Code of Virginia

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Code of Virginia
Title 64.2. Wills, Trusts, and Fiduciaries
Subtitle III. Trusts.
4/19/2024

Chapter 7. Uniform Trust Code.

Article 1. General Provisions and Definitions.

§ 64.2-700. Scope.

A. This chapter applies to express inter vivos trusts, charitable or noncharitable, and trusts created pursuant to a statute, judgment, or decree that requires the trust to be administered in the manner of an express trust. This chapter also applies to testamentary trusts, except to the extent that specific provision is made for them in Part A (§ 64.2-1200 et seq.) of Subtitle IV or elsewhere in the Code of Virginia, or to the extent it is clearly inapplicable to them. Section 64.2-775, which provides the duties of a trustee to inform and report to the trust's beneficiaries, shall apply to testamentary trusts. For purposes of this subsection, the word "trust" and the words "trustee" or "fiduciary," as used in Part A (§ 64.2-1200 et seq.) of Subtitle IV, shall be deemed to refer to testamentary trusts and testamentary trustees, except to the extent that the use of such words is clearly inapplicable to testamentary trusts and testamentary trustees. This chapter shall not apply to:

1. A trust that is primarily used for business, investment, or commercial transactions, including business trusts, land trusts (§ 55.1-117), deeds of trusts (Article 2 (§ 55.1-316 et seq.) of Chapter 3 of Title 55.1), voting trusts, common trust funds, security arrangements, liquidation trusts, trusts created by deposit arrangement in a financial institution, and trusts created for paying debts, dividends, interest, or profits.

2. A trust that is used primarily for employment including trusts created for paying salaries, wages, pensions, or employee benefits of any kind.

3. A trust under which a person is a nominee or escrowee for another.

4. Other special purpose trusts governed by particular statutes, including trusts under Title 57.

B. Notwithstanding subsection A, a court, in exercising jurisdiction over the supervision or administration of trusts, may determine that application of the policies, procedures, or rules of the Code is appropriate to resolution of particular issues.

2005, c. 935, § 55-541.02; 2012, c. 614.

§ 64.2-701. Definitions.

As used in this chapter, unless the context requires a different meaning:

"Action," with respect to an act of a trustee, includes a failure to act.

"Appointive property" means the property or property interest subject to a power of appointment.

"Ascertainable standard" means a standard relating to an individual's health, education, support, or maintenance within the meaning of § 2041(b)(1)(A) or 2514(c)(1) of the Internal Revenue Code of 1986 and any applicable regulations.

"Authorized fiduciary" means (i) a trustee or other fiduciary, other than a settlor, that has discretion to distribute or direct a trustee to distribute part or all of the income or principal of the first trust to one or more current beneficiaries and that is not (a) a current beneficiary of the first trust or a beneficiary to which the net income or principal of the first trust would be distributed if the first trust were terminated, (b) a trustee of the first trust that may be removed and replaced by a current beneficiary who has the power to remove the existing trustee of the first trust and designate as successor trustee a person that may be a related or subordinate party, as defined in 26 U.S.C. § 672(c), with respect to such current beneficiary, or (c) an individual trustee whose legal obligation to support a beneficiary may be satisfied by distributions of income and principal of the first trust; (ii) a special fiduciary appointed under § 64.2-779.6; or (iii) a special-needs fiduciary under § 64.2-779.10.

"Beneficiary" means a person that (i) has a present or future, vested or contingent, beneficial interest in a trust; (ii) holds a power of appointment over trust property; or (iii) is an identified charitable organization that will or may receive distributions under the terms of the trust.

"Charitable interest" means an interest in a trust that (i) is held by an identified charitable organization and makes the organization a qualified beneficiary; (ii) benefits only charitable organizations and, if the interest were held by an identified charitable organization, would make the organization a qualified beneficiary; or (iii) is held solely for charitable purposes and, if the interest were held by an identified charitable organization, would make the organization a qualified beneficiary.

"Charitable organization" means (i) a person, other than an individual, organized and operated exclusively for charitable purposes or (ii) a government or governmental subdivision, agency, or instrumentality, to the extent that it holds funds exclusively for a charitable purpose.

"Charitable purpose" means the relief of poverty, the advancement of education or religion, the promotion of health, a municipal or other governmental purpose, or another purpose the achievement of which is beneficial to the community.

"Charitable trust" means a trust, or portion of a trust, created for a charitable purpose described in § 64.2-723.

"Conservator" means a person appointed by the court to administer the estate of an adult individual.

"Court" means the court of the Commonwealth having jurisdiction in matters related to trusts.

"Current beneficiary" means a beneficiary that on the date the beneficiary's qualification is determined is a distributee or permissible distributee of trust income or principal. "Current beneficiary" includes the holder of a presently exercisable general power of appointment but does not include a person that is a beneficiary only because the person holds any other power of appointment.

"Decanting power" means the power of an authorized fiduciary under the Uniform Trust Decanting Act (§ 64.2-779.1 et seq.) to distribute property of a first trust to one or more second trusts or to modify the terms of the first trust.

"Directed trustee" means a trustee that is subject to a trust director's power of direction.

"Environmental law" means a federal, state, or local law, rule, regulation, or ordinance relating to protection of the environment.

"Expanded distributive discretion" means a discretionary power of distribution that is not limited to an ascertainable standard or a reasonably definite standard.

"First trust" means a trust over which an authorized fiduciary may exercise the decanting power.

"First-trust instrument" means the trust instrument for a first trust.

"General power of appointment" means a power of appointment exercisable in favor of a powerholder, the powerholder's estate, a creditor of the powerholder, or a creditor of the powerholder's estate.

"Guardian" means a person appointed by the court to make decisions regarding the support, care, education, health, and welfare of a minor or adult individual. The term does not include a guardian ad litem.

"Guardian of the estate" means a person appointed by the court to administer the estate of a minor.

"Interests of the beneficiaries" means the beneficial interests provided in the terms of the trust.

"Jurisdiction," with respect to a geographic area, includes a state or country.

"Person" means an individual; estate; business or nonprofit entity; government; governmental subdivision, agency, or instrumentality; public corporation; or other legal entity.

"Powerholder" means a person in which a donor creates a power of appointment.

"Power of appointment" means a power that enables a powerholder acting in a nonfiduciary capacity to designate a recipient of an ownership interest in or another power of appointment over the appointive property. "Power of appointment" does not include a power of attorney.

"Power of direction" means a power over a trust granted to a person by the terms of the trust to the extent the power is exercisable while the person is not serving as a trustee. The term includes a power over the investment, management, or distribution of trust property or other matters of trust administration. The term excludes the powers described in subsection A of § 64.2-779.28.

"Power of withdrawal" means a presently exercisable general power of appointment other than a power exercisable by a trustee that is limited by an ascertainable standard, or that is exercisable by another person only upon consent of the trustee or a person holding an adverse interest.

"Presently exercisable power of appointment" means a power of appointment exercisable by the powerholder at the relevant time. "Presently exercisable power of appointment" includes a power of appointment exercisable only after the occurrence of a specified event, the satisfaction of an ascertainable standard, or the passage of a specified time, only after (i) the occurrence of the specified event, (ii) the satisfaction of the ascertainable standard, or (iii) the passage of the specified time. "Presently exercisable power of appointment" does not include a power exercisable only at the powerholder's death.

"Property" means anything that may be the subject of ownership, whether real or personal, legal or equitable, or any interest therein.

"Qualified beneficiary" means a beneficiary who, on the date the beneficiary's qualification is determined, (i) is a distributee or permissible distributee of trust income or principal; (ii) would be a distributee or permissible distributee of trust income or principal if the interests of the distributees described in clause (i) terminated on that date without causing the trust to terminate; or (iii) would be a distributee or permissible distributee of trust income or principal if the trust terminated on that date.

"Reasonably definite standard" means a clearly measurable standard under which a holder of a power of distribution is legally accountable within the meaning of § 674(b)(5)(A) of the Internal Revenue Code of 1986 and any applicable regulations.

"Record" means information that is inscribed on a tangible medium or that is stored in an electronic or other medium and is retrievable in perceivable form.

"Revocable," as applied to a trust, means revocable by the settlor without the consent of the trustee or a person holding an adverse interest.

"Second trust" means (i) a first trust after modification, including a restatement of the first trust, under the Uniform Trust Decanting Act (§ 64.2-779.1 et seq.) or (ii) a trust to which a distribution of property from a first trust is or may be made under the Uniform Trust Decanting Act (§ 64.2-779.1 et seq.).

"Second-trust instrument" means the trust instrument for a second trust.

"Settlor," except as otherwise provided in § 64.2-779.22, means a person, including a testator, who creates or contributes property to a trust. If more than one person creates or contributes property to a trust, each person is a settlor of the portion of the trust property attributable to that person's contribution except to the extent another person has the power to revoke or withdraw that portion.

"Sign" means, with present intent to authenticate or adopt a record, (i) to execute or adopt a tangible symbol or (ii) to attach to or logically associate with the record an electronic symbol, sound, or process.

"Spendthrift provision" means a term of a trust that restrains both voluntary and involuntary transfer of a beneficiary's interest.

"State" means a state of the United States, the District of Columbia, Puerto Rico, the United States Virgin Islands, or any territory or insular possession subject to the jurisdiction of the United States. The term includes an Indian tribe or band recognized by federal law or formally acknowledged by a state.

"Terms of a trust" means:

1. Except as otherwise provided in subdivision 2, the manifestation of the settlor's intent regarding a trust's provisions as (i) expressed in the trust instrument or (ii) established by other evidence that would be admissible in a judicial proceeding; or

2. The trust's provisions as established, determined, or amended by (i) a trustee or trust director in accordance with applicable law, (ii) court order, or (iii) a nonjudicial settlement agreement under § 64.2-709.

"Trust director" means a person that is granted a power of direction by the terms of a trust to the extent the power is exercisable while the person is not serving as a trustee. The person is a trust director whether or not the terms of the trust refer to the person as a trust director and whether or not the person is a beneficiary or settlor of the trust.

"Trust instrument" means a record executed by the settlor to create a trust or by any person to create a second trust that contains some or all of the terms of the trust, including any amendments.

"Trustee" includes an original, additional, and successor trustee and a cotrustee.

2005, c. 935, § 55-541.03; 2012, c. 614; 2017, c. 592; 2018, c. 476; 2020, c. 768.

§ 64.2-702. Knowledge.

A. Subject to subsection B, a person has knowledge of a fact if the person:

1. Has actual knowledge of it;

2. Has received a notice or notification of it; or

3. From all the facts and circumstances known to the person at the time in question, has reason to know it.

B. An organization that conducts activities through employees has notice or knowledge of a fact involving a trust only from the time the information was received by an employee having responsibility to act for the trust, or would have been brought to the employee's attention if the organization had exercised reasonable diligence. An organization exercises reasonable diligence if it maintains reasonable routines for communicating significant information to the employee having responsibility to act for the trust and there is reasonable compliance with the routines. Reasonable diligence does not require an employee of the organization to communicate information unless the communication is part of the individual's regular duties or the individual knows a matter involving the trust would be materially affected by the information.

2005, c. 935, § 55-541.04; 2012, c. 614.

§ 64.2-703. Default and mandatory rules.

A. Except as otherwise provided in the terms of the trust, this chapter governs the duties and powers of a trustee, relations among trustees, and the rights and interests of a beneficiary.

B. The terms of a trust prevail over any provision of this chapter except:

1. The requirements for creating a trust;

2. Subject to subsection I of § 64.2-756 and §§ 64.2-779.32 and 64.2-779.34, the duty of a trustee to act in good faith and in accordance with the terms and purposes of the trust and the interests of the beneficiaries;

3. The requirement that a trust and its terms be for the benefit of its beneficiaries, and that the trust have a purpose that is lawful, not contrary to public policy, and possible to achieve;

4. The power of the court to modify or terminate a trust under §§ 64.2-728 through 64.2-734;

5. The effect of a spendthrift provision and the rights of certain creditors and assignees to reach a trust as provided in Article 5 (§ 64.2-742 et seq.);

6. The power of the court under § 64.2-755 to require, dispense with, or modify or terminate a bond;

7. The power of the court under subsection B of § 64.2-761 to adjust a trustee's compensation specified in the terms of the trust that is unreasonably low or high;

8. The effect of an exculpatory term under § 64.2-799;

9. The rights under §§ 64.2-801 through 64.2-804 of a person other than a trustee or beneficiary;

10. Periods of limitation for commencing a judicial proceeding; and

11. The power of the court to take such action and exercise such jurisdiction as may be necessary in the interests of justice.

2005, c. 935, § 55-541.05; 2007, c. 216; 2012, c. 614; 2020, c. 768.

§ 64.2-704. Common law of trusts; principles of equity.

The common law of trusts and principles of equity supplement this chapter, except to the extent modified by this chapter or another statute of the Commonwealth.

2005, c. 935, § 55-541.06; 2012, c. 614.

§ 64.2-705. Governing law.

The meaning and effect of the terms of a trust are determined by:

1. The law of the jurisdiction designated in the terms unless the designation of that jurisdiction's law is contrary to a strong public policy of the jurisdiction having the most significant relationship to the matter at issue; or

2. In the absence of a controlling designation in the terms of the trust, the law of the jurisdiction having the most significant relationship to the matter at issue.

2005, c. 935, § 55-541.07; 2012, c. 614.

§ 64.2-706. Principal place of administration.

A. Without precluding other means for establishing a sufficient connection with the designated jurisdiction, terms of an inter vivos trust designating the principal place of administration are valid and controlling if:

1. A trustee's principal place of business is located in or a trustee is a resident of the designated jurisdiction;

2. A trust director's principal place of business is located in or a trust director is a resident of the designated jurisdiction; or

3. All or part of the administration occurs in the designated jurisdiction.

B. Without precluding the right of the court to order, approve, or disapprove a transfer, the trustee of an inter vivos trust may transfer the trust's principal place of administration to another state or to a jurisdiction outside of the United States that is appropriate to the trust's purposes, its administration, and the interests of the beneficiaries.

C. When the proposed transfer of a trust's principal place of administration is to another state or to a jurisdiction outside of the United States, the trustee shall notify the qualified beneficiaries of the proposed transfer not less than 60 days before initiating the transfer. A corporate trustee that maintains a place of business in the Commonwealth where one or more trust officers are available on a regular basis for personal contact with trust customers and beneficiaries shall not be deemed to have transferred its principal place of administration if all or significant portions of the administration of the trust are performed outside the Commonwealth. The notice of proposed transfer shall include:

1. The name of the jurisdiction to which the principal place of administration is to be transferred;

2. The address and telephone number at the new location at which the trustee can be contacted;

3. An explanation of the reasons for the proposed transfer;

4. The date on which the proposed transfer is anticipated to occur; and

5. The date, not less than 60 days after the giving of the notice, by which the qualified beneficiary shall notify the trustee of an objection to the proposed transfer.

D. The authority of a trustee under this section to transfer a trust's principal place of administration to another state or to a jurisdiction outside of the United States terminates if a qualified beneficiary notifies the trustee of an objection to the proposed transfer on or before the date specified in the notice.

E. In connection with a transfer of the trust's principal place of administration, the trustee may transfer some or all of the trust property to a successor trustee designated in the terms of the trust or appointed pursuant to § 64.2-757.

F. The court, for good cause shown, may transfer the principal place of administration of a testamentary trust to another state or to a jurisdiction outside of the United States upon such conditions, if any, as it may deem appropriate.

2005, c. 935, § 55-541.08; 2012, c. 614; 2020, c. 768.

§ 64.2-707. Methods and waiver of notice.

A. Notice to a person under this chapter or the sending of a document to a person under this chapter shall be accomplished in a manner reasonably suitable under the circumstances and likely to result in receipt of the notice or document. Permissible methods of notice or for sending a document include first-class mail, personal delivery, delivery to the person's last known place of residence or place of business, or a properly directed electronic message.

B. Notice otherwise required under this chapter or a document otherwise required to be sent under this chapter need not be provided to a person whose identity or location is unknown to and not reasonably ascertainable by the trustee.

C. Notice under this chapter or the sending of a document under this chapter may be waived by the person to be notified or sent the document.

D. Notice of a judicial proceeding shall be given as provided in § 64.2-713.

2005, c. 935, § 55-541.09; 2012, c. 614.

§ 64.2-708. Others treated as qualified beneficiaries.

A. Whenever notice to qualified beneficiaries of a trust is required under this chapter, the trustee shall also give notice to any other beneficiary who has sent the trustee a request for notice.

B. A charitable organization expressly designated to receive distributions under the terms of a charitable trust has the rights of a qualified beneficiary under this chapter if the charitable organization, on the date of the charitable organization's qualification is being determined:

1. Is a distributee or permissible distributee of trust income or principal;

2. Would be a distributee or permissible distributee of trust income or principal upon the termination of the interests of other distributees or permissible distributees then receiving or eligible to receive distributions; or

3. Would be a distributee or permissible distributee of trust income or principal if the trust terminated on that date.

C. A person appointed to enforce a trust created for the care of an animal or another noncharitable purpose as provided in § 64.2-726 or 64.2-727 has the rights of a qualified beneficiary under this chapter.

D. The Attorney General has the rights of a qualified beneficiary with respect to a charitable trust having its principal place of administration in the Commonwealth but need not be given notices or information required under §§ 64.2-758 and 64.2-775 unless otherwise requested.

2005, c. 935, § 55-541.10; 2012, c. 614.

§ 64.2-709. Nonjudicial settlement agreements.

A. For purposes of this section, "interested persons" means persons whose consent would be required in order to achieve a binding settlement were the settlement to be approved by the court.

B. Except as otherwise provided in subsection C, interested persons may enter into a binding nonjudicial settlement agreement with respect to any matter involving a trust.

C. A nonjudicial settlement agreement is valid only to the extent it does not violate a material purpose of the trust and includes terms and conditions that could be properly approved by the court under this chapter or other applicable law.

D. Matters that may be resolved by a nonjudicial settlement agreement include:

1. The interpretation or construction of the terms of the trust;

2. The approval of a trustee's report or accounting;

3. Direction to a trustee to refrain from performing a particular act or the grant to a trustee of any necessary or desirable power;

4. The resignation or appointment of a trustee and the determination of a trustee's compensation;

5. Transfer of a trust's principal place of administration; and

6. Liability of a trustee for an action relating to the trust.

E. Any interested person may petition the court to approve a nonjudicial settlement agreement, to determine whether the representation as provided in Article 3 (§ 64.2-714 et seq.) was adequate, and to determine whether the agreement contains terms and conditions the court could have properly approved.

2005, c. 935, § 55-541.11; 2012, c. 614.

Article 2. Judicial Proceedings.

§ 64.2-710. Role of court in administration of trust.

A. The court may intervene in the administration of a trust to the extent its jurisdiction is invoked by an interested person or as provided by law.

B. Except as provided in Part A (§ 64.2-1200 et seq.) of Subtitle IV, a trust is not subject to continuing judicial supervision unless ordered by the court.

C. A judicial proceeding involving a trust may relate to any matter involving the trust's administration, including a request for instructions and an action to declare rights.

2005, c. 935, § 55-542.01; 2012, c. 614.

§ 64.2-711. Jurisdiction over trustee and beneficiary.

A. By accepting the trusteeship of a trust having its principal place of administration in the Commonwealth or by moving the principal place of administration to the Commonwealth, the trustee submits personally to the jurisdiction of the courts of the Commonwealth regarding any matter involving the trust.

B. With respect to their interests in the trust, the beneficiaries of a trust having its principal place of administration in the Commonwealth are subject to the jurisdiction of the courts of the Commonwealth regarding any matter involving the trust. By accepting a distribution from such a trust, the recipient submits personally to the jurisdiction of the courts of the Commonwealth regarding any matter involving the trust.

C. This section does not preclude other methods of obtaining jurisdiction over a trustee, beneficiary, or other person receiving property from the trust.

2005, c. 935, § 55-542.02; 2012, c. 614.

§ 64.2-712. Proceedings to appoint or remove trustees.

A. Proceedings to appoint or remove trustees may be brought by motion pursuant to §§ 64.2-1405 and 64.2-1406.

B. Proceedings to appoint or remove trustees also may be brought by petition or complaint. In such a proceeding, beneficiaries who are not qualified beneficiaries shall not be necessary parties, nor shall it be necessary to join (i) a trustee who has declined to accept the trust, resigned or been adjudicated an incapacitated person or (ii) the personal representative of a trustee.

2005, c. 935, § 55-542.05; 2012, c. 614.

§ 64.2-713. Pleadings; parties; orders; notice.

A. In judicial proceedings involving trusts governed under this chapter, including proceedings to modify or terminate a trust:

1. Interests to be affected by the proceeding shall be described in pleadings that give reasonable information to owners by name or class, by reference to the instrument creating the interests, or in any other appropriate manner.

2. Orders shall bind persons as follows:

a. An order binding the sole holder or all co-holders of a power of revocation or a presently exercisable general power of appointment, including one in the form of a power of amendment, binds other persons to the extent their interests as objects, takers in default or otherwise are subject to such power.

b. To the extent there is no conflict of interest between or among them:

(1) An order binding a conservator or a guardian of an estate binds the person whose estate he controls;

(2) An order binding a guardian of the person binds the ward if no conservator or guardian of his estate has been appointed;

(3) An order binding a trustee binds beneficiaries of the trust in proceedings to probate a will establishing or adding to a trust, to review the acts or accounts of a prior fiduciary, and in proceedings involving creditors or other third parties;

(4) An order binding a personal representative binds persons interested in the undistributed assets of a decedent's estate in actions or proceedings by or against the estate; and

(5) An order binding a sole holder or all co-holders of a general testamentary power of appointment binds other persons to the extent their interests as objects, takers in default, or otherwise are subject to the power.

c. Unless otherwise represented, a minor, an incapacitated, unborn, or unascertained person is bound by an order if his interest is adequately represented by another party having a substantially identical interest in the proceedings.

3. Notice shall be given:

a. Pursuant to Chapter 8 (§ 8.01-285 et seq.) of Title 8.01 and the Rules of Supreme Court of Virginia: (i) to every interested party or to a person who can bind an interested party pursuant to subdivision 2 a or 2 b; and (ii) if the proceeding seeks the modification or termination of a charitable trust or the sale of any of its real estate, to the public at large by order of publication published once a week for three consecutive weeks prior to any hearing or trial in a paper of general circulation in the county or city (a) of the trust's principal place of administration and (b) where any affected real estate of the trust is located. This notice provision does not change the common law rule that members of the public at large are not entitled to be parties to such judicial proceedings or to have any right to appear therein. The purpose of the notice, which shall be stated therein, is solely to make the public aware of the nature of such proceedings, the remedy being sought therein, and the opportunity to share their views in regard thereto with the Attorney General. The court shall not conduct any hearing or trial until it has made a finding that the required notice to the public has been given as specified herein.

b. To unborn or unascertained persons who are not represented pursuant to subdivision 2 a or 2 b by giving notice to all known persons whose interests in the proceeding are substantially identical to those of the unborn or unascertained persons.

4. Persons under a disability, or unborn or incapacitated persons may be represented during the course of a judicial proceeding as follows:

a. At any point in a judicial proceeding, a court may appoint a guardian ad litem to represent the interest of a minor, an incapacitated, unborn or unascertained person, or a person whose identity or address is unknown, if the court determines that representation of the interest otherwise would be inadequate. The guardian ad litem may be appointed to represent several persons or interests to the extent there is no conflict of interest among those persons or interests. The reasons for appointing a guardian ad litem shall be stated in the record of the proceedings.

b. A minor or other person under a disability may be represented by an attorney-at-law duly licensed to practice in the Commonwealth who has entered of record an appearance on his behalf to the extent permitted by § 8.01-9.

B. The provisions of this section shall apply notwithstanding the Rules of Supreme Court of Virginia or any applicable provisions in Title 8.01.

2005, c. 935, § 55-542.06; 2007, c. 752; 2012, c. 614.

Article 3. Representation.

§ 64.2-714. Representation; basic effect.

A. Notice to a person who may represent and bind another person under this chapter 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 this chapter is binding on the person represented unless the person represented objects to the representation by notifying the trustee or the representative before the consent would otherwise have become effective.

C. Except as otherwise provided in §§ 64.2-729 and 64.2-751, a person who under this chapter may represent a settlor who lacks capacity may receive notice and give a binding consent on the settlor's behalf.

D. A settlor may not represent and bind a beneficiary under this chapter with respect to the termination or modification of a trust under § 64.2-729.

2005, c. 935, § 55-543.01; 2012, c. 614.

§ 64.2-715. Representation by holder of general testamentary power of appointment.

To the extent there is no conflict of interest between the holder of a general testamentary power of appointment and the persons represented with respect to the particular question or dispute, the holder may represent and bind persons whose interests, as permissible appointees, takers in default, or otherwise, are subject to the power.

2005, c. 935, § 55-543.02; 2012, c. 614.

§ 64.2-716. Representation by fiduciaries and parents or other ancestors.

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 conservator or guardian of the estate may represent and bind the estate that such fiduciary controls;

2. A guardian 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 act with respect to the particular question or dispute may represent and bind the principal;

4. A trustee may represent and bind the beneficiaries of the trust;

5. A personal representative of a decedent's estate may represent and bind persons interested in the estate;

6. A parent may represent and bind the parent's minor or unborn child if a guardian of the estate or guardian for the child has not been appointed; and

7. If a minor or unborn person is not otherwise represented under this section, a grandparent or more remote ancestor may represent and bind that minor or unborn person.

2005, c. 935, § 55-543.03; 2012, c. 614.

§ 64.2-717. Representation by person having substantially identical interest.

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 having a substantially identical interest with respect to the particular question or dispute, but only to the extent there is no conflict of interest with respect to the particular question or dispute between the representative and the person represented.

2005, c. 935, § 55-543.04; 2012, c. 614.

§ 64.2-718. Appointment of representative.

A. If the court determines that an interest is not represented under this chapter, or that the otherwise available representation might be inadequate, the court may appoint a representative 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 representative may be appointed to represent several persons or interests.

B. A representative may act on behalf of the individual represented with respect to any matter arising under this chapter, whether or not a judicial proceeding concerning the trust is pending.

C. In making decisions, a representative may consider general benefit accruing to the living members of the individual's family.

2005, c. 935, § 55-543.05; 2012, c. 614.

Article 4. Creation, Validity, Modification, and Termination of Trust.

§ 64.2-719. Methods of creating trust.

A. A trust may be created by:

1. Transfer of property to another person as trustee during the settlor's lifetime by the settlor or by the settlor's agent, acting in accordance with § 64.2-1612, under a power of attorney that expressly authorizes the agent to create a trust on the settlor's behalf or by will or other disposition taking effect upon the settlor's death;

2. Declaration by the owner of property that the owner holds identifiable property as trustee;

3. Exercise of a power of appointment in favor of a trustee; or

4. A conservator acting in accordance with § 64.2-2023.

B. A circuit court, upon petition from an interested party, may create and establish a trust with such trustee and such terms as the court determines. In an order creating and establishing the trust, the court shall determine whether the trustee shall have a duty to qualify in the clerk's office; post bond, with or without surety; or file an inventory and annual accounting with the commissioner of accounts as would apply to a testamentary trustee.

2005, c. 935, § 55-544.01; 2010, cc. 455, 632; 2012, c. 614; 2013, c. 523; 2016, c. 186.

§ 64.2-720. Requirements for creation.

A. A trust is created only if:

1. The settlor has capacity to create a trust; or when the trust is created by the settlor's agent under a power of attorney, which expressly authorizes the agent to create a trust on the settlor's behalf;

2. The settlor or his agent indicates an intention to create the trust;

3. The trust has a definite beneficiary or is:

a. A charitable trust;

b. A trust for the care of an animal, as provided in § 64.2-726; or

c. A trust for a noncharitable purpose, as provided in § 64.2-727;

4. The trustee has duties to perform; and

5. The same person is not the sole trustee and sole beneficiary.

B. A beneficiary is definite if the beneficiary can be ascertained now or in the future, subject to any applicable rule against perpetuities.

C. A power in a trustee to select a beneficiary from an indefinite class is valid. If the power is not exercised within a reasonable time, the power fails and the property subject to the power passes to the persons who would have taken the property had the power not been conferred.

2005, c. 935, § 55-544.02; 2010, cc. 455, 632; 2012, c. 614.

§ 64.2-721. Trusts created in other jurisdictions.

A trust not created by will is validly created if its creation complies with the law of the jurisdiction in which the trust instrument was executed, or the law of the jurisdiction in which, at the time of creation:

1. The settlor was domiciled, had a place of abode, or was a national;

2. A trustee was domiciled or had a place of business; or

3. Any trust property was located.

2005, c. 935, § 55-544.03; 2012, c. 614.

§ 64.2-722. Trust purposes.

A trust may be created only to the extent its purposes are lawful, not contrary to public policy, and possible to achieve. A trust and its terms shall be for the benefit of its beneficiaries.

2005, c. 935, § 55-544.04; 2012, c. 614.

§ 64.2-723. Charitable purposes; enforcement.

A. A charitable trust may be created for the relief of poverty, the advancement of education or religion, the promotion of health, governmental or municipal purposes, or other purposes the achievement of which is beneficial to the community.

B. If the terms of a charitable trust do not indicate a particular charitable purpose or beneficiary, the court may select one or more charitable purposes or beneficiaries. The selection shall be consistent with the settlor's intention to the extent it can be ascertained.

C. The settlor of a charitable trust, among others, may maintain a proceeding to enforce the trust.

2005, c. 935, § 55-544.05; 2012, c. 614.

§ 64.2-724. Creation of trust induced by fraud, duress, or undue influence.

A trust is void to the extent its creation was induced by fraud, duress, or undue influence.

2005, c. 935, § 55-544.06; 2012, c. 614.

§ 64.2-725. Evidence of oral trust.

Except as required by a statute other than this chapter, a trust need not be evidenced by a trust instrument, but the creation of an oral trust and its terms may be established only by clear and convincing evidence.

2005, c. 935, § 55-544.07; 2012, c. 614.

§ 64.2-726. Trust for care of animal.

A. A trust may be created to provide for the care of an animal alive during the settlor's lifetime. The trust terminates upon the death of the animal or, if the trust was created to provide for the care of more than one animal alive during the settlor's lifetime, upon the death of the last surviving animal. Funds from the trust may be applied to any outstanding expenses of the trust and for burial or other postdeath expenditures for animal beneficiaries as provided for in the instrument creating the trust.

B. The instrument creating the trust shall be liberally construed to bring the transfer within the scope of trusts governed by this section, to presume against the merely precatory or honorary nature of the disposition, and to carry out the general intent of the transferor. Extrinsic evidence is admissible in determining the transferor's intent.

C. A trust authorized by this section may be enforced by a person appointed in the terms of the trust or, if no person is so appointed, by a person appointed by the court. A person having an interest in the welfare of the animal may request the court to appoint a person to enforce the trust or to remove a person appointed. The appointed person shall have the rights of a trust beneficiary for the purpose of enforcing the trust, including receiving accountings, notices, and other information from the trustee and providing consents. Reasonable compensation for a person appointed by the court may be paid from the assets of the trust.

