GENERAL ASSEMBLY OF NORTH CAROLINA

SESSION 1993

S	1 

SENATE BILL 697

Short Title:  Trustee Powers Act.	(Public)
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Sponsors: Senator Soles.
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Referred to:  Judiciary II.
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April 5, 1993

A BILL TO BE ENTITLED
AN ACT TO BE KNOWN AS TRUSTEE POWERS ACT.
The General Assembly of North Carolina enacts:
Section 1.  Chapter 36A of the General Statutes is amended by adding three new Articles to read:
"ARTICLE 13.
"Powers of Trustees.
"§ 36A-135.  Applicability.
(a)	Articles 13, 14, and 15 of this Chapter apply only to trustees under express trust agreements, including testamentary trusts, whether the trustee is appointed under an express trust agreement or appointed by the clerk of superior court.  Articles 13, 14, and 15 of this Chapter shall not apply to trustees of a resulting or constructive trust, a business trust which provides for certificates to be issued to the beneficiary, an investment trust, a voting trust, a security instrument, a trust created by the judgment or decree of a court, a liquidation trust, or a trust for the primary purpose of paying dividends, interest, interest coupons, salaries, wages, pensions or profits, or employee benefits of any kind, an instrument wherein a person is nominee or escrowee for another, a trust created in deposits in any financial institution, or other trust, the nature of which does not admit of general trust administration.  A trustee shall have all the powers and duties under this Article to the extent that such powers and duties are not inconsistent with the powers and duties imposed in the express trust.  The powers and duties of more than one trustee are subject to the provisions of G.S. 36A-73.
(b)	Nothing contained in this Article shall be construed as authorizing any departure from the express terms or limitations set forth in any express trust agreement creating or limiting the trustee's powers and duties.
(c)	The powers contained in this Article are in addition to any other powers granted or provided by law.
"§ 36A-136.  Powers of a trustee.
A trustee has the power to perform in a reasonable and prudent manner every act that a reasonable and prudent person would perform incident to the collection, preservation, management, use and distribution of the trust estate to accomplish the desired result of administering the trust estate legally and in the best interest of the trust beneficiaries, including, but not limited to, the following specific powers:
(1)	To take possession, custody, or control of assets transferred to the trust.
(2)	To retain for such time as the trustee shall deem advisable any property, real or personal, which the trustee may receive, even though the retention of such property by reason of its character, amount, proportion to the total estate or otherwise would not be appropriate for the trustee apart from this provision.
(3)	To receive assets from other fiduciaries or other sources.
(4)	To compromise, adjust, arbitrate, sue on or defend, abandon, or otherwise deal with and settle claims in favor of or against the trust.
(5)	To make, execute, and deliver all instruments, under seal or otherwise, as may be necessary in the exercise of the powers herein granted.
(6)	To abandon or relinquish all rights in any property when, in the trustee's opinion, acting reasonably and in good faith, it is valueless, or is so encumbered or is otherwise in such condition that it is of no benefit or value to the trust.
(7)	To sell, exchange, or otherwise dispose of, or grant options with respect to, any personal property of the trust in the manner prescribed by the provisions of Article 14 of this Chapter.
(8)	To sell, exchange, partition, or otherwise dispose of, or grant options with respect to, any real property of the trust in the manner prescribed by the provisions of Article 15 of this Chapter.  However, where the terms of an express trust grant the trustee the power to sell, exchange, partition, or otherwise dispose of, or grant options with respect to, any real property, the powers contained in the express trust shall control, and the provisions of Article 15 of this Chapter shall not apply.
(9)	To comply with environmental law. –
a.	To inspect property held by the trustee, including interests in sole proprietorships, partnerships, or corporations and any assets owned by any such business enterprise, for the purpose of determining compliance with environmental law affecting such property and to respond to any actual or threatened violation of any environmental law affecting property held by the trustee;
b.	To take, on behalf of the estate or trust, any action necessary to prevent, abate, or otherwise remedy any actual or threatened violation of any environmental law affecting property held by the trustee, either before or after the initiation of an enforcement action by any governmental body;
c.	To refuse to accept property in trust if the trustee determines that any property to be donated to the trust either is contaminated by any hazardous substance or is being used or has been used for any activity directly or indirectly involving hazardous substance which could result in liability to the trust or otherwise impair the value of the assets held therein;
d.	To settle or compromise at any time any and all claims against the trust which may be asserted by any governmental body or private party involving the alleged violation of any environmental law affecting property held in trust;
e.	To disclaim any power granted by any document, statute, or rule of law which, in the sole discretion of the trustee, may cause the trustee to incur personal liability under any environmental law;
f.	To decline to serve as a trustee if the trustee reasonably believes that there is or may be a conflict of interest between it in its fiduciary capacity and in its individual capacity because of potential claims or liabilities which may be asserted against it on behalf of the trust because of the type or condition of assets held therein;
g.	For purposes of this subdivision, 'environmental law' means any federal, state, or local law, rule, regulation, or ordinance relating to protection of the environment or human health.  For purposes of this subdivision, 'hazardous substance' means any substance defined as hazardous or toxic or otherwise regulated by any environmental law.  The trustee shall be entitled to charge the cost of any inspection, review, abatement, response, cleanup, or remedial action authorized herein against the income or principal of the trust.  A trustee shall not be personally liable to any beneficiary or other party for any decrease in value of assets in trust by reason of the trustee's compliance with any environmental law, specifically including any reporting requirement under such law.  Neither the acceptance by the trustee of property or a failure by the trustee to inspect property shall be deemed to create any inference as to whether or not there is or may be any liability under any environmental law with respect to such property.
