by such beneficiary's legal representative, after reasonable notice to all beneficiaries who are known and in being and who have vested or contingent interests in the trust, and after holding a hearing, if the court determines that all of the following apply: (1) The continuation of the trust is (A) uneconomic when the costs of operating the trust, probable income and other relevant factors are considered, or (B) not in the best interest of the beneficiaries; (2) the termination of the trust is equitable and practical; and (3) the current market value of the trust does not exceed the sum of one hundred thousand dollars. (b) If the probate court orders termination of the trust, in whole or in part, it shall direct that the principal and undistributed income be distributed to the beneficiaries in such manner as the probate court determines is equitable. The probate court may also make such other order as it deems necessary or appropriate to protect the interests of the beneficiaries. (c) No trust may be terminated over the objection of its settlor or where the interest of the beneficiaries cannot be ascertained. The provisions of this section shall not apply to spendthrift trusts. (d) A probate court may terminate a testamentary trust pursuant to this section if the probate court has jurisdiction over the accounts of the testamentary trustee. A probate court may terminate an inter vivos trust pursuant to this section if the trustee or settlor has his or its principal place of business in, or resides in, that probate district. (P.A. 88-95; P.A. 94-98, S. 9; P.A. 03-183, S. 1.) History: Sec. 45-79c transferred to Sec. 45a-484 in 1991; P.A. 94-98 amended Subdiv. (3) of Subsec. (a) re maximum of current market value of trust by increasing twenty to forty thousand dollars; P.A. 03-183 amended Subsec. (a) by making a technical change in Subdiv. (1) and increasing maximum current market value from forty thousand to one hundred thousand dollars in Subdiv. (3). (Return to Chapter Table of Contents)

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Sec. 45a-485. Superior Court or Probate Court jurisdiction to reform instrument to ensure allowance of marital deduction. Qualified domestic trust. (a) If any marital deduction would not be allowed by reason of Section 2056(d)(1) of the Internal Revenue Code of 1986 with respect to any interest in property passing under any will, trust agreement or other governing instrument because such interest fails to comply with the requirements of Sections 2056(d)(2)(A) and 2056A(a) of said code, the Superior Court, or the Probate Court if the trust or estate is otherwise subject to the jurisdiction of the Probate Court, or with respect to an inter vivos trust, if that trust is or could be subject to the jurisdiction of the court for an accounting pursuant to section 45a-175, provided such an accounting need not be required, shall have jurisdiction over any action brought to reform such will, trust agreement or other governing instrument to comply with those requirements so as to allow a marital deduction under Section 2056(a) of said code. All references contained in this section to any section of the Internal Revenue Code of 1986 shall mean that section of the Internal Revenue Code of 1986, or any subsequent corresponding internal revenue code of the United

States, as from time to time amended. (b) The Superior Court or the Probate Court shall be empowered to reform any such will, trust agreement or other governing instrument to the extent necessary to ensure the allowance of the marital deduction described in subsection (a) of this section. (c) Any reformation of any will, trust agreement or other governing instrument in accordance with the provisions of this section shall be effective whether or not a disclaimer has been filed within the period of time specified in sections 45a-578 to 45a-585, inclusive. (d) This section shall be applicable to any action commenced to reform any such will, trust agreement or other governing instrument created by a decedent dying on or after November 10, 1988. (P.A. 91-214; May Sp. Sess. P.A. 92-11, S. 33, 70; P.A. 98-219, S. 6.) History: May Sp. Sess. P.A. 92-11 amended Subsec. (a) to delete redundant language re any subsequent corresponding internal revenue code of the United States; P.A. 98-219 amended Subsecs. (a) and (b) re jurisdiction of Probate Court to reform instrument to ensure allowance of marital deduction if instrument is otherwise subject to jurisdiction of Probate Court. (Return to Chapter Table of Contents)

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Sec. 45a-486. Termination of inter vivos trust when settlor or spouse is an applicant for or recipient of medical assistance. (a) The provisions of this section shall apply to an inter vivos trust (1) established or funded on or after October 1, 1992; (2) established or funded within the same period of time prior to application for public assistance or Medicaid as is specified in Section 1917(c) of the Social Security Act or in a waiver approved by the Secretary of Health and Human Services concerning the disposal of assets for less than fair market value; and (3) in which the settlor or the settlor's spouse is a beneficiary. (b) Upon the application of the Department of Social Services, the Superior Court shall terminate an inter vivos trust established by a person or the person's spouse when the person or the person's spouse becomes an applicant for or recipient of public assistance or Medicaid. The Superior Court shall order that the principal and any undistributed income shall be distributed to the settlor of the trust. This section shall not apply if the settlor, the settlor's spouse, a conservator or other legal representative of the settlor or the settlor's spouse, or any other person having a beneficial interest in the trust, establishes by clear and convincing evidence that not one of the principal purposes of the trust was the current or future qualification of the settlor or the settlor's spouse for benefits under Title XIX of the Social Security Act (42 USC 1396 et seq.). (c) On or after October 1, 1992, the provisions of this section shall not apply to charitable remainder trusts, as defined in Section 664(d) of the Internal Revenue Code of 1986, or any corresponding internal revenue code of the United States, as from time to time amended, nor to transfers which are deductible pursuant to Section 170(f)(2)(B), 2055(e)(2) or 2522(c)(2) of said code, nor to any trust in which the settlor or the settlor's spouse has not retained any interest, other than reversionary interest of five per cent or less. (P.A. 92-233, S. 3; P.A. 93-262, S. 1, 87; P.A. 96-255, S. 2; June 18 Sp. Sess. P.A. 97-2, S. 102, 165.) History: P.A. 93-262 authorized substitution of commissioner and department of social services for commissioner and department of income maintenance, effective July 1, 1993; P.A. 96-255 amended Subsec. (b) by deleting "a person, his conservator or legal representative or" after "application" and provided that section shall not apply if it is established that not one of principal purposes of trust was qualification for benefits under Social Security Act, and added Subsec. (c) which provides that section is not applicable to certain specified charitable remainder trusts, certain transfers which are deductible under the Internal Revenue Code nor to any trust in which settlor or settlor's spouse has retained any interest, other than reversionary interest of five per cent or less, on or after October 1, 1992; June 18 Sp. Sess. P.A. 97-2 made technical and conforming changes in Subsecs. (a) and (b) re references to public assistance and Medicaid, effective July 1, 1997. (Return to Chapter Table of Contents)

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Sec. 45a-487. Powers of trustees who are trust beneficiaries. (a) No person serving as trustee or cotrustee of a trust established by a will or inter vivos instrument shall have or be deemed to

possess in his or her capacity as trustee discretionary power or authority to expend or distribute income or principal of the trust to himself or herself or for the discharge of such trustee's legal obligations, unless: (1) The trustee is also the settlor or creator of the trust, and the trust is revocable or amendable by the settlor; or (2) The trustee is the spouse, widow or widower of the settlor of the trust, and a marital deduction has been allowed for federal estate tax purposes with respect to the trust property that is subject to such discretionary power; or (3) The terms of the will or governing trust instrument expressly grant such discretionary power, and such terms either: (A) Include with a specific reference to this section an acknowledgment that the designated trustee is specifically intended to be both a holder of such power and a permissible beneficiary of the exercise of such power, notwithstanding any conflict of interest or tax consequence that may result from such fact; or (B) Specifically limit the scope of such power to expenditures and distributions of income or principal upon an ascertainable standard, such as health, maintenance, support and education, as those terms are described in Sections 2041 and 2514 of the Internal Revenue Code of 1986, or any subsequent corresponding internal revenue code of the United States, as from time to time amended. (b) Unless a will or governing trust instrument expressly provides otherwise, the lack of such discretionary power by one trustee shall not impair any authority granted by the will or governing trust instrument to any other trustee or cotrustee to make such distributions with respect to the same trust to or for the benefit of the trustee who lacks such power, as long as such other trustee exercises the power without participation by the trustee who lacks such power. (c) This section shall take effect July 6, 1995, and shall apply to all wills, codicils, revocable inter vivos trust agreements and amendments thereto created by persons dying on or after October 1, 1995, and to irrevocable trusts established by inter vivos agreement executed on or after October 1, 1995. (P.A. 95-315, S. 1, 2; P.A. 06-196, S. 275.) History: P.A. 95-315 effective July 6, 1995; P.A. 06-196 made a technical change in Subsec. (b), effective June 7, 2006. (Return to Chapter Table of Contents)

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Sec. 45a-487a. Beneficiary interests in trust matters: Definitions. As used in this section and sections 45a-487b to 45a-487f, inclusive: (1) "Trust matters" means (A) any property or interest in property held as part of a trust; (B) actions by or against a trust or by or against the trustee of such trust, in its capacity as such trustee; (C) proceedings for the interpretation of any document creating a trust or other instrument pursuant to which property is held by a trustee; (D) accountings, whether intermediate or final, of any trustee; and (E) any other matters concerning the administration of a trust. Any reference to a trust in this section and sections 45a-487b to 45a-487f, inclusive, shall include both testamentary and nontestamentary trusts. (2) "Represent" shall not be construed to permit a person who has not been admitted as an attorney under the provisions of section 51-80 to serve as legal counsel for any other person in a trust matter. (P.A. 01-69, S. 1.) (Return to Chapter Table of Contents)

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Sec. 45a-487b. Representation by holder of power of appointment. In connection with trust matters, to the extent there is no conflict of interest between the holder of a power of appointment and the persons represented with respect to the particular question or dispute: (1) The sole holder or all coholders of any power of appointment, whether or not presently exercisable, shall represent the potential appointees; and (2) the sole holder or all coholders of a power of revocation or a general power of appointment, including one in the form of a power of amendment, shall also represent the takers in default of the exercise thereof. (P.A. 01-69, S. 2.) (Return to Chapter Table of Contents)

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Sec. 45a-487c. Representation by court-appointed conservator or guardian, agent, trustee, executor or administrator, or parent. In connection with trust matters, to the extent there is no conflict of interest between the representative and the person represented or among those being

represented with respect to a particular question or dispute: (1) A court-appointed conservator or guardian of the estate may represent and bind the estate that the conservator or guardian controls; (2) a court-appointed conservator or guardian of the person may represent and bind the ward if a conservator or guardian of the ward's estate has not been appointed; (3) an agent having authority to do so may represent and bind the principal; (4) a trustee may represent and bind the beneficiaries of the trust; (5) an executor or administrator of a decedent's estate may represent and bind persons interested in the estate; and (6) if a conservator or guardian has not been appointed, a parent may represent and bind the parent's minor or unborn child. (P.A. 01-69, S. 3.) (Return to Chapter Table of Contents)

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Sec. 45a-487d. Representation of minor, incapacitated or unborn individual or person whose identity or location is unknown. In connection with trust matters, unless otherwise represented, a minor, incapacitated or unborn individual, or a person whose identity or location is unknown and not reasonably ascertainable, may be represented by and bound by another person having a substantially identical interest with respect to the particular question or dispute, but only to the extent there is no conflict of interest between the representative and the person being represented. (P.A. 01-69, S. 4.) (Return to Chapter Table of Contents)

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Sec. 45a-487e. Appointment of guardian ad litem by court, when. Powers. (a) If the court determines that an interest is not represented under sections 45a-487b to 45a-487d, inclusive, or that the otherwise available representation might be inadequate, the court may appoint a guardian ad litem to receive notice, give consent, and otherwise represent, bind and act on behalf of a minor, incapacitated or unborn individual, or a person whose identity or location is unknown. A guardian ad litem may be appointed to represent several persons or interests. (b) A guardian ad litem may act on behalf of the individual represented with respect to any trust matter, whether or not a judicial proceeding is pending. (c) In making decisions in a trust matter, a guardian ad litem may consider general benefit accruing to the living members of the individual's family. (P.A. 01-69, S. 5.) (Return to Chapter Table of Contents)

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Sec. 45a-487f. Notice and consent re representation and binding another person. (a) Notice to a person who may represent and bind another person under sections 45a-487b to 45a-487e, inclusive, has the same effect as if notice were given directly to the other person. (b) The consent of a person who may represent and bind another person under sections 45a-487b to 45a-487e, inclusive, is binding on the person represented, unless the person represented objects to the representation before the consent would otherwise have become effective. (c) Notwithstanding any provisions of the general statutes, sections 45a-487b to 45a-487f, inclusive, shall apply to all judicial proceedings and all nonjudicial settlements, agreements or acts pertaining to trust matters. (P.A. 01-69, S. 6.) (Return to Chapter Table of Contents)

