A BILL TO BE ENTITLED
AN ACT governing the liability of directed trustees.
The General Assembly of North Carolina enacts:
SECTION 1.  G.S. 36C‑8‑808 reads as rewritten:
"§ 36C‑8‑808.  Powers  of a person who is not a trustee to take certain actions with respect to the trust.
(a)	While a trust is revocable, the settlor of a revocable trust has, at all times, the power to direct or consent to the actions of the trustee whether or not the power is conferred upon the settlor by the terms of the trust. The trustee may follow a direction of the settlor that is not authorized by or is contrary to the terms of the trust, even if by doing so (i) the trustee exceeds the authority granted to the trustee under the terms of the trust, or (ii) the trustee would otherwise violate a duty the trustee owes under the trust. The trustee is not liable, individually or as a fiduciary, for any loss resulting directly or indirectly from compliance with the direction. If the settlor requires the settlor's consent to certain actions of the trustee, and the settlor does not provide consent within a reasonable time after the trustee has made a timely request for the settlor's consent, the trustee is not liable, individually or as a fiduciary, for any loss resulting directly or indirectly from the trustee's failure to take any action that required the settlor's consent.
(b)	 The terms of a trust may confer upon a person other than the settlor of a revocable trust the power to  take certain actions  with respect to the trust, including, but not limited to, the power to do the following:
(1)	Direct or consent to actions regarding the following:
a.	Investments, including retention, purchase, sale, exchange, or other transaction  affecting the ownership of investments with respect to all or any one or more of the trust assets.
b.	Discretionary distributions of trust assets, including distributions to one or more beneficiaries, distribution of one or more trust assets, and termination of the trust by distribution of all of the trust assets.
c.	Any other matter regarding trust administration, including the transfer of the principal place of administration of the trust.
(2)	Modify or amend the trust to do the following:
a.	Achieve favorable tax status under applicable law.
b.	Take advantage of laws governing restraints on alienation or other State laws restricting the terms of the trust, distribution of trust property, or the administration of the trust.
(3)	Remove and appoint trustees, advisors, trust committee members, and trust protectors.(4)	Increase or decrease the interests of any beneficiary.
(5)	Grant a power of appointment to one or more beneficiaries of the trust or modify the terms of or terminate a power of appointment granted to a beneficiary by the governing instrument, except that a grant or modification of a power of appointment may not grant a beneficial interest to any of the following:
a.	Any individual or class of individuals not specifically provided for in the trust instrument.
b.	The person having the power to grant, modify, or terminate the power of appointment.
c.	That person's estate or that person's creditors.
(6)	Change the governing law of the trust.
(c)	 When the terms of a trust confer upon a person described in subsection (b) of this section a power authorized in subsection (b) of this section, the duty and liability of the  trustee is as follows:
(1)	If the terms of a trust confer upon the person the power to direct certain actions of the trustee, the trustee must act in accordance with the direction and is not liable, individually or as a fiduciary, for any loss resulting directly or indirectly from compliance with the direction unless compliance with the direction constitutes intentional wrongdoing, not mere negligence or gross negligence on the part of the trustee.
(2)	If the terms of the trust confer upon the person the power to consent to certain actions of the trustee, and the power holder does not provide consent within a reasonable time after the trustee has made a timely request for the power holder's consent, the trustee is not liable, individually or as a fiduciary, for any loss resulting directly or indirectly from the trustee's failure to take any action that required the power holder's consent.
(3)	If the terms of the trust confer upon the person a power other than the power to direct or consent to actions of the trustee, the trustee is not liable, individually or as a fiduciary, for any loss resulting directly or indirectly from the exercise or nonexercise of the power.
(4)	The trustee shall have no duty to monitor the conduct of the power holder, provide advice to the power holder, or consult with the power holder. The trustee is not required to give notice to any beneficiary of any action taken or not taken by the power holder whether or not the trustee agrees with the result. Administrative actions taken by the trustee for the purpose of implementing directions of the power holder, including confirming that the directions of the power holder have been carried out, do not constitute monitoring of the power holder nor do they constitute participation in decisions within the scope of the power holder's authority.
(d)	A  person described in subsection (b) of this section, who holds a power to authorize under subsection (b) of this section is  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, except that if a beneficiary is a person with a power authorized under subsection (b) of this section, the beneficiary is not a fiduciary with respect to the following:
(1)	A power to remove and appoint a trustee.
(2)	The power that constitutes a power of appointment.
(3)	A power the exercise or nonexercise of which may affect only the interests of the beneficiary holding the power and no other beneficiary.