D. Except as ordered by a court or required by the trust instrument, no filing, report, registration, periodic accounting, separate maintenance of funds, appointment, or surety bond shall be required by reason of the existence of the fiduciary relationship of the trustee.

E. Property of a trust authorized by this section may be applied only to its intended use, except to the extent the court determines that the value of the trust property exceeds the amount required for the intended use. Except as otherwise provided in the terms of the trust, property not required for the intended use shall be distributed to the settlor, if then living. If the settlor is deceased, such property shall be distributed pursuant to the residuary clause of the settlor's will if the trust for the animal was created in a preresiduary clause in the will or pursuant to the residuary provisions of the inter vivos trust if the trust for the animal was created in a preresiduary clause in the trust instrument; otherwise, such property shall be distributed to the settlor's successors in interest.

2005, c. 935, § 55-544.08; 2006, c. 666. 2012, c. 614.

§ 64.2-727. Noncharitable trust without ascertainable beneficiary.

Except as otherwise provided in § 64.2-726 or by another statute, the following rules apply:

1. A trust may be created for a noncharitable purpose without a definite or definitely ascertainable beneficiary or for a noncharitable but otherwise valid purpose to be selected by the trustee. The trust may not be enforced for more than 21 years.

2. A trust authorized by this section may be enforced by a person appointed in the terms of the trust or, if no person is so appointed, by a person appointed by the court.

3. Property of a trust authorized by this section may be applied only to its intended use, except to the extent the court determines that the value of the trust property exceeds the amount required for the intended use. Except as otherwise provided in the terms of the trust, property not required for the intended use shall be distributed to the settlor, if then living, otherwise to the settlor's successors in interest.

2005, c. 935, § 55-544.09; 2012, c. 614.

§ 64.2-728. Modification or termination of trust; proceedings for approval or disapproval.

A. In addition to the methods of termination prescribed by §§ 64.2-729 through 64.2-732, a trust terminates to the extent the trust is revoked or expires pursuant to its terms, no purpose of the trust remains to be achieved, or the purposes of the trust have become unlawful, contrary to public policy, or impossible to achieve.

B. A proceeding to approve or disapprove a proposed modification or termination under §§ 64.2-729 through 64.2-734, or trust combination or division under § 64.2-735, may be commenced by a trustee or beneficiary. The settlor of a charitable trust may maintain a proceeding to modify the trust under § 64.2-731.

2005, c. 935, § 55-544.10; 2012, c. 614.

§ 64.2-729. Modification or termination of noncharitable irrevocable trust by consent.

A. If upon petition the court finds that the settlor and all beneficiaries consent to the modification or termination of a noncharitable irrevocable trust, the court shall enter an order approving the modification or termination even if the modification or termination is inconsistent with a material purpose of the trust. A settlor's power to consent to a trust's modification or termination may be exercised by an agent under a power of attorney only to the extent expressly authorized by the power of attorney or the terms of the trust; by the settlor's conservator with the approval of the court supervising the conservatorship if an agent is not so authorized; or by the settlor's guardian with the approval of the court supervising the guardianship if an agent is not so authorized and a conservator has not been appointed.

B. A noncharitable irrevocable trust may be terminated upon consent of all of the beneficiaries if the court concludes that continuance of the trust is not necessary to achieve any material purpose of the trust. A noncharitable irrevocable trust may be modified upon consent of all of the beneficiaries if the court concludes that modification is not inconsistent with a material purpose of the trust.

C. Upon termination of a trust under subsection A or B, the trustee shall distribute the trust property as agreed by the beneficiaries.

D. If not all of the beneficiaries consent to a proposed modification or termination of the trust under subsection A or B, the modification or termination may be approved by the court if the court is satisfied that:

1. If all of the beneficiaries had consented, the trust could have been modified or terminated under this section; and

2. The interests of a beneficiary who does not consent will be adequately protected.

2005, c. 935, § 55-544.11; 2012, c. 614.

§ 64.2-730. Modification or termination because of unanticipated circumstances or inability to administer trust effectively.

A. The court may modify the administrative or dispositive terms of a trust or terminate the trust if, because of circumstances not anticipated by the settlor, modification or termination will further the purposes of the trust. To the extent practicable, the modification shall be made in accordance with the settlor's probable intention.

B. The court may modify the administrative terms of a trust if continuation of the trust on its existing terms would be impracticable or wasteful or impair the trust's administration.

C. Upon termination of a trust under this section, the trustee shall distribute the trust property in a manner consistent with the purposes of the trust.

2005, c. 935, § 55-544.12; 2012, c. 614.

§ 64.2-731. Cy pres.

A. Except as otherwise provided in subsection B, if a particular charitable purpose becomes unlawful, impracticable, impossible to achieve, or wasteful:

1. The trust does not fail, in whole or in part;

2. The trust property does not revert to the settlor or the settlor's successors in interest; and

3. The court may apply cy pres to modify or terminate the trust by directing that the trust property be applied or distributed, in whole or in part, in a manner consistent with the settlor's charitable purposes.

B. A provision in the terms of a charitable trust that would result in distribution of the trust property to a noncharitable beneficiary prevails over the power of the court under subsection A to apply cy pres to modify or terminate the trust only if, when the provision takes effect:

1. The trust property is to revert to the settlor and the settlor is still living; or

2. Fewer than 21 years have elapsed since the date of the trust's creation.

2005, c. 935, § 55-544.13; 2012, c. 614.

§ 64.2-732. Modification or termination of uneconomic trust.

A. After notice to the qualified beneficiaries, the trustee of a trust consisting of trust property having a total value less than $100,000 may terminate the trust if the trustee concludes that the value of the trust property is insufficient to justify the cost of administration.

B. The court may modify or terminate a trust or remove the trustee and appoint a different trustee if it determines that the value of the trust property is insufficient to justify the cost of administration.

C. Upon termination of a trust under this section, the trustee shall distribute the trust property in a manner consistent with the purposes of the trust.

D. This section does not apply to an easement for conservation or preservation.

2005, c. 935, § 55-544.14; 2012, c. 614.

§ 64.2-733. Reformation to correct mistakes.

The court may reform the terms of a trust, even if unambiguous, to conform the terms to the settlor's intention if it is proved by clear and convincing evidence that both the settlor's intent and the terms of the trust were affected by a mistake of fact or law, whether in expression or inducement.

2005, c. 935, § 55-544.15; 2012, c. 614.

§ 64.2-734. Modification to achieve settlor's tax objectives.

To achieve the settlor's tax objectives, the court may modify the terms of a trust in a manner that is not contrary to the settlor's probable intention. The court may provide that the modification has retroactive effect.

2005, c. 935, § 55-544.16; 2012, c. 614.

§ 64.2-735. Combination and division of trusts.

After notice to the qualified beneficiaries, a trustee may combine two or more trusts into a single trust or divide a trust into two or more separate trusts, if the result does not materially impair the rights of any beneficiary or adversely affect achievement of the purposes of the trust.

2005, c. 935, § 55-544.17; 2012, c. 614.

§ 64.2-736. Amendment of trust where gift, grant, or will establishes private foundation or constitutes a charitable trust or a split-interest trust.

When any such gift, grant, devise, or bequest establishes a private foundation, as defined in § 509 of the Internal Revenue Code, or constitutes a charitable trust, as described in § 4947(a)(1) of the Internal Revenue Code, or a split-interest trust, as described in § 4947(a)(2) of the Internal Revenue Code, the trustee or trustees of such trust, with the concurrence of the creator of the trust, if then living and able to give such consent, and the Attorney General, may, without resort to any court, unless such amendment is inconsistent with an express provision of such trust's governing instrument, amend the terms of such trust to bring such trust into or continue such trust in conformity with requirements for exemption of such trust, or any interest therein, from federal taxes. When such gift, grant, or will is recorded, a copy of such amendment shall be similarly recorded.

2005, c. 935, § 55-544.18; 2012, c. 614.

§ 64.2-737. Distribution of income of trust that is a private foundation or a charitable trust; prohibitions as to such private foundation.

Every trust that is a private foundation, as defined in § 509 of the Internal Revenue Code, or a charitable trust, as described in § 4947(a)(1) of the Internal Revenue Code, unless its governing instrument expressly includes specific provisions to the contrary, shall distribute its income, and if necessary principal, for each taxable year at such time and in such manner as not to subject such trust to tax under § 4942 of the Internal Revenue Code, and such trust shall not engage in any act of self-dealing, as defined in § 4941(d) of the Internal Revenue Code, retain any excess business holdings, as defined in § 4943(c) of the Internal Revenue Code, make any investments in such manner as to give rise to liability for the tax imposed by § 4944 of the Internal Revenue Code, or make any taxable expenditures, as defined in § 4945(d) of the Internal Revenue Code.

2005, c. 935, § 55-544.19; 2012, c. 614.

§ 64.2-738. Prohibitions as to trust that is deemed a split-interest trust.

Every trust that is a split-interest trust, as described in § 4947(a)(2) of the Internal Revenue Code, unless its governing instrument expressly includes specific provisions to the contrary, shall not engage in any act of self-dealing, as defined in § 4941(d) of the Internal Revenue Code, retain any excess business holdings, as defined in § 4943(c) of the Internal Revenue Code, that would give rise to liability for the tax imposed by § 4943(a) of the Internal Revenue Code, make any investments in such manner as to give rise to liability for the tax imposed by § 4944 of the Internal Revenue Code, or make any taxable expenditures, as defined in § 4945(d) of the Internal Revenue Code. This section shall not apply with respect to:

1. Any amounts payable under the terms of such trust to income beneficiaries, unless a deduction was allowed under § 170(f)(2)(B), 2055(e)(2)(B), or 2522(c)(2)(B) of the Internal Revenue Code;

2. Any amounts in trust other than amounts for which a deduction was allowed under § 170, 545(b)(2), 556(b)(2), 642(c), 2055, 2106(a)(2), or 2522 of the Internal Revenue Code, if such other amounts are segregated from amounts for which no deduction was allowable; or

3. Any amounts transferred in trust before May 27, 1969.

2005, c. 935, § 55-544.20; 2012, c. 614.

§ 64.2-739. Application of §§ 64.2-737 and 64.2-738.

Sections 64.2-737 and 64.2-738 shall apply to any private foundation, charitable trust, or split-interest trust defined or described therein and established after December 31, 1969; and to any such private foundation, charitable trust, or split-interest trust established before January 1, 1970, only for its taxable years beginning on and after January 1, 1972, unless the exceptions provided in § 508(e)(2)(A) or (B) of the Internal Revenue Code shall apply or unless the trustee or trustees shall elect that this section shall not apply by filing written notice of such election with the Attorney General, and with the clerk of the court in which its governing instrument may be recorded, on or before December 31, 1971.

2005, c. 935, § 55-544.21; 2012, c. 614.

§ 64.2-740. Interpretation of references to Internal Revenue Code in §§ 64.2-736 through 64.2-739.

Each reference to a section of the Internal Revenue Code made in §§ 64.2-736 through 64.2-739 shall include future amendments to such Code sections and corresponding provisions of future internal revenue laws.

2005, c. 935, § 55-544.22; 2012, c. 614.

§ 64.2-741. Powers of courts not impaired by §§ 64.2-736 through 64.2-740.

Nothing in §§ 64.2-736 through 64.2-740 shall impair the power of a court of competent jurisdiction with respect to any such foundation or trust.

2005, c. 935, § 55-544.23; 2012, c. 614; 2015, c. 709.

Article 5. Creditor's Claims; Spendthrift and Discretionary Trusts.

§ 64.2-742. Rights of beneficiary's creditor or assignee.

To the extent a beneficiary's interest is not subject to a spendthrift provision, the court may authorize a creditor or assignee of the beneficiary to reach the beneficiary's interest by attachment of present or future distributions to or for the benefit of the beneficiary or other means. The court may limit the award to such relief as is appropriate under the circumstances.

2005, c. 935, § 55-545.01; 2007, c. 216; 2012, c. 614.

§ 64.2-743. Spendthrift provision.

A. A spendthrift provision is valid only if it restrains both voluntary and involuntary transfer of a beneficiary's interest.

B. A term of a trust providing that the interest of a beneficiary is held subject to a "spendthrift trust," or words of similar import, is sufficient to restrain both voluntary and involuntary transfer of the beneficiary's interest.

C. A beneficiary may not transfer an interest in a trust in violation of a valid spendthrift provision and, except as otherwise provided in this article, a creditor or assignee of the beneficiary may not reach the interest or a distribution by the trustee before its receipt by the beneficiary.

2005, c. 935, § 55-545.02; 2012, c. 614.

§ 64.2-744. Exceptions to spendthrift provision.

A. In this section, "child" includes any person for whom an order or judgment for child support has been entered in this or another state.

B. Even if a trust contains a spendthrift provision, a beneficiary's child who has a judgment or court order against the beneficiary for support or maintenance, or a judgment creditor who has provided services for the protection of a beneficiary's interest in the trust, may obtain from a court an order attaching present or future distributions to or for the benefit of the beneficiary.

C. Subject to the limitations of § 64.2-745, no spendthrift provision shall operate to the prejudice of the United States, the Commonwealth, or any county, city, or town.

D. A claimant against which a spendthrift provision cannot be enforced may obtain from a court an order attaching present or future distributions to or for the benefit of a beneficiary. The court may limit the award of such relief as is appropriate under the circumstances.

2005, c. 935, § 55-545.03; 2007, c. 216; 2012, c. 614.

§ 64.2-745. Certain claims for reimbursement for public assistance.

A. Notwithstanding any contrary provision in the trust instrument, if a statute or regulation of the United States or Commonwealth requires a beneficiary to reimburse the Commonwealth or any agency or instrumentality thereof, for public assistance, including medical assistance, furnished or to be furnished to the beneficiary, the Attorney General or an attorney acting on behalf of the state agency responsible for the program may file a petition in the circuit court having jurisdiction over the trustee requesting reimbursement. The petition may be filed prior to obtaining a judgment. The beneficiary, the guardian of his estate, his conservator, or his committee shall be made a party.

B. Following its review of the circumstances of the case, the court may:

1. Order the trustee to satisfy all or part of the liability out of all or part of the amounts to which the beneficiary is entitled, whether presently or in the future, to the extent the beneficiary has the right under the trust to compel the trustee to pay income or principal to or for the benefit of the beneficiary; or

2. Regardless of whether the beneficiary has the right to compel the trustee to pay income or principal to or for the benefit of the beneficiary, order the trustee to satisfy all or part of the liability out of all or part of any future payments that the trustee chooses to make to or for the benefit of the beneficiary in the exercise of discretion under the trust.

C. A duty in the trustee under the instrument to make disbursements in a manner designed to avoid rendering the beneficiary ineligible for public assistance to which he might otherwise be entitled, however, shall not be construed as a right possessed by the beneficiary to compel such payments.

D. The court shall not issue an order pursuant to this section if the beneficiary is a person who has a medically determined physical or mental disability that substantially impairs his ability to provide for his care or custody, and constitutes a substantial disability.

2005, c. 935, § 55-545.03:1; 2012, c. 614; 2023, cc. 148, 149.

§ 64.2-745.1. Self-settled spendthrift trusts.

A. A settlor may transfer assets to a qualified self-settled spendthrift trust and retain in that trust a qualified interest, and, except as otherwise provided in this article, § 64.2-747 shall not apply to such qualified interest.

B. Section 64.2-747 shall continue to apply with respect to any interest held by a settlor in a qualified self-settled spendthrift trust, other than a qualified interest.

C. A settlor's transfer to a qualified self-settled spendthrift trust shall not, to the extent of the settlor's qualified interest, be deemed to have been made with intent to delay, hinder, or defraud creditors, for purposes of § 55.1-400, merely because it is made to a trust with respect to which the settlor retains a qualified interest and merely because it is made without consideration. A settlor's transfer to a qualified self-settled spendthrift trust may, however, be set aside under § 55.1-400 or 55.1-401 on other bases, such as if the transfer renders the settlor insolvent.

D. A settlor's creditor may bring an action under § 55.1-402 to avoid a transfer to a qualified self-settled spendthrift trust or otherwise to enforce a claim that existed on the date of the settlor's transfer to such trust within five years after the date of the settlor's transfer to such trust to which such claim relates.

E. A creditor shall have only such rights with respect to a settlor's transfer to a qualified self-settled spendthrift trust as are provided in this section. No creditor and no other person shall have any claim or cause of action against any trustee, trust adviser, trust director, or any person involved in the counseling, drafting, preparation, or execution of, or transfers to a qualified self-settled spendthrift trust.

F. If a settlor makes more than one transfer to the same qualified self-settled spendthrift trust, the following rules shall apply:

1. The settlor's making of a subsequent transfer shall be disregarded in determining whether a creditor's claim with respect to a prior transfer is valid under this section;

2. With respect to each subsequent transfer by the settlor, the five-year limitations period provided in subsection D, with respect to actions brought under Chapter 4 (§ 55.1-400 et seq.) of Title 55.1 with respect to the subsequent transfer, commences on the date of such subsequent transfer; and

3. Any distribution to a beneficiary is deemed to have been made from the latest such transfer.

G. The movement to the Commonwealth of the administration of an existing trust, which, after such movement to the Commonwealth, meets for the first time all of the requirements of a qualified self-settled spendthrift trust, shall be treated, for purposes of this section, as a transfer to this trust by the settlor on the date of such movement of all of the assets previously transferred to the trust by the settlor.

2012, c. 555, § 55-545.03:2; 2012, c. 614.

§ 64.2-745.2. Definitions; vacancies; right to withdraw.

A. As used in this article, unless the context requires a different meaning:

"Independent qualified trustee" means a qualified trustee who is not, and whose actions are not, subject to direction by:

1. The settlor;

2. Any natural person who is not a resident of the Commonwealth;

3. Any entity that is not authorized under Title 6.2 to engage in trust business within the Commonwealth;

4. The settlor's spouse;

5. A parent of the settlor;

6. Any issue of the settlor;

7. A sibling of the settlor;

8. An employee of the settlor;

9. A business entity in which the settlor's holdings represent at least 30 percent of the total voting power of all interests entitled to vote;

10. A subordinate employee of the settlor; or

11. A subordinate employee of a business entity in which the settlor is an executive.

"Qualified interest" means a settlor's interest in a qualified self-settled spendthrift trust, to the extent that such interest entitles the settlor to receive distributions of income, principal, or both, in the sole discretion of an independent qualified trustee. A settlor may have a qualified interest in a qualified self-settled spendthrift trust and also have an interest in the same trust that is not a qualified interest, and the rules of § 64.2-747 shall apply to each interest of the settlor in the same trust other than the settlor's qualified interest.

"Qualified self-settled spendthrift trust" means a trust if:

1. The trust is irrevocable;

2. The trust is created during the settlor's lifetime;

3. There is, at all times when distributions could be made to the settlor pursuant to the settlor's qualified interest, at least one beneficiary other than the settlor (i) to whom income may be distributed, if the settlor's qualified interest relates to trust income, (ii) to whom principal may be distributed, if the settlor's qualified interest relates to trust principal, or (iii) to whom both income and principal may be distributed, if the settlor's qualified interest relates to both trust income and principal;

4. The trust has at all times at least one qualified trustee, who may be, but need not be, an independent qualified trustee;

5. The trust instrument expressly incorporates the laws of the Commonwealth to govern the validity, construction, and administration of the trust;

6. The trust instrument includes a spendthrift provision, as defined in § 64.2-743, that restrains both voluntary and involuntary transfer of the settlor's qualified interest; and

7. The settlor does not have the right to disapprove distributions from the trust.

"Qualified trustee" means any person who is a natural person residing within the Commonwealth or a legal entity authorized to engage in trust business within the Commonwealth and who maintains or arranges for custody within the Commonwealth of some or all of the property that has been transferred to the trust by the settlor, maintains records within the Commonwealth for the trust on an exclusive or nonexclusive basis, prepares or arranges for the preparation within the Commonwealth of fiduciary income tax returns for the trust, or otherwise materially participates within the Commonwealth in the administration of the trust. A trustee is not a qualified trustee if such trustee's authority to make distributions of income or principal or both are subject to the direction of someone who, were that person a trustee of the trust, would not meet the requirements to be a qualified trustee.

B. A vacancy in the position of qualified trustee that occurs for any reason, whether or not there is then serving another trustee, shall be filled in the following order of priority:

1. By a person eligible to be a qualified trustee and who is designated pursuant to the terms of the trust to act as successor trustee;

2. By a person eligible to be a qualified trustee and who is designated by unanimous agreement of the qualified beneficiaries; or

3. By a person eligible to be a qualified trustee and who is appointed by the court pursuant to §§ 64.2-1405 and 64.2-1406 or pursuant to § 64.2-712.

C. A vacancy in the position of independent qualified trustee that occurs for any reason, whether or not there is then serving another trustee, shall be filled in the following order of priority:

1. By a person eligible to be an independent qualified trustee and who is designated pursuant to the terms of the trust to act as successor trustee;

2. By a person eligible to be an independent qualified trustee and who is designated by unanimous agreement of the qualified beneficiaries; or

3. By a person eligible to be an independent qualified trustee and who is appointed by the court pursuant to §§ 64.2-1405 and 64.2-1406 or pursuant to § 64.2-712.

D. A trust instrument shall not be deemed revocable on account of the inclusion of any one or more of the following rights, powers, and interests:

1. A power of appointment, exercisable by the settlor by will or other written instrument effective only upon the settlor's death, other than a power to appoint to the settlor's estate or the creditors of the settlor's estate;

2. The settlor's qualified interest in the trust;

3. The settlor's right to receive income or principal pursuant to an ascertainable standard;

4. The settlor's potential or actual receipt of income or principal from a charitable remainder unitrust or charitable remainder annuity trust (each within the meaning of § 664(d) of the Internal Revenue Code) and the settlor's right, at any time, and from time to time, to release, in writing delivered to the qualified trustee, all or any part of the settlor's retained interest in such trust;

5. The settlor's receipt each year of a percentage, not to exceed five percent, specified in the trust instrument of the initial value of the trust assets or their value determined from time to time pursuant to the trust instrument;

6. The settlor's right to remove a trustee and to appoint a new trustee;

7. The settlor's potential or actual use of real property held under a personal residence trust (within the meaning of § 2702(c) of the Internal Revenue Code);

8. The settlor's potential or actual receipt or use of a qualified annuity interest (within the meaning of § 2702 of the Internal Revenue Code);

9. The ability of a qualified trustee, whether pursuant to discretion or direction, to pay, after the settlor's death, all or any part of the settlor's debts outstanding at the time of the settlor's death, the expenses of administering the settlor's estate, or any estate inheritance tax imposed on or with respect to the settlor's estate; and

10. A settlor's potential or actual receipt of income or principal to pay, in whole or in part, income taxes due on trust income, or the direct payment of such taxes to the applicable tax authorities, pursuant to a provision in the trust instrument that expressly provides for the direct payment of such taxes or the reimbursement of the settlor for such tax payments.

E. A beneficiary who has the right to withdraw his entire beneficial interest in a trust shall be treated as its settlor to the extent of such withdrawal right, when such right to withdraw has lapsed, been released, or otherwise expired, without regard to the limitations otherwise imposed by subsection B of § 64.2-747.

2012, c. 555, § 55-545.03:3; 2012, c. 614.

§ 64.2-746. Discretionary trusts; effect of standard.

A. In this section, "child" includes any person for whom an order or judgment for child support has been entered in this or another state.

B. Except as otherwise provided in subsection C and § 64.2-745, whether or not a trust contains a spendthrift provision, a creditor of a beneficiary may not compel a distribution that is subject to the trustee's discretion, even if:

1. The discretion is expressed in the form of a standard of distribution; or

2. The trustee has abused the discretion.

C. To the extent a trustee has not complied with a standard of distribution or has abused a discretion:

1. A distribution may be ordered by the court to satisfy a judgment or court order against the beneficiary for support or maintenance of the beneficiary's child; and

2. The court shall direct the trustee to pay to the child such amount as is equitable under the circumstances but not more than the amount the trustee would have been required to distribute to or for the benefit of the beneficiary had the trustee complied with the standard or not abused the discretion.

D. This section does not limit the right of a beneficiary to maintain a judicial proceeding against a trustee for an abuse of discretion or failure to comply with a standard for distribution.

E. A creditor may not reach the interest of a beneficiary who is also a trustee or cotrustee, or otherwise compel a distribution, if the trustee's discretion to make distributions for the trustee's own benefit is limited by an ascertainable standard.

2005, c. 935, § 55-545.04; 2012, c. 614.

§ 64.2-747. Creditor's claim against settlor.

A. Whether or not the terms of a trust contain a spendthrift provision, the following rules apply:

1. During the lifetime of the settlor, the property of a revocable trust is subject to claims of the settlor's creditors.

2. With respect to an irrevocable trust, except to the extent otherwise provided in §§ 64.2-745.1 and 64.2-745.2, a creditor or assignee of the settlor may reach the maximum amount that can be distributed to or for the settlor's benefit. If a trust has more than one settlor, the amount the creditor or assignee of a particular settlor may reach may not exceed the settlor's interest in the portion of the trust attributable to that settlor's contribution. A trustee's discretionary authority to pay directly or to reimburse the settlor for any tax on trust income or principal that is payable by the settlor shall not be considered to be an amount that can be distributed to or for the settlor's benefit, and a creditor or assignee of the settlor shall not be entitled to reach any amount solely by reason of this discretionary authority.

3. After the death of a settlor, and subject to the settlor's right to direct the source from which liabilities will be paid, the property of a trust that was revocable at the settlor's death is subject to claims of the settlor's creditors, costs of administration of the settlor's estate, the expenses of the settlor's funeral and disposal of remains, and statutory allowances to a surviving spouse and children including the family allowance, the right to exempt property, and the homestead allowance to the extent the settlor's probate estate is inadequate to satisfy those claims, costs, expenses, and allowances. This section shall not apply to life insurance proceeds under § 38.2-3122. No proceeding to subject a trustee, trust assets, or distributees of such assets to such claims, costs, and expenses shall be commenced unless the personal representative of the settlor has received a written demand by a surviving spouse, a creditor, or one acting for a minor or dependent child of the settlor, and no proceeding shall be commenced later than two years following the death of the settlor. This section shall not affect the right of a trustee to make distributions required or permitted by the terms of the trust prior to being served with process in a proceeding brought by the personal representative.

B. For purposes of this section:

1. During the period the power may be exercised, the holder of a power of withdrawal is treated in the same manner as the settlor of a revocable trust to the extent of the property subject to the power; and

2. Upon the lapse, release, or waiver of the power, the holder is treated as the settlor of the trust only to the extent the value of the property affected by the lapse, release, or waiver exceeds the greatest of (i) the amount specified in § 2041(b)(2) or 2514(e) of the Internal Revenue Code of 1986, (ii) the amount specified in § 2503(b) of the Internal Revenue Code of 1986, or (iii) two times the amount specified in § 2503(b) of the Internal Revenue Code of 1986 if the donor was married at the time of the transfer to which the power of withdrawal applies.

3. The assets in a trust that are attributable to a contribution to an inter vivos marital deduction trust described in either § 2523(e) or (f) of the Internal Revenue Code of 1986, after the death of the spouse of the settlor of the inter vivos marital deduction trust shall be deemed to have been contributed by the settlor's spouse and not by the settlor.

2005, c. 935, § 55-545.05; 2011, c. 354; 2012, cc. 555, 614, 718; 2013, c. 784.

§ 64.2-748. Overdue distribution.

A. In this section "mandatory distribution" means a distribution of income or principal that the trustee is required to make to a beneficiary under the terms of the trust, including a distribution upon termination of the trust. The term does not include a distribution subject to the exercise of the trustee's discretion even if (i) the discretion is expressed in the form of a standard of distribution or (ii) the terms of the trust authorizing a distribution use language of discretion with language of direction.

B. Whether or not a trust contains a spendthrift provision, a creditor or assignee of a beneficiary may reach a mandatory distribution of income or principal, including a distribution upon termination of the trust, if the trustee has not made the distribution to the beneficiary within a reasonable time after the designated distribution date.

2005, c. 935, § 55-545.06; 2007, c. 216; 2012, c. 614.

§ 64.2-749. Personal obligations of trustee.

Trust property is not subject to personal obligations of the trustee, even if the trustee becomes insolvent or bankrupt.

2005, c. 935, § 55-545.07; 2012, c. 614.

Article 6. Revocable Trusts.

§ 64.2-750. Capacity of settlor of revocable trust.

The capacity required to create, amend, revoke, or add property to a revocable trust, or to direct the actions of the trustee of a revocable trust, is the same as that required to make a will.

2005, c. 935, § 55-546.01; 2012, c. 614.

§ 64.2-751. Revocation or amendment of revocable trust.

A. Unless the terms of a trust expressly provide that the trust is irrevocable, the settlor may revoke or amend the trust. This subsection does not apply to a trust created under an instrument executed before July 1, 2006.

B. If a revocable trust is created or funded by more than one settlor:

1. To the extent the trust consists of community property, the trust may be revoked by either spouse acting alone but may be amended only by joint action of both spouses;

2. To the extent the trust consists of property other than community property, each settlor may revoke or amend the trust with regard to the portion of the trust property attributable to that settlor's contribution; and

3. Upon the revocation or amendment of the trust by fewer than all of the settlors, the trustee shall promptly notify the other settlors of the revocation or amendment.

C. The settlor may revoke or amend a revocable trust:

1. By substantial compliance with a method provided in the terms of the trust; or

2. If the terms of the trust do not provide a method, by any method manifesting clear and convincing evidence of the settlor's intent.

D. Upon revocation of a revocable trust, the trustee shall deliver the trust property as the settlor directs.

E. A settlor's powers with respect to revocation, amendment, or distribution of trust property may be exercised by an agent, acting in accordance with § 64.2-1612, under a power of attorney that expressly authorizes such action except to the extent expressly prohibited by the terms of the trust.

F. A conservator of the settlor or, if no conservator has been appointed, a guardian of the settlor may exercise a settlor's powers with respect to revocation, amendment, or distribution of trust property only (i) to the extent expressly authorized by the terms of the trust or (ii) if authorized by the court supervising the conservatorship or guardianship for good cause shown.

G. A trustee who does not know that a trust has been revoked or amended is not liable to the settlor or settlor's successors in interest for distributions made and other actions taken on the assumption that the trust had not been amended or revoked.

2005, c. 935, § 55-546.02; 2010, cc. 455, 632; 2012, c. 614.

§ 64.2-752. Settlor's powers; powers of withdrawal.

A. While a trust is revocable, rights of the beneficiaries are subject to the control of, and the duties of the trustee are owed exclusively to, the settlor.

B. While a trust is revocable, the trustee may follow a direction of the settlor that is contrary to the terms of the trust.

C. During the period the power may be exercised, the holder of a power of withdrawal has the rights of a settlor of a revocable trust under this section to the extent of the property subject to the power.

2005, c. 935, § 55-546.03; 2012, c. 614; 2020, c. 768.

§ 64.2-753. Limitation on action contesting validity of revocable trust; distribution of trust property.

A. A person may commence a judicial proceeding to contest the validity of a trust that was revocable at the settlor's death within the earlier of:

1. Two years after the settlor's death; or

2. Six months after the trustee sent the person a copy of the trust instrument and a notice informing the person of the trust's existence, of the trustee's name and address, and of the time allowed for commencing a proceeding.