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Sec. 45a-488. Division of trust for benefit of beneficiaries. Approval by beneficiaries required. (a) The trustee of an inter vivos or testamentary trust may divide a single trust into two or more separate trusts if the division is in the best interests of the beneficiaries of the trust. The provisions of the separate trusts shall be identical to the provisions of the original trust, but differing tax elections may be made for the separate trusts. The division of the trust shall be done on a fractional or percentage basis, based upon the fair market value of the assets of the trust at the time of the division, except that the separate trusts do not have to be funded with a pro rata portion of each asset held by the undivided trust. The trustee may make a division under this subsection by: (1) Giving written notice of the division, not later than thirty days before the date of a division under

this subsection, to each beneficiary who may then be entitled to receive distributions from the trust or may be entitled to receive distributions from the trust once it is funded or to the guardian or guardian ad litem, if any, of each such beneficiary; and (2) Executing a written instrument to be retained with the trust records, acknowledged before a notary public or other person authorized to take acknowledgments of conveyances of real estate, stating that the trust has been divided pursuant to this subsection and that the notice requirements of this subsection have been satisfied. (b) Before the date of the division, the trustee or any beneficiary of a trust that is to be divided under subsection (a) of this section or the guardian or guardian ad litem, if any, of each such beneficiary may seek approval of the division, or any beneficiary of a trust that is to be so divided or the guardian or guardian ad litem, if any, of each such beneficiary may object to the division, by petitioning (1) the court of probate having jurisdiction over the estate of the settlor, or (2) in the case of an inter vivos trust, the court of probate having jurisdiction under subsection (c) of this section. (c) A court of probate shall have jurisdiction to review a division of an inter vivos trust under subdivision (2) of subsection (b) of this section if (1) a trustee of the trust resides in the district, (2) in the case of a corporate trustee, the trustee has a place of business in the district, (3) any of the trust assets are maintained or evidences of intangible property of the trust are situated in the district, or (4) the settlor resides in the district. (d) The right to divide an inter vivos or testamentary trust under subsection (a) of this section is in addition to, and does not exclude or abridge, any other rights or procedures to divide a trust that exist under the governing instrument, under any other section of the general statutes, at common law, or in equity. (e) This section shall be applicable to trusts created before, on or after October 1, 1995. (P.A. 95-82; P.A. 01-195, S. 25, 181.) History: P.A. 01-195 made a technical change in Subsec. (b), effective July 11, 2001. (Return to Chapter Table of Contents)

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Sec. 45a-489. Title and beneficial interest in property held in trust not merged nor trust invalidated, when. (a) The legal title to and the beneficial interest in property that is held in trust are not merged, nor is a trust invalidated, because any person, including the settlor of the trust, is or may become the sole trustee and the sole holder of any or all beneficial interests therein, whether any such interest be vested or contingent, present or future, and whether created by express provision of the trust instrument or as a result of reversion to the settlor's estate. (b) This section shall be applicable to all trusts whether created before, on or after October 1, 1999. Nothing in this section shall be construed to invalidate any trust created prior to October 1, 1999. (P.A. 99-103.) (Return to Chapter Table of Contents)

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PART II* UNIFORM STATUTORY RULE AGAINST PERPETUITIES *Statutory rule against perpetuities, Sec. 45a-490 et seq. cited. 234 C. 581. Sec. 45a-490. Short title: Uniform Statutory Rule Against Perpetuities. Sections 45a-490 to 45a-496, inclusive, may be cited as the "Uniform Statutory Rule Against Perpetuities". (P.A. 89-44, S. 1.) (Return to Chapter Table of Contents)

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Sec. 45a-491. Statutory rule against perpetuities. (a) A nonvested property interest is invalid unless: (1) When the interest is created, it is certain to vest or terminate no later than twenty-one years after the death of an individual then alive; or (2) the interest either vests or terminates within ninety years after its creation. (b) A general power of appointment not presently exercisable because of a condition precedent is invalid unless: (1) When the power is created, the condition

precedent is certain to be satisfied or become impossible to satisfy no later than twenty-one years after the death of an individual then alive; or (2) the condition precedent either is satisfied or becomes impossible to satisfy within ninety years after its creation. (c) A nongeneral power of appointment or a general testamentary power of appointment is invalid unless: (1) When the power is created, it is certain to be irrevocably exercised or otherwise to terminate no later than twenty-one years after the death of an individual then alive; or (2) the power is irrevocably exercised or otherwise terminates within ninety years after its creation. (d) In determining whether a nonvested property interest or a power of appointment is valid under subdivision (1) of subsection (a), (b) or (c) of this section, the possibility that a child will be born to an individual after the individual's death is disregarded. (e) If, in measuring a period from the creation of a trust or other property arrangement, language in a governing instrument (1) seeks to disallow the vesting or termination of any interest or trust beyond, (2) seeks to postpone the vesting or termination of any interest or trust until, or (3) seeks to operate in effect in any similar fashion upon, the later of (A) the expiration of a period of time not exceeding twenty-one years after the death of the survivor of specified lives in being at the creation of the trust or other property arrangement or (B) the expiration of a period of time that exceeds or might exceed twenty-one years after the death of the survivor of lives in being at the creation of the trust or other property arrangement, that language is inoperative to the extent it produces a period of time that exceeds twenty-one years after the death of the survivor described in subparagraph (A) of this subsection. Nothing in this subsection shall affect the validity of the other provisions of the trust or other property arrangement or of the governing instrument. (P.A. 89-44, S. 2; P.A. 91-40.) History: P.A. 91-40 added Subsec. (e) re when language in a governing instrument is rendered inoperative. (Return to Chapter Table of Contents)

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Sec. 45a-492. When nonvested property interest or power of appointment created. (a) Except as provided in subsections (b) and (c) of this section and in subsection (a) of section 45a-495, the time of creation of a nonvested property interest or a power of appointment is determined under general principles of property law. (b) For purposes of sections 45a-490 to 45a-496, inclusive, if there is a person who alone can exercise a power created by a governing instrument to become the unqualified beneficial owner of (1) a nonvested property interest or (2) a property interest subject to a power of appointment described in subsection (b) or (c) of section 45a-491, the nonvested property interest or power of appointment is created when the power to become the unqualified beneficial owner terminates. (c) For purposes of sections 45a-490 to 45a-496, inclusive, a nonvested property interest or a power of appointment arising from a transfer of property to a previously funded trust or other existing property arrangement is created when the nonvested property interest or power of appointment in the original contribution was created. (P.A. 89-44, S. 3.) (Return to Chapter Table of Contents)

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Sec. 45a-493. Reformation. Upon the petition of an interested person, a court shall reform a disposition in the manner that most closely approximates the transferor's manifested plan of distribution and is within the ninety years allowed by subdivision (2) of subsection (a), (b) or (c) of section 45a-491 if: (1) A nonvested property interest or a power of appointment becomes invalid under section 45a-491; (2) A class gift is not but might become invalid under section 45a-491 and the time has arrived when the share of any class member is to take effect in possession or enjoyment; or (3) A nonvested property interest that is not validated by subdivision (1) of subsection (a) of section 45a-491 can vest but not within ninety years after its creation. (P.A. 89-44, S. 4.) (Return to Chapter Table of Contents)

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Sec. 45a-494. Exclusions from statutory rule against perpetuities. The provisions of section 45a-491 do not apply to: (1) A nonvested property interest or a power of appointment arising out of a nondonative transfer, except a nonvested property interest or a power of appointment arising out of (A) a premarital or postmarital agreement, (B) a separation or divorce settlement, (C) a spouse's election, (D) a similar arrangement arising out of a prospective, existing or previous marital relationship between the parties, (E) a contract to make or not to revoke a will or trust, (F) a contract to exercise or not to exercise a power of appointment, (G) a transfer in satisfaction of a duty of support, or (H) a reciprocal transfer; (2) A fiduciary's power relating to the administration or management of assets, including the power of a fiduciary to sell, lease or mortgage property, and the power of a fiduciary to determine principal and income; (3) A power to appoint a fiduciary; (4) A discretionary power of a trustee to distribute principal before termination of a trust to a beneficiary having an indefeasibly vested interest in the income and principal; (5) A nonvested property interest held by a charity, government or governmental agency or subdivision, if the nonvested property interest is preceded by an interest held by another charity, government or governmental agency or subdivision; (6) A nonvested property interest in or a power of appointment with respect to a trust or other property arrangement forming part of a pension, profit-sharing, stock bonus, health, disability, death benefit, income deferral or other current or deferred benefit plan for one or more employees, independent contractors or their beneficiaries or spouses, to which contributions are made for the purpose of distributing to or for the benefit of the participants or their beneficiaries or spouses the property, income or principal in the trust or other property arrangement, except a nonvested property interest or a power of appointment that is created by an election of a participant or a beneficiary or spouse; or (7) A property interest, power of appointment or arrangement that was not subject to the common-law rule against perpetuities or is excluded by another statute of this state. (P.A. 89-44, S. 5.) (Return to Chapter Table of Contents)

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Sec. 45a-495. Prospective application. (a) Except as extended by subsection (b) of this section, sections 45a-490 to 45a-496, inclusive, apply to a nonvested property interest or a power of appointment that is created on or after October 1, 1989. For purposes of this section, a nonvested property interest or a power of appointment created by the exercise of a power of appointment is created when the power is irrevocably exercised or when a revocable exercise becomes irrevocable. (b) If a nonvested property interest or a power of appointment that was created before October 1, 1989, and is determined in a judicial proceeding, commenced on or after October 1, 1989, to violate this state's rule against perpetuities as that rule existed before October 1, 1989, a court upon the petition of an interested person may reform the disposition in the manner that most closely approximates the transferor's manifested plan of distribution and is within the limits of the rule against perpetuities applicable when the nonvested property interest or power of appointment was created. (P.A. 89-44, S. 6; P.A. 90-230, S. 59, 101.) History: P.A. 90-230 made a technical change to Subsec. (b). (Return to Chapter Table of Contents)

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Sec. 45a-496. Uniformity of application and construction. Sections 45a-490 to 45a-496, inclusive, shall be applied and construed to effectuate their general purpose to make uniform the law with respect to the subject of said sections among states enacting them. (P.A. 89-44, S. 7.) (Return to Chapter Table of Contents)

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Secs. 45a-497 to 45a-501. Reserved for future use. (Return to Chapter Table of Contents)

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PART III CONSTRUCTION OF TRUSTS AND LIMITATIONS

OF RULE AGAINST PERPETUITIES Sec. 45a-502. (Formerly Sec. 45-96a). "Majority" defined for trusts executed prior to October 1, 1972. When the word "majority" is used in a will or trust instrument executed prior to October 1, 1972, it shall be construed to mean a person who has attained the age of twenty-one. (1972, P.A. 127, S. 73.) History: Sec. 45-96a transferred to Sec. 45a-502 in 1991. Annotation to former section 45-96a: Cited. 168 C. 144. (Return to Chapter Table of Contents)

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Sec. 45a-503. (Formerly Sec. 45-95). Rule against perpetuities. "Second look" doctrine. In applying the rule against perpetuities to an interest in real or personal property created before October 1, 1989, limited to take effect at or after the termination of one or more life estates in, or lives of, persons in being when the period of said rule commences to run, the validity of the interest shall be determined on the basis of facts existing at the termination of such one or more life estates or lives. For the purpose of this section, an interest which must terminate not later than the death of one or more persons is a life estate although it may terminate at an earlier time. (1955, S. 2912d; P.A. 89-44, S. 8.) History: P.A. 89-44 limited applicability of section to an interest created before October 1, 1989; Sec. 45-95 transferred to Sec. 45a-503 in 1991. Annotations to former section 45-95: Application of "second look" doctrine. 174 C. 616, 628. Cited. 213 C. 676. Contingent remainder not cured under, when. 29 CS 275. Cited. 41 CS 79. (Return to Chapter Table of Contents)

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Sec. 45a-504. (Formerly Sec. 45-96). Reduction of age contingency to preserve interest. If an interest in real or personal property created before October 1, 1989, would violate the rule against perpetuities as modified by section 45a-503 because such interest is contingent upon any person attaining or failing to attain an age in excess of twenty-one, the age contingency shall be reduced to twenty-one as to all persons subject to the same age contingency. (1955, S. 2913d; 1972, P.A. 127, S. 68; P.A. 73-35, S. 1, 2; P.A. 89-44, S. 9.) History: 1972 act reduced age of majority from "twenty-one" to "eighteen"; P.A. 73-35 returned applicable age to twenty-one; P.A. 89-44 limited applicability of section to an interest created before October 1, 1989; Sec. 45-96 transferred to Sec. 45a-504 in 1991. Annotation to former section 45-96: Cited. 29 CS 275. (Return to Chapter Table of Contents)

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Sec. 45a-505. (Formerly Sec. 45-97). Fee simple determinable or subject to right of entry to become absolute, when. A fee simple determinable in land or a fee simple in land subject to a right of entry for condition broken shall become a fee simple absolute if the specified contingency does not occur within thirty years from the date when such fee simple determinable or such fee simple subject to a right of entry becomes possessory. If such contingency occurs within such thirty years, the succeeding interest, which may be an interest in a person other than the person creating the interest or his heirs, shall become possessory or the right of entry exercisable notwithstanding the rule against perpetuities. If a fee simple determinable in land or a fee simple in land subject to a right of entry for condition broken is so limited that the specified contingency must occur, if at all, within the period of the rule against perpetuities, said interests shall take effect as limited. This section shall not apply where both such fee simple determinable and such succeeding interest, or both such fee simple and such right of entry, are for public, charitable or religious purposes; nor shall it apply to a deed, gift or grant of the state or any political subdivision thereof. (1955, S. 2914d.) History: Sec. 45-97 transferred to Sec. 45a-505 in 1991. (Return to Chapter Table of Contents)

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Sec. 45a-506. (Formerly Sec. 45-98). Limitations not invalidated, when. Except as provided in the first sentence of section 45a-505, sections 45a-502 to 45a-507, inclusive, shall not be construed

to invalidate or modify the terms of any limitation which would have been valid prior to October 1, 1955. (1955, S. 2915d.) History: Sec. 45-98 transferred to Sec. 45a-506 in 1991. (Return to Chapter Table of Contents)

