Section 49 Subdivisions (2)

• Library: Trust and Estate Legislation 2012

(2) Unless the exercise of such power is limited by an ascertainable standard, no trustee of the first trust may exercise such authority to make a distribution from the first trust if:

(a) Such trustee is a beneficiary of the first trust; or

(b) Any beneficiary may remove and replace the trustee of the first trust with a related or subordinate party to such beneficiary within
the meaning of Section 672(c) of the Internal Revenue Code;

(3) Except if participating in a change that is needed for a distribution to any such beneficiary under an ascertainable standard, no trustee shall exercise such authority to the extent that doing so would have the effect either of:

(a) Increasing the distributions that can be made in the future from the second trust to the trustee of the first trust or to a beneficiary who can remove and replace the trustee of the first trust with a related or subordinate party to such beneficiary within the meaning of Section 672(c) of the Internal Revenue Code; or

(b) Removing restrictions on discretionary distributions imposed by the instrument under which the first trust was created;

Section 456.4-419.2(2) and (3), RSMo Supp. 2011.

These provisions are even more convoluted than others in § 456.4-419.2, so perhaps it would help to separate out the rules and restate them in as simple terms as possible.

Subdivision (2) includes two rules, which can be restated as follows:

1. A trustee who is also a beneficiary may decant only if that trustee’s power to distribute is limited by an ascertainable standard.

2. A trustee who may be removed by a beneficiary and replaced with a party who is “related or subordinate” to that beneficiary (as that phrase is defined in I.R.C. § 672(c)) may decant only if that trustee’s power to distribute is limited by an ascertainable standard.

Subdivision (3) includes one rule with two parts, all of which can be restated as follows:

Except if...