B. Upon the death of the settlor of a trust that was revocable at the settlor's death, the trustee may proceed to distribute the trust property in accordance with the terms of the trust. The trustee is not subject to liability for doing so unless:

1. The trustee knows of a pending judicial proceeding contesting the validity of the trust; or

2. A potential contestant has notified the trustee of a possible judicial proceeding to contest the trust and a judicial proceeding is commenced within 60 days after the contestant sent the notification.

C. A beneficiary of a trust that is determined to have been invalid is liable to return any distribution received.

2005, c. 935, § 55-546.04; 2007, c. 218; 2012, c. 614.

Article 7. Office of Trustee.

§ 64.2-754. Accepting or declining trusteeship.

A. Except as otherwise provided in subsection C, a person designated as trustee accepts the trusteeship:

1. By substantially complying with a method of acceptance provided in the terms of the trust; or

2. If the terms of the trust do not provide a method or the method provided in the terms is not expressly made exclusive, by accepting delivery of the trust property, exercising powers or performing duties as trustee, or otherwise indicating acceptance of the trusteeship.

B. A person designated as trustee who has not yet accepted the trusteeship may reject the trusteeship. A designated trustee who does not accept the trusteeship within a reasonable time after knowing of the designation is deemed to have rejected the trusteeship.

C. A person designated as trustee, without accepting the trusteeship, may:

1. Act to preserve the trust property if, within a reasonable time after acting, the person sends a rejection of the trusteeship to the settlor or, if the settlor is dead or lacks capacity, to a qualified beneficiary; and

2. Inspect or investigate trust property to determine potential liability under environmental or other law or for any other purpose.

2005, c. 935, § 55-547.01; 2012, c. 614.

§ 64.2-755. Trustee's bond.

A. Except as otherwise provided in Part A (§ 64.2-1200 et seq.) of Subtitle IV, a trustee shall give bond, or bond with surety or other security, to secure performance of the trustee's duties only if the court finds that a bond is needed to protect the interests of the beneficiaries or is required by the terms of the trust and the court has not dispensed with the requirement.

B. The court may specify the amount of a bond, its liabilities, and whether sureties are necessary. The court may modify or terminate a bond at any time.

C. A regulated financial service institution qualified to do trust business in the Commonwealth need not give bond, even if required by the terms of the trust.

2005, c. 935, § 55-547.02; 2012, c. 614.

§ 64.2-756. Cotrustees.

A. Cotrustees who are unable to reach a unanimous decision may act by majority decision.

B. If a vacancy occurs in a cotrusteeship, the remaining cotrustees may act for the trust.

C. Subject to subsection I, a cotrustee shall participate in the performance of a trustee's function unless the cotrustee is unavailable to perform the function because of absence, illness, disqualification under other law, or other temporary incapacity, or the cotrustee has properly delegated the performance of the function to another trustee.

D. If a cotrustee is unavailable to perform duties because of absence, illness, disqualification under other law, or other temporary incapacity, and prompt action is necessary to achieve the purposes of the trust or to avoid injury to the trust property, the remaining cotrustee or a majority of the remaining cotrustees may act for the trust.

E. A trustee may delegate to a cotrustee the performance of any function other than a function that the terms of the trust expressly require to be performed by the trustees jointly. Unless a delegation was irrevocable, a trustee may revoke a delegation previously made.

F. Except as otherwise provided in subsection G, a trustee who does not join in an action of another trustee is not liable for the action.

G. Subject to subsection I, each trustee shall exercise reasonable care to:

1. Prevent a cotrustee from committing a serious breach of trust; and

2. Compel a cotrustee to redress a serious breach of trust.

H. A dissenting trustee who joins in an action at the direction of the majority of the trustees and who notified any cotrustee of the dissent at or before the time of the action is not liable for the action unless the action is a serious breach of trust.

I. The terms of a trust may relieve a cotrustee from duty and liability with respect to another cotrustee's exercise or nonexercise of a power of the other cotrustee to the same extent that in a directed trust a directed trustee is relieved from duty and liability with respect to a trust director's power of direction under §§ 64.2-779.32, 64.2-779.33, and 64.2-779.34.

2005, c. 935, § 55-547.03; 2012, c. 614; 2020, c. 768.

§ 64.2-757. Vacancy in trusteeship; appointment of successor.

A. A vacancy in a trusteeship occurs if:

1. A person designated as trustee rejects the trusteeship;

2. A person designated as trustee cannot be identified or does not exist;

3. A trustee resigns;

4. A trustee is disqualified or removed;

5. A trustee dies; or

6. An individual serving as trustee is adjudicated an incapacitated person.

B. If one or more cotrustees remain in office, a vacancy in a trusteeship need not be filled. A vacancy in a trusteeship shall be filled if the trust has no remaining trustee.

C. A vacancy in a trusteeship of a noncharitable trust that is required to be filled shall be filled in the following order of priority:

1. By a person designated pursuant to the terms of the trust to act as successor trustee;

2. By a person appointed by unanimous agreement of the qualified beneficiaries; or

3. By a person appointed by the court pursuant to §§ 64.2-1405 and 64.2-1406, or pursuant to § 64.2-712.

D. A vacancy in a trusteeship of a charitable trust that is required to be filled shall be filled in the following order of priority:

1. By a person designated pursuant to the terms of the trust to act as successor trustee;

2. By a person selected by the charitable organizations expressly designated to receive distributions under the terms of the trust, subject, however, to the concurrence of the Attorney General in any case in which he has previously requested of an organization so designated that he be consulted regarding the selection of successor; or

3. By a person appointed by the court pursuant to §§ 64.2-1405 and 64.2-1406, or pursuant to § 64.2-712.

E. Whether or not a vacancy in a trusteeship exists or is required to be filled, the court may appoint an additional trustee or special fiduciary whenever the court considers the appointment necessary for the administration of the trust.

F. A successor or surviving trustee shall succeed to all the rights, powers, and privileges, and shall be subject to all the duties, liabilities, and responsibilities imposed upon the original trustee without regard to the nature of discretionary powers conferred by the instrument, unless the trust instrument expressly provides to the contrary, or unless an order appointing the successor trustee provides otherwise.

2005, c. 935, § 55-547.04; 2012, c. 614.

§ 64.2-758. Resignation of trustee.

A. A trustee may resign:

1. Upon at least 30 days' notice to the settlor, if living, to all cotrustees, and to the qualified beneficiaries except those qualified beneficiaries under a revocable trust that the settlor has the capacity to revoke; or

2. With the approval of the court.

B. In approving a resignation, the court may issue orders and impose conditions reasonably necessary for the protection of the trust property.

C. Any liability of a resigning trustee or of any sureties on the trustee's bond for acts or omissions of the trustee is not discharged or affected by the trustee's resignation.

2005, c. 935, § 55-547.05; 2012, c. 614.

§ 64.2-759. Removal of trustee.

A. The settlor, a cotrustee, or a beneficiary, or, in the case of a charitable trust, the Attorney General may petition the court to remove a trustee, or a trustee may be removed by the court on its own initiative.

B. The court may remove a trustee if:

1. The trustee has committed a serious breach of trust;

2. Lack of cooperation among cotrustees substantially impairs the administration of the trust;

3. Because of unfitness, unwillingness, or persistent failure of the trustee to administer the trust effectively, the court determines that removal of the trustee best serves the interests of the beneficiaries; or

4. There has been a substantial change of circumstances or removal is requested by all of the qualified beneficiaries, the court finds that removal of the trustee best serves the interests of all of the beneficiaries and is not inconsistent with a material purpose of the trust, and a suitable cotrustee or successor trustee is available.

C. Pending a final decision on a request to remove a trustee, or in lieu of or in addition to removing a trustee, the court may order such appropriate relief under subsection B of § 64.2-792 as may be necessary to protect the trust property or the interests of the beneficiaries.

2005, c. 935, § 55-547.06; 2012, c. 614.

§ 64.2-760. Delivery of property by former trustee.

A. Unless a cotrustee remains in office or the court otherwise orders, and until the trust property is delivered to a successor trustee or other person entitled to it, a trustee who has resigned or been removed has the duties of a trustee and the powers necessary to protect the trust property.

B. A trustee who has resigned or been removed shall proceed expeditiously to deliver the trust property within the trustee's possession to the cotrustee, successor trustee, or other person entitled to it.

C. Title to all trust property shall be owned and vested in any successor trustee, upon acceptance of the trusteeship, without any conveyance, transfer, or assignment by the prior trustee.

2005, c. 935, § 55-547.07; 2012, c. 614.

§ 64.2-761. Compensation of trustee.

A. If the terms of a trust do not specify the trustee's compensation, a trustee is entitled to compensation that is reasonable under the circumstances.

B. If the terms of a trust specify the trustee's compensation, the trustee is entitled to be compensated as specified, but the court may allow more or less compensation if:

1. The duties of the trustee are substantially different from those contemplated when the trust was created; or

2. The compensation specified by the terms of the trust would be unreasonably low or high.

2005, c. 935, § 55-547.08; 2012, c. 614.

§ 64.2-762. Reimbursement of expenses.

A. A trustee is entitled to be reimbursed out of the trust property, with interest as appropriate, for:

1. Expenses that were properly incurred in the administration of the trust; and

2. To the extent necessary to prevent unjust enrichment of the trust, expenses that were not properly incurred in the administration of the trust.

B. An advance by the trustee of money for the protection of the trust gives rise to a lien against trust property to secure reimbursement with reasonable interest.

2005, c. 935, § 55-547.09; 2012, c. 614.

Article 8. Duties and Powers of Trustee.

§ 64.2-763. Duty to administer trust and invest.

Upon acceptance of a trusteeship, the trustee shall administer the trust and invest trust assets in good faith, in accordance with its terms and purposes and the interests of the beneficiaries, and in accordance with this chapter. In administering, managing and investing trust assets, the trustee shall comply with the provisions of the Uniform Prudent Investor Act (§ 64.2-780 et seq.) and the Uniform Principal and Income Act (§ 64.2-1000 et seq.).

2005, c. 935, § 55-548.01; 2012, c. 614.

§ 64.2-764. Duty of loyalty.

A. A trustee shall administer the trust solely in the interests of the beneficiaries.

B. Subject to the rights of persons dealing with or assisting the trustee as provided in § 64.2-803, a sale, encumbrance, or other transaction involving the investment or management of trust property entered into by the trustee for the trustee's own personal account or that is otherwise affected by a conflict between the trustee's fiduciary and personal interests is voidable by a beneficiary affected by the transaction unless:

1. The transaction was authorized by the terms of the trust;

2. The transaction was approved by the court;

3. The beneficiary did not commence a judicial proceeding within the time allowed by § 64.2-796;

4. The beneficiary consented to the trustee's conduct, ratified the transaction, or released the trustee in compliance with § 64.2-800; or

5. The transaction involves a contract entered into or claim acquired by the trustee before the person became or contemplated becoming trustee.

C. A sale, encumbrance, or other transaction involving the investment or management of trust property is presumed to be affected by a conflict between personal and fiduciary interests if it is entered into by the trustee with:

1. The trustee's spouse;

2. The trustee's descendants, siblings, parents, or their spouses;

3. An agent or attorney of the trustee; or

4. A corporation or other person or enterprise in which the trustee, or a person that owns a significant interest in the trustee, has an interest that might affect the trustee's best judgment.

D. A transaction between a trustee and a beneficiary that does not concern trust property but that occurs during the existence of the trust or while the trustee retains significant influence over the beneficiary and from which the trustee obtains an advantage beyond the normal commercial advantage from such transaction is voidable by the beneficiary unless the trustee establishes that the transaction was fair to the beneficiary.

E. A transaction not concerning trust property in which the trustee engages in the trustee's individual capacity involves a conflict between personal and fiduciary interests if the transaction concerns an opportunity properly belonging to the trust.

F. An investment by a trustee in securities of an investment company, investment trust, mutual fund, or other investment or financial product to which the trustee, or an affiliate of the trustee, sponsors, sells, or provides services in a capacity other than as trustee is not presumed to be affected by a conflict between personal and fiduciary interests if the investment otherwise complies with the Uniform Prudent Investor Act (§ 64.2-780 et seq.) and § 64.2-1506. The trustee may be compensated by the investment company, investment trust, mutual fund, or other investment or financial product, or by the affiliated entity sponsoring, selling, or providing such service, and such compensation may be in addition to the compensation the trustee is receiving as a trustee if the trustee notifies the persons entitled to receive a copy of the trustee's annual report under § 64.2-775 of the rate and method by which that compensation was determined and of any subsequent changes to such rate or method of compensation.

G. In voting shares of stock or in exercising powers of control over similar interests in other forms of enterprise, the trustee shall act in the best interests of the beneficiaries. If the trust is the sole owner of a corporation or other form of enterprise, the trustee shall elect or appoint directors or other managers who will manage the corporation or enterprise in the best interests of the beneficiaries.

H. This section does not preclude the following transactions, if fair to the beneficiaries:

1. An agreement between a trustee and a beneficiary relating to the appointment or compensation of the trustee;

2. Payment of reasonable compensation to the trustee;

3. A transaction between a trust and another trust, decedent's estate, or conservatorship of which the trustee is a fiduciary or in which a beneficiary has an interest;

4. A deposit of trust money in a regulated financial service institution operated by the trustee; or

5. An advance by the trustee of money for the protection of the trust.

I. The court may appoint a special fiduciary to make a decision with respect to any proposed transaction that might violate this section if entered into by the trustee.

2005, c. 935, § 55-548.02; 2012, c. 614.

§ 64.2-765. Impartiality.

If a trust has two or more beneficiaries, the trustee shall act impartially in investing, managing, and distributing the trust property, giving due regard to the beneficiaries' respective interests.

2005, c. 935, § 55-548.03; 2012, c. 614.

§ 64.2-766. Prudent administration.

A trustee shall administer the trust as a prudent person would, by considering the purposes, terms, distributional requirements, and other circumstances of the trust. In satisfying this standard, the trustee shall exercise reasonable care, skill, and caution.

2005, c. 935, § 55-548.04; 2012, c. 614.

§ 64.2-767. Costs of administration.

In administering a trust, the trustee may incur only costs that are reasonable in relation to the trust property, the purposes of the trust, and the skills of the trustee.

2005, c. 935, § 55-548.05; 2012, c. 614.

§ 64.2-768. Trustee's skills.

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, shall use those special skills or expertise.

2005, c. 935, § 55-548.06; 2012, c. 614.

§ 64.2-769. Delegation by trustee.

A. A trustee may delegate duties and powers 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 terms of the delegation.

B. In performing a delegated function, an agent owes a duty to the trust to exercise reasonable care to comply with the terms of the delegation.

C. A trustee who complies with subsection A is not liable to the beneficiaries or to the trust for an action of the agent to whom the function was delegated.

D. By accepting a delegation of powers or duties from the trustee of a trust that is subject to the law of the Commonwealth, an agent submits to the jurisdiction of the courts of the Commonwealth.

2005, c. 935, § 55-548.07; 2012, c. 614.

§ 64.2-770. Repealed.

Repealed by Acts 2020, c. 768, cl. 2.

§ 64.2-771. Control and protection of trust property.

A trustee shall take reasonable steps to take control of and protect the trust property.

2005, c. 935, § 55-548.09; 2012, c. 614.

§ 64.2-772. Recordkeeping and identification of trust property.

A. A trustee shall keep adequate records of the administration of the trust.

B. A trustee shall keep trust property separate from the trustee's own property.

C. Except as otherwise provided in subsection D, a trustee shall cause the trust property to be designated so that the interest of the trust, to the extent feasible, appears in records maintained by a party other than a trustee or beneficiary.

D. If the trustee maintains records clearly indicating the respective interests, a trustee may invest as a whole the property of two or more separate trusts.

E. A deed or other instrument purporting to convey or transfer real or personal property to a trust instead of to the trustee or trustees of the trust shall be deemed to convey or transfer such property to the trustee or trustees as fully as if made directly to the trustee or trustees.

2005, c. 935, § 55-548.10; 2007, c. 197; 2012, c. 614.

§ 64.2-773. Enforcement and defense of claims.

A trustee shall take reasonable steps to enforce claims of the trust and to defend claims against the trust.

2005, c. 935, § 55-548.11; 2012, c. 614.

§ 64.2-774. Collecting trust property.

A trustee shall take reasonable steps to compel a former trustee or other person to deliver trust property to the trustee, and to redress a breach of trust or duty known to the trustee to have been committed by a former trustee or other fiduciary.

2005, c. 935, § 55-548.12; 2012, c. 614.

§ 64.2-775. Duty to inform and report.

A. A trustee shall keep the qualified beneficiaries of the trust reasonably informed about the administration of the trust and of the material facts necessary for them to protect their interests. Unless unreasonable under the circumstances, a trustee shall promptly respond to a beneficiary's request for information related to the administration of the trust. A trustee who fails to furnish information to a beneficiary or respond to a request for information regarding the administration of the trust in a good faith belief that to do so would be unreasonable under the circumstances or contrary to the purposes of the settlor shall not be subject to removal or other sanctions therefor.

B. A trustee:

1. Upon request of a beneficiary, shall promptly furnish to the beneficiary a copy of the trust instrument;

2. Within 60 days after accepting a trusteeship, shall notify the qualified beneficiaries of the acceptance and of the trustee's name, address, and telephone number;

3. Within 60 days after the date the trustee acquires knowledge of the creation of an irrevocable trust, or the date the trustee acquires knowledge that a formerly revocable trust has become irrevocable, whether by the death of the settlor or otherwise, shall notify the qualified beneficiaries of the trust's existence, of the identity of the settlor or settlors, of the right to request a copy of the trust instrument, and of the right to a trustee's report as provided in subsection C; and

4. Shall notify the qualified beneficiaries in advance of any change in the method or rate of the trustee's compensation.

C. A trustee shall send to the distributees or permissible distributees of trust income or principal, and to other qualified or nonqualified beneficiaries who request it, at least annually and at the termination of the trust, a report of the trust property, liabilities, receipts, and disbursements, including the source and amount of the trustee's compensation, a listing of the trust assets and, if feasible, their respective market values. Upon a vacancy in a trusteeship, unless a cotrustee remains in office, a report shall be sent to the qualified beneficiaries by the former trustee. A personal representative, conservator, or guardian may send the qualified beneficiaries a report on behalf of a deceased or incapacitated trustee.

D. A beneficiary may waive the right to a trustee's report or other information otherwise required to be furnished under this section. A beneficiary, with respect to future reports and other information, may withdraw a waiver previously given.

E. Subdivisions B 2 and B 3 and subsection C apply only to an irrevocable trust created on or after the effective date of this chapter, and to a revocable trust that becomes irrevocable on or after the effective date of this chapter.

2005, c. 935, § 55-548.13; 2007, c. 254; 2012, c. 614.

§ 64.2-776. Discretionary powers; tax savings.

A. Notwithstanding the breadth of discretion granted to a trustee in the terms of the trust, including the use of such terms as "absolute," "sole," or "uncontrolled," the trustee shall exercise a discretionary power in good faith and in accordance with the terms and purposes of the trust and the interests of the beneficiaries.

B. Subject to subsection D, and unless the terms of the trust expressly indicate that a rule in this subsection does not apply:

1. A person other than a settlor who is a beneficiary and trustee of a trust that confers on the trustee a power to make discretionary distributions to or for the trustee's personal benefit may exercise the power only in accordance with an ascertainable standard; and

2. A trustee may not exercise a power to make discretionary distributions to satisfy a legal obligation of support that the trustee personally owes another person.

For purposes of this subsection, "trustee" includes a person who is deemed to have any power of a trustee, whether because such person has the right to remove or replace any trustee or because a reciprocal trust or power doctrine applies.

C. A power whose exercise is limited or prohibited by subsection B may be exercised by a majority of the remaining trustees whose exercise of the power is not so limited or prohibited. If the power of all trustees is so limited or prohibited, the court may appoint a special fiduciary with authority to exercise the power.

D. Subsection B does not apply to:

1. A power held by the settlor's spouse who is the trustee of a trust for which a marital deduction, as defined in § 2056(b)(5) or 2523(e) of the Internal Revenue Code of 1986, as in effect on the effective date of this chapter, or as later amended, was previously allowed;

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

3. A trust if contributions to the trust qualify for the annual exclusion under § 2503(c) of the Internal Revenue Code of 1986, as in effect on the effective date of this chapter, or as later amended.

2005, c. 935, § 55-548.14; 2012, c. 614; 2013, c. 324.

§ 64.2-777. General powers of trustee.

A. A trustee, without authorization by the court, may exercise:

1. Powers conferred by the terms of the trust; and

2. Except as limited by the terms of the trust:

a. All powers over the trust property that an unmarried competent owner has over individually owned property;

b. Any other powers appropriate to achieve the proper investment, management, and distribution of the trust property; and

c. Any other powers conferred by this chapter.

B. The exercise of a power is subject to the fiduciary duties prescribed by this article.

C. Any reference in a trust instrument incorporating the powers authorized under § 64.2-105 shall not be construed to limit powers a trustee may exercise pursuant to this section, unless the settlor expressly states in the trust instrument that such reference should be so construed.

2005, c. 935, § 55-548.15; 2012, c. 614.

§ 64.2-778. Specific powers of trustee.

A. Without limiting the authority conferred by § 64.2-777, a trustee may:

1. Collect trust property and accept or reject additions to the trust property from a settlor or any other person;

2. Acquire or sell property, for cash or on credit, at public or private sale;

3. Exchange, partition, or otherwise change the character of trust property;

4. Deposit trust money in an account in a regulated financial service institution;

5. Borrow money, with or without security, and mortgage or pledge trust property for a period within or extending beyond the duration of the trust;

6. With respect to an interest in a proprietorship, partnership, limited liability company, business trust, corporation, or other form of business or enterprise, continue the business or other enterprise and take any action that may be taken by shareholders, members, or property owners, including merging, dissolving, or otherwise changing the form of business organization or contributing additional capital;

7. With respect to stocks or other securities, exercise the rights of an absolute owner, including the right to:

a. Vote, or give proxies to vote, with or without power of substitution, or enter into or continue a voting trust agreement;

b. Hold a security in the name of a nominee or in other form without disclosure of the trust so that title may pass by delivery;

c. Pay calls, assessments, and other sums chargeable or accruing against the securities, and sell or exercise stock subscription or conversion rights; and

d. Deposit the securities with a depository or other regulated financial service institution;

8. With respect to an interest in real property, construct, or make ordinary or extraordinary repairs to, alterations to, or improvements in, buildings or other structures, demolish improvements, raze existing or erect new party walls or buildings, subdivide or develop land, dedicate land to public use or grant public or private easements, and make or vacate plats and adjust boundaries;

9. Enter into a lease for any purpose as lessor or lessee, including a lease or other arrangement for exploration and removal of natural resources, with or without the option to purchase or renew, for a period within or extending beyond the duration of the trust;

10. Grant an option involving a sale, lease, or other disposition of trust property or acquire an option for the acquisition of property, including an option exercisable beyond the duration of the trust, and exercise an option so acquired;

11. Insure the property of the trust against damage or loss and insure the trustee, the trustee's agents, and beneficiaries against liability arising from the administration of the trust;

12. Abandon or decline to administer property of no value or of insufficient value to justify its collection or continued administration;

13. With respect to possible liability for violation of environmental law:

a. Inspect or investigate property the trustee holds or has been asked to hold, or property owned or operated by an organization in which the trustee holds or has been asked to hold an interest, for the purpose of determining the application of environmental law with respect to the property;

b. Take action to prevent, abate, or otherwise remedy any actual or potential violation of any environmental law affecting property held directly or indirectly by the trustee, whether taken before or after the assertion of a claim or the initiation of governmental enforcement;

c. Decline to accept property into trust or disclaim any power with respect to property that is or may be burdened with liability for violation of environmental law;

d. Compromise claims against the trust that may be asserted for an alleged violation of environmental law; and

e. Pay the expense of any inspection, review, abatement, or remedial action to comply with environmental law;

14. Pay or contest any claim, settle a claim by or against the trust, and release, in whole or in part, a claim belonging to the trust;

15. Pay taxes, assessments, compensation of the trustee and of employees and agents of the trust, and other expenses incurred in the administration of the trust;

16. Exercise elections with respect to federal, state, and local taxes;

17. Select a mode of payment under any employee benefit or retirement plan, annuity, or life insurance payable to the trustee, exercise rights thereunder, including exercise of the right to indemnification for expenses and against liabilities, and take appropriate action to collect the proceeds;

18. Make loans out of trust property, including loans to a beneficiary on terms and conditions the trustee considers to be fair and reasonable under the circumstances, and the trustee has a lien on future distributions for repayment of those loans;

19. Pledge trust property to guarantee loans made by others to the beneficiary;

20. Appoint a trustee to act in another jurisdiction with respect to trust property located in the other jurisdiction, confer upon the appointed trustee all of the powers and duties of the appointing trustee, require that the appointed trustee furnish security, and remove any trustee so appointed;

21. Pay an amount distributable to a beneficiary who is under a legal disability or who the trustee reasonably believes is incapacitated, by paying it directly to the beneficiary or applying it for the beneficiary's benefit, or by:

a. Paying it to the beneficiary's conservator or, if the beneficiary does not have a conservator, the beneficiary's guardian;

b. Paying it to the beneficiary's custodian under the Uniform Transfers to Minors Act (§ 64.2-1900 et seq.) or custodial trustee under the Uniform Custodial Trust Act (§ 64.2-900 et seq.), and, for that purpose, creating a custodianship or custodial trust;

c. If the trustee does not know of a conservator, guardian, custodian, or custodial trustee, paying it to an adult relative or other person having legal or physical care or custody of the beneficiary, to be expended on the beneficiary's behalf; or

d. Managing it as a separate fund on the beneficiary's behalf, subject to the beneficiary's continuing right to withdraw the distribution;

22. On distribution of trust property or the division or termination of a trust, make distributions in divided or undivided interests, allocate particular assets in proportionate or disproportionate shares, value the trust property for those purposes, and adjust for resulting differences in valuation;

23. Resolve a dispute concerning the interpretation of the trust or its administration by mediation, arbitration, or other procedure for alternative dispute resolution;

24. Prosecute or defend an action, claim, or judicial proceeding in any jurisdiction to protect trust property and the trustee in the performance of the trustee's duties;

25. Sign and deliver contracts and other instruments that are useful to achieve or facilitate the exercise of the trustee's powers; and

26. On termination of the trust, exercise the powers appropriate to wind up the administration of the trust and distribute the trust property to the persons entitled to it.

B. Any reference in a trust instrument incorporating the powers authorized under § 64.2-105 shall not be construed to limit powers a trustee may exercise pursuant to this section, unless the settlor expressly states in the trust instrument that such reference should be so construed.

2005, c. 935, § 55-548.16; 2012, c. 614.

§ 64.2-778.1. Repealed.

Repealed by Acts 2017, c. 592, cl. 2.

§ 64.2-779. Distribution upon termination.

A. Upon termination or partial termination of a trust, the trustee may send to the beneficiaries a proposal for distribution. The right of any beneficiary to object to the proposed distribution terminates if the beneficiary does not notify the trustee of an objection within 30 days after the proposal was sent but only if the proposal informed the beneficiary of the right to object and of the time allowed for objection.

B. Upon the occurrence of an event terminating or partially terminating a trust, the trustee shall proceed expeditiously to distribute the trust property to the persons entitled to it, subject to the right of the trustee to retain a reasonable reserve for the payment of debts, expenses, and taxes.

C. A release by a beneficiary of a trustee from liability for breach of trust is invalid to the extent:

1. It was induced by improper conduct of the trustee; or

2. The beneficiary, at the time of the release, did not know of the beneficiary's rights or of the material facts relating to the breach.

2005, c. 935, § 55-548.17; 2012, c. 614.

Article 8.1. Uniform Trust Decanting Act.

§ 64.2-779.1. Scope.

A. Except as otherwise provided in subsections B and C, this article applies to an express trust that is irrevocable or revocable by the settlor only with the consent of the trustee or a person holding an adverse interest.

B. This article does not apply to a trust held solely for charitable purposes.

C. Subject to § 64.2-779.12, a trust instrument may restrict or prohibit exercise of the decanting power.

D. This article does not limit the power of a trustee, powerholder, or other person to distribute or appoint property in further trust or to modify a trust under the trust instrument, a law of the Commonwealth other than this article, common law, a court order, or a nonjudicial settlement agreement.

E. This article does not affect the ability of a settlor to provide in a trust instrument for the distribution of the trust property or appointment in further trust of the trust property or for modification of the trust instrument.

2017, c. 592.

§ 64.2-779.2. Fiduciary duty.

A. In exercising the decanting power, an authorized fiduciary shall act in accordance with its fiduciary duties, including the duty to act in accordance with the purposes of the first trust.

B. This article does not create or imply a duty to exercise the decanting power or to inform beneficiaries about the applicability of this article.

C. Except as otherwise provided in a first-trust instrument, for purposes of this article and § 64.2-763 and subsection A of § 64.2-764, the terms of the first trust are deemed to include the decanting power.

2017, c. 592.

§ 64.2-779.3. Application; governing law.

This article applies to a trust created before, on, or after July 1, 2017, that:

1. Has its principal place of administration in the Commonwealth, including a trust whose principal place of administration has been changed to the Commonwealth; or

2. Provides by its trust instrument that it is governed by the law of the Commonwealth or is governed by the law of the Commonwealth for the purpose of:

a. Administration, including administration of a trust whose governing law for purposes of administration has been changed to the law of the Commonwealth;

b. Construction of terms of the trust; or

c. Determining the meaning or effect of terms of the trust.

2017, c. 592.

§ 64.2-779.4. Reasonable reliance.

A trustee or other person that reasonably relies on the validity of a distribution of part or all of the property of a trust to another trust, or a modification of a trust, under this article, a law of the Commonwealth other than this article, or the law of another jurisdiction is not liable to any person for any action or failure to act as a result of the reliance.

2017, c. 592.

§ 64.2-779.5. Notice; exercise of decanting power.

A. In this section, a notice period begins on the day notice is given under subsection C and ends 59 days after the day notice is given.

B. Except as otherwise provided in this article, an authorized fiduciary may exercise the decanting power without the consent of any person and without court approval.

C. Except as otherwise provided in subsection F, an authorized fiduciary shall give notice in a record of the intended exercise of the decanting power not later than 60 days before the exercise to (i) each settlor of the first trust, if living or then in existence; (ii) each qualified beneficiary of the first trust; (iii) each holder of a presently exercisable power of appointment over any part or all of the first trust; (iv) each person that currently has the right to remove or replace the authorized fiduciary; (v) each other fiduciary of the first trust; (vi) each fiduciary of the second trust; (vii) each person acting as an advisor or protector of the first trust; (viii) each person holding an adverse interest who has the power to consent to the revocation of the first trust; and (ix) the Attorney General, if subsection B of § 64.2-779.11 applies.

D. An authorized fiduciary is not required to give notice under subsection C to a person that is not known to the fiduciary or is known to the fiduciary but cannot be located by the fiduciary after reasonable diligence.