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Sec. 45a-507. (Formerly Sec. 45-99). Application of rule. Sections 45a-502 to 45a-506, inclusive, shall apply only to inter vivos instruments and wills taking effect after October 1, 1955, and to appointments made after said date, including appointments by inter vivos instrument or will under powers created before said date. Said sections shall apply to both legal and equitable interests. (1955, S. 2916d.) History: Sec. 45-99 transferred to Sec. 45a-507 in 1991. Annotation to former section 45-99: Application of "second look" doctrine. 174 C. 616. (Return to Chapter Table of Contents)

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Sec. 45a-508. (Formerly Sec. 45-100). Exemption of certain employees' trust funds from the rule against perpetuities. A trust created by an employer as part of a stock bonus, pension, disability, death benefit or profit-sharing plan for the benefit of some or all employees, to which contributions are made by the employer or employees or both, for the purpose of distributing to the employees the earnings or the principal, or both earnings and principal, of the fund held in trust, shall not be deemed to be invalid as violating any existing law or rule of law against perpetuities or suspension of the power of alienation of the title to property. A trust created for such purpose may continue for such time as may be necessary to accomplish the purposes for which it has been created. The income arising from any property held in any such trust may be permitted to accumulate in accordance with the terms of such trust and the plan of which such trust forms a part for such time as may be necessary to accomplish the purposes for which such trust has been created. Any rule of law against perpetuities or suspension of the power of alienation of the title to property shall not invalidate any such trust. (1949 Rev., S. 6898; P.A. 80-476, S. 223.) History: P.A. 80-476 made minor changes in wording and deleted obsolete provision re invalidation of trusts "terminated by a court of competent jurisdiction in a suit instituted within three years after May 21, 1947"; Sec. 45-100 transferred to Sec. 45a-508 in 1991. (Return to Chapter Table of Contents)

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Secs. 45a-509 to 45a-513. Reserved for future use. (Return to Chapter Table of Contents)

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PART IV CHARITABLE TRUSTS Sec. 45a-514. (Formerly Sec. 45-79). Charitable trusts. Any charitable trust or use created in writing or by deed by any resident of the state, or any public and charitable trust or use for aiding and assisting any person or persons to be selected by the trustees of such trust or use to acquire education, shall forever remain to the uses and purposes to which it has been granted according to the true intent and meaning of the grantor and to no other use. (1949 Rev., S. 6882.) History: Sec. 45-79 transferred to Sec. 45a-514 in 1991. See Sec. 47-2 re charitable uses of estates. Annotations to former section 45-79: A trust to promote the distribution of books or pamphlets may, in the absence of any profit element, qualify as a valid charity. Gifts devoted to illegal objectives are void. 143 C. 247. Upon failure of trust, a resulting trust arises in favor of grantor-testator's estate. 150 C. 570. A charitable trust is to be construed, as far as reasonably possible, so as to uphold the trust. 157 C. 265. Lands and property owned by charitable organization devoted to a charitable public use may not be used for commercial purposes unless reasonably necessary to continue the charitable purpose of such organization. 168 C. 447. Cited. 172 C. 496. Cited. 179 C. 62. Cited. 209 C. 429. The modified doctrine of cy pres, or of approximation, exists only when the specific method adopted by the testator for carrying his general

intent into effect can no longer be executed, but court held that the fact that at any particular time there are only a few, or even no, persons qualified to receive the benefit intended by a charitable bequest is not necessarily a reason for holding that such bequest has failed. 21 CS 217. Applicability of cy pres doctrine or doctrine of approximation depends on proof of general dominant charitable intent to which particular expressed intent is secondary. 27 CS 176. Neither doctrine of cy pres nor that of deviation will be applied when testator's express directions can be carried out. Id., 483. Annotation to present section: Cited. 225 C. 32. (Return to Chapter Table of Contents)

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Sec. 45a-515. (Formerly Sec. 45-80). Charitable uses determined by trustee, when. Any person may, by will, deed or other instrument, give, devise or bequeath property, real or personal or both, to any trustee or trustees, and may provide in such instrument that the property so given, devised or bequeathed shall be held in trust and the income or principal applied in whole or in part for any charitable purpose. A donor or testator shall not be required to designate in such will, deed or other instrument the particular charitable purpose or class of purposes for which the property shall be used or the income applied. Any such gift, devise or bequest shall be valid and operative, provided the donor or testator shall give to the trustee or trustees thereof or to any other person or persons, the power to select, from time to time and in such manner as such donor or testator may direct, the charitable purpose or purposes to which such property or the income thereof shall be applied; and such gift, devise or bequest, accompanied by such power of selection, shall not be void by reason of uncertainty. (1949 Rev., S. 6883; P.A. 80-476, S. 224.) History: P.A. 80-476 rephrased provisions; Sec. 45-80 transferred to Sec. 45a-515 in 1991. Annotations to former section 45-80: Trusts for support of religion are charitable trusts; trust giving trustee power to select particular mission held to comply with statute. 113 C. 231. Trust not void for uncertainty if trustee can distribute only to institutions exclusively devoted to charitable purposes. 123 C. 552. Trust valid with direction that trustee distribute "to such charitable and educational purposes as it may deem wise and prudent." 126 C. 665. Effect of section is to make valid a bequest to charity generally, provided that by the terms of the bequest there is an absolute power vested in either a trustee or some other person to determine to what specific charity the property bequeathed shall be devoted. 138 C. 676. Cited. 157 C. 268. Cited. 18 CS 100. A trustee, in fulfillment of his duty to give effect to the testator's charitable intentions as made apparent in the will, may use surplus income to bestow on the charities named by the testator additional benefits in proportion to their original shares. 22 CS 409. (Return to Chapter Table of Contents)

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Sec. 45a-516. (Formerly Sec. 45-81). Gifts to charitable community trust. Any person may incorporate by reference in any will, deed or other instrument, the terms, conditions, trusts, uses or purposes of any existing written or printed resolution, declaration or deed of trust passed by any corporation or executed by any person whereby there is established or is attempted to be established any charitable community trust. Any gift, devise or bequest so given to any person or corporation, in trust for any use or purpose of such charitable community trust, shall be valid and effectual notwithstanding that the terms, conditions, uses and purposes thereof are not otherwise recited in such deed, will or other instrument than by such reference; and the property so given to such person or corporation shall be used for the purposes and upon the terms, conditions and trusts contained in such resolution, declaration or deed of trust establishing such community trust, so far as the same do not conflict with the intent of the donor or testator as expressed in such will, deed or other instrument. Any gift, devise or bequest so made shall not be void for uncertainty or invalid because such resolution, declaration or deed of trust establishing such community trust was not executed by the testator or donor in accordance with statutory provisions, provided such will, deed or other instrument is executed in accordance with such provisions. (1949 Rev., S. 6884; P.A. 80-476,

S. 225.) History: P.A. 80-476 made minor changes in wording; Sec. 45-81 transferred to Sec. 45a-516 in 1991. Annotation to former section 45-81: Cited. 126 C. 670. (Return to Chapter Table of Contents)

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Sec. 45a-517. (Formerly Sec. 45-82). Community trustees to render annual accounts. Hearing on adjustment and allowance. (a) The trustee or trustees of any charitable community trust shall annually render an account signed under penalty of false statement to the court of probate for the district in which the trust is being administered. The account shall include an inventory of the estate held by such trustee or trustees and shall state the manner in which the principal of such fund is invested and the items of income and expenditure. (b) The court of probate shall direct the notice, if any, which shall be given of the hearing upon the adjustment and allowance of any such account. The court may adjust and allow the account and make any order necessary to secure the execution of the duties of such trustee or trustees, subject to appeal as provided for appeals from orders of the probate court. (1949 Rev., S. 6885; P.A. 80-476, S. 226; P.A. 99-84, S. 22.) History: P.A. 80-476 divided section into Subsecs. and rephrased provisions; Sec. 45-82 transferred to Sec. 45a-517 in 1991; P.A. 99-84 amended Subsec. (a) by deleting "under oath" and inserting "signed under penalty of false statement". Annotation to former section 45-82: Cited. 126 C. 670. (Return to Chapter Table of Contents)

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Sec. 45a-518. Reserved for future use. (Return to Chapter Table of Contents)

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Sec. 45a-519. (Formerly Sec. 45-79a). Superior Court or Probate Court jurisdiction to reform instruments to federal tax requirements. (a) If any deduction under Section 170, Section 2055 or Section 2522 of the Internal Revenue Code of 1986 is not allowable with respect to any interest in property passing under any will, trust agreement or other governing instrument to a person, or for a use, described in Section 170(c), Section 2055(a) or Section 2522(a) and (b) of said code because such interest shall fail to comply with the requirements of Section 170(f)(2), Section 2055(e)(2) or Section 2522(c)(2) of said code, the Superior Court, or the Probate Court if the trust or estate is otherwise subject to the jurisdiction of the Probate Court, or with respect to an inter vivos trust, if that trust is or could be subject to the jurisdiction of the court for an accounting pursuant to section 45a-175, provided such an accounting need not be required, shall have jurisdiction over any action brought to reform such will, trust agreement or other governing instrument in accordance with the provisions of Section 170(f)(7), Section 2055(e)(3) or Section 2522(c)(4) of said code so that such deduction may be allowed under the applicable provisions of said code. All references contained in this section to any section of the Internal Revenue Code of 1986 shall mean that section of the Internal Revenue Code of 1986, or any subsequent corresponding internal revenue code of the United States, as from time to time amended. (b) The Superior Court or the Probate Court shall be empowered to reform any such will, trust agreement or other governing instrument only to the extent necessary in order to ensure the allowance of any deduction described in subsection (a) of this section, and only to the extent the court finds that such reformation is consistent with the original intent of the testator or donor. (c) This section shall not be construed to effect a change in any dispositive provisions of the governing instrument as provided in section 45a-514. (d) Any reformation of any will, trust agreement or other governing instrument in accordance with the provisions of this section shall be effective whether or not a disclaimer has been filed within the period of time specified in sections 45a-578 to 45a-585, inclusive. (e) This section shall be applicable to any action commenced on or after July 18, 1984. (P.A. 75-207, S. 1, 2; P.A. 77-436, S. 1, 2; P.A. 79-43; P.A. 80-122; P.A. 81-42, S. 1, 2; P.A. 83-24, S. 1, 2; P.A. 85-523, S. 3, 9; P.A. 89-211, S. 46; May Sp. Sess. P.A. 92-11, S. 32, 70; P.A. 98-219, S. 7.) History: P.A. 77-436 revised dates in Subsec. (a), substituting "December 31, 1977" for "September 21, 1974" re

date of execution of will or creation of trust and for "December 31, 1975" re date action brought to conform instrument to requirements of Internal Revenue Code and added Subsec. (f) re effect of failure to file disclaimer within time specified in Ch. 798; P.A. 79-43 changed year from 1977 to 1978 in Subsec. (a) re date of action brought to conform instrument to Internal Revenue Code requirements; P.A. 80-122 changed year to 1980 in provision re date of action brought to conform instrument to Code; P.A. 81-42 amended Subsec (a) to change date applicable to execution of will or creation of trust from December 31, 1977, to December 31, 1978, and date applicable to actions subject to court jurisdiction to conform will or trust to meet federal requirements from December 31, 1980, to December 31, 1981; P.A. 83-24 amended Subsec. (a) by deleting references to decedent whose death occurs after December 31, 1969, and to any action brought on or before December 31, 1981, and added references to Section 170 of the Internal Revenue Code and provision re jurisdiction of superior court over any action brought within the time provided in Section 2055(e)(3) of the Internal Revenue Code of 1954; P.A. 85-523 entirely revised section, removing limitation of execution of will or creation of trust before December 31, 1978, and making revised provisions applicable to any action commenced on or after July 18, 1984; P.A. 89-211 clarified reference to the Internal Revenue Code of 1986; Sec. 45-79a transferred to Sec. 45a-519 in 1991; May Sp. Sess. P.A. 92-11 amended Subsec. (a) to delete redundant language re any subsequent corresponding internal revenue code of the United States; P.A. 98-219 added provisions applying section to Probate Court. See Sec. 45a-485 re reformation of instrument to ensure allowance of marital deduction. Annotations to former section 45-79a: Cited as P.A. 77-436. 9 CA 825. Cited. 39 CS 80. (Return to Chapter Table of Contents)

