53-12-270. Exercise of power by trustee who is also a beneficiary.

Subject to subsection (c) of this Code section, and unless the trust provisions expressly indicate that a rule in this subsection shall not apply, a person other than a settlor or donor who is a beneficiary and either a trustee or trust director of a trust shall not:#

1. (1)

   Make discretionary distributions to or for the benefit of such person unless in accordance with an ascertainable standard;#

2. (2)

   Make discretionary allocations of receipts or expenses as between principal and income, unless such person acts in a fiduciary capacity whereby such person has no power to enlarge or shift any beneficial interest except as an incidental consequence of the discharge of such person’s fiduciary duties; and#

3. (3)

   Make discretionary distributions to satisfy any of such person’s legal obligations of support.#

A power whose exercise is limited or prohibited by subsection (a) of this Code section may be exercised by a majority of the remaining trustees or trust directors who have the power to make or direct discretionary distributions to or for such trustee or trust director and whose exercise of such power is not so limited or prohibited. If the power of all trustees or trust directors is so limited or prohibited, the court may appoint a special fiduciary with authority to exercise the power.#

Subsection (a) of this Code section shall not apply to:#

1. (1)

   A power held by the settlor’s or donor’s spouse who is the trustee or trust director of a trust for which a marital deduction, as defined in Section 2056(b)(5) or 2523(e) of the federal Internal Revenue Code of 1986, was previously allowed;#

2. (2)

   Any trust during any period that the trust may be revoked or amended by its settlor;#

3. (3)

   A trust if contributions to such trust qualify for the annual exclusion under Section 2503(c) of the federal Internal Revenue Code of 1986; or#

4. (4)

   Any portion of a trust over which the trustee or trust director is expressly granted in the trust instrument a presently exercisable or testamentary general power of appointment.#

1. (1)

   If a beneficiary of a trust, in an individual, fiduciary, or other capacity, removes and appoints a successor trustee or trust director who would be related or subordinate to the beneficiary within the meaning of Section 672(c) of the federal Internal Revenue Code if the beneficiary were a grantor, the successor trustee or trust director’s discretionary powers shall be limited as follows:#

   1. (A)

      The trustee or trust director’s discretionary power to make distributions to or for the benefit of that beneficiary is limited to an ascertainable standard;#

   2. (B)

      The trustee or trust director’s discretionary power shall not be exercised to satisfy any of that beneficiary’s legal obligations for support or other purposes; and#

   3. (C)

      The trustee or trust director’s discretionary power shall not be exercised to grant to the beneficiary a general power to appoint property of the trust to the beneficiary, the beneficiary’s estate, or the creditors thereof within the meaning of Section 2041 of the federal Internal Revenue Code.#

2. (2)

   This subsection shall not apply if the appointment of the trustee or trust director by the beneficiary may be made only in conjunction with another person having a substantial interest in the property of the trust subject to the power that is adverse to the exercise of the power in favor of the beneficiary within the meaning of Section 2041 (b)(1)(C)(ii) of the federal Internal Revenue Code.#