E. A notice under subsection C shall (i) specify the manner in which the authorized fiduciary intends to exercise the decanting power, (ii) specify the proposed effective date for exercise of the power, (iii) include a copy of the first-trust instrument, and (iv) include a copy of all second-trust instruments.

F. The decanting power may be exercised before expiration of the notice period under subsection A if all persons entitled to receive notice waive the period in a signed record.

G. The receipt of notice, waiver of the notice period, or expiration of the notice period does not affect the right of a person to file an application under § 64.2-779.6 asserting that (i) an attempted exercise of the decanting power is ineffective because it did not comply with this article or was an abuse of discretion or breach of fiduciary duty or (ii) § 64.2-779.19 applies to the exercise of the decanting power.

H. An exercise of the decanting power is not ineffective because of the failure to give notice to one or more persons under subsection C if the authorized fiduciary acted with reasonable care to comply with subsection C.

I. The decanting power under this article may be exercised by a majority of the authorized fiduciaries. If no trustee is an authorized fiduciary or upon request of any of the trustees, the court may appoint a special fiduciary pursuant to § 64.2-779.6 with authority to exercise the decanting power under this article.

2017, c. 592; 2018, c. 476.

§ 64.2-779.6. Court involvement.

A. On application of an authorized fiduciary, a person entitled to notice under subsection C of § 64.2-779.5, a beneficiary, or with respect to a charitable interest the Attorney General or other person that has standing to enforce the charitable interest, the court may (i) provide instructions to the authorized fiduciary regarding whether a proposed exercise of the decanting power is permitted under this article and consistent with the fiduciary duties of the authorized fiduciary; (ii) appoint a special fiduciary and authorize the special fiduciary to determine whether the decanting power should be exercised under this article and to exercise the decanting power; (iii) approve an exercise of the decanting power; (iv) determine that a proposed or attempted exercise of the decanting power is ineffective because (a) after applying § 64.2-779.19, the proposed or attempted exercise does not or did not comply with this article or (b) the proposed or attempted exercise would be or was an abuse of the fiduciary's discretion or a breach of fiduciary duty; (v) determine the extent to which § 64.2-779.19 applies to a prior exercise of the decanting power; (vi) provide instructions to the trustee regarding the application of § 64.2-779.19 to a prior exercise of the decanting power; or (vii) order other relief to carry out the purposes of this article.

B. On application of an authorized fiduciary, the court may approve (i) an increase in the fiduciary's compensation under § 64.2-779.13 or (ii) a modification under § 64.2-779.15 of a provision granting a person the right to remove or replace the fiduciary.

2017, c. 592.

§ 64.2-779.7. Formalities.

An exercise of the decanting power shall be made in a record signed by an authorized fiduciary. The signed record shall, directly or by reference to the notice required by § 64.2-779.5, identify the first trust and the second trust or trusts and state the property of the first trust being distributed to or held subject to the terms of each second trust and the property, if any, that remains in the first trust.

2017, c. 592.

§ 64.2-779.8. Decanting power under expanded distributive discretion.

A. As used in this section:

"Noncontingent right" means a right that is not subject to the exercise of discretion or the occurrence of a specified event that is not certain to occur. "Noncontingent right" does not include a right held by a beneficiary if any person has discretion to distribute property subject to the right to any person other than the beneficiary or the beneficiary's estate.

"Presumptive remainder beneficiary" means a qualified beneficiary other than a current beneficiary.

"Successor beneficiary" means a beneficiary that is not a qualified beneficiary on the date the beneficiary's qualification is determined. "Successor beneficiary" does not include a person that is a beneficiary only because the person holds a nongeneral power of appointment.

"Vested interest" means:

1. A right to a mandatory distribution that is a noncontingent right as of the date of the exercise of the decanting power;

2. A current and noncontingent right, annually or more frequently, to a mandatory distribution of income, a specified dollar amount, or a percentage of value of some or all of the trust property;

3. A current and noncontingent right, annually or more frequently, to withdraw income, a specified dollar amount, or a percentage of value of some or all of the trust property;

4. A presently exercisable general power of appointment; or

5. A right to receive an ascertainable part of the trust property on the trust's termination that is not subject to the exercise of discretion or to the occurrence of a specified event that is not certain to occur.

B. Subject to subsection C and § 64.2-779.11, an authorized fiduciary that has expanded distributive discretion over the income or principal of a first trust for the benefit of one or more current beneficiaries may exercise the decanting power over the income or principal of the first trust.

C. Subject to § 64.2-779.10, in an exercise of the decanting power under this section, a second trust may not:

1. Include as a current beneficiary a person that is not a current beneficiary of the first trust, except as otherwise provided in subsection D;

2. Include as a presumptive remainder beneficiary or successor beneficiary a person that is not a current beneficiary, presumptive remainder beneficiary, or successor beneficiary of the first trust, except as otherwise provided in subsection D; or

3. Reduce or eliminate a vested interest.

D. Subject to subdivision C 3 and § 64.2-779.11, in an exercise of the decanting power under this section, a second trust may be a trust created or administered under the law of any jurisdiction and may:

1. Retain a power of appointment granted in the first trust;

2. Omit a power of appointment granted in the first trust, other than a presently exercisable general power of appointment;

3. Create or modify a power of appointment if the powerholder is a current beneficiary of the first trust and the authorized fiduciary has expanded distributive discretion to distribute principal to the beneficiary; and

4. Create or modify a power of appointment if the powerholder is a presumptive remainder beneficiary or successor beneficiary of the first trust, but the exercise of the power may take effect only after the powerholder becomes, or would have become if then living, a current beneficiary.

E. A power of appointment described in subdivisions D 1 through 4 may be general or nongeneral. The class of permissible appointees in favor of which the power may be exercised may be broader than or different from the beneficiaries of the first trust.

F. If an authorized fiduciary has expanded distributive discretion over part but not all of the income or principal of a first trust, the fiduciary may exercise the decanting power under this section over that part of the income or principal over which the authorized fiduciary has expanded distributive discretion.

2017, c. 592.

§ 64.2-779.9. Decanting power under limited distributive discretion.

A. As used in this section, "limited distributive discretion" means a discretionary power of distribution that is limited to an ascertainable standard or a reasonably definite standard.

B. An authorized fiduciary that has limited distributive discretion over the income or principal of the first trust for benefit of one or more current beneficiaries may exercise the decanting power over the income or principal of the first trust.

C. Under this section and subject to § 64.2-779.11, a second trust may be created or administered under the law of any jurisdiction. Under this section, the second trusts, in the aggregate, must grant each beneficiary of the first trust beneficial interests that are substantially similar to the beneficial interests of the beneficiary in the first trust. A second trust that defers or postpones a contingent right of a beneficiary to receive an outright distribution of assets upon the attainment of a certain age or upon the occurrence of a specific event (a "deferred distribution") shall be substantially similar to the first trust if the second trust provides that (i) during the lifetime of the beneficiary, no portion of the income or principal attributable to the deferred distribution may be distributed to, or for the benefit of, any person other than the beneficiary and (ii) the beneficiary shall have a testamentary general power of appointment exercisable in favor of the beneficiary's estate over the deferred distribution or the deferred distribution shall be payable to the beneficiary's estate if the second trust does not terminate during the beneficiary's lifetime.

D. A power to make a distribution under a second trust for the benefit of a beneficiary who is an individual is substantially similar to a power under the first trust to make a distribution directly to the beneficiary. A distribution is for the benefit of a beneficiary if:

1. The distribution is applied for the benefit of the beneficiary;

2. The beneficiary is under a legal disability or the trustee reasonably believes the beneficiary is incapacitated, and the distribution is made as permitted under this chapter; or

3. The distribution is made as permitted under the terms of the first-trust instrument and the second-trust instrument for the benefit of the beneficiary.

E. If an authorized fiduciary has limited distributive discretion over part but not all of the income or principal of a first trust, the fiduciary may exercise the decanting power under this section over that part of the income or principal over which the authorized fiduciary has limited distributive discretion.

2017, c. 592.

§ 64.2-779.10. Trust for beneficiary with disability.

A. As used in this section:

"Beneficiary with a disability" means a beneficiary of a first trust who the special-needs fiduciary believes may qualify for governmental benefits based on disability, whether or not the beneficiary currently receives those benefits or is an individual who has been determined to be an incapacitated person.

"Governmental benefits" means financial aid or services from a state, federal, or other public agency.

"Special-needs fiduciary" means, with respect to a trust that has a beneficiary with a disability:

1. A trustee or other fiduciary, other than a settlor, that has discretion to distribute part or all of the principal of a first trust to one or more current beneficiaries;

2. If no trustee or fiduciary has discretion under subdivision 1, a trustee or other fiduciary, other than a settlor, that has discretion to distribute part or all of the income of the first trust to one or more current beneficiaries; or

3. If no trustee or fiduciary has discretion under subdivisions 1 and 2, a trustee or other fiduciary, other than a settlor, that is required to distribute part or all of the income or principal of the first trust to one or more current beneficiaries.

"Special-needs trust" means a trust the trustee believes would not be considered a resource for purposes of determining whether a beneficiary with a disability is eligible for governmental benefits.

B. A special-needs fiduciary may exercise the decanting power under § 64.2-779.8 over the income or principal of a first trust, including a first trust under which the fiduciary has only limited distributive discretion as defined in subsection A of § 64.2-779.9, as if the fiduciary had authority to distribute income or principal to a beneficiary with a disability subject to expanded distributive discretion if:

1. A second trust is a special-needs trust that benefits the beneficiary with a disability; and

2. The special-needs fiduciary determines that exercise of the decanting power will further the purposes of the first trust.

C. In an exercise of the decanting power under this section, the following rules apply:

1. Notwithstanding subdivision C 2 of § 64.2-779.8, the interest in the second trust of a beneficiary with a disability may:

a. Be a pooled trust as defined by Medicaid law for the benefit of the beneficiary with a disability under 42 U.S.C. § 1396p(d)(4)(C); or

b. Contain payback provisions complying with reimbursement requirements of Medicaid law under 42 U.S.C. § 1396p(d)(4)(A).

2. Subdivision C 3 of § 64.2-779.8 does not apply to the interests of the beneficiary with a disability.

3. Except as affected by any change to the interests of the beneficiary with a disability, the second trust, or if there are two or more second trusts, the second trusts in the aggregate, must grant each other beneficiary of the first trust beneficial interests in the second trusts that are substantially similar to the beneficiary's beneficial interests in the first trust.

2017, c. 592.

§ 64.2-779.11. Protection of charitable interest.

A. As used in this section:

"Determinable charitable interest" means a charitable interest that is a right to a mandatory distribution currently, periodically, on the occurrence of a specified event, or after the passage of a specified time and that is unconditional or will be held solely for charitable purposes.

"Unconditional" means not subject to the occurrence of a specified event that is not certain to occur, other than a requirement in a trust instrument that a charitable organization be in existence or qualify under a particular provision of the United States Internal Revenue Code of 1986 on the date of the distribution, if the charitable organization meets the requirement on the date of determination.

B. If a first trust contains a determinable charitable interest, the Attorney General has the rights of a qualified beneficiary and may represent and bind the charitable interest.

C. If a first trust contains a charitable interest, the second trust or trusts may not:

1. Diminish the charitable interest;

2. Diminish the interest of an identified charitable organization that holds the charitable interest;

3. Alter any charitable purpose stated in the first-trust instrument; or

4. Alter any condition or restriction related to the charitable interest.

D. If there are two or more second trusts, the second trusts shall be treated as one trust for purposes of determining whether the exercise of the decanting power diminishes the charitable interest or diminishes the interest of an identified charitable organization for purposes of subsection C.

E. If a first trust contains a determinable charitable interest, the second trust or trusts that include a charitable interest pursuant to subsection C must be administered under the law of the Commonwealth unless:

1. The Attorney General, after receiving notice under § 64.2-779.5, fails to object in a signed record delivered to the authorized fiduciary within the notice period;

2. The Attorney General consents in a signed record to the second trust or trusts being administered under the law of another jurisdiction; or

3. The court approves the exercise of the decanting power.

F. This article does not limit the powers and duties of the Attorney General under law of the Commonwealth other than this article.

2017, c. 592.

§ 64.2-779.12. Trust limitation on decanting.

A. An authorized fiduciary may not exercise the decanting power to the extent the first-trust instrument expressly prohibits exercise of:

1. The decanting power; or

2. A power granted by state law to the fiduciary to distribute part or all of the income or principal of the trust to another trust or to modify the trust.

B. Exercise of the decanting power is subject to any restriction in the first-trust instrument that expressly applies to exercise of:

1. The decanting power; or

2. A power granted by state law to a fiduciary to distribute part or all of the income or principal of the trust to another trust or to modify the trust.

C. A general prohibition of the amendment or revocation of a first trust, a spendthrift clause, or a clause restraining the voluntary or involuntary transfer of a beneficiary's interest does not preclude exercise of the decanting power.

D. Subject to subsections A and B, an authorized fiduciary may exercise the decanting power under this article even if the first-trust instrument permits the authorized fiduciary or another person to modify the first-trust instrument or to distribute part or all of the income or principal of the first trust to another trust.

E. If a first-trust instrument contains an express prohibition described in subsection A or an express restriction described in subsection B, the provision must be included in the second-trust instrument.

2017, c. 592.

§ 64.2-779.13. Change in compensation.

A. If a first-trust instrument specifies an authorized fiduciary's compensation, the fiduciary may not exercise the decanting power to increase the fiduciary's compensation above the specified compensation unless:

1. All qualified beneficiaries of the second trust consent to the increase in a signed record; or

2. The increase is approved by the court.

B. If a first-trust instrument does not specify an authorized fiduciary's compensation, the fiduciary may not exercise the decanting power to increase the fiduciary's compensation above the compensation permitted by this chapter unless:

1. All qualified beneficiaries of the second trust consent to the increase in a signed record; or

2. The increase is approved by the court.

C. A change in an authorized fiduciary's compensation that is incidental to other changes made by the exercise of the decanting power is not an increase in the fiduciary's compensation for purposes of subsections A and B.

2017, c. 592.

§ 64.2-779.14. Relief from liability and indemnification.

A. Except as otherwise provided in this section, a second-trust instrument may not relieve an authorized fiduciary from liability for breach of trust to a greater extent than the first-trust instrument.

B. A second-trust instrument may provide for indemnification of an authorized fiduciary of the first trust or another person acting in a fiduciary capacity under the first trust for any liability or claim that would have been payable from the first trust if the decanting power had not been exercised.

C. A second-trust instrument may not reduce fiduciary liability in the aggregate.

D. Subject to subsection C, a second-trust instrument may divide and reallocate fiduciary powers among fiduciaries, including one or more trustees, distribution advisors, investment advisors, trust protectors, or other persons, and relieve a fiduciary from liability for an act or failure to act of another fiduciary as permitted by law of the Commonwealth other than this article.

2017, c. 592.

§ 64.2-779.15. Removal or replacement of authorized fiduciary.

An authorized fiduciary may not exercise the decanting power to modify a provision in a first-trust instrument granting another person power to remove or replace the fiduciary unless:

1. The person holding the power consents to the modification in a signed record and the modification applies only to the person;

2. The person holding the power and the qualified beneficiaries of the second trust consent to the modification in a signed record and the modification grants a substantially similar power to another person; or

3. The court approves the modification and the modification grants a substantially similar power to another person.

2017, c. 592.

§ 64.2-779.16. Tax-related provisions.

A. As used in this section:

"Grantor trust" means a trust as to which a settlor of a first trust is considered the owner under §§ 671 through 677 of the Internal Revenue Code or § 679 of the Internal Revenue Code.

"Internal Revenue Code" means the United States Internal Revenue Code of 1986.

"Nongrantor trust" means a trust that is not a grantor trust.

"Qualified benefits property" means property subject to the minimum distribution requirements of § 401(a)(9) of the Internal Revenue Code and any applicable regulations, or to any similar requirements that refer to § 401(a)(9) of the Internal Revenue Code or the regulations.

B. An exercise of the decanting power is subject to the following limitations:

1. If a first trust contains property that qualified, or would have qualified but for provisions of this article other than this section, for a marital deduction for purposes of the gift or estate tax under the Internal Revenue Code or a state gift, estate, or inheritance tax, the second-trust instrument must not include or omit any term that, if included in or omitted from the trust instrument for the trust to which the property was transferred, would have prevented the transfer from qualifying for the deduction, or would have reduced the amount of the deduction, under the same provisions of the Internal Revenue Code or state law under which the transfer qualified.

2. If the first trust contains property that qualified, or would have qualified but for provisions of this article other than this section, for a charitable deduction for purposes of the income, gift, or estate tax under the Internal Revenue Code or a state income, gift, estate, or inheritance tax, the second-trust instrument must not include or omit any term that, if included in or omitted from the trust instrument for the trust to which the property was transferred, would have prevented the transfer from qualifying for the deduction, or would have reduced the amount of the deduction, under the same provisions of the Internal Revenue Code or state law under which the transfer qualified.

3. If the first trust contains property that qualified, or would have qualified but for provisions of this article other than this section, for the exclusion from the gift tax described in § 2503(b) of the Internal Revenue Code, the second-trust instrument must not include or omit a term that, if included in or omitted from the trust instrument for the trust to which the property was transferred, would have prevented the transfer from qualifying under § 2503(b) of the Internal Revenue Code. If the first trust contains property that qualified, or would have qualified but for provisions of this article other than this section, for the exclusion from the gift tax described in § 2503(b) of the Internal Revenue Code by application of § 2503(c) of the Internal Revenue Code, the second-trust instrument must not include or omit a term that, if included or omitted from the trust instrument for the trust to which the property was transferred, would have prevented the transfer from qualifying under § 2503(c) of the Internal Revenue Code.

4. If the property of the first trust includes shares of stock in an S corporation, as defined in § 1361 of the Internal Revenue Code, and the first trust is, or but for provisions of this article other than this section would be, a permitted shareholder under any provision of § 1361 of the Internal Revenue Code, an authorized fiduciary may exercise the power with respect to part or all of the S-corporation stock only if any second trust receiving the stock is a permitted shareholder under § 1361(c)(2) of the Internal Revenue Code. If the property of the first trust includes shares of stock in an S corporation and the first trust is, or but for provisions of this article other than this section would be, a qualified subchapter-S trust within the meaning of § 1361(d) of the Internal Revenue Code, the second-trust instrument must not include or omit a term that prevents the second trust from qualifying as a qualified subchapter-S trust.

5. If the first trust contains property that qualified, or would have qualified but for provisions of this article other than this section, for a zero inclusion ratio for purposes of the generation-skipping transfer tax under § 2642(c) of the Internal Revenue Code the second-trust instrument must not include or omit a term that, if included in or omitted from the first-trust instrument, would have prevented the transfer to the first trust from qualifying for a zero inclusion ratio under § 2642(c) of the Internal Revenue Code.

6. If the first trust is directly or indirectly the beneficiary of qualified benefits property, the second-trust instrument may not include or omit any term that, if included in or omitted from the first-trust instrument, would have increased the minimum distributions required with respect to the qualified benefits property under § 401(a)(9) of the Internal Revenue Code and any applicable regulations, or any similar requirements that refer to § 401(a)(9) of the Internal Revenue Code or the regulations. If an attempted exercise of the decanting power violates the preceding sentence, the trustee is deemed to have held the qualified benefits property and any reinvested distributions of the property as a separate share from the date of the exercise of the power, and § 64.2-779.19 applies to the separate share.

7. If the first trust qualifies as a grantor trust because of the application of § 672(f)(2)(A) of the Internal Revenue Code, the second trust may not include or omit a term that, if included in or omitted from the first-trust instrument, would have prevented the first trust from qualifying under § 672(f)(2)(A) of the Internal Revenue Code.

8. In this subdivision, "tax benefit" means a federal or state tax deduction, exemption, exclusion, or other benefit not otherwise listed in this section, except for a benefit arising from being a grantor trust. Subject to subdivision 9, a second-trust instrument may not include or omit a term that, if included in or omitted from the first-trust instrument, would have prevented qualification for a tax benefit if:

a. The first-trust instrument expressly indicates an intent to qualify for the benefit or the first-trust instrument clearly is designed to enable the first trust to qualify for the benefit; and

b. The transfer of property held by the first trust or the first trust qualified, or would have qualified but for provisions of this article other than this section, would have qualified for the tax benefit.

9. Subject to subdivision 4:

a. Except as otherwise provided in subdivision 7, the second trust may be a nongrantor trust, even if the first trust is a grantor trust; and

b. Except as otherwise provided in subdivision 10, the second trust may be a grantor trust, even if the first trust is a nongrantor trust.

10. An authorized fiduciary may not exercise the decanting power if a settlor objects in a signed record delivered to the fiduciary within the notice period and:

a. The first trust and a second trust are both grantor trusts, in whole or in part, the first-trust instrument grants the settlor or another person the power to cause the first trust to cease to be a grantor trust, and the second-trust instrument does not grant an equivalent power to the settlor or other person; or

b. The first trust is a nongrantor trust and a second trust is a grantor trust, in whole or in part, with respect to the settlor, unless:

(1) The settlor has the power at all times to cause the second trust to cease to be a grantor trust; or

(2) The first-trust instrument contains a provision granting the settlor or another person a power that would cause the first trust to cease to be a grantor trust and the second-trust instrument contains the same provision.

C. If an authorized fiduciary that has limited distributive discretion over the income or principal of a first trust reasonably determines that the overall income, estate, gift, and generation-skipping tax consequences of the first trust may be reduced by either (i) granting a general power of appointment to a beneficiary of the first trust or (ii) eliminating a general power of appointment granted to a beneficiary of the first trust, the fiduciary may exercise the decanting power over all or any portion of the principal of the trust to grant or eliminate such a general power of appointment and shall, in addition, have the powers found in subsection D of § 64.2-779.8 as if the fiduciary had expanded distributive discretion, subject to the following provisions:

1. In the case of the grant of a general power of appointment, the class of permissible appointees contained in the second trust shall be limited to the creditors of the powerholder or the creditors of the powerholder's estate.

2. In the case of the elimination of a general power of appointment, the class of permissible appointees in the second trust shall exclude the powerholder, the powerholder's creditors, the powerholder's estate, and the creditors of the powerholder's estate, but shall otherwise be identical to the class of appointees permitted in the first trust.

2017, c. 592.

§ 64.2-779.17. Duration of second trust.

A. Subject to subsection B, a second trust may have a duration that is the same as or different from the duration of the first trust.

B. To the extent that property of a second trust is attributable to property of the first trust, the property of the second trust is subject to any rules governing maximum perpetuity, accumulation, or suspension of the power of alienation that apply to property of the first trust.

2017, c. 592.

§ 64.2-779.18. Need to distribute not required.

An authorized fiduciary may exercise the decanting power whether or not under the first trust's discretionary distribution standard the fiduciary would have made or could have been compelled to make a discretionary distribution of income or principal at the time of the exercise.

2017, c. 592.

§ 64.2-779.19. Savings provision.

A. If exercise of the decanting power would be effective under this article except that the second-trust instrument in part does not comply with this article, the exercise of the power is effective and the following rules apply with respect to the income or principal of the second trust attributable to the exercise of the power:

1. A provision in the second-trust instrument which is not permitted under this article is void to the extent necessary to comply with this article.

2. A provision required by this article to be in the second-trust instrument which is not contained in the instrument is deemed to be included in the instrument to the extent necessary to comply with this article.

B. If a trustee or other fiduciary of a second trust determines that subsection A applies to a prior exercise of the decanting power, the fiduciary shall take corrective action consistent with the fiduciary's duties.

2017, c. 592.

§ 64.2-779.20. Trust for care of animal.

A. As used in this section:

"Animal trust" means a trust or an interest in a trust created to provide for the care of one or more animals.

"Protector" means a person appointed in an animal trust to enforce the trust on behalf of the animal or, if no such person is appointed in the trust, a person appointed by the court for that purpose.

B. The decanting power may be exercised over an animal trust that has a protector to the extent that the trust could be decanted under this article if each animal that benefits from the trust were an individual, if the protector consents in a signed record to the exercise of the power.

C. A protector for an animal has the rights under this article of a qualified beneficiary.

D. Notwithstanding any other provision of this article, if a first trust is an animal trust, in an exercise of the decanting power, the second trust must provide that trust property may be applied only to its intended purpose for the period the first trust benefited the animal.

2017, c. 592.

§ 64.2-779.21. Terms of second trust.

A reference in this chapter to a trust instrument or terms of the trust includes a second-trust instrument and the terms of the second trust.

2017, c. 592.

§ 64.2-779.22. Settlor.

A. For purposes of law of the Commonwealth other than this article and subject to subsection B, a settlor of a first trust is deemed to be the settlor of the second trust with respect to the portion of the income or principal of the first trust subject to the exercise of the decanting power.

B. In determining settlor intent with respect to a second trust, the intent of a settlor of the first trust, a settlor of the second trust, and the authorized fiduciary may be considered.

2017, c. 592.

§ 64.2-779.23. Later-discovered property.

A. Except as otherwise provided in subsection C, if exercise of the decanting power was intended to distribute all the income or principal of the first trust to one or more second trusts, later-discovered property belonging to the first trust and property paid to or acquired by the first trust after the exercise of the power is part of the trust estate of the second trust or trusts.

B. Except as otherwise provided in subsection C, if exercise of the decanting power was intended to distribute less than all the income or principal of the first trust to one or more second trusts, later-discovered property belonging to the first trust or property paid to or acquired by the first trust after exercise of the power remains part of the trust estate of the first trust.

C. An authorized fiduciary may provide in an exercise of the decanting power or by the terms of a second trust for disposition of later-discovered property belonging to the first trust or property paid to or acquired by the first trust after exercise of the power.

2017, c. 592.

§ 64.2-779.24. Obligations.

A debt, liability, or other obligation enforceable against property of a first trust is enforceable to the same extent against the property when held by the second trust after exercise of the decanting power.

2017, c. 592.

§ 64.2-779.25. Accountings.

If accounts for the first trust are filed with the commissioner of accounts, the accounts for the second trust shall be filed with the commissioner of accounts unless the court orders otherwise.

2017, c. 592.

Article 8.2. Uniform Directed Trust Act.

§ 64.2-779.26. Definitions.

As used in this article, unless the context requires a different meaning:

"Breach of trust" includes a violation by a trust director or trustee of a duty imposed on that trust director or trustee by the terms of the trust, this article, or law of the Commonwealth other than this article pertaining to trusts.

"Directed trust" means a trust for which the terms of the trust grant a power of direction.

2020, c. 768.

§ 64.2-779.27. Application.

A. Except as otherwise provided in subsection B and § 64.2-779.28, this article applies to a trust that has its principal place of administration in the Commonwealth and that:

1. Is created on or after July 1, 2020;

2. Is amended by a settlor on or after July 1, 2020;

3. Is amended or modified on or after July 1, 2020, by a nonjudicial settlement agreement under § 64.2-709, by a second-trust instrument under the Uniform Trust Decanting Act (§ 64.2-779.1 et seq.), or by the court; or

4. In the case of any trust not described in subdivision A 1, A 2, or A 3, was made subject to subsection E of § 64.2-770, as it existed prior to the effective date of this article, by specific reference in the trust instrument.

B. In the case of a trust described in subdivision A 2 or A 3, this article applies only to a decision or action on or after the date of the first such amendment or modification.

C. Any trust, decision, or action to which this article does not apply shall be governed by the following rules:

1. If the terms of a trust confer upon a person other than the settlor of a revocable trust power to direct certain actions of the trustee, the trustee shall act in accordance with an exercise of the power unless the attempted exercise is manifestly contrary to the terms of the trust or the trustee knows the attempted exercise would constitute a serious breach of a fiduciary duty that the person holding the power owes to the beneficiaries of the trust.

2. The terms of a trust may confer upon a trustee or other person a power to direct the modification or termination of the trust.

3. A person, other than a beneficiary, who holds a power to direct is presumptively a fiduciary who, as such, is required to act in good faith with regard to the purposes of the trust and the interests of the beneficiaries. The holder of a power to direct is liable for any loss that results from breach of a fiduciary duty.

2020, c. 768.

§ 64.2-779.28. Exclusions.

A. This article does not apply to a:

1. Power of appointment;

2. Power to appoint or remove a trustee or trust director;

3. Power of a settlor over a trust to the extent the settlor has a power to revoke the trust;

4. Power of a beneficiary over a trust to the extent the exercise or nonexercise of the power affects the beneficial interest of:

a. The beneficiary; or

b. Another beneficiary represented by the beneficiary under Article 3 (§ 64.2-714 et seq.) with respect to the exercise or nonexercise of the power;

5. Power over a trust if:

a. The terms of the trust provide that the power is held in a nonfiduciary capacity; and

b. The power must be held in a nonfiduciary capacity to achieve the settlor's tax objectives under the United States Internal Revenue Code; or

6. Power over a trust if the terms of the trust provide that the Uniform Directed Trust Act does not apply to the trust.

B. Unless the terms of a trust provide otherwise, a power granted to a person to designate a recipient of an ownership interest in or power of appointment over trust property which is exercisable while the person is not serving as a trustee is a power of appointment and not a power of direction.

2020, c. 768.

§ 64.2-779.29. Powers of trust director.

A. Subject to § 64.2-779.30, the terms of a trust may grant a power of direction to a trust director.

B. Unless the terms of a trust provide otherwise:

1. A trust director may exercise any further power appropriate to the exercise or nonexercise of a power of direction granted to the trust director under subsection A; and

2. Trust directors with joint powers must act by majority decision.

2020, c. 768.

§ 64.2-779.30. Limitations on trust director.

A trust director is subject to the same rules as a trustee in a like position and under similar circumstances in the exercise or nonexercise of a power of direction or further power under subdivision B 1 of § 64.2-779.29 regarding:

1. A payback provision in the terms of a trust necessary to comply with the reimbursement requirements of Medicaid law in § 1917 of the Social Security Act, 42 U.S.C. § 1396p(d)(4)(A), as amended; and

2. A charitable interest in the trust, including notice regarding the interest to the Attorney General.

2020, c. 768.

§ 64.2-779.31. Duty and liability of trust director.

A. Subject to subsection B, with respect to a power of direction or further power under subdivision B 1 of § 64.2-779.29:

1. A trust director has the same fiduciary duty and liability in the exercise or nonexercise of the power:

a. If the power is held individually, as a sole trustee in a like position and under similar circumstances; or

b. If the power is held jointly with a trustee or another trust director, as a cotrustee in a like position and under similar circumstances; and

2. The terms of the trust may vary the trust director's duty or liability to the same extent the terms of the trust could vary the duty or liability of a trustee in a like position and under similar circumstances.

B. Unless the terms of a trust provide otherwise, if a trust director is licensed, certified, or otherwise authorized or permitted by law other than this article to provide health care in the ordinary course of the trust director's business or practice of a profession, to the extent the trust director acts in that capacity, the trust director has no duty or liability under this article.

C. The terms of a trust may impose a duty or liability on a trust director in addition to the duties and liabilities imposed under this section.

2020, c. 768.

§ 64.2-779.32. Duty and liability of directed trustee.

A. Subject to subsection B, a directed trustee shall take reasonable action to comply with a trust director's exercise or nonexercise of a power of direction or further power under subdivision B 1 of § 64.2-779.29, and the trustee is not liable for the action.