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Sec. 45a-520. (Formerly Sec. 45-79b). Termination of charitable trusts. (a) As used in this section: (1) "Charitable beneficiary" and "charitable entity" shall include, without limitation, towns, ecclesiastical society and cemetery associations owning or controlling the operation of a cemetery or burial ground; (2) "charitable trust" shall mean a trust for the benefit of one or more charitable beneficiaries. (b) In any case where the current market value of the assets of a testamentary or inter vivos charitable trust is less than one hundred fifty thousand dollars, any trustee thereof, any charitable beneficiary specifically designated in the governing instrument or the Attorney General may petition a court of probate for an order terminating the trust. If such a trust has been under the jurisdiction of a court of probate prior to any such petition, the petition shall be brought to the court of probate for the district which has had jurisdiction over the trust. If such a trust has not been under the jurisdiction of a court of probate prior to any such petition, the petition shall be brought to the court of probate for any district in which any such trustee resides or has a place of business. If such a trust has not been under the jurisdiction of a court of probate prior to any such petition and if there is no trustee thereof residing or having a place of business in Connecticut, the petition shall be brought to the court of probate for any district in which any charitable beneficiary of the trust has its principal office. Upon receipt of such a petition, the court shall order a hearing and cause notice thereof to be given to the Attorney General, the trustees, the grantor of the trust, if living, and any charitable beneficiary of the trust specifically designated in the governing instrument. If at such a hearing the court determines that continuation of the trust is uneconomic when the costs of operating the trust, probable income and other relevant factors are considered or not in the best interest of the beneficiaries, the court may order termination of the trust and distribution of the trust assets to any charitable beneficiary specifically designated in the governing instrument or, in the event no such beneficiary exists, to such other charitable trusts or charitable entities, including any community trust or foundation, as the court may determine will fulfill the charitable purposes of the trust being so terminated. (c) The provisions of this section shall not apply to termination of trusts or funds as provided in chapter 368j. (P.A. 79-365; P.A. 80-221; P.A. 82-155; P.A. 84-294, S. 14; P.A. 86-234, S. 3, 6; P.A. 96-35.) History: P.A. 80-221 inserted Subsec. (a) defining charitable beneficiaries, entities and trusts, made previous provisions Subsec. (b) clarifying to

which court petition should be brought and added Subsec. (c); P.A. 82-155 amended Subsec. (b) by increasing from ten to fifteen thousand dollars the limitation on the maximum value of a trust which may be terminated; P.A. 84-294 amended Subsec. (b) by increasing limit on market value of assets of a testamentary or inter vivos charitable trust from fifteen to twenty thousand dollars; P.A. 86-234 amended Subsec. (b) by increasing the asset level of the trust from twenty thousand dollars to sixty-five thousand dollars; Sec. 45-79b transferred to Sec. 45a-520 in 1991; P.A. 96-35 amended Subsec. (b) by increasing asset level of trust from sixty-five thousand to one hundred fifty thousand dollars. (Return to Chapter Table of Contents)

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Sec. 45a-521. Superior Court or Probate Court jurisdiction to reform charitable remainder unitrust re payment. (a) Upon a petition filed within the period specified in the Code of Federal Regulations, Title 26, Section 1.664-3(a)(1)(i)(f)(3), by a trustee of a charitable remainder unitrust, the Superior Court, or the Probate Court if the trustee is otherwise subject to the jurisdiction of the Probate Court, or with respect to an inter vivos trust, if such trust is or could be subject to the jurisdiction of the Probate Court for an accounting pursuant to section 45a-175, provided such an accounting need not be required, shall have jurisdiction to reform such charitable remainder unitrust for the sole purpose of substituting a provision allowing payment of the unitrust amount under the Code of Federal Regulations, Title 26, Section 1.664-3(a)(1)(i)(c) for an existing provision providing for payment of the unitrust amount under Title 26, Section 1.664-3(a)(1)(i)(b) of the Code of Federal Regulations. (b) The Superior Court or the Probate Court shall be empowered to reform such trust only to the extent the court finds that such reformation is consistent with the original intent of the testator or donor. (c) This section shall not be construed to effect a change in any dispositive provision of the trust as provided in section 45a-514. (P.A. 99-164, S. 34, 36.) History: P.A. 99-164 effective June 23, 1999. (Return to Chapter Table of Contents)

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Secs. 45a-522 to 45a-525. Reserved for future use. (Return to Chapter Table of Contents)

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PART V* CONNECTICUT UNIFORM MANAGEMENT OF INSTITUTIONAL FUNDS ACT *Connecticut Uniform Management of Institutional Funds Act (CUMIFA), Secs. 45a-526-45a-534 cited. 225 C. 32; 243 C. 1. Connecticut Uniform Management of Institutional Funds Act (CUMIFA), Secs. 45a-526-45a-534 cited. 41 CA 790. Sec. 45a-526. (Formerly Sec. 45-100h). Short title: Uniform Management of Institutional Funds Act. Sections 45a-526 to 45a-534, inclusive, may be cited as the "Uniform Management of Institutional Funds Act". (P.A. 73-548, S. 9; P.A. 93-189, S. 4.) History: Sec. 45-100h transferred to Sec. 45a-526 in 1991; P.A. 93-189 incorporated reference to Secs. 45a-529a and 45a-529b, but did not necessitate any permanent changes in wording. (Return to Chapter Table of Contents)

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Sec. 45a-527. (Formerly Sec. 45-100i). Definitions. As used in sections 45a-526 to 45a-534, inclusive: (1) "Institution" means an incorporated or unincorporated organization organized and operated exclusively for educational, religious, charitable or other eleemosynary purposes, a governmental organization to the extent that it holds funds exclusively for any of these purposes, or a charitable community trust as described in section 45a-516; (2) "Institutional fund" means a fund held by an institution for its exclusive use, benefit or purposes, but does not include (A) a fund

held for an institution by a trustee that is not an institution, other than a fund which is held for a charitable community trust or (B) a fund in which a beneficiary that is not an institution has an interest, other than possible rights that could arise upon violation or failure of the purposes of the fund; (3) "Endowment fund" means an institutional fund, or any part thereof, not wholly expendable by the institution on a current basis under the terms of the applicable gift instrument; (4) "Governing board" means the body responsible for the management of an institution or of an institutional fund; (5) "Historic dollar value" means the aggregate fair value in dollars of (A) an endowment fund at the time it became an endowment fund, (B) each subsequent donation to the fund at the time it is made, and (C) each accumulation made pursuant to a direction in the applicable gift instrument at the time the accumulation is added to the fund. The determination of historic dollar value made in good faith by the institution is conclusive; (6) "Gift instrument" means a will, deed, grant, conveyance, agreement, memorandum, writing or other governing document, including the terms of any institutional solicitations from which an institutional fund resulted, under which property is transferred to or held by an institution as an institutional fund. (P.A. 73-548, S. 1; P.A. 74-121, S. 1, 2; P.A. 80-476, S. 211; P.A. 93-189, S. 5.) History: P.A. 74-121 redefined "institution" and "institutional fund" with references to charitable community trusts; P.A. 80-476 made no change; Sec. 45-100i transferred to Sec. 45a-527 in 1991; P.A. 93-189 incorporated reference to Secs. 45a-529a and 45a-529b, but did not necessitate any permanent changes in wording. Subdiv. (1): Cited. 225 C. 32. Cited. 243 C. 1. Cited. 41 CA 790. Subdiv. (2): Cited. 225 C. 32. Cited. 243 C. 1. Cited. 41 CA 790. Subdiv. (6): Cited. 243 C. 1. Cited. 41 CA 790. (Return to Chapter Table of Contents)

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Sec. 45a-528. (Formerly Sec. 45-100j). Expenditure of net appreciation, standards. The governing board may appropriate for expenditure for the uses and purposes for which an endowment fund is established so much of the net appreciation, realized and unrealized, in the fair value of the assets of an endowment fund over the historic dollar value of the fund as is prudent under the standard established by section 45a-532. This section does not limit the authority of the governing board to expend funds as permitted under other law, the terms of the applicable gift instrument or the charter of the institution. (P.A. 73-548, S. 2.) History: Sec. 45-100j transferred to Sec. 45a-528 in 1991. (Return to Chapter Table of Contents)

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Sec. 45a-529. (Formerly Sec. 45-100k). Exception and restriction on expenditure of net appreciation. Construction. Section 45a-528 does not apply if the applicable gift instrument indicates the donor's intention that net appreciation shall not be expended. A restriction upon the expenditure of net appreciation may not be implied from a designation of a gift as an endowment, or from a direction or authorization in the applicable gift instrument to use only "income", "interest", "dividends" or "rents, issues or profits", or "to preserve the principal intact", or a direction which contains other words of similar import. This rule of construction applies to gift instruments executed or in effect before or after October 1, 1973. (P.A. 73-548, S. 3.) History: Sec. 45-100k transferred to Sec. 45a-529 in 1991. (Return to Chapter Table of Contents)

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Sec. 45a-529a. Accumulation of annual net income, standards. The governing board may accumulate so much of the annual net income of an endowment fund as is prudent under the standard established by section 45a-532 and may hold any or all of such accumulated income in an income reserve for subsequent expenditure for the uses and purposes for which such endowment fund is established or may add any or all of such accumulated income to the principal of such endowment fund as is prudent under said standard. This section does not limit the authority of the governing board to accumulate income or to add the same to principal of an endowment fund as

permitted under other law, the terms of the applicable gift instrument or the charter of the institution. (P.A. 93-189, S. 2.) (Return to Chapter Table of Contents)

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Sec. 45a-529b. Exception and restriction on accumulation of annual net income. Construction. Section 45a-529a does not apply if and to the extent that the applicable gift instrument indicates the donor's intention that income of an endowment fund shall not be accumulated or shall not be added to the principal of the fund. A restriction against accumulation or addition to principal may not be implied from a designation of a gift as an endowment, or from a direction or authorization in the applicable gift instrument to apply to the uses and purposes of the fund the "income", "interest", "dividends", "currently expendable income" or "rent, issues or profits", or a direction which contains other words of similar import. This rule of construction applies to gift instruments executed or in effect before or after October 1, 1993. (P.A. 93-189, S. 3.) (Return to Chapter Table of Contents)

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Sec. 45a-530. (Formerly Sec. 45-100l). Investment of institutional funds. In addition to an investment otherwise authorized by law or by the applicable gift instrument, and without restriction to investments a fiduciary may make, the governing board, subject to any specific limitations set forth in the applicable gift instrument or in the applicable law other than law relating to investments by a fiduciary, may: (1) Invest and reinvest an institutional fund in any real or personal property deemed advisable by the governing board, whether or not it produces a current return, including mortgages, stocks, bonds, debentures and other securities of profit or nonprofit corporations, shares in or obligations of associations, partnerships or individuals, and obligations of any government or subdivision or instrumentality thereof; (2) retain property contributed by a donor to an institutional fund for as long as the governing board deems advisable; (3) include all or any part of an institutional fund in any pooled or common fund maintained by the institution; and (4) invest all or any part of an institutional fund in any other pooled or common fund available for investment, including shares or interests in regulated investment companies, mutual funds, common trust funds, investment partnerships, real estate investment trusts, or similar organizations in which funds are commingled and investment determinations are made by persons other than the governing board. (P.A. 73-548, S. 4; P.A. 80-476, S. 212.) History: P.A. 80-476 made technical correction, correcting misspelling of "institution"; Sec. 45-100l transferred to Sec. 45a-530 in 1991. (Return to Chapter Table of Contents)

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Sec. 45a-531. (Formerly Sec. 45-100m). Delegation of powers of investment. Except as otherwise provided by the applicable gift instrument or by applicable law relating to governmental institutions or funds, the governing board may (1) delegate to its committees, officers or employees of the institution or the fund, or agents, including investment counsel, the authority to act in place of the board in investment and reinvestment of institutional funds, (2) contract with independent investment advisors, investment counsel or managers, banks or trust companies so to act, and (3) authorize the payment of compensation for investment advisory or management services. (P.A. 73-548, S. 5.) History: Sec. 45-100m transferred to Sec. 45a-531 in 1991. (Return to Chapter Table of Contents)

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Sec. 45a-532. (Formerly Sec. 45-100n). Standards applicable to actions of governing board. In the administration of the powers to appropriate appreciation, to make and retain investments and to delegate investment management of institutional funds, members of a governing board shall exercise care and prudence in accordance with the standards established by the Connecticut Uniform Prudent Investor Act, sections 45a-541 to 45a-541l, inclusive. (P.A. 73-548, S. 6; P.A. 97-140, S. 14.) History: Sec. 45-100n transferred to Sec. 45a-532 in 1991; P.A. 97-140 replaced provisions requiring the members of a governing board to exercise ordinary business care

and prudence under the facts and circumstances prevailing at the time of the action or decision and to consider certain specified factors in so doing with provision requiring the exercise of care and prudence in accordance with the standards established by the Connecticut Uniform Prudent Investor Act. (Return to Chapter Table of Contents)

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Sec. 45a-533. (Formerly Sec. 45-100o). Release of restriction in gift instrument: Written consent, court order. Limitations. Doctrine of cy pres applicable. (a) With the written consent of the donor, the governing board may release, in whole or in part, a restriction imposed by the applicable gift instrument on the use or investment of an institutional fund. (b) If written consent of the donor cannot be obtained by reason of his death, disability, unavailability or impossibility of identification, the governing board may apply, in the name of the institution, to the Superior Court for a judicial district in which the institution conducts its affairs for release of a restriction imposed by the applicable gift instrument on the use or investment of an institutional fund. The Attorney General shall be notified of the application and shall be given an opportunity to be heard. If the court finds that the restriction is obsolete, inappropriate or impracticable, it may by order release the restriction in whole or in part. A release under this subsection may not change an endowment fund to a fund that is not an endowment fund. (c) A release under this section may not allow a fund to be used for purposes other than the educational, religious, charitable or other eleemosynary purposes of the institution affected. (d) This section does not limit the application of the doctrine of cy pres or approximation. (P.A. 73-548, S. 7; P.A. 78-280, S. 2, 127.) History: P.A. 78-280 deleted reference to counties in Subsec. (b); Sec. 45-100o transferred to Sec. 45a-533 in 1991. Annotation to former section 45-100o: Cited. 172 C. 496 (Dissent). Annotations to present section: Cited. 225 C. 32. Cited. 243 C. 1. Cited. 41 CA 790. Subsec. (a): Would be anomalous for a statute to provide for written consent by a donor to change a restriction and then deny that donor access to the courts to complain of a change without such consent. 41 CA 790. (Return to Chapter Table of Contents)

