A BILL TO BE ENTITLED
AN ACT to modernize the law affecting the compensation of trustees and other fiduciaries.
The General Assembly of North Carolina enacts:
SECTION 1.  Article 5 of Chapter 32 of the General Statutes is repealed.
SECTION 2.  Chapter 32 of the General Statutes is amended by adding  a new Article to read:
"Article 5A.
"Compensation of Trustees and Other Fiduciaries.
"§ 32-53. Definitions.
As used in this Article:
(1)	"Interested person" includes (i) the grantor of the trust, if living; (ii) all living persons who are currently receiving or eligible to receive distributions of income or principal of the trust; (iii) all living persons who would be entitled to income and/or principal of the trust (without regard to the exercise of any power of appointment) if the trust terminated on that date; and (iv) any special trustee, trust protector, or advisor named in the trust instrument who is entitled to receive similar notices pursuant to the terms of the trust.
(2)	"Trust" has the same meaning as contained in G.S. 36A-22.1(5).
"§ 32-54. Compensation of trustees.
(a)	If the terms of the trust do not specify the trustee's compensation, the trustee is entitled to receive compensation that is reasonable under the circumstances and shall be empowered to pay such compensation from the assets of the trust without prior approval of the clerk of superior court.
(b)	Factors to be considered in determining reasonableness of compensation: 
(1)	The degree of difficulty and novelty of the tasks required of the trustee;
(2)	The responsibilities and risks involved;
(3)	The amount and character of the trust assets;
(4)	The skill, experience, expertise, and facilities of the trustee;
(5)	The quality of the trustee's performance;
(6)	Comparable charges for similar services;
(7)	Time devoted to administering the trust;
(8)	Time constraints imposed upon the trustee in administering the trust;
(9)	Nature and costs of services delegated to others by the trustee;
(10)	Where more than one trustee is serving, the reasonableness of the total fees paid to all trustees; and
(11)	Other factors which the trustee or the clerk of superior court deems to be relevant.
"§ 32-55. Reimbursement for expenses incurred.
In addition to the compensation referred to in G.S. 32-54, the trustee shall be entitled to reimbursement out of the assets of the trust for expenses properly incurred in the administration of the trust.
"§ 32-56. Notice of compensation and other payments.
Within a reasonable period of time after the end of each fiscal year of the trust, regardless of whether an accounting is otherwise required by law or by the trust instrument, the trustee shall give written notice to all interested persons of any compensation, expense reimbursement, professional fee, counsel fees allowed under G.S. 32-60, distribution, or payment of any kind made to the trustee in such fiscal year from the assets of the trust. If any interested person is then under a legal disability, such notice shall be given to such person's guardian or agent under a durable power of attorney or to a parent of such person if such person is then a minor; and such notice shall have the same effect as if given directly to the interested person while not under a legal disability so long as the person receiving the notice is not also the trustee. An annual accounting provided by the trustee to all interested persons who are not then under a legal disability and to the guardian, agent, or parent of any interested person who is then under a legal disability within a reasonable time after the end of the fiscal year of the trust shall be deemed sufficient notice under this section provided that it sets forth and clearly identifies all compensation, expense reimbursements, professional fees, counsel fees allowed under G.S. 32-60, distributions, and other payments of any kind to the trustee during such fiscal year from the assets of the trust.
"§ 32-57. Judicial review of compensation and other payments to trustee.
(a)	Unless specifically prohibited by the trust instrument, any interested person, or the guardian, agent, or parent of any interested person who is then under a legal disability, may initiate a proceeding under Article 3 of Chapter 36A of the General Statutes for the review of the reasonableness of any compensation or expense reimbursement paid under this Article. The provisions of Article 3 of Chapter 36A shall govern that proceeding and any appeal from that proceeding, except that:
(1)	The definition of "interested person" contained in G.S. 32-53(1) shall control in all matters relating to such review, including the determination of who may initiate a proceeding under G.S 36A-23.1 and the determination of when an interested person may be represented by others under G.S. 36A-26.3(2).
(2)	For purposes of G.S. 36A-26.1, it shall be necessary that all interested persons not joined as petitioners be joined as respondents, but it shall not be necessary that all known beneficiaries be joined as respondents unless they are interested persons.
(3)	In addition to other powers of the clerk of superior court acting under Article 3 of Chapter 36A of the General Statutes if the clerk of superior court determines upon review that a trustee has received excessive compensation or expense reimbursement, the clerk may order such trustee to make appropriate refunds.
(b)	Notwithstanding the foregoing, if a proceeding for review of the reasonableness of compensation or expense reimbursement paid to a trustee is not initiated within one year from the date when notice of such payment is given pursuant to G.S. 32-56, then it shall be presumed that such compensation or expense reimbursement was reasonable.
