Trust Division Legislative Update New York Bankers Association 70th Annual Trust & Investment Conference September 21-23, 2016 Cooperstown, New York

Decanting S.5191(Bonacic)/A.6263(Braunstein) Support A technical amendment to 2011 Decanting Statute which allows fiduciaries to invade principal using power of appointment to create new trusts. S.5191(Bonacic)/A.6263(Braunstein) clarifies that a trustee may recant a decanting during the thirty day period before decanting takes effect – after which it is irrevocable. Where a notice of decanting has been served, and the trustee wishes to recant, the trustee shall serve notice of such revocation to persons interested in the invaded trust and the appointed trust. The bill does not authorize a trustee to amend an invasion and creation of a trust during the 30 day period. This bill was signed by the Governor in November 2015. It took effect immediately and applies to all estates and living trusts.

Payment of Legacies to Genetic Posthumous Children A.6024A (Weinstein)/ S.5160 (Bonacic) Support In 2014, a NYBA-supported bill was enacted into law that eliminated the ambiguity related to payments of interest on delayed pecuniary legacies by requiring interest payments to begin: (a) 7 months from the date of death or other date provided in the will or trust, or (b) 7 months from the date the letters are granted, if required. In 2015, the Legislature passed a bill clarifying that the commencement date for payment of a legacy with interest to a genetic posthumous child will occur upon the later of the aforementioned time period or the genetic child’s date of birth. This bill was signed by the Governor in November 2015. The law took effect immediately and it applies to estates of decedents who died on or after 12/20/2014.

Revocable Trusts Privilege A.10357 (Simotas)/ S.7807 (Bonacic) Adds a provision to CPLR 4503(b) that the same exceptions to the attorney-client privilege set forth in the statute for the probate or construction of a will also extend to revocable trusts Makes clear that privileged material is not subject to disclosure during the life of the revocable trust’s grantor; nor can it be disclosed posthumously if it disgraces the decedent’s memory Though generally accepted as a principle given that a revocable trust is a functional equivalent of a will, the bill was introduced in order to make an explicit declaration in the law. The bill was signed by the Governor on August 19, 2016 and went into effect immediately.

Digital Assets A.9910 (Weinstein)/ S.7604A (Bonacic) Support Introduced at the request of the Office of Court Administration, this bill would expressly authorize a fiduciary to gain access to, manage, distribute and copy or delete digital assets, thus generally extending a fiduciary’s existing authority over a person’s traditional assets to include the person’s digital assets. It is essentially the revised Uniform Fiduciary Access to Digital Assets Act (UFADAA), with minor changes to conform to existing New York law. Service providers are protected by required user Terms of Service agreements if such agreements have a policy regarding transfer or disposal of the account and its content, which allows a user to modify or delete a direction at all times

Digital Assets A.9910 (Weinstein)/ S.7604A (Bonacic) If a user hasn’t used the online directional tool or if the service provider hasn’t provided such a tool, the user may direct the use and disposal of digital assets in his will. Fiduciaries seeking authorized access to digital assets must provide written proof of such authorization, as delineated in the statute. This bill passed both Houses and is awaiting signature by the Governor. It will take effect immediately once signed.

Directed Trusts S.1635(Bonacic) Support This proposed legislation is designed to: Statutorily authorize creation of directed trusts Reflect grantors’ desire to establish bifurcated trusts, vesting authority for investment in the hands of an advisor, while retaining traditional corporate trustee for administrative & ministerial functions, Provide relief from liability, except for gross negligence or willful misconduct, to a fiduciary who is following the direction of an advisor or protectors. Establish same standard for reasonable compensation for advisor as other fiduciaries.

Power to Adjust A.9930 (Weinstein)/ S.7710 (Bonacic) Support Introduced at the request of the Office of Court Administration, this bill would provide that adjustments made by a trustee (from income to principal, or principal to income), under the prudent investment act, shall be deemed to be re-characterizations for the purposes of the payment of commissions. The re-characterization would take effect on the date the transfer is made on a trust’s records. This bill passed the Assembly in 2016, but died on the Senate floor.

Allocation of Income Gains from a Sale of Capital Assets S.5620(Bonacic) Support Introduced at the request of the Office of Court Administration   Provides that a trustee: may, in a reasonable and impartial exercise of discretion, allocate to income gains from the sale or exchange of a capital asset, to the extent that the principal is re-characterized as income by the exercise of the power to adjust; and may similarly allocate to income, gains from the sale or exchange of a capital asset (where the trustee has an unlimited discretionary power to distribute principal). Would take effect immediately upon enactment and apply to all trusts.

NYBA’s 2017 State Trust Agenda Power of Attorney   Avoid amendments that would impose new ambiguities and/or penalties for bank non- acceptance Directed Trust Legislation Continue to work toward enactment of legislation, like S.1635, statutorily authorizing creation of directed trusts and relieving fiduciaries of liability for following the direction of an advisor or protector. Proprietary Funds Legislation Will seek to authorize corporate trustees to invest trust funds in proprietary investments offered, advised or managed by affiliates beyond mutual funds, common trust funds, and bank deposits; will also seek to authorize trust commissions and fees for affiliate services

Proposed Changes to New York’s Statutory Short Form Power of Attorney (POA) Remove gift rider Change standard for valid POA from strict compliance to substantial compliance Penalties and attorneys fees for unreasonable refusal to accept a properly executed POA

Questions? Roberta Kotkin General Counsel & COO New York Bankers Association (212) 297-1684 rkotkin@nyba.com