B. A directed trustee must not comply with a trust director's exercise or nonexercise of a power of direction or further power under subdivision B 1 of § 64.2-779.29 to the extent that by complying the trustee would engage in willful misconduct.

C. An exercise of a power of direction under which a trust director may release a trustee or another trust director from liability for breach of trust is not effective if:

1. The breach involved the trustee's or other trust director's willful misconduct;

2. The release was induced by improper conduct of the trustee or other trust director in procuring that release; or

3. At the time of the release, the trust director did not know the material facts relating to the breach.

D. A directed trustee that has reasonable doubt about its duty under this section may petition the court for instructions.

E. The terms of a trust may impose a duty or liability on a directed trustee in addition to the duties and liabilities under this section.

2020, c. 768.

§ 64.2-779.33. Duty to provide information to trust director or trustee.

A. Subject to § 64.2-779.34, a trustee shall provide information to a trust director to the extent the information is reasonably related both to:

1. The powers or duties of the trustee; and

2. The powers or duties of the trust director.

B. Subject to § 64.2-779.34, a trust director shall provide information to a trustee or another trust director to the extent the information is reasonably related both to:

1. The powers or duties of the trust director; and

2. The powers or duties of the trustee or other trust director.

C. A trustee that acts in reliance on information provided by a trust director is not liable for a breach of trust to the extent the breach resulted from the reliance, unless by so acting the trustee engages in willful misconduct.

D. A trust director that acts in reliance on information provided by a trustee or another trust director is not liable for a breach of trust to the extent the breach resulted from the reliance, unless by so acting the trust director engages in willful misconduct.

2020, c. 768.

§ 64.2-779.34. No duty to monitor, inform, or advise.

A. Unless the terms of a trust provide otherwise:

1. A trustee does not have a duty to:

a. Monitor a trust director; or

b. Inform or give advice to a settlor, beneficiary, trustee, or trust director concerning an instance in which the trustee might have acted differently than the trust director; and

2. By taking an action described in subdivision 1, a trustee does not assume the duty excluded by subdivision 1.

B. Unless the terms of a trust provide otherwise:

1. A trust director does not have a duty to:

a. Monitor a trustee or another trust director; or

b. Inform or give advice to a settlor, beneficiary, trustee, or another trust director concerning an instance in which the trust director might have acted differently than a trustee or another trust director; and

2. By taking an action described in subdivision 1, a trust director does not assume the duty excluded by subdivision 1.

2020, c. 768.

§ 64.2-779.35. Limitation of action against trust director.

A. An action against a trust director for breach of trust must be commenced within the same limitation period as under § 64.2-796 for an action for breach of trust against a trustee in a like position and under similar circumstances.

B. A report or accounting has the same effect on the limitation period for an action against a trust director for breach of trust that the report or accounting would have under § 64.2-796 in an action for breach of trust against a trustee in a like position and under similar circumstances.

2020, c. 768.

§ 64.2-779.36. Defenses in action against trust director.

In an action against a trust director for breach of trust, the trust director may assert the same defenses a trustee in a like position and under similar circumstances could assert in an action for breach of trust against the trustee.

2020, c. 768.

§ 64.2-779.37. Jurisdiction over trust director.

A. By accepting appointment as a trust director of a trust subject to this article, the trust director submits to personal jurisdiction of the courts of the Commonwealth regarding any matter related to a power or duty of the trust director.

B. This section does not preclude other methods of obtaining jurisdiction over a trust director.

2020, c. 768.

§ 64.2-779.38. Office of trust director.

Unless the terms of a trust provide otherwise, the rules applicable to a trustee apply to a trust director regarding the following matters:

1. Acceptance under § 64.2-754;

2. Giving of bond to secure performance under § 64.2-755;

3. Reasonable compensation under § 64.2-761;

4. Resignation under § 64.2-758;

5. Removal under § 64.2-759; and

6. Vacancy and appointment of successor under § 64.2-757.

2020, c. 768.

Article 9. Uniform Prudent Investor Act.

§ 64.2-780. Definition of terms.

As used in this article:

"Controlling document" means the will, agreement, power of attorney, court order, or other instrument creating the fiduciary powers.

"Trust" includes the assets under the control or management of the trustee.

"Trustee" includes any fiduciary as defined in § 8.01-2, an attorney-in-fact or agent acting for a principal under a written power of attorney, a custodian under § 64.2-1911, and a custodial trustee under § 64.2-906.

1999, c. 772, § 26-45.13; 2007, c. 517; 2012, c. 614.

§ 64.2-781. Prudent investor rule.

A. Except as otherwise provided in subsection B or § 2.2-4519 or 64.2-1502, a trustee who invests and manages trust assets owes a duty to the beneficiaries of the trust to comply with the prudent investor rule set forth in this article.

B. The prudent investor rule, a default rule, may be expanded, restricted, eliminated, or otherwise altered by the provisions of a trust. A general authorization in a controlling document authorizing a trustee to invest in such assets as the trustee, in his sole discretion, may deem best, or other language purporting to expand the trustee's investment powers, shall not be construed to waive the rule of subsection A unless the controlling document expressly manifests an intention that it be waived (i) by reference to the "prudent man" or "prudent investor" rule, (ii) by reference to power of the trustee to make "speculative" investments, (iii) by an express authorization to acquire or retain a specific asset or type of asset such as a closely held business, or (iv) by other language synonymous with clause (i), (ii) or (iii). A trustee shall not be liable to a beneficiary for the trustee's good faith reliance on a waiver of the rule of subsection A.

1999, c. 772, § 26-45.3; 2012, c. 614.

§ 64.2-782. 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 or strategies;

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. Other resources of the beneficiaries;

7. Needs for liquidity, regularity of income, and preservation or appreciation of capital; and

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.

D. A trustee shall make a reasonable effort to verify facts relevant to the investment and management of trust assets.

E. A trustee may invest in any kind of property or type of investment consistent with the standards of this article.

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.

G. A trustee may hold any policies of life insurance acquired by gift or pursuant to an express permission or direction in the governing instrument including an authority granted by subdivision B 19 of § 64.2-105 with no duty or need to (i) determine whether any such policy is or remains a proper investment, (ii) dispose of such policy in order to diversify the investments of the trust, or (iii) exercise policy options under any such contract not essential to the continuation of the life insurance provided by such contract. However, apart from these specific authorities, this subsection is not intended and shall not be construed to affect the application of the standard of judgment and care as set forth in this section. This subsection shall apply to all trusts, regardless of when established.

1999, c. 772, § 26-45.4; 2012, c. 614.

§ 64.2-783. Diversification by trustee.

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.

1999, c. 772, § 26-45.5; 2012, c. 614.

§ 64.2-784. 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 this article.

1999, c. 772, § 26-45.6; 2012, c. 614.

§ 64.2-785. Loyalty and impartiality.

A. A trustee shall invest and manage the trust assets solely in the interest of the beneficiaries.

B. 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.

1999, c. 772, § 26-45.7; 2012, c. 614.

§ 64.2-786. 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.

1999, c. 772, § 26-45.8; 2012, c. 614.

§ 64.2-787. Reviewing compliance.

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 and not by hindsight.

1999, c. 772, § 26-45.9; 2012, c. 614.

§ 64.2-788. 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 terms of the delegation.

B. In performing a delegated function, an agent owes a duty to the trust to exercise reasonable care to comply with the terms of the delegation.

C. A trustee who complies with the requirements of subsection A 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 the Commonwealth, an agent submits to the jurisdiction of the courts of the Commonwealth.

1999, c. 772, § 26-45.10; 2012, c. 614.

§ 64.2-789. Language invoking standard of article.

The following terms or comparable language in the provisions of a trust, unless otherwise limited or modified by language articulating the investment standard to which the trustee is to be held, authorizes any investment or strategy permitted under this article: "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."

1999, c. 772, § 26-45.11; 2012, c. 614.

§ 64.2-790. Application to existing trusts.

This article applies to trusts existing on and created after January 1, 2000. As applied to trusts existing on its effective date, this article governs only decisions or actions occurring after that date.

1999, c. 772, § 26-45.12; 2012, c. 614.

§ 64.2-791. Uniformity of application and construction.

This article shall be applied and construed to effectuate its general purpose to make uniform the law with respect to the subject of this article among the states enacting it.

1999, c. 772, § 26-45.14; 2012, c. 614.

Article 10. Liability of Trustees and Rights of Persons Dealing With Trustee.

§ 64.2-792. Remedies for breach of trust.

A. A violation by a trustee of a duty the trustee owes to a beneficiary is a breach of trust.

B. To remedy a breach of trust that has occurred or may occur, the court may:

1. Compel the trustee to perform the trustee's duties;

2. Enjoin the trustee from committing a breach of trust;

3. Compel the trustee to redress a breach of trust by paying money, restoring property, or other means;

4. Order a trustee to account;

5. Appoint a special fiduciary to take possession of the trust property and administer the trust;

6. Suspend the trustee;

7. Remove the trustee as provided in § 64.2-759;

8. Reduce or deny compensation to the trustee;

9. Subject to § 64.2-803, void an act of the trustee, impose a lien or a constructive trust on trust property, or trace trust property wrongfully disposed of and recover the property or its proceeds; or

10. Order any other appropriate relief.

2005, c. 935, § 55-550.01; 2012, c. 614.

§ 64.2-793. Damages for breach of trust.

A. A trustee who commits a breach of trust is liable to the beneficiaries affected for the greater of:

1. The amount required to restore the value of the trust property and trust distributions to what they would have been had the breach not occurred; or

2. The profit the trustee made by reason of the breach.

B. Except as otherwise provided in this subsection, if more than one trustee is liable to the beneficiaries for a breach of trust, a trustee is entitled to contribution from the other trustee or trustees. A trustee is not entitled to contribution if the trustee was substantially more at fault than another trustee or if the trustee committed the breach of trust in bad faith or with reckless indifference to the purposes of the trust or the interests of the beneficiaries. A trustee who received a benefit from the breach of trust is not entitled to contribution from another trustee to the extent of the benefit received.

2005, c. 935, § 55-550.02; 2012, c. 614.

§ 64.2-794. Damages in absence of breach.

A. A trustee is accountable to an affected beneficiary for any profit made by the trustee arising from the administration of the trust, even absent a breach of trust.

B. Absent a breach of trust, a trustee is not liable to a beneficiary for a loss or depreciation in the value of trust property or for not having made a profit.

2005, c. 935, § 55-550.03; 2012, c. 614.

§ 64.2-795. Attorney fees and costs.

In a judicial proceeding involving the administration of a trust, the court, as justice and equity may require, may award costs and expenses, including reasonable attorney fees, to any party, to be paid by another party or from the trust that is the subject of the controversy.

2005, c. 935, § 55-550.04; 2012, c. 614.

§ 64.2-796. Limitation of action against trustee.

A. A beneficiary may not commence a proceeding against a trustee for breach of trust more than one year after the date the beneficiary or a representative of the beneficiary was sent a report that adequately disclosed the existence of a potential claim for breach of trust and informed the beneficiary of the time allowed for commencing a proceeding.

B. A report adequately discloses the existence of a potential claim for breach of trust if it provides sufficient information so that the beneficiary or representative knows of the potential claim or should have inquired into its existence.

C. If subsection A does not apply, a judicial proceeding by a beneficiary against a trustee for breach of trust shall be commenced within five years after the first to occur of:

1. The removal, resignation, or death of the trustee;

2. The termination of the beneficiary's interest in the trust; or

3. The termination of the trust.

D. Whenever fraud has been perpetrated in connection with any proceeding or in any statement filed under this chapter, or if fraud is used to avoid or circumvent the provisions or purposes of this chapter, any person injured thereby may obtain appropriate relief against the perpetrator of the fraud or restitution from any person benefiting from the fraud, whether innocent or not, except for a bona fide purchaser. Any proceeding shall be commenced within two years after the fraud is discovered, but no proceeding may be brought against one not a perpetrator of the fraud later than five years after the time the fraud is committed. This section does not apply to remedies for fraud practiced on a decedent during his lifetime that affects the succession of his estate.

E. The provisions of this section shall not operate to reduce the period of limitations applicable to actions and suits governed by § 8.01-245.

2005, c. 935, § 55-550.05; 2012, c. 614.

§ 64.2-797. Reliance on trust instrument.

A trustee who acts in reasonable reliance on the terms of the trust as expressed in the trust instrument is not liable to a beneficiary for a breach of trust to the extent the breach resulted from the reliance.

2005, c. 935, § 55-550.06; 2012, c. 614.

§ 64.2-798. Event affecting administration or distribution.

If the happening of an event, including marriage, divorce, performance of educational requirements, or death, affects the administration or distribution of a trust, a trustee who has exercised reasonable care to ascertain the happening of the event is not liable for a loss resulting from the trustee's lack of knowledge.

2005, c. 935, § 55-550.07; 2012, c. 614.

§ 64.2-799. Exculpation of trustee.

A. A term of a trust relieving a trustee of liability for breach of trust is unenforceable to the extent that it:

1. Relieves the trustee of liability for breach of trust committed in bad faith or with reckless indifference to the purposes of the trust or the interests of the beneficiaries; or

2. Was inserted as the result of an abuse by the trustee of a fiduciary or confidential relationship to the settlor.

B. An exculpatory term drafted or caused to be drafted by the trustee is invalid as an abuse of a fiduciary or confidential relationship unless the trustee proves that the existence and contents of the exculpatory term were adequately communicated to the settlor.

2005, c. 935, § 55-550.08; 2012, c. 614.

§ 64.2-800. Beneficiary's consent, release, or ratification.

A trustee is not liable to a beneficiary for breach of trust if the beneficiary consented to the conduct constituting the breach, released the trustee from liability for the breach, or ratified the transaction constituting the breach, unless:

1. The consent, release, or ratification of the beneficiary was induced by improper conduct of the trustee; or

2. At the time of the consent, release, or ratification, the beneficiary did not know of the beneficiary's rights or of the material facts relating to the breach.

2005, c. 935, § 55-550.09; 2012, c. 614.

§ 64.2-801. Limitation on personal liability of trustee.

A. Except as otherwise provided in the contract, a trustee is not personally liable on a contract properly entered into in the trustee's fiduciary capacity in the course of administering the trust if the trustee in the contract disclosed the fiduciary capacity.

B. A trustee is personally liable for torts committed in the course of administering a trust, or for obligations arising from ownership or control of trust property, including liability for violation of environmental law, only if the trustee is personally at fault.

C. A claim based on a contract entered into by a trustee in the trustee's fiduciary capacity, on an obligation arising from ownership or control of trust property, or on a tort committed in the course of administering a trust, may be asserted in a judicial proceeding against the trustee in the trustee's fiduciary capacity, whether or not the trustee is personally liable for the claim.

2005, c. 935, § 55-550.10; 2012, c. 614.

§ 64.2-802. Interest as general partner.

A. Except as otherwise provided in subsection C or unless personal liability is imposed in the contract, a trustee who holds an interest as a general partner in a general or limited partnership is not personally liable on a contract entered into by the partnership after the trust's acquisition of the interest if the fiduciary capacity was disclosed in the contract or in a statement previously filed pursuant to the Uniform Partnership Act (§ 50-73.79 et seq.).

B. Except as otherwise provided in subsection C, a trustee who holds an interest as a general partner is not personally liable for torts committed by the partnership or for obligations arising from ownership or control of the interest unless the trustee is personally at fault.

C. The immunity provided by this section does not apply if an interest in the partnership is held by the trustee in a capacity other than that of trustee or is held by the trustee's spouse or one or more of the trustee's descendants, siblings, or parents, or the spouse of any of them.

D. If the trustee of a revocable trust holds an interest as a general partner, the settlor is personally liable for contracts and other obligations of the partnership as if the settlor were a general partner.

2005, c. 935, § 55-550.11; 2012, c. 614.

§ 64.2-803. Protection of person dealing with trustee.

A. A person other than a beneficiary who in good faith assists a trustee, or who in good faith and for value deals with a trustee, without knowledge that the trustee is exceeding or improperly exercising the trustee's powers, is protected from liability as if the trustee properly exercised the power.

B. A person other than a beneficiary who in good faith deals with a trustee is not required to inquire into the extent of the trustee's powers or the propriety of their exercise.

C. A person who in good faith delivers assets to a trustee need not ensure their proper application.

D. A person other than a beneficiary who in good faith assists a former trustee, or who in good faith and for value deals with a former trustee, without knowledge that the trusteeship has terminated is protected from liability as if the former trustee were still a trustee.

E. Comparable protective provisions of other laws relating to commercial transactions or transfer of securities by fiduciaries prevail over the protection provided by this section.

2005, c. 935, § 55-550.12; 2012, c. 614.

§ 64.2-804. Certification of trust.

A. Instead of furnishing a copy of the trust instrument to a person other than a beneficiary, the trustee may furnish to the person a certification of trust containing the following information:

1. That the trust exists and the date the trust instrument was executed;

2. The identity of the settlor;

3. The identity and address of the currently acting trustee;

4. The powers of the trustee;

5. The revocability or irrevocability of the trust and the identity of any person holding a power to revoke the trust;

6. The authority of cotrustees to sign or otherwise authenticate and whether all or less than all are required in order to exercise powers of the trustee;

7. The trust's taxpayer identification number; and

8. The manner of taking title to trust property.

B. A certification of trust may be signed or otherwise authenticated by any trustee.

C. A certification of trust shall state that the trust has not been revoked, modified, or amended in any manner that would cause the representations contained in the certification of trust to be incorrect.

D. A certification of trust need not contain the dispositive terms of a trust.

E. A recipient of a certification of trust may require the trustee to furnish copies of those excerpts from the original trust instrument and later amendments that designate the trustee and confer upon the trustee the power to act in the pending transaction.

F. A person who acts in reliance upon a certification of trust without knowledge that the representations contained therein are incorrect is not liable to any person for so acting and may assume without inquiry the existence of the facts contained in the certification. Knowledge of the terms of the trust may not be inferred solely from the fact that a copy of all or part of the trust instrument is held by the person relying upon the certification.

G. A person who in good faith enters into a transaction in reliance upon a certification of trust may enforce the transaction against the trust property as if the representations contained in the certification were correct.

H. A person making a demand for the trust instrument in addition to a certification of trust or excerpts is liable for damages if the court determines that the person did not act in good faith in demanding the trust instrument.

I. This section does not limit the right of a person to obtain a copy of the trust instrument in a judicial proceeding concerning the trust.

2005, c. 935, § 55-550.13; 2012, c. 614.

Article 11. Miscellaneous Provisions.

§ 64.2-805. Uniformity of application and construction.

In applying and construing this uniform act, consideration shall be given to the need to promote uniformity of the law with respect to its subject matter among states that enact it.

2005, c. 935, § 55-551.01; 2012, c. 614.

§ 64.2-806. Electronic records and signatures.

The provisions of this chapter governing the legal effect, validity, or enforceability of electronic records or electronic signatures, and of contracts formed or performed with the use of such records or signatures, conform to the requirements of § 102 of the Electronic Signatures in Global and National Commerce Act (15 U.S.C. § 7002) and supersede, modify, and limit the requirements of the Electronic Signatures in Global and National Commerce Act.

2005, c. 935, § 55-551.02; 2012, c. 614.

§ 64.2-807. Repealed.

Repealed by Acts 2015, c. 709, cl. 2.

§ 64.2-808. Application to existing relationships.

A. Except as otherwise provided in this chapter:

1. This chapter applies to all trusts created before, on, or after July 1, 2006;

2. This chapter applies to all judicial proceedings concerning trusts commenced on or after July 1, 2006;

3. This chapter applies to judicial proceedings concerning trusts commenced before July 1, 2006, unless the court finds that application of a particular provision of this chapter would substantially interfere with the effective conduct of the judicial proceedings or prejudice the rights of the parties, in which case the particular provision of this chapter does not apply and the superseded law applies;

4. Any rule of construction or presumption provided in this chapter applies to trust instruments executed before July 1, 2006, unless there is a clear indication of a contrary intent in the terms of the trust; and

5. An act done before July 1, 2006, is not affected by this chapter.

B. If a right is acquired, extinguished, or barred upon the expiration of a prescribed period that has commenced to run under any other statute before July 1, 2006, that statute continues to apply to the right even if it has been repealed or superseded.

2005, c. 935, § 55-551.06; 2012, c. 614.

Chapter 9. Uniform Custodial Trust Act.

§ 64.2-900. Definitions.

As used in this chapter:

"Adult" means an individual who is at least 18 years of age.

"Beneficiary" means an individual for whom property has been transferred to or held under a declaration of trust by a custodial trustee for the individual's use and benefit under this chapter.

"Conservator" means a person appointed or qualified by a court to manage the estate of an individual or a person legally authorized to perform substantially the same functions.

"Court" means a circuit court of the Commonwealth.

"Custodial trust property" means an interest in property transferred to or held under a declaration of trust by a custodial trustee under this chapter and the income from and proceeds of that interest.

"Custodial trustee" means a person designated as trustee of a custodial trust under this chapter or a substitute or successor to the person designated.

"Guardian" means a person appointed or qualified by a court as a guardian of a person, including a limited guardian, but not a person who is only a guardian ad litem.

"Incapacitated" means lacking the ability to manage property and business affairs effectively by reason of mental illness, mental deficiency, physical illness or disability, chronic use of drugs, chronic intoxication, confinement, detention by a foreign power, disappearance, minority, or other disabling cause.

"Legal representative" means a personal representative or conservator.

"Member of the beneficiary's family" means a beneficiary's spouse, descendant, stepchild, parent, stepparent, grandparent, brother, sister, uncle, or aunt, whether of the whole or half blood or by adoption.

"Person" means an individual, corporation, business trust, estate, trust, partnership, joint venture, association, or any other legal or commercial entity.

"Personal representative" means an executor, administrator, or special administrator of a decedent's estate, a person legally authorized to perform substantially the same functions, or a successor to any of them.

"State" means a state, territory, or possession of the United States, the District of Columbia, or the Commonwealth of Puerto Rico.

"Transferor" means a person who creates a custodial trust by transfer or declaration.

"Trust company" means a financial institution, corporation, or other legal entity authorized to exercise general trust powers.

1990, c. 264, § 55-34.1; 2012, c. 614.

§ 64.2-901. Custodial trust; creation and termination; general provisions.

A. A person may create a custodial trust of property by a written transfer of the property to another person, evidenced by registration if the property is of a type subject to registration, or by other instrument of transfer, executed in any lawful manner, naming as beneficiary an individual who may be the transferor, in which the transferee is designated, in substance, as custodial trustee under this chapter.

B. In addition, a person may create a custodial trust of property by a written declaration, evidenced by registration of the property if the property is of a type subject to registration, or by other instrument of declaration, executed in any lawful manner, describing the property and naming as beneficiary an individual other than the declarant, in which the declarant as titleholder is designated, in substance, as custodial trustee under this chapter. A registration or other declaration of trust for the sole benefit of the declarant is not a custodial trust under this chapter.

C. Title to custodial trust property is in the custodial trustee and the beneficial interest is in the beneficiary.

D. The beneficiary, if not incapacitated, may terminate a custodial trust by delivering to the custodial trustee a writing signed by the beneficiary declaring the termination. The conservator of an incapacitated beneficiary may similarly terminate the custodial trust in this manner but only if granted the power by the circuit court that appointed him in a proceeding in which the custodial trustee is made a party. If not previously terminated, the custodial trust terminates on the death of the beneficiary. A transferor may not terminate a custodial trust except as provided in this subsection.

E. Any person may augment existing custodial trust property by the addition of other property pursuant to this chapter.

F. The transferor may designate, or authorize the designation of, a successor custodial trustee in the trust instrument.

G. This chapter does not displace or restrict other means of creating trusts. A trust whose terms do not conform to this chapter may be enforceable according to its terms under other law.

1990, c. 264, § 55-34.2; 2012, c. 614.

§ 64.2-902. Custodial trustee for future payment or transfer.

A. A person having the right to designate the recipient of property payable or transferable upon a future event may create a custodial trust upon the occurrence of the future event by designating in writing the recipient,
followed in substance by: "as custodial trustee for.................… (name of beneficiary) under the Virginia Uniform Custodial Trust Act."

B. Persons may be designated as substitute or successor custodial trustees to whom the property shall be paid or transferred in the order named if the first designated custodial trustee is unable or unwilling to serve.

C. A designation under this section may be made in a will, a trust, a deed, a multiple-party account, an insurance policy, an instrument exercising a power of appointment, or a writing designating a beneficiary of contractual rights. Otherwise, to be effective, the designation shall be registered with or delivered to the fiduciary, payor, issuer, or obligor of the future right.

1990, c. 264, § 55-34.3; 2012, c. 614.

§ 64.2-903. Form and effect of receipt and acceptance by custodial trustee; jurisdiction.

A. Obligations of a custodial trustee, including the obligation to follow directions of the beneficiary, arise under this chapter upon the custodial trustee's acceptance, express or implied, of the custodial trust property.

B. The custodial trustee's acceptance may be evidenced by a writing stating in substance:

CUSTODIAL TRUSTEE'S RECEIPT AND ACCEPTANCE

I, ____________________ (name of custodial trustee), acknowledge receipt of the custodial trust property described below or in the attached instrument and accept the custodial trust as custodial trustee for ____________________ (name of beneficiary) under the Virginia Uniform Custodial Trust Act. I undertake to administer and distribute the custodial trust property pursuant to the Virginia Uniform Custodial Trust Act. My obligations as custodial trustee are subject to the directions of the beneficiary unless the beneficiary is designated as, is, or becomes incapacitated. The custodial trust property consists of ________________________________________.

Dated: ____________________

________________________________________
(signature of custodial trustee)

C. Upon accepting custodial trust property, a person designated as custodial trustee under this chapter is subject to personal jurisdiction of the court with respect to any matter relating to the custodial trust.

1990, c. 264, § 55-34.4; 2012, c. 614.

§ 64.2-904. Transfer to custodial trustee by fiduciary or obligor; facility of payment.

A. Unless otherwise directed by an instrument designating a custodial trustee pursuant to § 64.2-902, a person, including a fiduciary other than a custodial trustee, who holds property of or owes a debt to an incapacitated individual not having a conservator may make a transfer to an adult member of the beneficiary's family or to a trust company as custodial trustee for the use and benefit of the incapacitated individual. If the value of the property or the debt exceeds $25,000, the transfer is not effective unless authorized by the court.

B. With court approval, any person, including a conservator, guardian, or other fiduciary who holds property of or owes a debt to an incapacitated individual, may make a transfer to any person as a custodial trustee for the use and benefit of the incapacitated individual. The court, in the exercise of its discretion, may require the custodial trustee to furnish a bond with surety for the faithful performance of his fiduciary duties.

C. A written acknowledgment of delivery, signed by a custodial trustee, is a sufficient receipt and discharge for property transferred to the custodial trustee pursuant to this section.

1990, c. 264, § 55-34.5; 1995, c. 444; 2012, c. 614; 2014, c. 532.

§ 64.2-905. Multiple beneficiaries; separate custodial trusts; survivorship.

A. Beneficial interests in a custodial trust created for multiple beneficiaries are deemed to be separate custodial trusts of equal undivided interests for each beneficiary. Except in a transfer or declaration for use and benefit of spouses, for whom survivorship is presumed, a right of survivorship does not exist unless the instrument creating the custodial trust specifically provides for survivorship or survivorship is required as to marital property.

B. Custodial trust property held under this chapter by the same custodial trustee for the use and benefit of the same beneficiary may be administered as a single custodial trust.

C. A custodial trustee of custodial trust property held for more than one beneficiary shall separately account to each beneficiary pursuant to §§ 64.2-906 and 64.2-914 for the administration of the custodial trust.

1990, c. 264, § 55-34.6; 2012, c. 614; 2020, c. 900.

§ 64.2-906. General duties of custodial trustee.

A. If appropriate, a custodial trustee shall register or record the instrument vesting title to custodial trust property. If the beneficiary is not incapacitated, a custodial trustee shall follow the directions of the beneficiary in the management, control, investment, or retention of the custodial trust property. In the absence of effective contrary direction by the beneficiary while not incapacitated, the custodial trustee shall observe the standard of care set forth in the Uniform Prudent Investor Act (§ 64.2-780 et seq.), except to the extent provided by § 64.2-1502. However, a custodial trustee, in the custodial trustee's discretion, may retain any custodial trust property received from the transferor. Subject to this subsection, a custodial trustee shall take control of and collect, hold, manage, invest, and reinvest custodial trust property.

B. A custodial trustee at all times shall keep custodial trust property of which the custodial trustee has control, separate from all other property in a manner sufficient to identify it clearly as custodial trust property of the beneficiary. Custodial trust property, the title to which is subject to recordation, is so identified if an appropriate instrument so identifying the property is recorded, and custodial trust property subject to registration is so identified if it is registered, or held in an account in the name of the custodial trustee, designated in substance: "as custodial trustee for ____________________ (name of beneficiary) under the Virginia Uniform Custodial Trust Act."

C. A custodial trustee shall keep records of all transactions with respect to custodial trust property, including information necessary for the preparation of tax returns, and shall make the records and information available at reasonable times to the beneficiary or legal representative of the beneficiary.

D. An agent under a power of attorney for an incapacitated beneficiary may not terminate or direct the administration of a custodial trust.

1990, c. 264, § 55-34.7; 2007, c. 517; 2010, cc. 455, 632; 2012, c. 614.

§ 64.2-907. General powers of custodial trustee.

A. A custodial trustee, acting in a fiduciary capacity, has all the rights and powers over custodial trust property that an unmarried adult owner has over individually owned property, which shall include but not be limited to those powers set forth in § 64.2-105 as of the date the custodian acts, but a custodial trustee may exercise those rights and powers in a fiduciary capacity only.

B. This section does not relieve a custodial trustee from liability for a violation of § 64.2-906.

1990, c. 264, § 55-34.8; 2012, c. 614.

§ 64.2-908. Use of custodial trust property.

A. A custodial trustee shall pay to the beneficiary or expend for the beneficiary's use and benefit so much or all of the custodial trust property as the beneficiary while not incapacitated may direct from time to time. If the beneficiary is incapacitated, the custodial trustee shall expend so much or all of the custodial trust property as the custodial trustee considers advisable for the use and benefit of the beneficiary and individuals who were supported by the beneficiary when the beneficiary became incapacitated, or who are legally entitled to support by the beneficiary. Expenditures may be made in the manner, when, and to the extent that the custodial trustee determines suitable and proper, without court order and without regard to other support, income, or property of the beneficiary.

B. A custodial trustee may establish checking, savings, or other similar accounts of reasonable amounts under which either the custodial trustee or the beneficiary may withdraw funds from, or draw checks against, the accounts. Funds withdrawn from, or checks written against, the account by the beneficiary are distributions of custodial trust property by the custodial trustee to the beneficiary.

1990, c. 264, § 55-34.9; 2012, c. 614.

§ 64.2-909. Determination of incapacity; effect.