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Sec. 45a-534. (Formerly Sec. 45-100p). Construction. Sections 45a-526 to 45a-534, inclusive, shall be so applied and construed as to effectuate their general purpose to make uniform the law with respect to the subject of said sections among those states which enact them. (P.A. 73-548, S. 8; P.A. 93-189, S. 6.) History: Sec. 45-100p transferred to Sec. 45a-534 in 1991; P.A. 93-189 incorporated reference to Secs. 45a-529a and 45a-529b, but did not necessitate any permanent changes in wording. Cited. 225 C. 32. Cited. 41 CA 790. (Return to Chapter Table of Contents)

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Secs. 45a-535 to 45a-539. Reserved for future use. (Return to Chapter Table of Contents)

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PART VI POWERS IN TRUST INSTRUMENTS ACT Sec. 45a-540. (Formerly Secs. 45-100a to 45-100c). Powers in trust instruments act. Sections 45-100a to 45-100c, inclusive, are repealed, except said sections shall continue in effect insofar as any instrument executed prior to January 1, 1970, incorporated said sections. (1967, P.A. 753, S. 1-3; 1969, P.A. 827, S. 5; P.A. 80-476, S. 208-210.) History: Section containing conditional repeal of former Secs. 45-100a to 45-100c transferred to Sec. 45a-540 in 1991. (Return to Chapter Table of Contents)

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PART VII CONNECTICUT UNIFORM PRUDENT INVESTOR ACT

Sec. 45a-541. Short title: Connecticut Uniform Prudent Investor Act. Sections 45a-541 to 45a-541l, inclusive, may be cited as the "Connecticut Uniform Prudent Investor Act". (P.A. 97-140, S. 1.) (Return to Chapter Table of Contents)

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Sec. 45a-541a. Prudent investor rule. (a) Except as provided in subsection (b) of this section, a trustee who invests and manages trust assets owes a duty to the beneficiaries of the trust to comply with the prudent investor rule, as set forth in sections 45a-541 to 45a-541l, inclusive. (b) The prudent investor rule is a default rule that may be expanded, restricted, eliminated or otherwise altered by provisions of the trust. A trustee is not liable to a beneficiary to the extent that the trustee acted in reasonable reliance on provisions of the trust. (P.A. 97-140, S. 2.) (Return to Chapter Table of Contents)

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Sec. 45a-541b. Standard of care. Portfolio strategy. Risk and return objectives. (a) A trustee shall invest and manage trust assets as a prudent investor would, by considering the purposes, terms, distribution requirements and other circumstances of the trust. In satisfying this standard, the trustee shall exercise reasonable care, skill and caution. (b) A trustee's investment and management decisions respecting individual assets shall be evaluated not in isolation, but in the context of the trust portfolio as a whole and as a part of an overall investment strategy having risk and return objectives reasonably suited to the trust. (c) Among circumstances that a trustee shall consider in investing and managing trust assets are such of the following as are relevant to the trust or its beneficiaries: (1) General economic conditions; (2) the possible effect of inflation or deflation; (3) the expected tax consequences of investment decisions, strategies and distributions; (4) the role that each investment or course of action plays within the overall trust portfolio, which may include financial assets, interests in closely held enterprises, tangible and intangible personal property and real property; (5) the expected total return from income and the appreciation of capital; (6) related trusts and other income and resources of the beneficiaries; (7) needs for liquidity, for regularity of income and for preservation or appreciation of capital; (8) an asset's special relationship or special value, if any, to the purposes of the trust or to one or more of the beneficiaries; (9) the size of the portfolio; and (10) the nature and estimated duration of the trust. (d) A trustee shall take reasonable steps to verify facts relevant to the investment and management of trust assets. (e) Subject to the standard of sections 45a-541 to 45a-541l, inclusive, a trustee may invest in any kind of property or type of investment. (f) A trustee who has special skills or expertise, or is named trustee in reliance upon the trustee's representation that the trustee has special skills or expertise, has a duty to use those special skills or expertise. (P.A. 97-140, S. 3.) (Return to Chapter Table of Contents)

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Sec. 45a-541c. Diversification. A trustee shall diversify the investments of the trust unless the trustee reasonably determines that, because of special circumstances, the purposes of the trust are better served without diversifying. (P.A. 97-140, S. 4.) (Return to Chapter Table of Contents)

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Sec. 45a-541d. Duties at inception of trusteeship. Within a reasonable time after accepting a trusteeship or receiving trust assets, a trustee shall review the trust assets and make and implement decisions concerning the retention and disposition of assets, in order to bring the trust portfolio into compliance with the purposes, terms, distribution requirements and other circumstances of the trust, and with the requirements of sections 45a-541 to 45a-541l, inclusive. (P.A. 97-140, S. 5.) (Return to Chapter Table of Contents)

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Sec. 45a-541e. Loyalty. A trustee shall invest and manage the trust assets solely in the interest of the beneficiaries. (P.A. 97-140, S. 6.) (Return to Chapter Table of Contents)

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Sec. 45a-541f. Impartiality. If a trust has two or more beneficiaries, the trustee shall act impartially in investing and managing the trust assets, taking into account any differing interests of the beneficiaries. (P.A. 97-140, S. 7.) (Return to Chapter Table of Contents)

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Sec. 45a-541g. Investment costs. In investing and managing trust assets, a trustee may only incur costs that are appropriate and reasonable in relation to the assets, the purposes of the trust and the skills of the trustee. (P.A. 97-140, S. 8.) (Return to Chapter Table of Contents)

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Sec. 45a-541h. Reviewing compliance. The prudent investor rule expresses a standard of conduct, not outcome. Compliance with the prudent investor rule is determined in light of the facts and circumstances existing at the time of a trustee's decision or action. (P.A. 97-140, S. 9.) (Return to Chapter Table of Contents)

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Sec. 45a-541i. Delegation of investment and management functions. (a) A trustee may delegate investment and management functions that a prudent trustee of comparable skills could properly delegate under the circumstances. The trustee shall exercise reasonable care, skill and caution in: (1) Selecting an agent; (2) establishing the scope and terms of the delegation, consistent with the purposes and terms of the trust; and (3) periodically reviewing the agent's actions in order to monitor the agent's performance and compliance with the scope and terms of the delegation. (b) In performing a delegated function, an agent owes a duty to the trustee and to the trust to exercise reasonable care to comply with the scope and terms of the delegation and to exercise the delegated function with reasonable care, skill and caution. An attempted exoneration of the agent from liability for failure to meet such a duty is contrary to public policy and void. (c) A trustee who complies with the requirements of subsection (a) of this section is not liable to the beneficiaries or to the trust for the decisions or actions of the agent to whom the function was delegated. (d) By accepting the delegation of a trust function from the trustee of a trust that is subject to the law of this state, an agent submits to the jurisdiction of the courts of this state and can be held liable by the courts of this state for any breach of duty arising out of the delegation agreement or the terms of sections 45a-541 to 45a-541l, inclusive. (P.A. 97-140, S. 10.) (Return to Chapter Table of Contents)

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Sec. 45a-541j. Language invoking standards of act. The following terms or comparable language in a trust instrument, unless otherwise limited or modified by the instrument, authorizes any investment or strategy permitted under sections 45a-541 to 45a-541l, inclusive: "Investments permissible by law for investment of trust funds", "legal investments", "authorized investments", "using the judgment and care under the circumstances then prevailing that persons of prudence, discretion, and intelligence exercise in the management of their own affairs, not in regard to speculation but in regard to the permanent disposition of their funds, considering the probable income as well as the probable safety of their capital", "prudent man rule", "prudent trustee rule", "prudent person rule", and "prudent investor rule". (P.A. 97-140, S. 11.) (Return to Chapter Table of Contents)

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Sec. 45a-541k. Uniformity of application and construction. Sections 45a-541 to 45a-541l, inclusive, shall be applied and construed to effectuate their general purpose to make uniform the

law with respect to the subject of said sections among the states enacting them. (P.A. 97-140, S. 12.) (Return to Chapter Table of Contents)

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Sec. 45a-541l. Applicability. Section 45a-532 and sections 45a-541 to 45a-541l, inclusive, apply to trusts existing on and created after October 1, 1997. As applied to trusts existing on October 1, 1997, section 45a-532 and sections 45a-541 to 45a-541l, inclusive, govern only decisions or actions occurring after that date. (P.A. 97-140, S. 13.) (Return to Chapter Table of Contents)

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PART VIII CONNECTICUT UNIFORM PRINCIPAL AND INCOME ACT Sec. 45a-542. Short title: Connecticut Principal and Income Act. Sections 45a-542 to 45a-542ff, inclusive, may be cited as the "Connecticut Principal and Income Act (1999)". (P.A. 99-164, S. 1, 36.) History: P.A. 99-164 effective January 1, 2000. (Return to Chapter Table of Contents)

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Sec. 45a-542a. Definitions. As used in sections 45a-542 to 45a-542ff, inclusive: (1) "Accounting period" means a calendar year unless another twelve-month period is selected by a fiduciary. The term includes a portion of a calendar year or other twelve-month period that begins when an income interest begins or ends when an income interest ends. (2) "Beneficiary" includes, in the case of a decedent's estate, an heir, legatee and devisee and, in the case of a trust, an income beneficiary and a remainder beneficiary. (3) "Fiduciary" means a personal representative or a trustee. The term includes an executor, administrator, successor personal representative, special administrator and a person performing substantially the same function. (4) "Income" means money or property that a fiduciary receives as current return from a principal asset. The term includes a portion of receipts from a sale, exchange or liquidation of a principal asset, to the extent provided in sections 45a-542i to 45a-542w, inclusive. (5) "Income beneficiary" means a person to whom net income of a trust is or may be payable. (6) "Income interest" means the right of an income beneficiary to receive all or part of net income, whether the terms of the trust require it to be distributed or authorize it to be distributed in the trustee's discretion. (7) "Mandatory income interest" means the right of an income beneficiary to receive net income that the terms of the trust require the fiduciary to distribute. (8) "Net income" means the total receipts allocated to income during an accounting period minus the disbursements made from income during the period, plus or minus transfers under sections 45a-542 to 45a-542ff, inclusive, to or from income during the period. (9) "Person" means an individual, corporation, business trust, estate, trust, partnership, limited liability company, association, joint venture, government, governmental subdivision, agency or instrumentality, public corporation or any other legal or commercial entity. (10) "Principal" means property held in trust for distribution to a remainder beneficiary when the trust terminates. (11) "Remainder beneficiary" means a person entitled to receive principal when an income interest ends. (12) "Terms of a trust" means the manifestation of the intent of a settlor or decedent with respect to the trust, expressed in a manner that admits of its proof in a judicial proceeding, whether by written or spoken words or by conduct. (13) "Trustee" includes an original, additional, or successor trustee, whether or not appointed or confirmed by a court. (P.A. 99-164, S. 2, 36.) History: P.A. 99-164 effective January 1, 2000. (Return to Chapter Table of Contents)

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Sec. 45a-542b. Fiduciary duties. (a) In allocating receipts and disbursements to or between principal and income, and with respect to any matter within the scope of sections 45a-542d to 45a-542h, inclusive, a fiduciary: (1) Shall administer a trust or estate in accordance with the terms

of the trust or the will, even if there is a different provision in sections 45a-542 to 45a-542ff, inclusive; (2) May administer a trust or estate by the exercise of a discretionary power of administration given to the fiduciary by the terms of the trust or the will, even if the exercise of the power produces a result different from a result required or permitted by sections 45a-542 to 45a-542ff, inclusive; (3) Shall administer a trust or estate in accordance with sections 45a-542 to 45a-542ff, inclusive, if the terms of the trust or the will do not contain a different provision or do not give the fiduciary a discretionary power of administration; and (4) Shall add a receipt or charge a disbursement to principal to the extent that the terms of the trust and sections 45a-542 to 45a-542ff, inclusive, do not provide a rule for allocating the receipt or disbursement to or between principal and income. (b) In exercising the power to adjust under subsection (a) of section 45a-542c or a discretionary power of administration regarding a matter within the scope of sections 45a-542 to 45a-542ff, inclusive, whether granted by the terms of a trust, a will or said sections, a fiduciary shall administer a trust or estate impartially, based on what is fair and reasonable to all of the beneficiaries, except to the extent that the terms of the trust or the will clearly manifest an intention that the fiduciary shall or may favor one or more of the beneficiaries. A determination in accordance with sections 45a-542 to 45a-542ff, inclusive, is presumed to be fair and reasonable to all of the beneficiaries. (P.A. 99-164, S. 3, 36.) History: P.A. 99-164 effective January 1, 2000. (Return to Chapter Table of Contents)

