Summary of the Committee Version of the Bill

HCS HB 241 -- TRUSTS

SPONSOR:  Smith

COMMITTEE ACTION:  Voted "do pass" by the Committee on Civil and
Administrative Law by a vote of 9 to 0.

This substitute revises the law governing principal and income
in the administration of trusts.  The substitute:

(1)  Redefines the standards and processes used to determine
which parts of a trust constitute principal and which constitute
income from that principal, as well as trustees' obligations in
administering those trusts;

(2)  Allows trustees discretion in adjusting the trust
portfolio, to do what is fair and reasonable to all
beneficiaries, absent clear intent in the trust to the contrary,
in accordance with the Prudent Investor Act;

(3)  Adopts and sets the "unitrust amount" (the default
mechanism used to determine how much of a portfolio to count as
income) at 3%;

(4)  Repeals the rule against perpetuities as it applies to
trusts, under certain conditions; and

(5)  Reduces the statute of limitations, from 5 years to 2
years, for claims of breach of trust resulting from a trustee's
allocation of income and principal.

FISCAL NOTE:  No impact on state funds.

PROPONENTS:  Supporters say that the bill is a uniform act,
being adopted throughout the country, which revises many
outdated fiduciary accounting rules and methods.  The bill is
needed to bring the chapter up to date with changes in the
federal income tax code and to make it consistent with the
Prudent Investor Act, enacted in 1996.  The current law was
enacted in 1983, and there have been a myriad of changes in the
financial world and accounting methods since that time.  The
common law Rule Against Perpetuities (as it is applied to
trusts) has been repealed in 14 states already to avoid huge tax
implications from the federal "generation-skipping tax."  As a
result, Missouri trusts companies and attorneys have been losing
trust business to those other states.

Testifying for the bill were Representative Smith; Missouri Bar;
and Missouri Bankers Association.

OPPONENTS:  There was no opposition voiced to the committee.

Richard Smreker, Senior Legislative Analyst


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Last Updated November 26, 2001 at 11:43 am