A. The custodial trustee shall administer the custodial trust as for an incapacitated beneficiary if (i) the custodial trust was created under § 64.2-904, (ii) the transferor has so directed in the instrument creating the custodial trust, or (iii) the custodial trustee has determined that the beneficiary is incapacitated. A custodial trustee may determine that the beneficiary is incapacitated in reliance upon (a) previous direction or authority given by the beneficiary while not incapacitated, including direction or authority pursuant to a durable power of attorney, (b) the certificate of the beneficiary's physician, or (c) other persuasive evidence. On petition of the beneficiary, the custodial trustee, or other person interested in the custodial trust property or the welfare of the beneficiary, the court shall determine whether the beneficiary is incapacitated. Absent determination of incapacity of the beneficiary, a custodial trustee who has reason to believe that the beneficiary is incapacitated shall administer the custodial trust in accordance with the provisions of this chapter applicable to an incapacitated beneficiary.

B. If a custodial trustee for an incapacitated beneficiary reasonably concludes that the beneficiary's incapacity has ceased, or that circumstances concerning the beneficiary's ability to manage property and business affairs have changed since the creation of a custodial trust directing administration as for an incapacitated beneficiary, the custodial trustee may administer the trust as for a beneficiary who is not incapacitated.

C. Incapacity of a beneficiary does not terminate (i) the custodial trust, (ii) any designation of a successor custodial trustee, (iii) rights or powers of the custodial trustee, or (iv) any immunities of third persons acting on instructions of the custodial trustee.

1990, c. 264, § 55-34.10; 2012, c. 614.

§ 64.2-910. Exemption of third person from liability.

A third person in good faith and without a court order may act on instructions of, or otherwise deal with, a person purporting to make a transfer as, or purporting to act in the capacity of, a custodial trustee. In the absence of knowledge to the contrary, the third person is not responsible for determining (i) the validity of the purported custodial trustee's designation, (ii) the propriety of, or the authority under this chapter for, any action of the purported custodial trustee, (iii) the validity or propriety of an instrument executed or instruction given pursuant to this chapter either by the person purporting to make a transfer or declaration or by the purported custodial trustee, or (iv) the propriety of the application of property vested in the purported custodial trustee.

1990, c. 264, § 55-34.11; 2012, c. 614.

§ 64.2-911. Liability to third person; exceptions.

A. A claim based on a contract entered into by a custodial trustee acting in a fiduciary capacity, an obligation arising from the ownership or control of custodial trust property, or a tort committed in the course of administering the custodial trust, may be asserted by a third person against the custodial trust property by proceeding against the custodial trustee in a fiduciary capacity, whether or not the custodial trustee or the beneficiary is personally liable.

B. A custodial trustee is not personally liable to a third person (i) on a contract properly entered into in a fiduciary capacity, unless the custodial trustee fails to reveal that capacity or to identify the custodial trust in the contract, or (ii) for an obligation arising from control of custodial trust property or for a tort committed in the course of the administration of the custodial trust unless the custodial trustee is personally at fault. A beneficiary is not personally liable to a third person for an obligation arising from beneficial ownership of custodial trust property or for a tort committed in the course of administration of the custodial trust unless the beneficiary is personally in possession of the custodial trust property giving rise to the liability or is personally at fault.

C. This section does not preclude actions or proceedings to establish liability of the custodial trustee or beneficiary to the extent the person sued is protected as the insured by liability insurance.

1990, c. 264, § 55-34.12; 2012, c. 614.

§ 64.2-912. Declination, resignation, incapacity, death, or removal of custodial trustee; designation of successor.

A. Before accepting the custodial trust property, a person designated as custodial trustee may decline to serve by notifying the person who made the designation, the transferor, or the transferor's legal representative. If an event giving rise to a transfer has not occurred, the substitute custodial trustee designated under § 64.2-902 becomes the custodial trustee, or, if a substitute custodial trustee has not been designated, the person who made the designation may designate a substitute custodial trustee pursuant to § 64.2-902. In other cases, the transferor or the transferor's legal representative may designate a substitute custodial trustee.

B. A custodial trustee who has accepted the custodial trust property may resign by (i) delivering written notice to a successor custodial trustee, if any, the beneficiary, and, if the beneficiary is incapacitated, to the beneficiary's conservator, if any, and (ii) transferring or registering, or recording an appropriate instrument relating to, the custodial trust property, in the name of, and delivering the records to, the successor custodial trustee.

C. If a custodial trustee or successor custodial trustee is ineligible, resigns, dies, or becomes incapacitated, the successor designated in accordance with the trust instrument or in accordance with § 64.2-902 becomes custodial trustee. If there is no effective provision for a successor, the beneficiary, if not incapacitated, may designate a successor custodial trustee. If the beneficiary is incapacitated, or fails to act within 90 days after the ineligibility, resignation, death, or incapacity of the custodial trustee, the beneficiary's conservator becomes successor custodial trustee. If the beneficiary does not have a conservator or the conservator fails to act, the resigning custodial trustee may designate a successor custodial trustee.

D. If a successor custodial trustee is not designated as provided in this section, the transferor, the legal representative of the transferor or of the custodial trustee, an adult member of the beneficiary's family, the guardian or conservator of the beneficiary, a person interested in the custodial trust property, or a person interested in the welfare of the beneficiary may petition the court to designate a successor custodial trustee.

E. A custodial trustee who declines to serve or resigns, or the legal representative of a deceased or incapacitated custodial trustee, as soon as practicable, shall put the custodial trust property and records in the possession and control of the successor custodial trustee. The successor custodial trustee may enforce the obligation to deliver custodial trust property and records and becomes responsible for each item as received.

F. A beneficiary, the beneficiary's conservator, an adult member of the beneficiary's family, a guardian of the beneficiary, a person interested in the custodial trust property, or a person interested in the welfare of the beneficiary may petition the court to remove the custodial trustee for cause and designate a successor custodial trustee, to require the custodial trustee to furnish a bond or other security for the faithful performance of fiduciary duties, or for other appropriate relief.

1990, c. 264, § 55-34.13; 1997, c. 80; 2012, c. 614.

§ 64.2-913. Expenses, compensation, and bond of custodial trustee.

Except as otherwise provided in the instrument creating the custodial trust, in an agreement with the beneficiary, or by court order, a custodial trustee:

1. Is entitled to reimbursement from custodial trust property for reasonable expenses incurred in the performance of fiduciary services;

2. Has a noncumulative election, to be made no later than six months after the end of each calendar year, to charge a reasonable compensation for fiduciary services performed during that year; and

3. Need not furnish a bond or other security for the faithful performance of fiduciary duties.

1990, c. 264, § 55-34.14; 2012, c. 614.

§ 64.2-914. Reporting and accounting by custodial trustee; determination of liability.

A. Upon the acceptance of custodial trust property, the custodial trustee shall provide a written statement describing the custodial trust property and shall thereafter provide a written statement of the administration of the custodial trust property (i) once each year, (ii) upon request at reasonable times by the beneficiary or the beneficiary's legal representative, (iii) upon resignation or removal of the custodial trustee, and (iv) upon termination of the custodial trust. The statements shall be provided to the beneficiary or to the beneficiary's legal representative, if any. Upon termination of the beneficiary's interest, the custodial trustee shall furnish a current statement to the person to whom the custodial trust property is to be delivered.

B. A beneficiary, the beneficiary's legal representative, an adult member of the beneficiary's family, a person interested in the custodial trust property, or a person interested in the welfare of the beneficiary may petition the court for an accounting by the custodial trustee or the custodial trustee's legal representative.

C. A successor custodial trustee may petition the court for an accounting by a predecessor custodial trustee.

D. If a custodial trustee is removed, the court shall require an accounting and order delivery of the custodial trust property and records to the successor custodial trustee and the execution of all instruments required for transfer of the custodial trust property.

E. In an action or proceeding under this chapter or in any other proceeding, the court may require or permit the custodial trustee or the custodial trustee's legal representative to account. The custodial trustee or the custodial trustee's legal representative may petition the court for approval of final accounts.

F. On petition of the custodial trustee or any person who could petition for an accounting, the court, after notice to interested persons, may issue instructions to the custodial trustee or review the propriety of the acts of a custodial trustee or the reasonableness of compensation determined by the custodial trustee for the services of the custodial trustee or others.

1990, c. 264, § 55-34.15; 2012, c. 614.

§ 64.2-915. Limitations of action against custodial trustee.

A. Except as otherwise provided in subsection C, unless previously barred by adjudication, consent, or limitation, a claim for relief against a custodial trustee for accounting or breach of duty is barred as to a beneficiary, a person to whom custodial trust property is to be paid or delivered, or the legal representative of an incapacitated or deceased beneficiary or payee who (i) has received a final account or statement fully disclosing the matter unless an action or proceeding to assert the claim is commenced within two years after receipt of the final account or statement or (ii) has not received a final account or statement fully disclosing the matter unless an action or proceeding to assert the claim is commenced within three years after the termination of the custodial trust.

B. Except as otherwise provided in subsection C, a claim for relief to recover from a custodial trustee for fraud, misrepresentation, or concealment related to the final settlement of the custodial trust or concealment of the existence of the custodial trust, is barred unless an action or proceeding to assert the claim is commenced within five years after the termination of the custodial trust.

C. A claim for relief is not barred by this section if the claimant:

1. Is a minor, until the earlier of two years after the claimant becomes an adult or dies;

2. Is an incapacitated adult, until the earliest of two years after (i) the appointment of a conservator, (ii) the removal of the incapacity, or (iii) the death of the claimant; or

3. Was an adult, now deceased, who was not incapacitated, until two years after the claimant's death.

1990, c. 264, § 55-34.16; 2012, c. 614.

§ 64.2-916. Distribution on termination.

A. Upon termination of a custodial trust, the custodial trustee shall transfer the unexpended custodial trust property as follows:

1. To the beneficiary, if not incapacitated or deceased;

2. To the conservator or such other recipient as is designated by the court for an incapacitated beneficiary; or

3. Upon the beneficiary's death, in the following order:

a. As last directed in writing signed by the deceased beneficiary while not incapacitated and received by the custodial trustee during the life of the deceased beneficiary;

b. To the survivor of multiple beneficiaries if survivorship is provided for pursuant to § 64.2-905;

c. As designated in the instrument creating the custodial trust; or

d. To the estate of the deceased beneficiary.

B. If, when the custodial trust would otherwise terminate, the distributee is incapacitated, the custodial trust continues for the use and benefit of the distributee as beneficiary until the incapacity is removed or the custodial trust is otherwise terminated.

C. Death of the beneficiary does not terminate the power of the custodial trustee to discharge obligations of the custodial trustee or beneficiary incurred before the termination of the custodial trust.

1990, c. 264, § 55-34.17; 2012, c. 614.

§ 64.2-917. Methods and forms for creating custodial trusts.

A. If a transaction, including a declaration with respect to or a transfer of specific property, otherwise satisfies applicable law, the criteria of § 64.2-901 are satisfied by either:

1. The execution and either delivery to the custodial trustee or recording of an instrument in substantially the following form:

TRANSFER UNDER THE VIRGINIA UNIFORM CUSTODIAL TRUST ACT

I, ____________________ (name of transferor or name and representative capacity if a fiduciary), transfer to ____________________ (name of trustee other than transferor), as custodial trustee for ____________________ (name of beneficiary) as beneficiary and ____________________ (name of distributee) as distributee on termination of the trust in absence of direction by the beneficiary under the Virginia Uniform Custodial Trust Act, the following: ____________________ (insert a description of the custodial trust property legally sufficient to identify and transfer each item of property).

Dated: ____________________

________________________________________
(signature of transferor or fiduciary)

2. The execution and the recording or giving notice of its execution to the beneficiary of an instrument in substantially the following form:

DECLARATION OF TRUST UNDER THE VIRGINIA UNIFORM CUSTODIAL TRUST ACT

I, ____________________ (name of owner of property), declare that henceforth I hold as custodial trustee for ____________________ (name of beneficiary other than transferor) as beneficiary and ____________________ (name of distributee) as distributee on termination of the trust in absence of direction by the beneficiary under the Virginia Uniform Custodial Trust Act, the following: ____________________ (insert a description of the custodial trust property legally sufficient to identify and transfer each item of property).

Dated: ____________________

________________________________________
(signature of owner)

3. Either form may be modified by the owner to include, for example, a designation of an alternate or successor trustee or the recipient of the custodial property upon termination of the trust.

B. Customary methods of transferring or evidencing ownership of property may be used to create a custodial trust, including any of the following:

1. Registration of a security in the name of a trust company, an adult other than the transferor, or the transferor if the beneficiary is other than the transferor, designated in substance "as custodial trustee for ____________________ (name of beneficiary) under the Virginia Uniform Custodial Trust Act";

2. Delivery of a certificated security, or a document necessary for the transfer of an uncertificated security, together with any necessary endorsement, to an adult other than the transferor or to a trust company as custodial trustee, accompanied by an instrument in substantially the form prescribed in subdivision A 1;

3. Payment of money or transfer of a security held in the name of a broker or a financial institution or its nominee to a broker or financial institution for credit to an account in the name of a trust company, an adult other than the transferor, or the transferor if the beneficiary is other than the transferor, designated in substance "as custodial trustee for ____________________ (name of beneficiary) under the Virginia Uniform Custodial Trust Act";

4. Registration of ownership of a life or endowment insurance policy or annuity contract with the issuer in the name of a trust company, an adult other than the transferor, or the transferor if the beneficiary is other than the transferor, designated in substance "as custodial trustee for ____________________ (name of beneficiary) under the Virginia Uniform Custodial Trust Act";

5. Delivery of a written assignment to an adult other than the transferor or to a trust company whose name in the assignment is designated in substance by the words "as custodial trustee for ____________________ (name of beneficiary) under the Virginia Uniform Custodial Trust Act";

6. Irrevocable exercise of power of appointment, pursuant to its terms, in favor of a trust company, an adult other than the donee of the power, or the donee who holds the power if the beneficiary is other than the donee, whose name in the appointment is designated in substance "as custodial trustee for ____________________ (name of beneficiary) under the Virginia Uniform Custodial Trust Act";

7. Delivery of a written notification or assignment of a right to future payment under a contract to an obligor that transfers the right under the contract to a trust company, an adult other than the transferor, or the transferor if the beneficiary is other than the transferor, whose name in the notification or assignment is designated in substance "as custodial trustee for ____________________ (name of beneficiary) under the Virginia Uniform Custodial Trust Act";

8. Execution, delivery, and recordation of a conveyance of an interest in real property in the name of a trust company, an adult other than the transferor, or the transferor if the beneficiary is other than the transferor, designated in substance "as custodial trustee for ____________________ (name of beneficiary) under the Virginia Uniform Custodial Trust Act";

9. Issuance of a certificate of title by an agency of a state or of the United States that evidences title to tangible personal property (i) issued in the name of a trust company, an adult other than the transferor, or the transferor if the beneficiary is other than the transferor, designated in substance "as custodial trustee for ____________________(name of beneficiary) under the Virginia Uniform Custodial Trust Act," or (ii) delivered to a trust company or an adult other than the transferor or endorsed by the transferor to that person, designated in substance "as custodial trustee for ____________________ (name of beneficiary) under the Virginia Uniform Custodial Trust Act"; or

10. Execution and delivery of an instrument of gift to a trust company or an adult other than the transferor, designated in substance "as custodial trustee for ____________________ (name of beneficiary) under the Virginia Uniform Custodial Trust Act."

1990, c. 264, § 55-34.18; 2012, c. 614.

§ 64.2-918. Applicable law.

A. This chapter applies to a transfer or declaration creating a custodial trust that refers to this chapter if, at the time of the transfer or declaration, the transferor, beneficiary, or custodial trustee is a resident of or has its principal place of business in the Commonwealth or custodial trust property is located in the Commonwealth. The custodial trust remains subject to this chapter despite a later change in residence or principal place of business of the transferor, beneficiary, or custodial trustee, or removal of the custodial trust property from the Commonwealth.

B. A transfer made pursuant to an act of another state substantially similar to this chapter is governed by the law of that state and may be enforced in the Commonwealth.

1990, c. 264, § 55-34.19; 2012, c. 614.

Chapter 10. Uniform Principal and Income Act [Repealed].

Article 1. Definitions and Fiduciary Duties.

§ 64.2-1000. Repealed.

Repealed by Acts 2022, c. 354, cl. 2.

Article 2. Decedent's Estate or Terminating Income Interest.

§ 64.2-1004. Repealed.

Repealed by Acts 2022, c. 354, cl. 2.

Article 3. Apportionment At Beginning and End of Income Interest.

§ 64.2-1006. Repealed.

Repealed by Acts 2022, c. 354, cl. 2.

Article 4. Allocation of Receipts During Administration of Trust.

§ 64.2-1009. Repealed.

Repealed by Acts 2022, c. 354, cl. 2.

§ 64.2-1012. Repealed.

Repealed by Acts 2022, c. 354, cl. 2.

§ 64.2-1016. Repealed.

Repealed by Acts 2022, c. 354, cl. 2.

Article 5. Allocation of Disbursements During Administration of Trust.

§ 64.2-1024. Repealed.

Repealed by Acts 2022, c. 354, cl. 2.

Article 6. Miscellaneous Provisions.

§ 64.2-1030. Repealed.

Repealed by Acts 2022, c. 354, cl. 2.

Chapter 10.1. Uniform Fiduciary Income and Principal Act.

Article 1. General Provisions.

§ 64.2-1033. Definitions.

As used in this chapter, unless the context requires a different meaning:

"Accounting period" means a calendar year, unless a fiduciary selects another period of 12 calendar months or approximately 12 calendar months. "Accounting period" includes a part of a calendar year or another period of 12 calendar months or approximately 12 calendar months that begins when an income interest begins or ends when an income interest ends.

"Asset-backed security" means a security that is serviced primarily by the cash flows of a discrete pool of fixed or revolving receivables or other financial assets that by their terms convert into cash within a finite time. "Asset-backed security" includes rights or other assets that ensure the servicing or timely distribution of proceeds to the holder of the asset-backed security. "Asset-backed security" does not include an asset to which § 64.2-1048, 64.2-1056, or 64.2-1061 applies.

"Beneficiary" includes:

1. For a trust, (i) a current beneficiary, including a current income beneficiary and a beneficiary that may receive only principal; (ii) a remainder beneficiary; and (iii) any other successor beneficiary;

2. For an estate, an heir, legatee, and devisee; and

3. For a life estate or term interest, a person that holds a life estate, term interest, or remainder or other interest following a life estate or term interest.

"Court" means the court in the Commonwealth having jurisdiction relating to a trust, estate, or life estate or other term interest described in subdivision 2 of § 64.2-1034.

"Current income beneficiary" means a beneficiary to which a fiduciary may distribute net income, whether or not the fiduciary also may distribute principal to the beneficiary.

"Distribution" means a payment or transfer by a fiduciary to a beneficiary in the beneficiary's capacity as a beneficiary, made under the terms of the trust, without consideration other than the beneficiary's right to receive the payment or transfer under the terms of the trust. "Distribute," "distributed," and "distributee" have corresponding meanings.

"Estate" means a decedent's estate. "Estate" includes the property of the decedent as the estate is originally constituted and the property of the estate as it exists at any time during administration.

"Fiduciary" includes a trustee, trust director under the Uniform Directed Trust Act (§ 64.2-779.26 et seq.), personal representative, life tenant, holder of a term interest, and person acting under a delegation from a fiduciary. "Fiduciary" includes a person that holds property for a successor beneficiary whose interest may be affected by an allocation of receipts and expenditures between income and principal. If there are two or more co-fiduciaries, "fiduciary" includes all co-fiduciaries acting under the terms of the trust and applicable law.

"Income" means money or other property a fiduciary receives as current return from principal. "Income" includes a part of receipts from a sale, exchange, or liquidation of a principal asset, to the extent provided in Articles 4 (§ 64.2-1048 et seq.), 5 (§ 64.2-1051 et seq.), and 6 (§ 64.2-1055 et seq.).

"Income interest" means the right of a current income beneficiary to receive all or part of net income, whether the terms of the trust require the net income to be distributed or authorize the net income to be distributed in the fiduciary's discretion. "Income interest" includes the right of a current beneficiary to use property held by a fiduciary.

"Independent person" means a person that is not:

1. For a trust, (i) a qualified beneficiary determined under § 64.2-701, (ii) a settlor of the trust, or (iii) an individual whose legal obligation to support a beneficiary may be satisfied by a distribution from the trust;

2. For an estate, a beneficiary;

3. A spouse, parent, brother, sister, or issue of an individual described in subdivision 1 or 2;

4. A corporation, partnership, limited liability company, or other entity in which persons described in subdivision 1, 2, or 3, in the aggregate, have voting control; or

5. An employee of a person described in subdivision 1, 2, 3, or 4.

"Mandatory income interest" means the right of a current income beneficiary to receive net income that the terms of the trust require the fiduciary to distribute.

"Net income" means the total allocations during an accounting period to income under the terms of a trust and this chapter minus the disbursements during the period, other than distributions, allocated to income under the terms of the trust and this chapter. To the extent the trust is a unitrust under Article 3 (§ 64.2-1039 et seq.), "net income" means the unitrust amount determined under Article 3. "Net income" includes an adjustment from principal to income under § 64.2-1038. "Net income" does not include an adjustment from income to principal under § 64.2-1038.

"Person" means an individual, estate, trust, business or nonprofit entity, public corporation, government or governmental subdivision, agency, or instrumentality, or other legal entity.

"Personal representative" means an executor, administrator, successor personal representative, special administrator, or person that performs substantially the same function with respect to an estate under the law governing the person's status.

"Principal" means property held in trust for distribution to, production of income for, or use by a current or successor beneficiary.

"Record" means information that is inscribed on a tangible medium or that is stored in an electronic or other medium and is retrievable in perceivable form.

"Settlor" has the same meaning as the definition provided in § 64.2-701.

"Special tax benefit" means:

1. Exclusion of a transfer to a trust from gifts described in § 2503(b) of the Internal Revenue Code of 1986, as amended, because of the qualification of an income interest in the trust as a present interest in property;

2. Status as a qualified subchapter S trust described in § 1361(d)(3) of the Internal Revenue Code of 1986, as amended, at a time the trust holds stock of an S corporation described in § 1361(a)(1) of the Internal Revenue Code of 1986, as amended;

3. An estate or gift tax marital deduction for a transfer to a trust under § 2056 or 2523 of the Internal Revenue Code of 1986, as amended, which depends or depended in whole or in part on the right of the settlor's spouse to receive the net income of the trust;

4. Exemption in whole or in part of a trust from the federal generation-skipping transfer tax imposed by § 2601 of the Internal Revenue Code of 1986, as amended, because the trust was irrevocable on September 25, 1985, if there is any possibility that (i) a taxable distribution, as defined in § 2612(b) of the Internal Revenue Code of 1986, as amended, could be made from the trust or (ii) a taxable termination, as defined in § 2612(a) of the Internal Revenue Code of 1986, as amended, could occur with respect to the trust; or

5. An inclusion ratio, as defined in § 2642(a) of the Internal Revenue Code of 1986, as amended, of the trust that is less than one, if there is any possibility that (i) a taxable distribution, as defined in § 2612(b) of the Internal Revenue Code of 1986, as amended, could be made from the trust or (ii) a taxable termination, as defined in § 2612(a) of the Internal Revenue Code of 1986, as amended, could occur with respect to the trust.

"Successive interest" means the interest of a successor beneficiary.

"Successor beneficiary" means a person entitled to receive income or principal or to use property when an income interest or other current interest ends.

"Terms of a trust" means:

1. Except as otherwise provided in subdivision 2, the manifestation of the settlor's intent regarding a trust's provisions as (i) expressed in the trust instrument or (ii) established by other evidence that would be admissible in a judicial proceeding;

2. The trust's provisions as established, determined, or amended by (i) a trustee or trust director in accordance with applicable law, (ii) court order, or (iii) a nonjudicial settlement agreement under § 64.2-709;

3. For an estate, a will; or

4. For a life estate or term interest, the corresponding manifestation of the rights of the beneficiaries.

"Trust" includes all trusts described in § 64.2-700.

"Trustee" means a person, other than a personal representative, that owns or holds property for the benefit of a beneficiary. "Trustee" includes an original, additional, or successor trustee, whether or not appointed or confirmed by a court.

"Will" means any testamentary instrument recognized by applicable law that makes a legally effective disposition of an individual's property, effective at the individual's death. "Will" includes a codicil or other amendment to a testamentary instrument.

2022, c. 354.

§ 64.2-1034. Scope.

Except as otherwise provided in the terms of the trust or this chapter, this chapter applies to:

1. A trust or estate; and

2. A life estate or other term interest in which the interest of one or more persons will be succeeded by the interest of one or more other persons.

2022, c. 354.

§ 64.2-1035. Governing law.

Except as otherwise provided in the terms of a trust or this chapter, this chapter applies when the Commonwealth is the principal place of administration of a trust or estate or the situs of property that is not held in a trust or estate and is subject to a life estate or other term interest described in subdivision 2 of § 64.2-1034. By accepting the trusteeship of a trust having its principal place of administration in the Commonwealth or by moving the principal place of administration of a trust to the Commonwealth, the trustee submits to the application of this chapter to any matter within the scope of this chapter involving the trust.

2022, c. 354.

Article 2. Fiduciary Duties and Judicial Review.

§ 64.2-1036. Fiduciary duties; general principles.

A. In making an allocation or determination or exercising discretion under this chapter, a fiduciary shall:

1. Act in good faith, based on what is fair and reasonable to all beneficiaries;

2. Administer a trust or estate impartially, except to the extent the terms of the trust manifest an intent that the fiduciary shall or may favor one or more beneficiaries;

3. Administer the trust or estate in accordance with the terms of the trust, even if there is a different provision in this chapter; and

4. Administer the trust or estate in accordance with this chapter, except to the extent the terms of the trust provide otherwise or authorize the fiduciary to determine otherwise.

B. A fiduciary's allocation, determination, or exercise of discretion under this chapter is presumed to be fair and reasonable to all beneficiaries. A fiduciary may exercise a discretionary power of administration given to the fiduciary by the terms of the trust, and an exercise of the power that produces a result different from a result required or permitted by this chapter does not create an inference that the fiduciary abused the fiduciary's discretion.

C. A fiduciary shall:

1. Add a receipt to principal, to the extent neither the terms of the trust nor this chapter allocates the receipt between income and principal; and

2. Charge a disbursement to principal, to the extent neither the terms of the trust nor this chapter allocates the disbursement between income and principal.

D. A fiduciary may exercise the power to adjust under § 64.2-1038, convert an income trust to a unitrust under subdivision A 1 of § 64.2-1041, change the percentage or method used to calculate a unitrust amount under subdivision A 2 of § 64.2-1041, or convert a unitrust to an income trust under subdivision A 3 of § 64.2-1041 if the fiduciary determines the exercise of the power will assist the fiduciary to administer the trust or estate impartially.

E. Factors the fiduciary must consider in making the determination under subsection D include:

1. The terms of the trust;

2. The nature, distribution standards, and expected duration of the trust;

3. The effect of the allocation rules, including specific adjustments between income and principal, under Articles 4 (§ 64.2-1048 et seq.) through 9 (§ 64.2-1073 et seq.);

4. The desirability of liquidity and regularity of income;

5. The desirability of the preservation and appreciation of principal;

6. The extent to which an asset is used or may be used by a beneficiary;

7. The increase or decrease in the value of principal assets, reasonably determined by the fiduciary;

8. Whether and to what extent the terms of the trust give the fiduciary power to accumulate income or invade principal or prohibit the fiduciary from accumulating income or invading principal;

9. The extent to which the fiduciary has accumulated income or invaded principal in preceding accounting periods;

10. The effect of current and reasonably expected economic conditions; and

11. The reasonably expected tax consequences of the exercise of the power.

2022, c. 354.

§ 64.2-1037. Judicial review of exercise of discretionary power; request for instruction.

A. As used in this section, "fiduciary decision" means:

1. A fiduciary's allocation between income and principal or other determination regarding income and principal required or authorized by the terms of the trust or this chapter;

2. The fiduciary's exercise or nonexercise of a discretionary power regarding income and principal granted by the terms of the trust or this chapter, including the power to adjust under § 64.2-1038, convert an income trust to a unitrust under subdivision A 1 of § 64.2-1041, change the percentage or method used to calculate a unitrust amount under subdivision A 2 of § 64.2-1041, or convert a unitrust to an income trust under subdivision A 3 of § 64.2-1041; or

3. The fiduciary's implementation of a decision described in subdivision 1 or 2.

B. The court may not order a fiduciary to change a fiduciary decision unless the court determines that the fiduciary decision was an abuse of the fiduciary's discretion.

C. If the court determines that a fiduciary decision was an abuse of the fiduciary's discretion, the court may order a remedy authorized by law, including § 64.2-792. To place the beneficiaries in the positions the beneficiaries would have occupied if there had not been an abuse of the fiduciary's discretion, the court may order:

1. The fiduciary to exercise or refrain from exercising the power to adjust under § 64.2-1038;

2. The fiduciary to exercise or refrain from exercising the power to convert an income trust to a unitrust under subdivision A 1 of § 64.2-1041, change the percentage or method used to calculate a unitrust amount under subdivision A 2 of § 64.2-1041, or convert a unitrust to an income trust under subdivision A 3 of § 64.2-1041;

3. The fiduciary to distribute an amount to a beneficiary;

4. A beneficiary to return some or all of a distribution; or

5. The fiduciary to withhold an amount from one or more future distributions to a beneficiary.

D. On petition by a fiduciary for instruction, the court may determine whether a proposed fiduciary decision will result in an abuse of the fiduciary's discretion. If the petition describes the proposed decision, contains sufficient information to inform the beneficiary of the reasons for making the proposed decision and the facts on which the fiduciary relies, and explains how the beneficiary will be affected by the proposed decision, a beneficiary that opposes the proposed decision has the burden to establish that it will result in an abuse of the fiduciary's discretion.

2022, c. 354.

§ 64.2-1038. Fiduciary's power to adjust.

A. Except as otherwise provided in the terms of a trust or this section, a fiduciary, in a record, without court approval, may adjust between income and principal if the fiduciary determines the exercise of the power to adjust will assist the fiduciary to administer the trust or estate impartially.

B. This section does not create a duty to exercise or consider the power to adjust under subsection A or to inform a beneficiary about the applicability of this section.

C. A fiduciary that in good faith exercises or fails to exercise the power to adjust under subsection A is not liable to a person affected by the exercise or failure to exercise.

D. In deciding whether and to what extent to exercise the power to adjust under subsection A, a fiduciary shall consider all factors the fiduciary considers relevant, including relevant factors in subsection E of § 64.2-1036 and the application of subsection I of § 64.2-1048 and §§ 64.2-1055 and 64.2-1060.