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Sec. 45a-542c. Trustee's power to adjust. (a) A trustee may adjust between principal and income to the extent the trustee considers necessary if the trustee invests and manages trust assets as a prudent investor, the terms of the trust describe the amount that may or must be distributed to a beneficiary by referring to the trust's income, and the trustee determines, after applying the rules in subsection (a) of section 45a-542b, that the trustee is unable to comply with subsection (b) of said section. (b) In deciding whether and to what extent to exercise the power conferred by subsection (a) of this section, a trustee shall consider all factors relevant to the trust and its beneficiaries, including the following factors to the extent they are relevant: (1) The nature, purpose and expected duration of the trust; (2) The intent of the settlor, including the settlor's probable intent, which is the settlor's dominant plan and purpose as they appear from the entirety of the trust when read and considered in light of the present facts and circumstances; (3) The identity and circumstances of the beneficiaries; (4) The needs for liquidity, regularity of income and preservation and appreciation of capital; (5) The assets held in the trust; the extent to which they consist of financial assets, interests in closely held enterprises, tangible and intangible personal property or real property; the extent to which an asset is used by a beneficiary; and whether an asset was purchased by the trustee or received from the settlor; (6) The net amount allocated to income under sections 45a-542 to 45a-542b, inclusive, and sections 45a-542d to 45a-542ff, inclusive, and the increase or decrease in the value of the principal assets, which the trustee may estimate as to assets for which market values are not readily available; (7) Whether and to what extent the terms of the trust give the trustee the power to invade principal or accumulate income or prohibit the trustee from invading principal or accumulating income, and the extent to which the trustee has exercised a power from time to time to invade principal or accumulate income; (8) The actual and anticipated effect of economic conditions on principal and income and effects of inflation and deflation; and (9) The anticipated tax consequences of an adjustment. (c) A trustee may not make an adjustment: (1) That diminishes the income interest in a trust that requires all of the income to be paid at least annually to a spouse and for which an estate tax or gift tax marital deduction would be allowed, in whole or in part, if the trustee did not have the power to make the adjustment; (2) That reduces the actuarial value of the income interest in a trust to which a person transfers property with the intent to qualify for a gift tax exclusion; (3) That changes the amount payable to a beneficiary as a fixed annuity or a fixed fraction of the value of the trust assets; (4) From any amount that is permanently set aside for charitable purposes under a

will or the terms of a trust unless both income and principal are so set aside; (5) If possessing or exercising the power to make an adjustment causes an individual to be treated as the owner of all or part of the trust for income tax purposes and the individual would not be treated as the owner if the trustee did not possess the power to make an adjustment; (6) If possessing or exercising the power to make an adjustment causes all or part of the trust assets to be included for estate tax purposes in the estate of an individual who has the power to remove a trustee or appoint a trustee, or both, and the assets would not be included in the estate of the individual if the trustee did not possess the power to make an adjustment; (7) If the trustee is a beneficiary of the trust; (8) If the trustee is not a beneficiary, but the adjustment would benefit the trustee directly or indirectly; (9) Between the income and principal of a legal life estate; or (10) If the exercise of the power to adjust by allocating principal to income conferred by subsection (a) of this section would not significantly increase the funds actually available to the income beneficiary, taking into account funds available from sources other than the trust. (d) If subdivision (5), (6), (7) or (8) of subsection (c) of this section applies to a trustee and there is more than one trustee, a cotrustee to whom the provision does not apply may make the adjustment unless the exercise of the power by the remaining trustee or trustees is not permitted by the terms of the trust. (e) A trustee may release the entire power conferred by subsection (a) of this section or may release only the power to adjust from income to principal or the power to adjust from principal to income if the trustee is uncertain about whether possessing or exercising the power will cause a result described in subdivisions (1) to (6), inclusive, or subdivision (8) of subsection (c) of this section or if the trustee determines that possessing or exercising the power will or may deprive the trust of a tax benefit or impose a tax burden not described in said subsection (c). The release may be permanent or for a specified period, including a period measured by the life of an individual. (f) Terms of a trust that limit the power of a trustee to make an adjustment between principal and income do not affect the application of this section unless it is clear from the terms of the trust that the terms are intended to deny the trustee the power of adjustment conferred by subsection (a) of this section. (P.A. 99-164, S. 4, 36; P.A. 01-68, S. 2.) History: P.A. 99-164 effective January 1, 2000; P.A. 01-68 amended Subsec. (c)(10) by adding "by allocating principal to income". (Return to Chapter Table of Contents)

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Sec. 45a-542d. Determination and distribution of income interest of decedent's estate or in trust after trust ends. After a decedent dies, in the case of an estate, or after an income interest in a trust ends, the following rules apply: (1) A fiduciary of an estate or of a terminating income interest shall determine the amount of net income and net principal receipts received from property specifically given to a beneficiary under the rules in sections 45a-542f to 45a-542cc, inclusive, which apply to trustees and the rules in subdivision (5) of this section. The fiduciary shall distribute the net income and net principal receipts to the beneficiary who is to receive the specific property. (2) A fiduciary shall determine the remaining net income of a decedent's estate or a terminating income interest under the rules in sections 45a-542f to 45a-542cc, inclusive, which apply to trustees and by: (A) Including in net income all income from property used to discharge liabilities; (B) Paying from income or principal, in the fiduciary's discretion, fees of attorneys, accountants and fiduciaries; court costs and other expenses of administration; and interest on death taxes, but the fiduciary may pay those expenses from income of property passing to a trust for which the fiduciary claims an estate tax marital or charitable deduction only to the extent that the payment of those expenses from income will not cause the reduction or loss of the deduction; and (C) Paying from principal all other disbursements made or incurred in connection with the settlement of a decedent's estate or the winding up of a terminating income interest, including debts, funeral expenses, disposition of remains, family allowances and death taxes and related penalties that are apportioned to the estate or terminating income interest by the will, the terms of the trust or applicable law. (3) A fiduciary shall distribute to a beneficiary who receives a pecuniary amount outright the interest or any other amount provided by the will, the terms of the trust or this

subdivision from net income determined under subdivision (2) of this section or from principal to the extent that net income is insufficient. Unless a will or trust waives such interest or provides for its calculation in a different amount or manner, a pecuniary amount payable outright shall bear simple interest in the amount of six per cent per year, beginning one year after the date of death in the case of pecuniary amounts payable under a will, or one year after the day the income interest ends in the case of pecuniary amounts payable from a trust after an income interest ends, and ending on the day the pecuniary amount is paid. (4) A fiduciary shall distribute the net income remaining after distributions required by subdivision (3) of this section in the manner described in section 45a-542e to all other beneficiaries, including a beneficiary who receives a pecuniary amount in trust, even if the beneficiary holds an unqualified power to withdraw assets from the trust or other presently exercisable general power of appointment over the trust. (5) A fiduciary may not reduce principal or income receipts from property described in subdivision (1) of this section because of a payment described in sections 45a-542x and 45a-542y to the extent that the will, the terms of the trust or applicable law requires the fiduciary to make the payment from assets other than the property or to the extent that the fiduciary recovers or expects to recover the payment from a third party. The net income and principal receipts from the property are determined by including all of the amounts the fiduciary receives or pays with respect to the property, whether those amounts accrued or became due before, on, or after the date of a decedent's death or an income interest's terminating event, and by making a reasonable provision for amounts that the fiduciary believes the estate or terminating income interest may become obligated to pay after the property is distributed. (P.A. 99-164, S. 5, 36.) History: P.A. 99-164 effective January 1, 2000. (Return to Chapter Table of Contents)

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Sec. 45a-542e. Distribution to beneficiaries. (a) Each beneficiary described in subdivision (4) of section 45a-542d is entitled to receive a portion of the net income equal to the beneficiary's fractional interest in undistributed principal assets, using values as of the distribution date. If a fiduciary makes more than one distribution of assets to beneficiaries to whom this section applies, each beneficiary, including one who does not receive part of the distribution, is entitled, as of each distribution date, to the net income the fiduciary has received after the date of death or terminating event or earlier distribution date but has not distributed as of the current distribution date. (b) In determining a beneficiary's share of net income, the following rules apply: (1) The beneficiary is entitled to receive a portion of the net income equal to the beneficiary's fractional interest in the undistributed principal assets immediately before the distribution date, including assets that later may be sold to meet principal obligations. (2) The beneficiary's fractional interest in the undistributed principal assets must be calculated without regard to property specifically given to a beneficiary and property required to pay pecuniary amounts not in trust. (3) The beneficiary's fractional interest in the undistributed principal assets must be calculated on the basis of the aggregate value of those assets as of the distribution date without reducing the value by any unpaid principal obligation. (c) If a fiduciary does not distribute all of the collected but undistributed net income to each person as of a distribution date, the fiduciary shall maintain appropriate records showing the interest of each beneficiary in that net income. (d) A fiduciary may apply the rules in this section, to the extent that the fiduciary considers it appropriate to net gain or loss realized after the date of death or terminating event or earlier distribution date from the disposition of a principal asset if this section applies to the income from the asset. (P.A. 99-164, S. 6, 36.) History: P.A. 99-164 effective January 1, 2000. (Return to Chapter Table of Contents)

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Sec. 45a-542f. Right to income. (a) An income beneficiary is entitled to net income from the date on which the income interest begins. An income interest begins on the date specified in the terms of the trust or, if no date is specified, on the date an asset becomes subject to a trust or successive income interest. (b) An asset becomes subject to a trust: (1) On the date it is

transferred to the trust in the case of an asset that is transferred to a trust during the transferor's life; (2) On the date of a testator's death in the case of an asset that becomes subject to a trust by reason of a will, even if there is an intervening period of administration of the testator's estate; or (3) On the date of an individual's death in the case of an asset that is transferred to a fiduciary by a third party because of the individual's death. (c) An asset becomes subject to a successive income interest on the day after the preceding income interest ends, as determined under subsection (d) of this section even if there is an intervening period of administration to wind up the preceding income interest. (d) An income interest ends on the day before an income beneficiary dies or another terminating event occurs, or on the last day of a period during which there is no beneficiary to whom a trustee may distribute income. (P.A. 99-164, S. 7, 36.) History: P.A. 99-164 effective January 1, 2000. (Return to Chapter Table of Contents)

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Sec. 45a-542g. Apportionment of receipts and disbursements when decedent dies or interest income begins. (a) A trustee shall allocate an income receipt or disbursement other than one to which subdivision (1) of section 45a-542d applies to principal if its due date occurs before a decedent dies in the case of an estate or before an income interest begins in the case of a trust or successive income interest. (b) A trustee shall allocate an income receipt or disbursement to income if its due date occurs on or after the date on which a decedent dies or an income interest begins and it is a periodic due date. An income receipt or disbursement must be treated as accruing from day to day if its due date is not periodic or it has no due date. The portion of the receipt or disbursement accruing before the date on which a decedent dies or an income interest begins must be allocated to principal and the balance must be allocated to income. (c) An item of income or an obligation is due on the date the payer is required to make a payment. If a payment date is not stated, there is no due date for the purposes of sections 45a-542 to 45a-542ff, inclusive. Distributions to shareholders or other owners from an entity to which section 45a-542i applies are deemed to be due on the date fixed by the entity for determining who is entitled to receive the distribution or, if no date is fixed, on the declaration date for the distribution. A due date is periodic for receipts or disbursements that must be paid at regular intervals under a lease or an obligation to pay interest or if an entity customarily makes distributions at regular intervals. (P.A. 99-164, S. 8, 36.) History: P.A. 99-164 effective January 1, 2000. (Return to Chapter Table of Contents)

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Sec. 45a-542h. Apportionment when income interest ends. (a) In this section, "undistributed income" means net income received before the date on which an income interest ends. The term does not include an item of income or expense that is due or accrued or net income that has been added or is required to be added to principal under the terms of the trust. (b) When a mandatory income interest ends, the trustee shall pay to a mandatory income beneficiary who survives that date, or the estate of a deceased mandatory income beneficiary whose death causes the interest to end, the beneficiary's share of the undistributed income that is not disposed of under the terms of the trust unless the beneficiary has an unqualified power to revoke more than five per cent of the trust immediately before the income interest ends. In the latter case, the undistributed income from the portion of the trust that may be revoked must be added to principal. (c) When a trustee's obligation to pay a fixed annuity or a fixed fraction of the value of the trust's assets ends, the trustee shall prorate the final payment if and to the extent required by applicable law to accomplish a purpose of the trust or its settlor relating to income, gift, estate or other tax requirements. (P.A. 99-164, S. 9, 36.) History: P.A. 99-164 effective January 1, 2000. (Return to Chapter Table of Contents)