The holder of a power to direct authorized under subsection (b) of this section is liable for any loss that results from breach of a fiduciary  duty occurring as a result of the exercise or nonexercise of the power."
SECTION 2.  G.S. 36C‑7‑703 is amended by adding a new subsection to read:
"(e1)	If the terms of a trust confer upon a cotrustee, to the exclusion of another cotrustee, the power to take certain actions with respect to the trust, including the power to direct or prevent certain actions of the trustees, the following apply:
(1)	The duty and liability of the excluded trustee is as follows:
a.	If the terms of a trust confer upon the cotrustee the power to direct certain actions of the excluded trustee, the excluded trustee must act in accordance with the direction and is not liable, individually or as a fiduciary, for any loss resulting directly or indirectly from compliance with the direction unless compliance with the direction constitutes intentional wrongdoing, not mere negligence or gross negligence on the part of the directed cotrustee.
b.	If the terms of the trust confer upon the cotrustee any other power, the excluded trustee is not liable, individually or as a fiduciary, for any loss resulting directly or indirectly from the action taken by the cotrustee.
c.	The excluded trustee shall have no duty to monitor the conduct of the cotrustee, provide advice to the cotrustee, or consult with or request directions from the cotrustee. The excluded trustee is not required to give notice to any beneficiary of any action taken or not taken by the cotrustee whether or not the excluded trustee agrees with the result. Administrative actions taken by the excluded trustee for the purpose of implementing directions of the cotrustee, including confirming that the directions of the cotrustee have been carried out, do not constitute monitoring of the cotrustee nor do they constitute participation in decisions within the scope of the cotrustee's authority.(2)	Subject to the provisions of sub‑subdivision a. of subdivision (1) of this subsection, the cotrustee holding the power to take certain actions with respect to the trust shall be liable to the beneficiaries with respect to the exercise of the power as if the excluded trustee was not in office and shall have the exclusive obligation to account to and defend any action brought by the beneficiaries with respect to the exercise of the power."
SECTION 3.  G.S. 32‑72(d) reads as rewritten:
"(d)	 The following provisions apply to an instrument creating a fiduciary relationship other than a trust instrument to which Chapter 36C of the General Statutes applies and to a fiduciary other than a trustee:
(1)	The terms of the instrument may confer upon a person the power to direct or consent to certain actions of the fiduciary with respect to the following:
a.	Investments, including retention, purchase, sale, exchange, or other transaction affecting the ownership of investments with respect to all or any one or more assets.
b.	Any other administrative matter.
(2)	When the terms of the instrument confer upon a person the power to direct or consent to certain actions of the fiduciary, the duty and liability of the fiduciary are as follows:
a.	If the terms of the instrument confer upon the person the power to direct certain actions of the fiduciary, the fiduciary must act in accordance with the direction and is not liable, individually or as a fiduciary, for any loss resulting directly or indirectly from compliance with the direction unless compliance with the direction constitutes intentional wrongdoing, not mere negligence or gross negligence on the part of the fiduciary.
b.	If the terms of the instrument confer upon a person the power to consent to certain actions of the fiduciary, and the power holder does not provide consent within a reasonable time after the fiduciary has made a timely request for the power holder's consent, the fiduciary is not liable, individually or as a fiduciary, for any loss resulting directly or indirectly from the fiduciary's failure to take any action that required the power holder's consent.
c.	The fiduciary shall have no duty to monitor the conduct of the power holder, provide advice to the power holder, or consult with the power holder. The fiduciary is not required to give notice to any beneficiary of any action taken or not taken by the power holder whether or not the fiduciary agrees with the result. Administrative actions taken by the fiduciary for the purpose of implementing directions of the power holder, including confirming that the directions of the power holder have been carried out, do not constitute monitoring of the power holder or other participation in decisions within the scope of the power holder's authority.
(3)	A person who holds a power to direct or consent is a fiduciary who, as such, is required to act in good faith with regard to the purposes of the estate, or other relationship between the fiduciary and beneficiaries, and the interests of the beneficiaries, except that if a beneficiary is a person with a power to direct or consent, the beneficiary is not a fiduciary with respect to the following:
a.	A power that constitutes a power of appointment.
b.	A power the exercise or nonexercise of which affects only the interests of the beneficiary holding the power and no other beneficiary.
The holder of the power to direct or consent is liable for any loss that results from breach of a fiduciary duty occurring as a result of the exercise or nonexercise of the power."SECTION 4.  This act becomes effective October 1, 2011, and applies to trusts and other instruments created before, on, or after that date.