Colorado § 15-16-916 - Change in compensation.

§ 15-16-916. Change in compensation.

(1) If a first-trust instrument specifies an authorized fiduciary's compensation, the fiduciary may not exercise the decanting power to increase the fiduciary's compensation above the specified compensation unless:

(a) All qualified beneficiaries of the second trust consent to the increase in a signed record; or

(b) The increase is approved by the court.

(2) If a first-trust instrument does not specify an authorized fiduciary's compensation, the fiduciary may not exercise the decanting power to increase the fiduciary's compensation above the compensation permitted by the laws of this state unless:

(a) All qualified beneficiaries of the second trust consent to the increase in a signed record; or

(b) The increase is approved by the court.

(3) A change in an authorized fiduciary's compensation which is incidental to other changes made by the exercise of the decanting power is not an increase in the fiduciary's compensation for purposes of subsections (1) and (2) of this section.

Source: L. 2016: Entire part added, (SB 16-085), ch. 228, p. 884, § 1, effective August 10.

COMMENT

An exercise of the decanting power generally is an action taken by the authorized fiduciary that does not require beneficiary consent or court approval. The purpose of requiring beneficiary consent or court approval to a change in the compensation of the authorized fiduciary is to place a check on an authorized fiduciary increasing its own compensation by decanting. In this context it does not seem necessary to require the consent of all beneficiaries. Obtaining the consent of qualified beneficiaries, who would generally be immediately impacted by a change in compensation, should be sufficient.

If the first-trust instrument specifies the authorized fiduciary's compensation, the decanting may not increase the fiduciary's compensation without either the consent of all qualified beneficiaries of the second trust or court approval. Section 15-16-916(1). This subsection applies whether the increase in compensation would result from omitting the provision in the trust instrument specifying compensation, modifying such provision or replacing such provision with a different provision. If it is unclear whether a change in method of calculating compensation would result in an increase, either court approval or consent of all qualified beneficiaries should be obtained.

If the first-trust instrument does not specify the authorized fiduciary's compensation, the decanting may not increase the compensation above the compensation permitted in the trust code of the enacting state without either the consent of all qualified beneficiaries or court approval. Section 15-16-916(2).

Section 15-16-916 expressly does not prohibit an increase in compensation arising incidentally because of other changes made by the exercise of the decanting power. For example, any increase in the compensation of the authorized fiduciary because the second trust may last longer than the first trust is incidental. Also incidental are any increases in compensation that may arise because the second trust may have a greater value in the future than the first trust would have had, for example, because property is retained in the trust longer or smaller distributions are made. Other incidental increases in the compensation of the authorized fiduciary may occur because of changes in investments, changes in the law governing the administration of the trust, changes in the identity of the authorized fiduciary, or changes in the duties of the authorized fiduciary.

In many cases the consideration of a proposed decanting or the implementation of a decanting is fairly seen as an exercise of a discretionary fiduciary power that does not warrant any additional compensation for the authorized fiduciary. In some cases, however, the authorized fiduciary may be required to spend an extraordinary amount of time in evaluating a potential exercise of the decanting power, particularly when an exercise of the power is suggested by a beneficiary, or in exercising the decanting power. In such cases, and regardless of whether the authorized fiduciary ultimately exercises the decanting power, the authorized fiduciary may be entitled to additional compensation under the trust instrument or under state law. See Section 708 of the Uniform Trust Code. In the absence of explicit authority on the appropriate amount of any such compensation, such compensation should be reasonable considering the relevant factors, including the time devoted to the decanting and the degree of difficulty. See Restatement Third of Trusts Section 38 comment c. The authorized fiduciary may also be entitled to have reasonable expenses related to evaluating a potential exercise of the decanting power or in exercising the decanting power paid from the first trust. See Section 709 of the Uniform Trust Code.