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Sec. 45a-542i. Character of receipts. (a) In this section, "entity" means a corporation, partnership, limited liability company, regulated investment company, real estate investment trust,

common trust fund or any other organization in which a trustee has an interest other than a trust or estate to which section 45a-542j applies, a business or activity to which section 45a-542k applies, or an asset-backed security to which section 45a-542w applies. (b) Except as otherwise provided in this section, a trustee shall allocate to income money received from an entity. (c) A trustee shall allocate the following receipts from an entity to principal: (1) Property other than money; (2) Money received in one distribution or a series of related distributions in exchange for part or all of a trust's interest in the entity; (3) Money received in total or partial liquidation of the entity; and (4) Money received from an entity that is a regulated investment company or a real estate investment trust if the money distributed is a capital gain dividend for federal income tax purposes. (d) Money is received in partial liquidation: (1) To the extent that the entity, at or near the time of a distribution, indicates that it is a distribution in partial liquidation; or (2) If the total amount of money and property received in a distribution or series of related distributions is greater than twenty per cent of the entity's gross assets, as shown by the entity's year-end financial statements immediately preceding the initial receipt. (e) Money is not received in partial liquidation, nor may it be taken into account under subdivision (2) of subsection (d) of this section, to the extent that it does not exceed the amount of income tax that a trustee or beneficiary must pay on taxable income of the entity that distributes the money. (f) A trustee may rely upon a statement made by an entity about the source or character of a distribution if the statement is made at or near the time of distribution by the entity's board of directors or other person or group of persons authorized to exercise powers to pay money or transfer property comparable to those of a corporation's board of directors; provided, however, that no such statement shall override the provisions of subdivision (2) of subsection (d) of this section and subsection (e) of this section. (P.A. 99-164, S. 10, 36.) History: P.A. 99-164 effective January 1, 2000. (Return to Chapter Table of Contents)

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Sec. 45a-542j. Distribution from trust or estate. A trustee shall allocate to income an amount received as a distribution of income from a trust or an estate in which the trust has an interest other than a purchased interest, and shall allocate to principal an amount received as a distribution of principal from such a trust or estate. If a trustee purchases an interest in a trust that is an investment entity, or a decedent or donor transfers an interest in such a trust to a trustee, section 45a-542i or 45a-542w applies to a receipt from the trust. (P.A. 99-164, S. 11, 36.) History: P.A. 99-164 effective January 1, 2000. (Return to Chapter Table of Contents)

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Sec. 45a-542k. Business and other activities conducted by trustee. (a) If a trustee who conducts a business or other activity determines that it is in the best interest of all the beneficiaries to account separately for the business or activity instead of accounting for it as part of the trust's general accounting records, the trustee may maintain separate accounting records for its transactions, whether or not its assets are segregated from other trust assets. (b) A trustee who accounts separately for a business or other activity may determine the extent to which its net cash receipts must be retained for working capital, the acquisition or replacement of fixed assets and other reasonably foreseeable needs of the business or activity, and the extent to which the remaining net cash receipts are accounted for as principal or income in the trust's general accounting records. If a trustee sells assets of the business or other activity, other than in the ordinary course of the business or activity, the trustee shall account for the net amount received as principal in the trust's general accounting records to the extent the trustee determines that the amount received is no longer required in the conduct of the business. (c) Activities for which a trustee may maintain separate accounting records include: (1) Retail, manufacturing, service and other traditional business activities; (2) Farming; (3) Raising and selling livestock and other animals; (4) Management of rental properties; (5) Extraction of minerals and other natural

resources; (6) Timber operations; and (7) Activities to which section 45a-452v applies. (P.A. 99-164, S. 12, 36.) History: P.A. 99-164 effective January 1, 2000. (Return to Chapter Table of Contents)

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Sec. 45a-542l. Principal receipts. A trustee shall allocate to principal: (1) To the extent not allocated to income under sections 45a-542 to 45a-542ff, inclusive, assets received from a transferor during the transferor's lifetime, a decedent's estate, a trust with a terminating income interest or a payer under a contract naming the trust or its trustee as beneficiary; (2) Money or other property received from the sale, exchange, liquidation or change in form of a principal asset, including realized profit, subject to sections 45a-542i to 45a-542w, inclusive; (3) Amounts recovered from third parties to reimburse the trust because of disbursements described in subdivision (7) of subsection (a) of section 45a-542y or for other reasons to the extent not based on the loss of income; (4) Proceeds of property taken by eminent domain, but a separate award made for the loss of income with respect to an accounting period during which a current income beneficiary had a mandatory income interest is income; (5) Net income received in an accounting period during which there is no beneficiary to whom a trustee may or must distribute income; and (6) Other receipts as provided in sections 45a-542p to 45a-542w, inclusive. (P.A. 99-164, S. 13, 36.) History: P.A. 99-164 effective January 1, 2000. (Return to Chapter Table of Contents)

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Sec. 45a-542m. Rental property. To the extent that a trustee accounts for receipts from rental property pursuant to this section, the trustee shall allocate to income an amount received as rent of real or personal property, including an amount received for cancellation or renewal of a lease. An amount received as a refundable deposit, including a security deposit or a deposit that is to be applied as rent for future periods, must be added to principal and held subject to the terms of the lease and is not available for distribution to a beneficiary until the trustee's contractual obligations have been satisfied with respect to that amount. (P.A. 99-164, S. 14, 36.) History: P.A. 99-164 effective January 1, 2000. (Return to Chapter Table of Contents)

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Sec. 45a-542n. Obligation to pay money. (a) An amount received as interest, whether determined at a fixed, variable or floating rate, on an obligation to pay money to the trustee, including an amount received as consideration for prepaying principal, must be allocated to income without any provision for amortization of premium. (b) A trustee shall allocate to principal an amount received from the sale, redemption or other disposition of an obligation to pay money to the trustee more than one year after it is purchased or acquired by the trustee, including an obligation whose purchase price or value when it is acquired is less than its value at maturity. If the obligation matures within one year after it is purchased or acquired by the trustee, an amount received in excess of its purchase price or its value when acquired by the trust must be allocated to income. (c) This section does not apply to an obligation to which section 45a-542q, 45a-542r, 45a-542s, 45a-542t, 45a-542v or 45a-542w applies. (P.A. 99-164, S. 15, 36.) History: P.A. 99-164 effective January 1, 2000. (Return to Chapter Table of Contents)

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Sec. 45a-542o. Insurance policies and similar contracts. (a) Except as otherwise provided in subsection (b) of this section, a trustee shall allocate to principal the proceeds of a life insurance policy or other contract in which the trust or its trustee is named as beneficiary, including a contract that insures the trust or its trustee against loss for damage to, destruction of, or loss of title to, a trust asset. The trustee shall allocate dividends on an insurance policy to income if the premiums on the policy are paid from income and to principal if the premiums are paid from principal. (b) A trustee shall allocate to income proceeds of a contract that insures the trustee against loss of

occupancy or other use by an income beneficiary, loss of income, or, subject to section 45a-542k, loss of profits from a business. (c) This section does not apply to a contract to which section 45a-542q applies. (P.A. 99-164, S. 16, 36.) History: P.A. 99-164 effective January 1, 2000. (Return to Chapter Table of Contents)

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Sec. 45a-542p. Insubstantial allocations not required. If a trustee determines that an allocation between principal and income required by section 45a-542q, 45a-542r, 45a-542s, 45a-542t or 45a-542w is insubstantial, the trustee may allocate the entire amount to principal unless one of the circumstances described in subsection (c) of section 45a-542c applies to the allocation. This power may be exercised by a cotrustee in the circumstances described in subsection (d) of section 45a-542c and may be released for the reasons and in the manner described in subsection (e) of said section. An allocation is presumed to be insubstantial if: (1) The amount of the allocation would increase or decrease net income in an accounting period, as determined before the allocation, by less than ten per cent; or (2) The value of the asset producing the receipt for which the allocation would be made is less than ten per cent of the total value of the trust's assets at the beginning of the accounting period. (P.A. 99-164, S. 17, 36.) History: P.A. 99-164 effective January 1, 2000. (Return to Chapter Table of Contents)

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Sec. 45a-542q. Deferred compensation, annuities and similar payments. (a) In this section, "payment" means a payment that a trustee may receive over a fixed number of years or during the life of one or more individuals because of services rendered or property transferred to the payer in exchange for future payments. The term includes a payment made in money or property from the payer's general assets or from a separate fund created by the payer, including a private or commercial annuity, an individual retirement account and a pension, profit-sharing, stock-bonus or stock-ownership plan. The term shall not include a payment pursuant to an installment sale contract. (b) To the extent that a payment is characterized as interest or a dividend or a payment made in lieu of interest or a dividend, a trustee shall allocate it to income. The trustee shall allocate to principal the balance of the payment and any other payment received in the same accounting period that is not characterized as interest, a dividend or an equivalent payment. (c) If no part of a payment is characterized as interest, a dividend or an equivalent payment, and all or part of the payment is required to be made, a trustee shall allocate to income ten per cent of the part that is required to be made during the accounting period and the balance to principal. If no part of a payment is required to be made or the payment received is the entire amount to which the trustee is entitled, the trustee shall allocate the entire payment to principal. For purposes of this subsection, a payment is not "required to be made" to the extent that it is made because the trustee exercises a right of withdrawal. (d) If, to obtain an estate tax marital deduction for a trust, a trustee must allocate more of a payment to income than provided for by this section, the trustee shall allocate to income the additional amount necessary to obtain the marital deduction. (e) This section does not apply to payments to which section 45a-542r applies. (P.A. 99-164, S. 18, 36.) History: P.A. 99-164 effective January 1, 2000. (Return to Chapter Table of Contents)

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Sec. 45a-542r. Liquidating asset. (a) In this section, "liquidating asset" means an asset whose value will diminish or terminate because the asset is expected to produce receipts for a period of limited duration. The term includes a leasehold, patent, copyright, royalty right and right to receive payments during a period of more than one year under an arrangement that does not provide for the payment of interest on the unpaid balance. The term does not include a payment subject to section 45a-542q, resources subject to section 45a-542s, timber subject to section 45a-542t, an activity subject to section 45a-542v, an asset subject to section 45a-542w, or any asset for which the trustee

establishes a reserve for depreciation under section 45a-542z. (b) A trustee shall allocate to income ten per cent of the receipts from a liquidating asset and the balance to principal. (P.A. 99-164, S. 19, 36.) History: P.A. 99-164 effective January 1, 2000. (Return to Chapter Table of Contents)

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Sec. 45a-542s. Minerals, water and other natural resources. (a) To the extent that a trustee accounts for receipts from an interest in minerals or other natural resources pursuant to this section, the trustee shall allocate them as follows: (1) If received as nominal delay rental or nominal annual rent on a lease, a receipt must be allocated to income. (2) If received from a production payment, a receipt must be allocated to income if and to the extent that the agreement creating the production payment provides a factor for interest or its equivalent. The balance must be allocated to principal. (3) If an amount received as a royalty, shut-in-well payment, take-or-pay payment, bonus or delay rental is more than nominal, ninety per cent must be allocated to principal and the balance to income. (4) If an amount is received from a working interest or any other interest not provided for in subdivision (1), (2) or (3) of this subsection, ninety per cent of the net amount received must be allocated to principal and the balance to income. (b) An amount received on account of an interest in water that is renewable must be allocated to income. If the water is not renewable, ninety per cent of the amount must be allocated to principal and the balance to income. (c) Sections 45a-542 to 45a-542ff, inclusive, apply whether or not a decedent or donor was extracting minerals, water, or other natural resources before the interest became subject to the trust. (d) If a trust owns an interest in minerals, water or other natural resources on January 1, 2000, the trustee may allocate receipts from the interest as provided in sections 45a-542 to 45a-542ff, inclusive, or in the manner used by the trustee before January 1, 2000. If the trust acquires an interest in minerals, water or other natural resources after January 1, 2000, the trustee shall allocate receipts from the interest as provided in sections 45a-542 to 45a-542ff, inclusive. (P.A. 99-164, S. 20, 36.) History: P.A. 99-164 effective January 1, 2000. (Return to Chapter Table of Contents)

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Sec. 45a-542t. Timber. (a) To the extent that a trustee accounts for receipts from the sale of timber and related products pursuant to this section, the trustee shall allocate the net receipts: (1) To income to the extent that the amount of timber removed from the land does not exceed the rate of growth of the timber during the accounting periods in which a beneficiary has a mandatory income interest; (2) To principal to the extent that the amount of timber removed from the land exceeds the rate of growth of the timber or the net receipts are from the sale of standing timber; (3) To or between income and principal if the net receipts are from the lease of timberland or from a contract to cut timber from land owned by a trust, by determining the amount of timber removed from the land under the lease or contract and applying the rules in subdivisions (1) and (2) of this subsection; or (4) To principal to the extent that advance payments, bonuses, and other payments are not allocated pursuant to subdivision (1), (2) or (3) of this subsection. (b) In determining net receipts to be allocated pursuant to subsection (a) of this section, a trustee shall deduct and transfer to principal a reasonable amount for depletion. (c) Sections 45a-542 to 45a-542ff, inclusive, apply whether or not a decedent or transferor was harvesting timber from the property before it became subject to the trust. (d) If a trust owns an interest in timberland on January 1, 2000, the trustee may allocate net receipts from the sale of timber and related products as provided in sections 45a-542 to 45a-542ff, inclusive, or in the manner used by the trustee before January 1, 2000. If the trust acquires an interest in timberland after January 1, 2000, the trustee shall allocate net receipts from the sale of timber and related products as provided in sections 45a-542 to 45a-542ff, inclusive. (P.A. 99-164, S. 21, 36.) History: P.A. 99-164 effective January 1, 2000. (Return to Chapter Table of Contents)

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Sec. 45a-542u. Property not productive of income. (a) If a marital deduction is allowed for all or part of a trust whose assets consist substantially of property that does not provide the spouse with sufficient income from or use of the trust assets, and if the amounts that the trustee transfers from principal to income under section 45a-542c and distributes to the spouse from principal pursuant to the terms of the trust are insufficient to provide the spouse with the beneficial enjoyment required to obtain the marital deduction, the spouse may require the trustee to make property productive of income, convert property within a reasonable time, or exercise the power conferred by subsection (a) of section 45a-542c. The trustee may decide which action or combination of actions to take. (b) In cases not governed by subsection (a) of this section, proceeds from the sale or other disposition of an asset are principal without regard to the amount of income the asset produces during any accounting period. (P.A. 99-164, S. 22, 36.) History: P.A. 99-164 effective January 1, 2000. (Return to Chapter Table of Contents)