E. A fiduciary may not exercise the power under subsection A to make an adjustment or under § 64.2-1055 to make a determination that an allocation is insubstantial if:

1. The adjustment or determination would reduce the amount payable to a current income beneficiary from a trust that qualifies for a special tax benefit, except to the extent the adjustment is made to provide for a reasonable apportionment of the total return of the trust between the current income beneficiary and successor beneficiaries;

2. The adjustment or determination would change the amount payable to a beneficiary, as a fixed annuity or a fixed fraction of the value of the trust assets, under the terms of the trust;

3. The adjustment or determination would reduce an amount that is permanently set aside for a charitable purpose under the terms of the trust, unless both income and principal are set aside for the charitable purpose;

4. Possessing or exercising the power would cause a person to be treated as the owner of all or part of the trust for federal income tax purposes;

5. Possessing or exercising the power would cause all or part of the value of the trust assets to be included in the gross estate of an individual for federal estate tax purposes;

6. Possessing or exercising the power would cause an individual to be treated as making a gift for federal gift tax purposes;

7. The fiduciary is not an independent person;

8. The trust is irrevocable and provides for income to be paid to the settlor and possessing or exercising the power would cause the adjusted principal or income to be considered an available resource or available income under a public-benefit program; or

9. The trust is a unitrust under Article 3 (§ 64.2-1039 et seq.).

F. If subdivision E 4, 5, 6, or 7 applies to a fiduciary:

1. A co-fiduciary to which subdivisions E 4 through 7 does not apply may exercise the power to adjust, unless the exercise of the power by the remaining co-fiduciary or co-fiduciaries is not permitted by the terms of the trust or law other than this chapter; or

2. If there is no co-fiduciary to which subdivisions E 4 through 7 does not apply, the fiduciary may appoint a co-fiduciary to which subdivisions E 4 through 7 does not apply, which may be a special fiduciary with limited powers, and the appointed co-fiduciary may exercise the power to adjust under subsection A, unless the appointment of a co-fiduciary or the exercise of the power by a co-fiduciary is not permitted by the terms of the trust or law other than this chapter.

G. A fiduciary may release or delegate to a co-fiduciary the power to adjust under subsection A if the fiduciary determines that the fiduciary's possession or exercise of the power will or may:

1. Cause a result described in subdivision E 1 through 6 or 8; or

2. Deprive the trust of a tax benefit or impose a tax burden not described in subdivisions E 1 through 6.

H. A fiduciary's release or delegation to a co-fiduciary under subsection G of the power to adjust under subsection A:

1. Must be in a record;

2. Applies to the entire power, unless the release or delegation provides a limitation, which may be a limitation to the power to adjust:

a. From income to principal;

b. From principal to income;

c. For specified property; or

d. In specified circumstances;

3. For a delegation, may be modified by a redelegation under this subsection by the co-fiduciary to which the delegation is made; and

4. Subject to subdivision 3, is permanent, unless the release or delegation provides a specified period, including a period measured by the life of an individual or the lives of more than one individual.

I. Terms of a trust that deny or limit the power to adjust between income and principal do not affect the application of this section, unless the terms of the trust expressly deny or limit the power to adjust under subsection A.

J. The exercise of the power to adjust under subsection A in any accounting period may apply to the current period, the immediately preceding period, and one or more subsequent periods.

K. A description of the exercise of the power to adjust under subsection A must be:

1. Included in a report, if any, sent to beneficiaries under § 64.2-775; or

2. Communicated at least annually to the qualified beneficiaries determined under § 64.2-701, other than the Attorney General.

2022, c. 354.

Article 3. Unitrust.

§ 64.2-1039. Definitions.

As used in this article, unless the context requires a different meaning:

"Applicable value" means the amount of the net fair market value of a trust taken into account under § 64.2-1045.

"Express unitrust" means a trust for which, under the terms of the trust without regard to this article, income or net income must or may be calculated as a unitrust amount.

"Income trust" means a trust that is not a unitrust.

"Net fair market value of a trust" means the fair market value of the assets of the trust, less the noncontingent liabilities of the trust.

"Unitrust" means a trust for which net income is a unitrust amount. "Unitrust" includes an express unitrust.

"Unitrust amount" means an amount computed by multiplying a determined value of a trust by a determined percentage. For a unitrust administered under a unitrust policy, "unitrust amount" means the applicable value, multiplied by the unitrust rate.

"Unitrust policy" means a policy described in §§ 64.2-1043 through 64.2-1047 and adopted under § 64.2-1041.

"Unitrust rate" means the rate used to compute the unitrust amount for a unitrust administered under a unitrust policy.

2022, c. 354.

§ 64.2-1040. Application; duties and remedies.

A. Except as otherwise provided in subsection B, this article applies to:

1. An income trust, unless the terms of the trust expressly prohibit use of this article by a specific reference to this article or an explicit expression of intent that net income not be calculated as a unitrust amount; and

2. An express unitrust, except to the extent the terms of the trust explicitly:

a. Prohibit use of this article by a specific reference to this article;

b. Prohibit conversion to an income trust; or

c. Limit changes to the method of calculating the unitrust amount.

B. This article does not apply to a trust described in § 170(f)(2)(B), 642(c)(5), 664(d), 2702(a)(3)(A)(ii) or (iii), or 2702(b) of the Internal Revenue Code of 1986, as amended.

C. An income trust to which this article applies under subdivision A 1 may be converted to a unitrust under this article regardless of the terms of the trust concerning distributions. Conversion to a unitrust under this article does not affect other terms of the trust concerning distributions of income or principal.

D. This article applies to an estate only to the extent a trust is a beneficiary of the estate. To the extent of the trust's interest in the estate, the estate may be administered as a unitrust, the administration of the estate as a unitrust may be discontinued, or the percentage or method used to calculate the unitrust amount may be changed, in the same manner as for a trust under this article.

E. This article does not create a duty to take or consider action under this article or to inform a beneficiary about the applicability of this article.

F A fiduciary that in good faith takes or fails to take an action under this article is not liable to a person affected by the action or inaction.

2022, c. 354.

§ 64.2-1041. Authority of fiduciary.

A. A fiduciary, without court approval, by complying with subsections B and F, may:

1. Convert an income trust to a unitrust if the fiduciary adopts in a record a unitrust policy for the trust providing:

a. That in administering the trust the net income of the trust will be a unitrust amount rather than net income determined without regard to this article; and

b. The percentage and method used to calculate the unitrust amount;

2. Change the percentage or method used to calculate a unitrust amount for a unitrust if the fiduciary adopts in a record a unitrust policy or an amendment or replacement of a unitrust policy providing changes in the percentage or method used to calculate the unitrust amount; or

3. Convert a unitrust to an income trust if the fiduciary adopts in a record a determination that, in administering the trust, the net income of the trust will be net income determined without regard to this article rather than a unitrust amount.

B. A fiduciary may take an action under subsection A if:

1. The fiduciary determines that the action will assist the fiduciary to administer a trust impartially;

2. The fiduciary sends a notice in a record, in the manner required by § 64.2-1042, describing and proposing to take the action;

3. The fiduciary sends a copy of the notice under subdivision 2 to each settlor of the trust that is:

a. If an individual, living; or

b. If not an individual, in existence;

4. At least one member of each class of the qualified beneficiaries determined under § 64.2-701, other than the Attorney General, receiving the notice under subdivision 2 is:

a. If an individual, legally competent;

b. If not an individual, in existence; or

c. Represented in the manner provided in Article 3 (§ 64.2-714 et seq.) of Chapter 7; and

5. The fiduciary does not receive, by the date specified in the notice under subdivision D 5 of § 64.2-1042, an objection in a record to the action proposed under subdivision 2 from a person to which the notice under subdivision 2 is sent.

C. If a fiduciary receives, not later than the date stated in the notice under subdivision D 5 of § 64.2-1042, an objection in a record described in subdivision D 4 of § 64.2-1042 to a proposed action, the fiduciary or a beneficiary may request the court to have the proposed action taken as proposed, taken with modifications, or prevented. A person described in subsection A of § 64.2-1042 may oppose the proposed action in the proceeding under this subsection, whether or not the person:

1. Consented under subsection C of § 64.2-1042; or

2. Objected under subdivision D 4 of § 64.2-1042.

D. If, after sending a notice under subdivision B 2, a fiduciary decides not to take the action proposed in the notice, the fiduciary shall notify in a record each person described in subsection A of § 64.2-1042 of the decision not to take the action and the reasons for the decision.

E. If a beneficiary requests in a record that a fiduciary take an action described in subsection A and the fiduciary declines to act or does not act within 90 days after receiving the request, the beneficiary may request the court to direct the fiduciary to take the action requested.

F. In deciding whether and how to take an action authorized by subsection A, or whether and how to respond to a request by a beneficiary under subsection E, a fiduciary shall consider all factors relevant to the trust and the beneficiaries, including relevant factors in subsection E of § 64.2-1036.

G. A fiduciary may release or delegate the power to convert an income trust to a unitrust under subdivision A 1, change the percentage or method used to calculate a unitrust amount under subdivision A 2, or convert a unitrust to an income trust under subdivision A 3, for a reason described in subsection G of § 64.2-1038 and in the manner described in subsection H of § 64.2-1038.

2022, c. 354.

§ 64.2-1042. Notice.

A. A notice required by subdivision B 2 of § 64.2-1041 shall be sent in a manner authorized under § 64.2-707 to:

1. The qualified beneficiaries determined under § 64.2-701, other than the Attorney General;

2. Each person acting as trust director of the trust under the Uniform Directed Trust Act (§ 64.2-779.26 et seq.); and

3. Each person that is granted a power by the terms of the trust to appoint or remove a trustee or person described in subdivision 2, to the extent the power is exercisable when the person that exercises the power is not then serving as a trustee or person described in subdivision 2.

B. The representation provisions of Article 3 (§ 64.2-714 et seq.) of Chapter 7 apply to notice under this section.

C. A person may consent in a record at any time to action proposed under subdivision B 2 of § 64.2-1041. A notice required by subdivision B 2 of § 64.2-1041 need not be sent to a person that consents under this subsection.

D. A notice required by subdivision B 2 of § 64.2-1041 shall include:

1. The action proposed under subdivision B 2 of § 64.2-1041;

2. For a conversion of an income trust to a unitrust, a copy of the unitrust policy adopted under subdivision A 1 of § 64.2-1041;

3. For a change in the percentage or method used to calculate the unitrust amount, a copy of the unitrust policy or amendment or replacement of the unitrust policy adopted under subdivision A 2 of § 64.2-1041;

4. A statement that the person to which the notice is sent may object to the proposed action by stating in a record the basis for the objection and sending or delivering the record to the fiduciary;

5. The date by which an objection under subdivision 4 must be received by the fiduciary, which must be at least 30 days after the date the notice is sent;

6. The date on which the action is proposed to be taken and the date on which the action is proposed to take effect;

7. The name and contact information of the fiduciary; and

8. The name and contact information of a person that may be contacted for additional information.

2022, c. 354.

§ 64.2-1043. Unitrust policy.

A. In administering a unitrust under this article, a fiduciary shall follow a unitrust policy adopted under subdivision A 1 or 2 of § 64.2-1041 or amended or replaced under subdivision A 2 of § 64.2-1041.

B. A unitrust policy shall provide:

1. The unitrust rate or the method for determining the unitrust rate under § 64.2-1044;

2. The method for determining the applicable value under § 64.2-1045; and

3. The rules described in §§ 64.2-1044 through 64.2-1047 that apply in the administration of the unitrust, whether the rules are:

a. Mandatory, as provided in subsection A of § 64.2-1045 and subsection A of § 64.2-1046; or

b. Optional, as provided in § 64.2-1044, subsection B of § 64.2-1045, subsection B of § 64.2-1046, and subsection A of § 64.2-1047, to the extent the fiduciary elects to adopt those rules.

2022, c. 354.

§ 64.2-1044. Unitrust rate.

A. Except as otherwise provided in subdivision B 1 of § 64.2-1047, a unitrust rate may be:

1. A fixed unitrust rate; or

2. A unitrust rate that is determined for each period using:

a. A market index or other published data; or

b. A mathematical blend of market indices or other published data over a stated number of preceding periods.

B. Except as otherwise provided in subdivision B 1 of § 64.2-1047, a unitrust policy may provide:

1. A limit on how high the unitrust rate determined under subdivision A 2 may rise;

2. A limit on how low the unitrust rate determined under subdivision A 2 may fall;

3. A limit on how much the unitrust rate determined under subdivision A 2 may increase over the unitrust rate for the preceding period or a mathematical blend of unitrust rates over a stated number of preceding periods;

4. A limit on how much the unitrust rate determined under subdivision A 2 may decrease below the unitrust rate for the preceding period or a mathematical blend of unitrust rates over a stated number of preceding periods; or

5. A mathematical blend of any of the unitrust rates determined under subdivision A 2 and subdivisions B 1 through 4.

2022, c. 354.

§ 64.2-1045. Applicable value.

A. A unitrust policy must provide the method for determining the fair market value of an asset for the purpose of determining the unitrust amount, including:

1. The frequency of valuing the asset, which need not require a valuation in every period; and

2. The date for valuing the asset in each period in which the asset is valued.

B. Except as otherwise provided in subdivision B 2 of § 64.2-1047, a unitrust policy may provide methods for determining the amount of the net fair market value of the trust to take into account in determining the applicable value, including:

1. Obtaining an appraisal of an asset for which fair market value is not readily available;

2. Exclusion of specific assets or groups or types of assets;

3. Other exceptions or modifications of the treatment of specific assets or groups or types of assets;

4. Identification and treatment of cash or property held for distribution;

5. Use of:

a. An average of fair market values over a stated number of preceding periods; or

b. Another mathematical blend of fair market values over a stated number of preceding periods;

6. A limit on how much the applicable value of all assets, groups of assets, or individual assets may increase over:

a. The corresponding applicable value for the preceding period; or

b. A mathematical blend of applicable values over a stated number of preceding periods;

7. A limit on how much the applicable value of all assets, groups of assets, or individual assets may decrease below:

a. The corresponding applicable value for the preceding period; or

b. A mathematical blend of applicable values over a stated number of preceding periods;

8. The treatment of accrued income and other features of an asset that affect value; and

9. Determining the liabilities of the trust, including treatment of liabilities to conform with the treatment of assets under subdivisions 1 through 8.

2022, c. 354.

§ 64.2-1046. Period.

A. A unitrust policy must provide the period used under §§ 64.2-1044 and 64.2-1045. Except as otherwise provided in subdivision B 3 of § 64.2-1047, the period may be:

1. A calendar year;

2. A 12-month period other than a calendar year;

3. A calendar quarter;

4. A three-month period other than a calendar quarter; or

5. Another period.

B. Except as otherwise provided in subsection B of § 64.2-1047, a unitrust policy may provide standards for:

1. Using fewer preceding periods under subdivision A 2 b, B 3, or B 4 of § 64.2-1044 if:

a. The trust was not in existence in a preceding period; or

b. Market indices or other published data are not available for a preceding period;

2. Using fewer preceding periods under subdivision B 5 a, B 5 b, B 6 b, or B 7 b of § 64.2-1045 if:

a. The trust was not in existence in a preceding period; or

b. Fair market values are not available for a preceding period; and

3. Prorating the unitrust amount on a daily basis for a part of a period in which the trust or the administration of the trust as a unitrust or the interest of any beneficiary commences or terminates.

2022, c. 354.

§ 64.2-1047. Special tax benefits; other rules.

A. A unitrust policy may:

1. Provide methods and standards for:

a. Determining the timing of distributions;

b. Making distributions in cash or in kind or partly in cash and partly in kind; or

c. Correcting an underpayment or overpayment to a beneficiary based on the unitrust amount if there is an error in calculating the unitrust amount;

2. Specify sources and the order of sources, including categories of income for federal income tax purposes, from which distributions of a unitrust amount are paid; or

3. Provide other standards and rules the fiduciary determines serve the interests of the beneficiaries.

B. If a trust qualifies for a special tax benefit or a fiduciary is not an independent person:

1. The unitrust rate established under § 64.2-1044 may not be less than three percent or more than five percent;

2. The only provisions of § 64.2-1045 that apply are subsection A and subdivisions B 1, B 4, B 5 a, and B 9 of § 64.2-1045;

3. The only period that may be used under § 64.2-1046 is a calendar year under subdivision A 1 of § 64.2-1046; and

4. The only other provisions of § 64.2-1046 that apply are subdivisions B 2 a and B 3 of § 64.2-1046.

2022, c. 354.

Article 4. Allocation of Receipts: Receipts From Entity.

§ 64.2-1048. Character of receipts from entity.

A. As used in this section:

"Capital distribution" means an entity distribution of money that is a (i) return of capital or (ii) distribution in total or partial liquidation of the entity.

"Entity" means a corporation, partnership, limited liability company, regulated investment company, real estate investment trust, common trust fund, or any other organization or arrangement in which a fiduciary owns or holds an interest, whether or not the entity is a taxpayer for federal income tax purposes. "Entity" does not include (i) a trust or estate to which § 64.2-1049 applies, (ii) a business or other activity to which § 64.2-1050 applies that is not conducted by an entity described above, (iii) an asset-backed security, or (iv) an instrument or arrangement to which § 64.2-1063 applies.

"Entity distribution" means a payment or transfer by an entity made to a person in the person's capacity as an owner or holder of an interest in the entity.

B. In this section, an attribute or action of an entity includes an attribute or action of any other entity in which the entity owns or holds an interest, including an interest owned or held indirectly through another entity.

C. Except as otherwise provided in subdivisions D 2, 3, and 4, a fiduciary shall allocate to income:

1. Money received in an entity distribution; and

2. Tangible personal property of nominal value received from the entity.

D. A fiduciary shall allocate to principal:

1. Property received in an entity distribution that is not:

a. Money; or

b. Tangible personal property of nominal value;

2. Money received in an entity distribution in an exchange for part or all of the fiduciary's interest in the entity, to the extent the entity distribution reduces the fiduciary's interest in the entity relative to the interests of other persons that own or hold interests in the entity;

3. Money received in an entity distribution that the fiduciary determines or estimates is a capital distribution; and

4. Money received in an entity distribution from an entity that is:

a. A regulated investment company or real estate investment trust if the money received is a capital gain dividend for federal income tax purposes; or

b. Treated for federal income tax purposes comparably to the treatment described in subdivision a.

E. A fiduciary may determine or estimate that money received in an entity distribution is a capital distribution:

1. By relying without inquiry or investigation on a characterization of the entity distribution provided by or on behalf of the entity, unless the fiduciary:

a. Determines, on the basis of information known to the fiduciary, that the characterization is or may be incorrect; or

b. Owns or holds more than 50 percent of the voting interest in the entity;

2. By determining or estimating, on the basis of information known to the fiduciary or provided to the fiduciary by or on behalf of the entity, that the total amount of money and property received by the fiduciary in the entity distribution or a series of related entity distributions is or will be greater than 20 percent of the fair market value of the fiduciary's interest in the entity; or

3. If neither subdivision 1 nor 2 applies, by considering the factors in subsection F and the information known to the fiduciary or provided to the fiduciary by or on behalf of the entity.

F. In making a determination or estimate under subdivision E 3, a fiduciary may consider:

1. A characterization of an entity distribution provided by or on behalf of the entity;

2. The amount of money or property received in:

a. The entity distribution; or

b. What the fiduciary determines is or will be a series of related entity distributions;

3. The amount described in subdivision 2 compared to the amount the fiduciary determines or estimates is, during the current or preceding accounting periods:

a. The entity's operating income;

b. The proceeds of the entity's sale or other disposition of:

(1) All or part of the business or other activity conducted by the entity;

(2) One or more business assets that are not sold to customers in the ordinary course of the business or other activity conducted by the entity; or

(3) One or more assets other than business assets, unless the entity's primary activity is to invest in assets to realize gain on the disposition of all or some of the assets;

c. If the entity's primary activity is to invest in assets to realize gain on the disposition of all or some of the assets, the gain realized on the disposition;

d. The entity's regular, periodic entity distributions;

e. The amount of money the entity has accumulated;

f. The amount of money the entity has borrowed;

g. The amount of money the entity has received from the sources described in §§ 64.2-1054, 64.2-1057, 64.2-1058, and 64.2-1059; and

h. The amount of money the entity has received from a source not otherwise described in this subdivision; and

4. Any other factor the fiduciary determines is relevant.

G. If, after applying subsections C through F, a fiduciary determines that a part of an entity distribution is a capital distribution but is in doubt about the amount of the entity distribution that is a capital distribution, the fiduciary shall allocate to principal the amount of the entity distribution that is in doubt.

H. If a fiduciary receives additional information about the application of this section to an entity distribution before the fiduciary has paid part of the entity distribution to a beneficiary, the fiduciary may consider the additional information before making the payment to the beneficiary and may change a decision to make the payment to the beneficiary.

I. If a fiduciary receives additional information about the application of this section to an entity distribution after the fiduciary has paid part of the entity distribution to a beneficiary, the fiduciary is not required to change or recover the payment to the beneficiary but may consider that information in determining whether to exercise the power to adjust under § 64.2-1038.

2022, c. 354.

§ 64.2-1049. Distribution from trust or estate.

A fiduciary shall allocate to income an amount received as a distribution of income, including a unitrust distribution under Article 3 (§ 64.2-1039 et seq.), from a trust or estate in which the fiduciary has an interest, other than an interest the fiduciary purchased in a trust that is an investment entity, and shall allocate to principal an amount received as a distribution of principal from the trust or estate. If a fiduciary purchases, or receives from a settlor, an interest in a trust that is an investment entity, § 64.2-1048, 64.2-1062, or 64.2-1063 applies to a receipt from the trust.

2022, c. 354.

§ 64.2-1050. Business or other activity conducted by fiduciary.

A. This section applies to a business or other activity conducted by a fiduciary if the fiduciary determines that it is in the interests of the beneficiaries to account separately for the business or other activity instead of:

1. Accounting for the business or other activity as part of the fiduciary's general accounting records; or

2. Conducting the business or other activity through an entity defined in subsection A of § 64.2-1048.

B. A fiduciary may account separately under this section for the transactions of a business or other activity, whether or not assets of the business or other activity are segregated from other assets held by the fiduciary.

C. A fiduciary that accounts separately under this section for a business or other activity:

1. May determine:

a. The extent to which the net cash receipts of the business or other activity must be retained for:

(1) Working capital;

(2) The acquisition or replacement of fixed assets; and

(3) Other reasonably foreseeable needs of the business or other activity; and

b. The extent to which the remaining net cash receipts are accounted for as principal or income in the fiduciary's general accounting records for the trust;

2. May make a determination under subdivision 1 separately and differently from the fiduciary's decisions concerning distributions of income or principal; and

3. Shall account for the net amount received from the sale of an asset of the business or other activity, other than a sale in the ordinary course of the business or other activity, as principal in the fiduciary's general accounting records for the trust, to the extent the fiduciary determines that the net amount received is no longer required in the conduct of the business or other activity.

D. Activities for which a fiduciary may account separately under this section include:

1. Retail, manufacturing, service, and other traditional business activities;

2. Farming;

3. Raising and selling livestock and other animals;

4. Managing rental properties;

5. Extracting minerals, water, and other natural resources;

6. Growing and cutting timber;

7. An activity to which § 64.2-1061, 64.2-1062, or 64.2-1063 applies; and

8. Any other business conducted by the fiduciary.

2022, c. 354.

Article 5. Allocation of Receipts: Receipts Not Normally Apportioned.

§ 64.2-1051. Principal receipts.

A fiduciary shall allocate to principal:

1. To the extent not allocated under this chapter, an asset received from:

a. An individual during the individual's lifetime;

b. An estate;

c. A trust on termination of an income interest; or

d. A payor under a contract naming the fiduciary as beneficiary;

2. Except as otherwise provided in this article, money or other property received from the sale, exchange, liquidation, or change in form of a principal asset;

3. An amount recovered from a third party to reimburse the fiduciary because of a disbursement described in subsection A of § 64.2-1065 or for another reason to the extent not based on loss of income;

4. Proceeds of property taken by eminent domain, except that proceeds awarded for loss of income in an accounting period are income if a current income beneficiary had a mandatory income interest during the period;

5. Net income received in an accounting period during which there is no beneficiary to which a fiduciary may or must distribute income; and

6. Other receipts as provided in Article 6 (§ 64.2-1055 et seq.).

2022, c. 354.

§ 64.2-1052. Rental property.

To the extent a fiduciary does not account for the management of rental property as a business under § 64.2-1050, the fiduciary 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:

1. Shall be added to principal and held subject to the terms of the lease, except as otherwise provided by law other than this chapter; and

2. Is not allocated to income or available for distribution to a beneficiary until the fiduciary's contractual obligations have been satisfied with respect to that amount.

2022, c. 354.

§ 64.2-1053. Receipt on obligation to be paid in money.

A. This section does not apply to an obligation to which § 64.2-1056, 64.2-1057, 64.2-1058, 64.2-1059, 64.2-1061, 64.2-1062, or 64.2-1063 applies.

B. A fiduciary shall allocate to income, without provision for amortization of premium, an amount received as interest on an obligation to pay money to the fiduciary, including an amount received as consideration for prepaying principal.

C. A fiduciary shall allocate to principal an amount received from the sale, redemption, or other disposition of an obligation to pay money to the fiduciary. A fiduciary shall allocate to income the increment in value of a bond or other obligation for the payment of money bearing no stated interest but payable or redeemable, at maturity or another future time, in an amount that exceeds the amount in consideration of which it was issued.

2022, c. 354.

§ 64.2-1054. Insurance policy or contract.

A. This section does not apply to a contract to which § 64.2-1056 applies.

B. Except as otherwise provided in subsection C, a fiduciary shall allocate to principal the proceeds of a life insurance policy or other contract received by the fiduciary as beneficiary, including a contract that insures against damage to, destruction of, or loss of title to an asset. The fiduciary shall allocate dividends on an insurance policy to income to the extent premiums on the policy are paid from income and to principal to the extent premiums on the policy are paid from principal.

C. A fiduciary shall allocate to income proceeds of a contract that insures the fiduciary against loss of:

1. Occupancy or other use by a current income beneficiary;

2. Income; or

3. Subject to § 64.2-1050, profits from a business.

2022, c. 354.

Article 6. Allocation of Receipts: Receipts Normally Apportioned.

§ 64.2-1055. Insubstantial allocation not required.

A. If a fiduciary determines that an allocation between income and principal required by § 64.2-1056, 64.2-1057, 64.2-1058, 64.2-1059, or 64.2-1062 is insubstantial, the fiduciary may allocate the entire amount to principal, unless subsection E of § 64.2-1038 applies to the allocation.

B. A fiduciary may presume an allocation is insubstantial under subsection A 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 10 percent; and

2. The asset producing the receipt to be allocated has a fair market value less than 10 percent of the total fair market value of the assets owned or held by the fiduciary at the beginning of the accounting period.

C. The power to make a determination under subsection A may be:

1. Exercised by a co-fiduciary in the manner described in subsection F of § 64.2-1038; or

2. Released or delegated for a reason described in subsection G of § 64.2-1038 and in the manner described in subsection H of § 64.2-1038.

2022, c. 354.

§ 64.2-1056. Deferred compensation, annuity, or similar payment.

A. As used in this section:

"Internal income of a separate fund" means the amount determined under subsection B.

"Marital trust" means a trust:

1. Of which the settlor's surviving spouse is the only current income beneficiary and is entitled to a distribution of all of the current net income of the trust; and

2. That qualifies for a marital deduction with respect to the settlor's estate under § 2056 of the Internal Revenue Code of 1986, as amended, because:

a. An election to qualify for a marital deduction under § 2056(b)(7) of the Internal Revenue Code of 1986, as amended, has been made; or

b. The trust qualifies for a marital deduction under § 2056(b)(5) of the Internal Revenue Code of 1986, as amended.

"Payment" means an amount a fiduciary 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 payor in exchange for future amounts the fiduciary may receive. "Payment" includes an amount received in money or property from the payor's general assets or from a separate fund created by the payor.

"Separate fund" includes a private or commercial annuity, an individual retirement account, and a pension, profit-sharing, stock-bonus, or stock-ownership plan.

B. For each accounting period, the following rules apply to a separate fund:

1. The fiduciary shall determine the internal income of the separate fund as if the separate fund were a trust subject to this chapter.

2. If the fiduciary cannot determine the internal income of the separate fund under subdivision 1, the internal income of the separate fund is deemed to equal four percent of the value of the separate fund, according to the most recent statement of value preceding the beginning of the accounting period.

3. If the fiduciary cannot determine the value of the separate fund under subdivision 2, the value of the separate fund is deemed to equal the present value of the expected future payments, as determined under § 7520 of the Internal Revenue Code of 1986, as amended, for the month preceding the beginning of the accounting period for which the computation is made.

C. A fiduciary shall allocate a payment received from a separate fund during an accounting period to income, to the extent of the internal income of the separate fund during the period, and the balance to principal.

D. The fiduciary of a marital trust shall:

1. Withdraw from a separate fund the amount the current income beneficiary of the trust requests the fiduciary to withdraw, not greater than the amount by which the internal income of the separate fund during the accounting period exceeds the amount the fiduciary otherwise receives from the separate fund during the period;

2. Transfer from principal to income the amount the current income beneficiary requests the fiduciary to transfer, not greater than the amount by which the internal income of the separate fund during the period exceeds the amount the fiduciary receives from the separate fund during the period after the application of subdivision 1; and

3. Distribute to the current income beneficiary as income:

a. The amount of the internal income of the separate fund received or withdrawn during the period; and

b. The amount transferred from principal to income under subdivision 2.

E. For a trust, other than a marital trust, of which one or more current income beneficiaries are entitled to a distribution of all of the current net income, the fiduciary shall transfer from principal to income the amount by which the internal income of a separate fund during the accounting period exceeds the amount the fiduciary receives from the separate fund during the period.

2022, c. 354.

§ 64.2-1057. Liquidating asset.

A. As used in this section, "liquidating asset" means an asset whose value will diminish or terminate because the asset is expected to produce receipts for a limited time. "Liquidating asset" 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.

B. This section does not apply to a receipt subject to § 64.2-1048, 64.2-1056, 64.2-1058, 64.2-1059, 64.2-1061, 64.2-1062, 64.2-1063, or 64.2-1066.

C. A fiduciary shall allocate:

1. To income:

a. A receipt produced by a liquidating asset, to the extent the receipt does not exceed four percent of the value of the asset; or

b. If the fiduciary cannot determine the value of the asset, 10 percent of the receipt; and

2. To principal, the balance of the receipt.

2022, c. 354.

§ 64.2-1058. Minerals, water, and other natural resources.

A. To the extent a fiduciary does not account for a receipt from an interest in minerals, water, or other natural resources as a business under § 64.2-1050, the fiduciary shall allocate the receipt:

1. To income, to the extent received:

a. As delay rental or annual rent on a lease;

b. As a factor for interest or the equivalent of interest under an agreement creating a production payment; or

c. On account of an interest in renewable water;

2. To principal, if received from a production payment, to the extent subdivision 1 b does not apply; or

3. Between income and principal equitably, to the extent received:

a. On account of an interest in nonrenewable water;

b. As a royalty, shut-in-well payment, take-or-pay payment, or bonus; or

c. From a working interest or any other interest not provided for in subdivision 1 or 2 or subdivision a or b.

B. This section applies to an interest owned or held by a fiduciary whether or not a settlor was extracting minerals, water, or other natural resources before the fiduciary owned or held the interest.

C. An allocation of a receipt under subdivision A 3 is presumed to be equitable if the amount allocated to principal is equal to the amount allowed by the Internal Revenue Code of 1986, as amended, as a deduction for depletion of the interest.