(10)	To sell or exercise stock subscription or conversion rights; to consent, directly or through a committee or other agent, to the reorganization, consolidation, merger, dissolution, or liquidation of a corporate or other business enterprise.
(11)	To insure the trust's assets against damage or loss, at the expense of the trust.
(12)	To pay taxes, assessments, and other expenses incident to the collection, care, administration, and protection of the trust property.
(13)	To pay necessary expenses of administering the trust from the trust property.
(14)	To employ persons, firms, and corporations including, but not limited to, agents, auditors, accountants, brokers, attorneys-at-law, attorneys-in-fact, investment advisors, appraisers, custodians, rental agents, realtors, and tax specialists to advise or assist the trustee in the performance of the trustee's administrative duties, and to charge the expense of such employment to the trust.
(15)	To continue any business or venture or farming operation in which the trust has an interest, where such continuation is reasonably necessary or desirable to preserve the value, including goodwill, of the trust's interest in such business.
(16)	To incorporate or participate in the incorporation of any business or venture in which the trust may have an interest.
(17)	To invest and reinvest trust property, as the trustee shall deem advisable in accordance with the provisions of the trust or as provided by law.
(18)	To lease any property of the trust for a term of not more than three years.
(19)	To foreclose, as an incident to the collection of any bond, note, or other obligation, any mortgage, deed of trust, or other lien securing such bond, note, or other obligation, and to bid in the property at such foreclosure sale, or to acquire the property from the mortgagor or obligor without foreclosure; and to retain the property so bid in or taken over without foreclosure.
(20)	To borrow money for such periods of time and upon such terms and conditions as to rates, maturities, renewals, and security as the trustee shall deem advisable, including the power of a corporate trustee to borrow from its own banking department, for the purpose of paying debts, taxes, and other claims against the trust and to mortgage, pledge, or otherwise encumber such portion of the trust property as may be required to secure such loan or loans; and to renew existing loans either as maker or endorser.
(21)	To allocate items of income or expense to either trust income or principal, as permitted by law.
(22)	To make payments in money, or in property in lieu of money, to or for a minor or incompetent in any one or more of the following ways:
a.	Directly to such minor or incompetent;
b.	To apply directly in payment for the support, maintenance, education, and medical, surgical, hospital, or other institutional care of such minor or incompetent;
c.	To the legal or natural guardian of such minor or incompetent;
d.	To any other person, whether or not appointed guardian of the person by any court, who shall, in fact, have the care and custody of the person of such minor or incompetent.
e.	To a custodian for such beneficiary under a uniform gifts or transfers to minors act.  The fiduciary shall not be under any duty to see to the application of the payments so made, if the fiduciary exercised due care in the selection of the person, including the minor or incompetent, to whom such payments were made; and the receipt of such person shall be full acquittance to the fiduciary.
(23)	To deposit, as a trustee, funds of the trust in a bank, including a bank operated by the trustee upon compliance with the provisions of G.S. 36A-63.
"ARTICLE 14.
"Disposition of Personal Property.
"§ 36A-137.  Disposition of personal property without court order.
Pursuant to the authority contained in G.S. 36A-136(7), the trustee has the power to sell at either a public or private sale, or to exchange, or otherwise dispose of, or grant options with respect to, personal property of the trust without court order.
"§ 36A-138.  Disposition of personal property by court order.
(a)	A trustee may, if he so desires, request the clerk of superior court to issue to him an order to sell, exchange, or otherwise dispose of, or grant options with respect to, personal property of the trust.
(b)	Sales of personal property shall be conducted as provided in Article 29A of Chapter 1 of the General Statutes, entitled 'Judicial Sales'.
"ARTICLE 15.
"Disposition of Real Estate.
"§ 36A-139.  Disposition of real property without court order.
Pursuant to the authority contained in G.S. 36A-136(8), the trustee has the power to sell, exchange, partition, or otherwise dispose of, or grant options with respect to, real property of the trust upon such terms as he may deem just and for the advantage of the trust.  The procedure shall be as provided in Article 29 of Chapter 1 of the General Statutes, entitled 'Judicial Sales'.  If it is made to appear to the clerk of superior court by petition and by satisfactory proof that it will be for the best interest of the estate to sell by private sale, the clerk may authorize a private sale in accordance with the provisions of G.S. 1-339.33 through G.S. 1-339.40.
"§ 36A-140.  Disposition of real property by court order.
(a)	A trustee may, if he so desires, request the clerk of superior court to issue to him an order to sell, exchange, partition, or otherwise dispose of, or grant options with respect to, real property of the trust.
(b)	Sales of real property shall be conducted as provided in Article 29 of Chapter 7 of the General Statutes, entitled 'Judicial Sales.'"
Sec. 2.  G.S. 1-339.4 is amended by adding the following new subdivision:
"(6a)	In a proceeding to sell property of a trust, the trustee;".
Sec. 3.  G.S. 1-339.10(c) reads as rewritten:
"(c)	Whenever an executor or trustee of a testamentary trust is ordered to sell real property, the judge or clerk having jurisdiction shall require such executor or trustee of a testamentary trust, before receiving the proceeds of the sale, to furnish bond to cover such proceeds, unless the will provides otherwise, in which case the judge or clerk may require such bond."
Sec. 4.  This act is effective for all trusts in existence or created on or after the date of ratification of this act.