2021 Colorado Code
Title 15 - Probate, Trusts, and Fiduciaries
Article 16 - Trust Administration
Part 9 - Colorado Uniform Trust Decanting Act
§ 15-16-907. Notice - Exercise of Decanting Power

1. In this section, a notice period begins on the day notice is given under subsection (3) of this section and ends sixty-two days after the day notice is given.
2. Except as otherwise provided in this part 9, an authorized fiduciary may exercise the decanting power without the consent of any person and without court approval.
3. Except as otherwise provided in subsection (6) of this section, an authorized fiduciary shall give notice in a record of the intended exercise of the decanting power not later than sixty-three days before the exercise to:
   1. Each settlor of the first trust, if living or then in existence;
   2. Each qualified beneficiary of the first trust;
   3. Each holder of a presently exercisable power of appointment over any part or all of the first trust;
   4. Each person that currently has the right to remove or replace the authorized fiduciary;
   5. Each other fiduciary of the first trust;
   6. Each fiduciary of the second trust; and
   7. The attorney general, if section 15-16-914 (2) applies.

4. An authorized fiduciary is not required to give notice under subsection (3) of this section to a qualified beneficiary who is a minor and has no representative or 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.
5. A notice under subsection (3) of this section must:
   1. Specify the manner in which the authorized fiduciary intends to exercise the decanting power;
   2. Specify the proposed effective date for exercise of the power;
   3. Include a copy of the first-trust instrument; and
   4. Include a copy of all second-trust instruments.

6. The decanting power may be exercised before expiration of the notice period under subsection (1) of this section if all persons entitled to receive notice waive the period in a signed record.
7. 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 section 15-16-909 asserting that:
   1. An attempted exercise of the decanting power is ineffective because it did not comply with this part 9 or was an abuse of discretion or breach of fiduciary duty; or
   2. Section 15-16-922 applies to the exercise of the decanting power.

8. An exercise of the decanting power is not ineffective because of the failure to give notice to one or more persons under subsection (3) of this section if the authorized fiduciary acted with reasonable care to comply with subsection (3) of this section.

History. Source: L. 2016: Entire part added,(SB 16-085), ch. 228, p. 874, § 1, effective August 10.

COMMENT

Generally a trustee is not required to provide notice to beneficiaries prior to exercising a discretionary power. This section is not intended to change the law in this regard except with respect to exercises of the decanting power. Because qualified beneficiaries are entitled to know the terms of the trust, they should receive notice of any change in the terms of the trust. Requiring prior notice seems reasonable, in light of the significant trust modifications that can be made by decanting, and practical, in that it helps determine if any settlor, fiduciary or beneficiary has an objection to or may challenge the decanting. Any person entitled to notice under Section 15-16-907(3) may petition the court under Section 15-16-909 for a determination of whether the proposed or attempted exercise of the decanting power is an abuse of discretion or does not otherwise comply with the act.

If a qualified beneficiary is a minor, incapacitated, or unknown, or a beneficiary whose identity or location is not reasonably ascertainable, the representation principles of applicable state law may be employed. Under state law, an emancipated minor presumably may represent himself or herself.

Notice must be given to (a) each settlor of the first trust (see Section 15-16-902(25) ); (b) all qualified beneficiaries (see Section 15-16-902(20) ); (c) each holder of a presently exercisable power of appointment, whether or not such holder is a qualified beneficiary; (d) any person who may remove or replace the authorized fiduciary; (e) all other fiduciaries of the first trust; (f) all fiduciaries of the second trust or trusts; and (g) the Attorney General (or other official with enforcement authority over charitable interests) if there is a determinable charitable interest (see Section 15-16-914(1)(a) ). If the authorized fiduciary is comprised of more than one fiduciary, notice should be given to any person who may remove or replace any of such fiduciaries. The term “replace” refers to the power to both remove and designate a successor for the authorized fiduciary, and does not refer to the power merely to designate a successor when a vacancy occurs.

Other notice provisions under state law may also apply to a decanting. Under Section 813(a) of the Uniform Trust Code, 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. An exercise of the decanting power is a material fact. If the second trust is newly created for purposes of decanting, state law may require notice of the creation of the trust to certain beneficiaries. For example, Section 813 of the Uniform Trust Code requires a trustee, within 60 days after accepting a trusteeship, to notify the qualified beneficiaries of the acceptance and of the trustee's name, address, and telephone number. In addition, if the exercise of the decanting power results in a distribution of property, the distribution would be considered a disbursement that should be reported on the accounting of the first trust. If the exercise of the decanting power results in the termination of the first trust, state law or the trust instrument may require a final accounting.

Subsection (3)(g) entitles the Attorney General to notice of an exercise of the decanting power with respect to a trust containing a determinable charitable interest. See Section 15-16-914(1)(a) .

Subsection (4) provides that notice need not be given to a person who is not known to the fiduciary or who is known to the fiduciary but cannot be located by the fiduciary after reasonable diligence. An analogous term, “reasonable care,” is used in Section 1007 of the Uniform Trust Code. Section 1007 provides that a trustee who has exercised reasonable care to ascertain the happening of an event that affects the administration of a trust is not liable for a loss resulting from the trustee's lack of knowledge.

Although the act does not limit the amount of time that may pass between the giving of notice and the exercise of the decanting power, if the exercise of the power does not occur within a reasonable period of time from the proposed effective date set forth in the notice, a new notice should be given with a new notice period. Further, the authorized fiduciary's duties to keep beneficiaries and interested persons informed about the trust may require the authorized fiduciary to inform such persons if the decanting is not completed as proposed or when the decanting has been completed.

If after notice is given and before the decanting power is exercised, relevant facts change in a manner that entitles an additional person to receive notice, unless such additional person can be represented by another person who has already received notice, notice should be provided to such additional person. A new notice period should begin to run, unless such additional person waives the notice period.

Subsection (5) describes the items that must be included in the notice. Subsection (1)(a) requires that the notice specify the manner in which the authorized fiduciary intends to exercise the decanting power. Depending upon the circumstances, the authorized fiduciary might describe the modifications being made, provide a comparison of the first trust and the second trust or, where the second trust is extensively different than the first trust, refer the notice recipient to the trust instruments. As a best practice, it is desirable to tell each notice recipient in which capacity he or she is receiving the notice. For example, a notice might state: “You are receiving this notice because you are the settlor of Trust XYZ” or “You are receiving this notice because you are a qualified beneficiary of Trust XYZ.” In the case of notice to an Attorney General, it is a best practice to indicate where in the instruments the determinable charitable interest may be found and whether the second trust will be administered under the law of a different state (see Section 15-16-914(5) ).

Although under Section 15-16-907(8) an exercise of the decanting power will not be ineffective because of the failure to provide the required notice to one or more persons, provided that the authorized fiduciary acted with reasonable care, the act does not override the court's ability to address breaches of fiduciary duty and to fashion appropriate remedies.