D. If a fiduciary owns or holds an interest in minerals, water, or other natural resources before July 1, 2022, the fiduciary may allocate receipts from the interest as provided in this section or in the manner used by the fiduciary before July 1, 2022. If the fiduciary acquires an interest in minerals, water, or other natural resources on or after July 1, 2022, the fiduciary shall allocate receipts from the interest as provided in this section.

2022, c. 354.

§ 64.2-1059. Timber.

A. To the extent a fiduciary does not account for receipts from the sale of timber and related products as a business under § 64.2-1050, the fiduciary shall allocate the net receipts:

1. To income, to the extent the amount of timber cut from the land does not exceed the rate of growth of the timber;

2. To principal, to the extent the amount of timber cut from the land exceeds the rate of growth of the timber or the net receipts are from the sale of standing timber;

3. Between income and principal if the net receipts are from the lease of land used for growing and cutting timber or from a contract to cut timber from land, by determining the amount of timber cut from the land under the lease or contract and applying the rules in subdivisions 1 and 2; or

4. To principal, to the extent advance payments, bonuses, and other payments are not allocated under subdivisions 1, 2, or 3.

B. In determining net receipts to be allocated under subsection A, a fiduciary shall deduct and transfer to principal a reasonable amount for depletion.

C. This section applies to land owned or held by a fiduciary whether or not a settlor was cutting timber from the land before the fiduciary owned or held the property.

D. If a fiduciary owns or holds an interest in land used for growing and cutting timber before July 1, 2022, the fiduciary may allocate net receipts from the sale of timber and related products as provided in this section or in the manner used by the fiduciary before July 1, 2022. If the fiduciary acquires an interest in land used for growing and cutting timber on or after July 1, 2022, the fiduciary shall allocate net receipts from the sale of timber and related products as provided in this section.

2022, c. 354.

§ 64.2-1060. Marital deduction property not productive of income.

A. If a trust received property for which a gift or estate tax marital deduction was allowed and the settlor's spouse holds a mandatory income interest in the trust, the spouse may require the trustee, to the extent the trust assets otherwise do not provide the spouse with sufficient income from or use of the trust assets to qualify for the deduction, to:

1. Make property productive of income;

2. Convert property to property productive of income within a reasonable time; or

3. Exercise the power to adjust under § 64.2-1038.

B. The trustee may decide which action or combination of actions in subsection A to take.

2022, c. 354.

§ 64.2-1061. Derivative or option.

A. As used in this section, "derivative" means a contract, instrument, other arrangement, or combination of contracts, instruments, or other arrangements, the value, rights, and obligations of which are, in whole or in part, dependent on or derived from an underlying tangible or intangible asset, group of tangible or intangible assets, index, or occurrence of an event. "Derivative" includes stocks, fixed income securities, and financial instruments and arrangements based on indices, commodities, interest rates, weather-related events, and credit-default events.

B. To the extent a fiduciary does not account for a transaction in derivatives as a business under § 64.2-1050, the fiduciary shall allocate 10 percent of receipts from the transaction and 10 percent of disbursements made in connection with the transaction to income and the balance to principal.

C. Subsection D applies if:

1. A fiduciary:

a. Grants an option to buy property from a trust, whether or not the trust owns the property when the option is granted;

b. Grants an option that permits another person to sell property to the trust; or

c. Acquires an option to buy property for the trust or an option to sell an asset owned by the trust; and

2. The fiduciary or other owner of the asset is required to deliver the asset if the option is exercised.

D. If this subsection applies, the fiduciary shall allocate 10 percent to income and the balance to principal of the following amounts:

1. An amount received for granting the option;

2. An amount paid to acquire the option; and

3. Gain or loss realized on the exercise, exchange, settlement, offset, closing, or expiration of the option.

2022, c. 354.

§ 64.2-1062. Asset-backed security.

A. Except as otherwise provided in subsection B, a fiduciary shall allocate to income a receipt from or related to an asset-backed security, to the extent the payor identifies the payment as being from interest or other current return, and to principal the balance of the receipt.

B. If a fiduciary receives one or more payments in exchange for part or all of the fiduciary's interest in an asset-backed security, including a liquidation or redemption of the fiduciary's interest in the security, the fiduciary shall allocate to income 10 percent of receipts from the transaction and 10 percent of disbursements made in connection with the transaction and to principal the balance of the receipts and disbursements.

2022, c. 354.

§ 64.2-1063. Other financial instrument or arrangement.

A fiduciary shall allocate receipts from or related to a financial instrument or arrangement not otherwise addressed by this chapter. The allocation must be consistent with §§ 64.2-1061 and 64.2-1062.

2022, c. 354.

Article 7. Allocation of Disbursements.

§ 64.2-1064. Disbursement from income.

Subject to § 64.2-1067, and except as otherwise provided in subdivision C 2 or 3 of § 64.2-1071, a fiduciary shall disburse from income:

1. One-half of:

a. The regular compensation of the fiduciary and any person providing investment advisory, custodial, or other services to the fiduciary, to the extent income is sufficient; and

b. An expense for an accounting, judicial or nonjudicial proceeding, or other matter that involves both income and successive interests, to the extent income is sufficient;

2. The balance of the disbursements described in subdivision 1, to the extent a fiduciary that is an independent person determines that making those disbursements from income would be in the interests of the beneficiaries;

3. Another ordinary expense incurred in connection with administration, management, or preservation of property and distribution of income, including interest, an ordinary repair, regularly recurring tax assessed against principal, and an expense of an accounting, judicial or nonjudicial proceeding, or other matter that involves primarily an income interest, to the extent income is sufficient; and

4. A premium on insurance covering loss of a principal asset or income from or use of the asset.

2022, c. 354.

§ 64.2-1065. Disbursement from principal.

A. Subject to § 64.2-1068, and except as otherwise provided in subdivision C 2 of § 64.2-1071, a fiduciary shall disburse from principal:

1. The balance of the disbursements described in subdivisions 1 and 3 of § 64.2-1064, after application of subdivision 2 of § 64.2-1064;

2. The fiduciary's compensation calculated on principal as a fee for acceptance, distribution, or termination;

3. A payment of an expense to prepare for or execute a sale or other disposition of property;

4. A payment on the principal of a trust debt;

5. A payment of an expense of an accounting, judicial or nonjudicial proceeding, or other matter that involves primarily principal, including a proceeding to construe the terms of the trust or protect property;

6. A payment of a premium for insurance, including title insurance, not described in subdivision 4 of § 64.2-1064, of which the fiduciary is the owner and beneficiary;

7. A payment of an estate or inheritance tax or other tax imposed because of the death of a decedent, including penalties, apportioned to the trust; and

8. A payment:

a. Related to environmental matters, including:

(1) Reclamation;

(2) Assessing environmental conditions;

(3) Remedying and removing environmental contamination;

(4) Monitoring remedial activities and the release of substances;

(5) Preventing future releases of substances;

(6) Collecting amounts from persons liable or potentially liable for the costs of activities described in subdivisions (1) through (5);

(7) Penalties imposed under environmental laws or regulations;

(8) Other actions to comply with environmental laws or regulations;

(9) Statutory or common law claims by third parties; and

(10) Defending claims based on environmental matters; and

b. For a premium for insurance for matters described in subdivision a.

B. If a principal asset is encumbered with an obligation that requires income from the asset to be paid directly to a creditor, the fiduciary 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.

C. Notwithstanding any other provision of law and unless the terms of the trust provide to the contrary, a trustee may pay from the principal of the trust from time to time (i) the federal or state income taxes, or both, imposed upon the settlor on income of the trust that is not distributed to the settlor or (ii) such amounts that are required to reimburse the settlor for any federal or state income taxes, or both, imposed on the settlor on income of the trust that is not distributed to the settlor. The trustee shall not have the power to make payments pursuant to this subsection with respect to any trust where a charitable income, estate, or gift tax deduction has been allowed, in whole or in part, for the contributions to such trust if the exercise of such power would limit or reduce the amount of such deduction.

2022, c. 354.

§ 64.2-1066. Transfer from income to principal for depreciation.

A. As used in this section, "depreciation" means a reduction in value due to wear, tear, decay, corrosion, or gradual obsolescence of a tangible asset having a useful life of more than one year.

B. A fiduciary 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 the part of real property used or available for use by a beneficiary as a residence;

2. Of tangible personal property held or made available for the personal use or enjoyment of a beneficiary; or

3. Under this section, to the extent the fiduciary accounts:

a. Under § 64.2-1057 for the asset; or

b. Under § 64.2-1050 for the business or other activity in which the asset is used.

C. An amount transferred to principal under this section need not be separately held.

2022, c. 354.

§ 64.2-1067. Reimbursement of income from principal.

A. If a fiduciary makes or expects to make an income disbursement described in subsection B, the fiduciary may transfer an appropriate amount from principal to income in one or more accounting periods to reimburse income.

B. To the extent the fiduciary has not been and does not expect to be reimbursed by a third party, income disbursements to which subsection A applies include:

1. An amount chargeable to principal but paid from income because principal is illiquid;

2. A disbursement made to prepare property for sale, including improvements and commissions; and

3. A disbursement described in subsection A of § 64.2-1065.

C. If an asset whose ownership gives rise to an income disbursement becomes subject to a successive interest after an income interest ends, the fiduciary may continue to make transfers under subsection A.

2022, c. 354.

§ 64.2-1068. Reimbursement of principal from income.

A. If a fiduciary makes or expects to make a principal disbursement described in subsection B, the fiduciary may transfer an appropriate amount from income to principal in one or more accounting periods to reimburse principal or provide a reserve for future principal disbursements.

B. To the extent a fiduciary has not been and does not expect to be reimbursed by a third party, principal disbursements to which subsection A applies include:

1. An amount chargeable to income but paid from principal because income is not sufficient;

2. The cost of an improvement to principal, whether a change to an existing asset or the construction of a new asset, including a special assessment;

3. A disbursement made to prepare property for rental, including tenant allowances, leasehold improvements, and commissions;

4. A periodic payment on an obligation secured by a principal asset, to the extent the amount transferred from income to principal for depreciation is less than the periodic payment; and

5. A disbursement described in subsection A of § 64.2-1065.

C. If an asset whose ownership gives rise to a principal disbursement becomes subject to a successive interest after an income interest ends, the fiduciary may continue to make transfers under subsection A.

2022, c. 354.

§ 64.2-1069. Income taxes.

A. A tax required to be paid by a fiduciary that is based on receipts allocated to income must be paid from income.

B. A tax required to be paid by a fiduciary that is 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. Subject to subsection D and §§ 64.2-1067, 64.2-1068, and 64.2-1070, a tax required to be paid by a fiduciary on a share of an entity's taxable income in an accounting period must be paid from:

1. Income and principal proportionately to the allocation between income and principal of receipts from the entity in the period; and

2. Principal, to the extent the tax exceeds the receipts from the entity in the period.

D. After applying subsections A, B, and C, a fiduciary shall adjust income or principal receipts, to the extent the taxes the fiduciary pays are reduced because of a deduction for a payment made to a beneficiary.

2022, c. 354.

§ 64.2-1070. Adjustment between income and principal because of taxes.

A. A fiduciary may make an adjustment between income and principal to offset the shifting of economic interests or tax benefits between current income beneficiaries and successor beneficiaries that arises from:

1. An election or decision the fiduciary makes regarding a tax matter, other than a decision to claim an income tax deduction to which subsection B applies;

2. An income tax or other tax imposed on the fiduciary or a beneficiary as a result of a transaction involving the fiduciary or a distribution by the fiduciary; or

3. Ownership by the fiduciary of an interest in an entity a part of whose taxable income, whether or not distributed, is includable in the taxable income of the fiduciary or a beneficiary.

B. If the amount of an estate tax marital or charitable 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 the fiduciary or a beneficiary are decreased, the fiduciary shall charge each beneficiary that benefits from the decrease in income tax to 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 the principal used to pay the increase would have qualified for a marital or charitable deduction but for the payment. The share of the reimbursement for each fiduciary or beneficiary whose income taxes are reduced must be the same as its share of the total decrease in income tax.

C. A fiduciary that charges a beneficiary under subsection B may offset the charge by obtaining payment from the beneficiary, withholding an amount from future distributions to the beneficiary, or adopting another method or combination of methods.

2022, c. 354.

Article 8. Death of Individual or Termination of Income Interest.

§ 64.2-1071. Determination and distribution of net income.

A. This section applies when:

1. The death of an individual results in the creation of an estate or trust; or

2. An income interest in a trust terminates, whether the trust continues or is distributed.

B. A fiduciary of an estate or trust with an income interest that terminates shall determine, under subsection G and Articles 4 (§ 64.2-1048 et seq.), 5 (§ 64.2-1051 et seq.), 6 (§ 64.2-1055 et seq.), 7 (§ 64.2-1064 et seq.), and 9 (§ 64.2-1073 et seq.), the amount of net income and net principal receipts received from property specifically given to a beneficiary. The fiduciary shall distribute the net income and net principal receipts to the beneficiary that is to receive the specific property.

C. A fiduciary shall determine the income and net income of an estate or income interest in a trust that terminates, other than the amount of net income determined under subsection B, under Articles 4 (§ 64.2-1048 et seq.), 5 (§ 64.2-1051 et seq.), 6 (§ 64.2-1055 et seq.), 7 (§ 64.2-1064 et seq.), and 9 (§ 64.2-1073 et seq.), and by:

1. Including in net income all income from property used or sold to discharge liabilities;

2. 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 estate and inheritance taxes and other taxes imposed because of the decedent's death, but the fiduciary may pay the expenses from income of property passing to a trust for which the fiduciary claims a federal estate tax marital or charitable deduction only to the extent:

a. The payment of the expenses from income will not cause the reduction or loss of the deduction; or

b. The fiduciary makes an adjustment under subsection B of § 64.2-1070; and

3. Paying from principal other disbursements made or incurred in connection with the settlement of the estate or the winding up of an income interest that terminates, including:

a. To the extent authorized by the decedent's will, the terms of the trust, or applicable law, debts, funeral expenses, disposition of remains, family allowances, estate and inheritance taxes, and other taxes imposed because of the decedent's death; and

b. Related penalties that are apportioned, by the decedent's will, the terms of the trust, or applicable law, to the estate or income interest that terminates.

D. If a decedent's will, the terms of a trust, or applicable law provides for the payment of interest or the equivalent of interest to a beneficiary that receives a pecuniary amount outright, the fiduciary shall make the payment from net income determined under subsection C or from principal, to the extent net income is insufficient.

E. If a beneficiary is to receive a pecuniary amount outright from a trust after an income interest ends because of an income beneficiary's death, and no payment of interest or the equivalent of interest is provided for by the terms of the trust or applicable law, the fiduciary shall pay the interest or the equivalent of interest to which the beneficiary would be entitled under applicable law if the pecuniary amount were required to be paid under a will.

F. A fiduciary shall distribute net income remaining after payments required by subsections D and E in the manner described in § 64.2-1072 to all other beneficiaries, including a beneficiary that 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.

G. A fiduciary may not reduce principal or income receipts from property described in subsection B because of a payment described in § 64.2-1064 or 64.2-1065, to the extent the decedent's 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 the fiduciary recovers or expects to recover the payment from a third party. The net income and principal receipts from the property must be determined by including the amount the fiduciary receives or pays regarding the property, whether the amount accrued or became due before, on, or after the date of the decedent's death or an income interest's terminating event, and making a reasonable provision for an amount the estate or income interest may become obligated to pay after the property is distributed.

2022, c. 354.

§ 64.2-1072. Distribution to successor beneficiary.

A. Except to the extent Article 3 (§ 64.2-1039 et seq.) applies for a beneficiary that is a trust, each beneficiary described in subsection F of § 64.2-1071 is entitled to receive a share 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 which this section applies, each beneficiary, including a beneficiary that does not receive part of the distribution, is entitled, as of each distribution date, to a share of the net income the fiduciary received after the decedent's death, an income interest's other terminating event, or the preceding distribution by the fiduciary.

B. In determining a beneficiary's share of net income under subsection A, the following rules apply:

1. The beneficiary is entitled to receive a share of the net income equal to the beneficiary's fractional interest in the undistributed principal assets immediately before the distribution date.

2. The beneficiary's fractional interest under subdivision 1 must be calculated:

a. On the aggregate value of the assets as of the distribution date without reducing the value by any unpaid principal obligation; and

b. Without regard to:

(1) Property specifically given to a beneficiary under the decedent's will or the terms of the trust; and

(2) Property required to pay pecuniary amounts not in trust.

3. The distribution date under subdivision 1 may be the date as of which the fiduciary calculates the value of the assets if that date is reasonably near the date on which the assets are distributed.

C. To the extent a fiduciary does not distribute under this section all of the collected but undistributed net income to each beneficiary as of a distribution date, the fiduciary shall maintain records showing the interest of each beneficiary in the net income.

D. If this section applies to income from an asset, a fiduciary may apply the rules in this section to net gain or loss realized from the disposition of the asset after the decedent's death, an income interest's terminating event, or the preceding distribution by the fiduciary.

2022, c. 354.

Article 9. Apportionment At Beginning and End of Income Interest.

§ 64.2-1073. When right to income begins and ends.

A. An income beneficiary is entitled to net income in accordance with the terms of the trust from the date an income interest begins. The 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:

1. The trust for the current income beneficiary; or

2. A successive interest for a successor beneficiary.

B. An asset becomes subject to a trust under subdivision A 1:

1. For an asset that is transferred to the trust during the settlor's life, on the date the asset is transferred;

2. For an asset that becomes subject to the trust because of a decedent's death, on the date of the decedent's death, even if there is an intervening period of administration of the decedent's estate; or

3. For an asset that is transferred to a fiduciary by a third party because of a decedent's death, on the date of the decedent's death.

C. An asset becomes subject to a successive interest under subdivision A 2 on the day after the preceding income interest ends, as determined under subsection D, 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 which a fiduciary may or must distribute income.

2022, c. 354.

§ 64.2-1074. Apportionment of receipts and disbursements when decedent dies or income interest begins.

A. A fiduciary shall allocate an income receipt or disbursement, other than a receipt to which subsection B of § 64.2-1071 applies, to principal if its due date occurs before the date on which:

1. For an estate, the decedent died; or

2. For a trust or successive interest, an income interest begins.

B. If the due date of a periodic income receipt or disbursement occurs on or after the date on which a decedent died or an income interest begins, a fiduciary shall allocate the receipt or disbursement to income.

C. If an income receipt or disbursement is not periodic or has no due date, a fiduciary shall treat the receipt or disbursement under this section as accruing from day to day. The fiduciary shall allocate to principal the portion of the receipt or disbursement accruing before the date on which a decedent died or an income interest begins and to income the balance.

D. A receipt or disbursement is periodic under subsections B and C if:

1. The receipt or disbursement must be paid at regular intervals under an obligation to make payments; or

2. The payor customarily makes payments at regular intervals.

E. An item of income or obligation is due under this section on the date the payor is required to make a payment. If a payment date is not stated, there is no due date.

F. Distributions to shareholders or other owners from an entity to which § 64.2-1048 applies are due:

1. On the date fixed by or on behalf of the entity for determining the persons entitled to receive the distribution;

2. If no date is fixed, on the date of the decision by or on behalf of the entity to make the distribution; or

3. If no date is fixed and the fiduciary does not know the date of the decision by or on behalf of the entity to make the distribution, on the date the fiduciary learns of the decision.

2022, c. 354.

§ 64.2-1075. Apportionment when income interest ends.

A. As used in this section, "undistributed income" means net income received on or before the date on which an income interest ends. "Undistributed income" 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. Except as otherwise provided in subsection C, when a mandatory income interest of a beneficiary ends, the fiduciary shall pay the beneficiary's share of the undistributed income that is not disposed of under the terms of the trust to the beneficiary or, if the beneficiary does not survive the date the interest ends, to the beneficiary's estate.

C. If a beneficiary has an unqualified power to withdraw more than five percent of the value of a trust immediately before an income interest ends:

1. The fiduciary shall allocate to principal the undistributed income from the portion of the trust which may be withdrawn; and

2. Subsection B applies only to the balance of the undistributed income.

D. When a fiduciary's obligation to pay a fixed annuity or a fixed fraction of the value of assets ends, the fiduciary shall prorate the final payment as required to preserve an income tax, gift tax, estate tax, or other tax benefit.

2022, c. 354.

Article 10. Miscellaneous Provisions.

§ 64.2-1076. Uniformity of application and construction.

In applying and construing this uniform act, consideration must be given to the need to promote uniformity of the law with respect to its subject matter among states that enact it.

2022, c. 354.

§ 64.2-1077. Relation to Electronic Signatures in Global and National Commerce Act.

This chapter modifies, limits, or supersedes the Electronic Signatures in Global and National Commerce Act, 15 U.S.C. § 7001 et seq., but does not modify, limit, or supersede § 101(c) of that act, 15 U.S.C. § 7001(c), or authorize electronic delivery of any of the notices described in § 103(b) of that act, 15 U.S.C. § 7003(b).

2022, c. 354.

§ 64.2-1078. Application to trust or estate.

This chapter applies to a trust or estate existing or created on or after July 1, 2022, except as otherwise expressly provided in the terms of the trust or this chapter.

2022, c. 354.

Chapter 11. Uniform Prudent Management of Institutional Funds Act.

§ 64.2-1100. Definitions.

In this chapter:

"Charitable purpose" means the relief of poverty, the advancement of education or religion, the promotion of health, the promotion of a governmental or municipal purpose, or any other purpose the achievement of which is beneficial to the community.

"Endowment fund" means an institutional fund or part thereof that, under the terms of a gift instrument, is not wholly expendable by the institution on a current basis. The term does not include assets that an institution designates as an endowment fund for its own use.

"Gift instrument" means a record or records, including an institutional solicitation, under which property is granted to, transferred to, or held by an institution as an institutional fund.

"Institution" means:

1. A person, other than an individual, organized and operated exclusively for charitable purposes;

2. A government or governmental subdivision, agency, or instrumentality, to the extent that it holds funds exclusively for a charitable purpose; or

3. A trust that had both charitable and noncharitable interests, after all noncharitable interests have terminated.

"Institutional fund" means a fund held by an institution exclusively for charitable purposes. The term does not include:

1. Program-related assets;

2. A fund held for an institution by a trustee that is not an institution, unless the fund is held by the trustee as a component trust of a community trust or foundation; or

3. A fund in which a beneficiary that is not an institution has an interest, other than an interest that could arise upon violation or failure of the purposes of the fund.

"Person" means an individual, corporation, business trust, estate, trust, partnership, limited liability company, association, joint venture, public corporation, government or governmental subdivision, agency, or instrumentality, or any other legal or commercial entity.

"Program-related asset" means an asset held by an institution primarily to accomplish a charitable purpose of the institution and not primarily for investment.

"Record" means information that is inscribed on a tangible medium or that is stored in an electronic or other medium and is retrievable in perceivable form.

1973, c. 167, § 55-268.1; 1995, c. 199; 1997, c. 219; 2008, c. 184, § 55-268.12; 2012, c. 614.

§ 64.2-1101. Standard of conduct in managing and investing institutional fund.

A. Subject to the intent of a donor expressed in a gift instrument, an institution, in managing and investing an institutional fund, shall consider the charitable purposes of the institution and the purposes of the institutional fund.

B. In addition to complying with the duty of loyalty imposed by law other than this chapter, each person responsible for managing and investing an institutional fund shall manage and invest the fund in good faith and with the care an ordinarily prudent person in a like position would exercise under similar circumstances.

C. In managing and investing an institutional fund, an institution:

1. May incur only costs that are appropriate and reasonable in relation to the assets, the purposes of the institution, and the skills available to the institution; and

2. Shall make a reasonable effort to verify facts relevant to the management and investment of the fund.

D. An institution may pool two or more institutional funds for purposes of management and investment.

E. Except as otherwise provided by a gift instrument, the following rules apply:

1. In managing and investing an institutional fund, the following factors, if relevant, shall be considered:

a. General economic conditions;

b. The possible effect of inflation or deflation;

c. The expected tax consequences, if any, of investment decisions or strategies;

d. The role that each investment or course of action plays within the overall investment portfolio of the fund;

e. The expected total return from income and the appreciation of investments;

f. Other resources of the institution;

g. The needs of the institution and the fund to make distributions and to preserve capital; and

h. An asset's special relationship or special value, if any, to the charitable purposes of the institution.

2. Management and investment decisions about an individual asset shall be made not in isolation but rather in the context of the institutional fund's portfolio of investments as a whole and as a part of an overall investment strategy having risk and return objectives reasonably suited to the fund and to the institution.

3. Except as otherwise provided by law other than this chapter, an institution may invest in any kind of property or type of investment consistent with this section.

4. An institution shall diversify the investments of an institutional fund unless the institution reasonably determines that, because of special circumstances, the purposes of the fund are better served without diversification.

5. Within a reasonable time after receiving property, an institution shall make and carry out decisions concerning the retention or disposition of the property or to rebalance a portfolio, in order to bring the institutional fund into compliance with the purposes, terms, and distribution requirements of the institution as necessary to meet other circumstances of the institution and the requirements of this chapter.

6. A person that has special skills or expertise, or is selected in reliance upon the person's representation that the person has special skills or expertise, has a duty to use those skills or that expertise in managing and investing institutional funds.

1973, c. 167, §§ 55-268.4, 55-268.6; 2008, c. 184, § 55-268.13; 2012, c. 614.

§ 64.2-1102. Appropriation for expenditure or accumulation of endowment fund; rules of construction.

A. Subject to the intent of a donor expressed in the gift instrument, an institution may appropriate for expenditure or accumulate so much of an endowment fund as the institution determines is prudent for the uses, benefits, purposes, and duration for which the endowment fund is established. Unless stated otherwise in the gift instrument, the assets in an endowment fund are donor-restricted assets until appropriated for expenditure by the institution. In making a determination to appropriate or accumulate, the institution shall act in good faith, with the care that an ordinarily prudent person in a like position would exercise under similar circumstances, and shall consider, if relevant, the following factors:

1. The duration and preservation of the endowment fund;

2. The purposes of the institution and the endowment fund;

3. General economic conditions;

4. The possible effect of inflation or deflation;

5. The expected total return from income and the appreciation of investments;

6. Other resources of the institution; and

7. The investment policy of the institution.

B. To limit the authority to appropriate for expenditure or accumulate under subsection A, a gift instrument shall specifically state the limitation.

C. Terms in a gift instrument designating a gift as an endowment, or a direction or authorization in the gift instrument to use only "income," "interest," "dividends," or "rents, issues, or profits," or "to preserve the principal intact," or words of similar import:

1. Create an endowment fund of permanent duration unless other language in the gift instrument limits the duration or purposes of the fund; and

2. Do not otherwise limit the authority to appropriate for expenditure or accumulate under subsection A.

1973, c. 167, §§ 55-268.2, 55-268.3; 2008, c. 184, § 55-268.14; 2012, c. 614.

§ 64.2-1103. Delegation of management and investment functions.

A. Subject to any specific limitation set forth in a gift instrument or in law other than this chapter, an institution may delegate to an external agent the management and investment of an institutional fund to the extent that an institution could prudently delegate under the circumstances. An institution shall act in good faith, with the care that an ordinarily prudent person in a like position would exercise under similar circumstances, in:

1. Selecting an agent;

2. Establishing the scope and terms of the delegation, consistent with the purposes of the institution and the institutional fund; 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 designated function, an agent owes a duty to the institution to exercise reasonable care to comply with the scope and terms of the delegation.

C. An institution that complies with subsection A is not liable for the decisions or actions of an agent to which the function was delegated.

D. By accepting delegation of a management or investment function from an institution that is subject to the laws of the Commonwealth, an agent submits to the jurisdiction of the courts of the Commonwealth in all proceedings arising from or related to the delegation or the performance of the delegated function.

E. An institution may delegate management and investment functions to its committees, officers, or employees as authorized by law of the Commonwealth other than this chapter.

1973, c. 167, § 55-268.5; 2008, c. 184, § 55-268.15; 2012, c. 614.

§ 64.2-1104. Release or modification of restrictions on management, investment, or purpose.

A. If the donor consents in a record, an institution may release or modify, in whole or in part, a restriction contained in a gift instrument on the management, investment, or purpose of an institutional fund. A release or modification may not allow a fund to be used for a purpose other than a charitable purpose of the institution.

B. The court, upon application of an institution, may modify a restriction contained in a gift instrument regarding the management or investment of an institutional fund if the restriction has become impracticable or wasteful, if it impairs the management or investment of the fund, or if, because of circumstances not anticipated by the donor, a modification of a restriction will further the purposes of the fund. The institution shall notify the Attorney General of the application, and the Attorney General shall be given an opportunity to be heard. To the extent practicable, any modification shall be made in accordance with the donor's probable intention.

C. If a particular charitable purpose or restriction contained in a gift instrument on the use of an institutional fund becomes unlawful, impracticable, impossible to achieve, or wasteful, the court, upon application of an institution, may modify the purpose of the fund or the restriction on the use of the fund in a manner consistent with the charitable purposes expressed in the gift instrument. The institution shall notify the Attorney General of the application, and the Attorney General shall be given an opportunity to be heard.

D. If an institution determines that a restriction contained in a gift instrument on the management, investment, or purpose of an institutional fund is unlawful, impracticable, impossible to achieve, or wasteful, the institution, without application to the court but with the consent of the Attorney General, may modify the purpose of the fund or the restriction on the use of the fund in a manner consistent with the charitable purposes expressed in the gift instrument if the fund subject to the restriction has a total value of less than $250,000.

E. If an institution determines that a restriction contained in a gift instrument on the management, investment, or purpose of an institutional fund is unlawful, impracticable, impossible to achieve, or wasteful, the institution, 60 days after notification to the Attorney General, may release or modify the restriction, in whole or part, if:

1. The institutional fund subject to the restriction has a total value of less than $50,000;

2. More than 20 years have elapsed since the fund was established; and

3. The institution uses the property in a manner consistent with the charitable purposes expressed in the gift instrument.

1973, c. 167, § 55-268.7; 2008, c. 184, § 55-268.16; 2012, c. 614.

§ 64.2-1105. Reviewing compliance.

Compliance with this chapter is determined in light of the facts and circumstances existing at the time a decision is made or action is taken, and not by hindsight.

2008, c. 184, § 55-268.17; 2012, c. 614.

§ 64.2-1106. Application to existing institutional funds.

This chapter applies to institutional funds existing on or established after July 1, 2008. As it applies to institutional funds existing on July 1, 2008, this article governs only decisions made or actions taken on or after that date.

2008, c. 184, § 55-268.18; 2012, c. 614.

§ 64.2-1107. Relation to Electronic Signatures in Global and National Commerce Act.

This chapter modifies, limits, and supersedes the Electronic Signatures in Global and National Commerce Act, 15 U.S.C. § 7001 et seq., but does not modify, limit, or supersede § 101 of that act, 15 U.S.C. § 7001(a), or authorize electronic delivery of any of the notices described in § 103 of that act, 15 U.S.C. § 7001(b).

2008, c. 184, § 55-268.19; 2012, c. 614.

§ 64.2-1108. Uniformity of application and construction.

In applying and construing this uniform act, consideration shall be given to the need to promote uniformity of the law with respect to its subject matter among states that enact it.

1973, c. 167, § 55-268.9; 2008, c. 184, § 55-268.20; 2012, c. 614.