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Sec. 45a-542v. Derivatives and options. (a) In this section, "derivative" means a contract or financial instrument or a combination of contracts and financial instruments which gives a trust the right or obligation to participate in some or all changes in the price of a tangible or intangible asset or group of assets, or changes in a rate, an index of prices or rates or other market indicator for an asset or a group of assets. (b) To the extent that a trustee does not account under section 45a-542k for transactions in derivatives, the trustee shall allocate to principal receipts from and disbursements made in connection with those transactions. (c) If a trustee grants an option to buy property from the trust, whether or not the trust owns the property when the option is granted, grants an option that permits another person to sell property to the trust, or acquires an option to buy property for the trust or an option to sell an asset owned by the trust, and the trustee or other owner of the asset is required to deliver the asset if the option is exercised, an amount received for granting the option must be allocated to principal. An amount paid to acquire the option must be paid from principal. A gain or loss realized upon the exercise of an option, including an option granted to a settlor of the trust for services rendered, must be allocated to principal. (P.A. 99-164, S. 23, 36.) History: P.A. 99-164 effective January 1, 2000. (Return to Chapter Table of Contents)

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Sec. 45a-542w. Asset-backed securities. (a) In this section, "asset-backed security" means an asset whose value is based upon the right it gives the owner to receive distributions from the proceeds of financial assets that provide collateral for the security. The term includes an asset that gives the owner the right to receive from the collateral financial assets only the interest or other current return or only the proceeds other than interest or current return. The term does not include an asset to which section 45a-542i or 45a-542q applies. (b) If a trust receives a payment from interest or other current return and from other proceeds of the collateral financial assets, the trustee shall allocate to income the portion of the payment which the payer identifies as being from interest or other current return and shall allocate the balance of the payment to principal. (c) If a trust receives one or more payments in exchange for the trust's entire interest in an asset-backed security in one accounting period, the trustee shall allocate the payments to principal. If a payment is one of a series of payments that will result in the liquidation of the trust's interest in the security over more than one accounting period, the trustee shall allocate ten per cent of the payment to income and the balance to principal. (P.A. 99-164, S. 24, 36.) History: P.A. 99-164 effective January 1, 2000. (Return to Chapter Table of Contents)

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Sec. 45a-542x. Disbursements from income. A trustee shall make the following disbursements from income to the extent that they are not disbursements to which subparagraph (B) or (C) of subdivision (2) of section 45a-542d applies: (1) One-half of the regular compensation of the

trustee and of any person providing investment advisory or custodial services to the trustee; (2) One-half of all expenses for accountings, judicial proceedings or other matters that involve both the income and remainder interests; (3) All of the other ordinary expenses incurred in connection with the administration, management or preservation of trust property and the distribution of income, including interest, ordinary repairs, regularly recurring taxes assessed against principal and expenses of a proceeding or other matter that concerns primarily the income interest; and (4) Recurring premiums on insurance covering the loss of a principal asset or the loss of income from or use of the asset. (P.A. 99-164, S. 25, 36.) History: P.A. 99-164 effective January 1, 2000. (Return to Chapter Table of Contents)

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Sec. 45a-542y. Disbursements from principal. (a) A trustee shall make the following disbursements from principal: (1) The remaining one-half of the disbursements described in subdivisions (1) and (2) of section 45a-542x; (2) All of the trustee's compensation calculated on principal as a fee for acceptance, distribution or termination, and disbursements made to prepare property for sale; (3) Payments on the principal of a trust debt; (4) Expenses of a proceeding that concerns primarily principal, including a proceeding to construe the trust or to protect the trust or its property; (5) Premiums paid on a policy of insurance not described in subdivision (4) of section 45a-542x of which the trust is the owner and beneficiary; (6) Estate, inheritance and other transfer taxes, including penalties, apportioned to the trust; and (7) Disbursements related to environmental matters, including reclamation, assessing environmental conditions, remedying and removing environmental contamination, monitoring remedial activities and the release of substances, preventing future releases of substances, collecting amounts from persons liable or potentially liable for the costs of those activities, penalties imposed under environmental laws or regulations and other payments made to comply with those laws or regulations, statutory or common law claims by third parties, and defending claims based on environmental matters. (b) If a principal asset is encumbered with an obligation that requires income from that asset to be paid directly to the creditor, the trustee shall transfer from principal to income an amount equal to the income paid to the creditor in reduction of the principal balance of the obligation. (P.A. 99-164, S. 26, 36.) History: P.A. 99-164 effective January 1, 2000. (Return to Chapter Table of Contents)

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Sec. 45a-542z. Transfers from income to principal for depreciation. (a) In this section, "depreciation" means a reduction in value due to wear, tear, decay, corrosion or gradual obsolescence of a fixed asset having a useful life of more than one year. (b) A trustee may transfer to principal a reasonable amount of the net cash receipts from a principal asset that is subject to depreciation, but may not transfer any amount for depreciation: (1) Of that portion of real property used or available for use by a beneficiary as a residence or of tangible personal property held or made available for the personal use or enjoyment of a beneficiary; (2) During the administration of a decedent's estate; or (3) Under this section if the trustee is accounting under section 45a-542k for the business or activity in which the asset is used. (c) An amount transferred to principal need not be held as a separate fund. (P.A. 99-164, S. 27, 36.) History: P.A. 99-164 effective January 1, 2000. (Return to Chapter Table of Contents)

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Sec. 45a-542aa. Transfers from income to reimburse principal. (a) If a trustee makes or expects to make a principal disbursement described in this section, the trustee may transfer an appropriate amount from income to principal in one or more accounting periods to reimburse principal or to provide a reserve for future disbursements. (b) Principal disbursements to which subsection (a) of this section applies include the following, but only to the extent that the trustee has not been and does not expect to be reimbursed by a third party: (1) An amount chargeable to income but paid

from principal because it is unusually large, including extraordinary repairs; (2) A capital improvement to a principal asset, whether in the form of changes to an existing asset or the construction of a new asset, including special assessments; (3) Disbursements made to prepare property for rental, including tenant allowances, leasehold improvements and broker's commissions; (4) Periodic payments on an obligation secured by a principal asset to the extent that the amount transferred from income to principal for depreciation is less than the periodic payments; and (5) Disbursements described in subdivision (7) of subsection (a) of section 45a-542y. (c) If the asset whose ownership gives rise to the disbursements becomes subject to a successive income interest after an income interest ends, a trustee may continue to transfer amounts from income to principal as provided in subsection (a) of this section. (P.A. 99-164, S. 28, 36.) History: P.A. 99-164 effective January 1, 2000. (Return to Chapter Table of Contents)

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Sec. 45a-542bb. Income taxes. (a) A tax required to be paid by a trustee based on receipts allocated to income must be paid from income. (b) A tax required to be paid by a trustee based on receipts allocated to principal must be paid from principal, even if the tax is called an income tax by the taxing authority. (c) A tax required to be paid by a trustee on the trust's share of an entity's taxable income must be paid proportionately: (1) From income to the extent that receipts from the entity are allocated to income; and (2) From principal to the extent that: (A) Receipts from the entity are allocated to principal; and (B) The trust's share of the entity's taxable income exceeds the total receipts described in subdivision (1) of this subsection and subparagraph (A) of this subdivision. (d) For purposes of this section, receipts allocated to principal or income must be reduced by the amount distributed to a beneficiary from principal or income for which the trust receives a deduction in calculating the tax. (P.A. 99-164, S. 29, 36.) History: P.A. 99-164 effective January 1, 2000. (Return to Chapter Table of Contents)

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Sec. 45a-542cc. Adjustments between principal and income as result of taxes. (a) A fiduciary may make adjustments between principal and income to offset the shifting of economic interests or tax benefits between income beneficiaries and remainder beneficiaries which arise from: (1) Elections and decisions, other than those described in subsection (b) of this section, that the fiduciary makes from time to time regarding tax matters; (2) An income tax or any other tax that is imposed upon the fiduciary or a beneficiary as a result of a transaction involving or a distribution from the estate or trust; or (3) The ownership by an estate or trust of an interest in an entity whose taxable income, whether or not distributed, is includable in the taxable income of the estate or trust, or a beneficiary. (b) If the amount of an estate tax marital deduction or charitable contribution deduction is reduced because a fiduciary deducts an amount paid from principal for income tax purposes instead of deducting it for estate tax purposes, and as a result estate taxes paid from principal are increased and income taxes paid by an estate, trust or beneficiary are decreased, each estate, trust or beneficiary that benefits from the decrease in income tax shall reimburse the principal from which the increase in estate tax is paid. The total reimbursement must equal the increase in the estate tax to the extent that the principal used to pay the increase would have qualified for a marital deduction or charitable contribution deduction but for the payment. The proportionate share of the reimbursement for each estate, trust or beneficiary whose income taxes are reduced must be the same as its proportionate share of the total decrease in income tax. An estate or trust shall reimburse principal from income. (P.A. 99-164, S. 30, 36.) History: P.A. 99-164 effective January 1, 2000. (Return to Chapter Table of Contents)

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Sec. 45a-542dd. Uniformity of application and construction. In applying and construing sections 45a-542 to 45a-542ff, inclusive, consideration must be given to the fact that this is a uniform law

and the need to promote uniformity of the law with respect to its subject matter among states that enact it. (P.A. 99-164, S. 31, 36.) History: P.A. 99-164 effective January 1, 2000. (Return to Chapter Table of Contents)

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Sec. 45a-542ee. Severability clause. If any provision of sections 45a-542 to 45a-542ff, inclusive, or their application to any person or circumstance is held invalid, the invalidity does not affect other provisions or applications of said sections which can be given effect without the invalid provision or application, and to this end the provisions of sections 45a-542 to 45a-542ff, inclusive, are severable. (P.A. 99-164, S. 32, 36.) History: P.A. 99-164 effective January 1, 2000. (Return to Chapter Table of Contents)

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Sec. 45a-542ff. Application to existing trust or decedent's estate. Sections 45a-542 to 45a-542ff, inclusive, apply to every trust or decedent's estate existing on or after January 1, 2000, except as otherwise expressly provided in the will or terms of the trust or in said sections. (P.A. 99-164, S. 33, 36.) History: P.A. 99-164 effective January 1, 2000. (Return to Chapter Table of Contents)

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Sec. 45a-543. Determination by court re abuse of discretion by fiduciary. (a) A court shall not change a fiduciary's decision to exercise a discretionary power conferred by sections 45a-542 to 45a-542ff, inclusive, unless it determines that the decision was an abuse of the fiduciary's discretion. A court shall not determine that a fiduciary abused its discretion merely because the court would have exercised the discretion in a different manner or would not have exercised the discretion. (b) The decisions to which subsection (a) of this section applies include: (1) A determination under subsection (a) of section 45a-542c of whether and to what extent an amount should be transferred from principal to income or from income to principal; and (2) a determination of the factors that are relevant to the trust and its beneficiaries, the extent to which they are relevant, and the weight, if any, to be given to the relevant factors, in deciding whether and to what extent to exercise the power conferred by subsection (a) of section 45a-542c. (c) If a court determines that a fiduciary has abused its discretion, the remedy is to restore the income and remainder beneficiaries to the positions they would have occupied if the fiduciary had not abused its discretion, according to the following rules: (1) To the extent that the abuse of discretion has resulted in no distribution to a beneficiary or a distribution that is too small, the court may require the fiduciary to distribute from the trust to the beneficiary an amount that the court determines will restore the beneficiary, in whole or in part, to his or her appropriate position; (2) to the extent that the abuse of discretion has resulted in a distribution to a beneficiary that is too large, the court may restore the beneficiaries, the trust, or both, in whole or in part, to their appropriate positions by requiring the fiduciary to withhold an amount from one or more future distributions to the beneficiary who received the distribution that was too large or requiring the beneficiary to return some or all of the distribution to the trust; and (3) to the extent that the court is unable, after applying subdivisions (1) and (2) of this subsection, to restore the beneficiaries, the trust, or both, to the positions they would have occupied if the fiduciary had not abused its discretion, the court may require the fiduciary to pay an appropriate amount from its own funds to one or more of the beneficiaries or to the trust, or both. (d) Upon a petition by the fiduciary, the court having jurisdiction over the trust or estate may determine whether a proposed exercise or nonexercise by a fiduciary of a discretionary power conferred by sections 45a-542 to 45a-542ff, inclusive, will result in the abuse of the fiduciary's discretion. If the petition describes the proposed exercise or nonexercise of the power and contains sufficient information to inform the beneficiaries of the reasons for the proposal, the facts upon which the fiduciary relies, and an explanation of how the income and remainder beneficiaries will be affected by the exercise or nonexercise of the power, a beneficiary who challenges the proposed exercise or nonexercise has the burden of establishing that it will result in an abuse of discretion. (P.A. 01-68, S. 1.)

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Secs. 45a-544 and 45a-545. Reserved for future use. (Return to Chapter Table of Contents)

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