"§ 32-58. Compensation of other fiduciaries.
In the case of a fiduciary other than a trustee under a trust, where the instrument creating the fiduciary relationship does not contain a provision relating to compensation and where there is no provision in the General Statutes providing for compensation for such fiduciary, such fiduciary shall be entitled to reasonable compensation determined in writing by the clerk of superior court in its discretion and to reimbursement of expenses properly incurred in the administration of the fiduciary relationship. Upon written request by the fiduciary, the clerk of superior court may allow the reimbursement of such expenses and such reasonable compensation after taking into account the factors set forth in G.S. 32-54(b).
"§ 32-59. Effect of provisions in instrument.
In those instances where the instrument creating the trust or other fiduciary relationship provides that the compensation of the fiduciary shall be the amount "provided by law", the "maximum amount provided by law", or other similar language, or references former G.S. 32-50, such language shall be construed as an intention that the trustee or other fiduciary shall receive reasonable compensation as allowed under this Article. In those instances where the instrument creating the trust or other fiduciary relationship provides that the trustee or other fiduciary shall serve without compensation, such language shall be construed as being a provision relating to compensation, and the trustee or other fiduciary shall not be entitled to receive reasonable compensation as allowed under this Article.
"§ 32-60. Counsel fees allowable to attorneys serving as fiduciaries.
The clerk of superior court may exercise discretion to allow counsel fees to an attorney serving as a fiduciary or trustee (in addition to the compensation allowed to the attorney as a fiduciary or trustee) where such attorney, on behalf of the trust or fiduciary relationship, renders professional services as an attorney that are different from the services normally performed by a fiduciary or trustee and of a type which would reasonably justify the retention of legal counsel by any fiduciary or trustee who is not licensed to practice law. 
"§ 32-61. Applicability.
The provisions of this Article shall apply to all payments made to a fiduciary after the enactment of this Article, including fiduciary compensation earned or paid after the enactment of this Article, with respect to trusts and fiduciary relationships created on or after January 1, 2004, and with respect to all trusts and fiduciary relationships existing on January 1, 2004."
SECTION 3.  G.S. 32A‑11(c) reads as rewritten:
"(c)	In the event that any power of attorney executed pursuant to the provisions of this Article does not contain the amount of  compensation that the attorney‑in‑fact is entitled to receive or the way such  compensation is to be determined, and the principal should thereafter become incapacitated or mentally incompetent,  then, subsequent to the principal's incapacity or mental incompetence, the attorney-in-fact shall be entitled to receive such reasonable compensation as determined by the clerk of superior court after considering the factors set forth in G.S. 32-54(b)."
SECTION 4.  G.S. 36A‑23.1(a) reads as rewritten:
"(a)	The clerks of superior court of this State have original jurisdiction over all proceedings initiated by interested persons concerning the internal affairs of trusts except proceedings to modify or terminate trusts. Except as provided in subdivision (3) of this subsection, the clerk's jurisdiction is exclusive. Proceedings that may be maintained under this subsection are those concerning the administration and distribution of trusts, the declaration of rights, and the determination of other matters involving trustees and trust beneficiaries, to the extent that those matters are not otherwise provided for in the governing instrument. These include proceedings:
(1)	To appoint or remove a trustee;
(2)	To review trustees' fees  and expenses pursuant to Article 5A of Chapter 32 of the General Statutes and to review and settle interim or final accounts; and
(3)	To ascertain beneficiaries, to determine any question arising in the administration or distribution of any trust, including questions of construction of trust instruments, and to determine the existence or nonexistence of trusts created other than by will and the existence or nonexistence of any immunity, power, privilege, duty, or right. The clerk, on the clerk's own motion, may determine that a proceeding to determine an issue listed in this subdivision shall be originally heard by a superior court judge."
SECTION 5.  G.S. 36A‑63(d) reads as rewritten:
"(d)	In addition to any other compensation to which it may be entitled under G.S. 28A‑23‑3, 34‑12, 35A‑1269, or under any other authority, a corporation acting in a fiduciary capacity shall be allowed to charge a fee for the temporary investment of funds held awaiting investment or distribution, which fee may be calculated upon the amount of such funds actually invested and upon the income produced thereby. The fee authorized by this subsection shall not exceed twelve percent (12%) of the income produced by such investment. A corporation acting in a fiduciary capacity has complied with its duty to disclose fees and practices in connection with the investment of fiduciary funds awaiting investment or distribution if the corporation's periodic statements set forth the method of computing such fees."
SECTION 6.  This act becomes effective January 1, 2004, and applies to payments made to a fiduciary on or after that date.