Nevada § 163.556 - Circumstances under which trustee is authorized to appoint property of one testamentary trust or irrevocable trust to another trust

§ 163.556. Circumstances under which trustee is authorized to appoint property of one testamentary trust or irrevocable trust to another trust

1. Except as otherwise provided in this section, unless the terms of a testamentary

instrument or irrevocable trust provide otherwise, a trustee with discretion or authority

to distribute trust income or principal to or for a beneficiary of the trust, whether

acting in the trustee's own discretion or at the direction or with the consent of

another party pursuant to the terms of the trust instrument, may exercise such discretion

or authority by appointing the property subject to such discretion or authority in

favor of a second trust as provided in this section. 2. The second trust to which a trustee appoints property of the original trust may

only have as beneficiaries one or more of the beneficiaries of the original trust: (a) To or for whom a distribution of income or principal may be made from the original

trust; (b) To or for whom a distribution of income or principal may be made in the future

from the original trust at a time or upon the happening of an event specified under

the original trust; or (c) Both paragraphs (a) and (b). For purposes of this subsection, a permissible appointee of a power of appointment

exercised by a beneficiary of the second trust is not considered a beneficiary of

the second trust. 3. A trustee may not appoint property of the original trust to a second trust if: (a) Appointing the property will reduce any income interest of any income beneficiary

of the original trust if the original trust is: (1) A trust for which a marital deduction has been taken for federal or state income,

gift or estate tax purposes; (2) A trust for which a charitable deduction has been taken for federal or state income,

gift or estate tax purposes; or (3) A grantor-retained annuity trust or unitrust under 26 C.F.R. § 25.2702-3(b) and (c) . As used in this paragraph, “unitrust” has the meaning ascribed to it in NRS 164.700 . (b) The property to be appointed is subject to a power of withdrawal which is held

by a beneficiary of the original trust and may be executed at the time of the proposed

appointment, unless after the exercise of such appointment, the beneficiary of the

original trust's power of withdrawal is unchanged with respect to the trust property. (c) A contribution made to the original trust qualified for a gift tax exclusion as

described in section 2503(b) of the Internal Revenue Code , 26 U.S.C. § 2503(b) , by reason of the application of section 2503(c) of the Internal Revenue Code , 26 U.S.C. § 2503(c) , unless the second trust provides that the beneficiary's remainder interest must

vest not later than the date upon which such interest would have vested under the

terms of the original trust. 4. A trustee who is a beneficiary of the original trust may not exercise the authority

to appoint property of the original trust to a second trust if: (a) Under the terms of the original trust or pursuant to law governing the administration

of the original trust: (1) The trustee does not have discretion to make distributions to himself or herself; (2) The trustee's discretion to make distributions to himself or herself is limited

by an ascertainable standard, and under the terms of the second trust, the trustee's

discretion to make distributions to himself or herself is not limited by the same

ascertainable standard; or (3) The trustee's discretion to make distributions to himself or herself can only

be exercised with the consent of a cotrustee or a person holding an adverse interest

and under the terms of the second trust the trustee's discretion to make distributions

to himself or herself is not limited by an ascertainable standard and may be exercised

without consent; or (b) Under the terms of the original trust or pursuant to law governing the administration

of the original trust, the trustee of the original trust does not have discretion

to make distributions that will discharge the trustee's legal support obligations

but under the second trust the trustee's discretion is not limited. 5. Notwithstanding the provisions of subsection 1, a trustee who may be removed by

the beneficiary or beneficiaries of the original trust and replaced with a trustee

that is related to or subordinate, as described in section 672 of the Internal Revenue Code , 26 U.S.C. § 672(c) , to a beneficiary, may not exercise the authority to appoint property of the original

trust to a second trust to the extent that the exercise of the authority by such trustee

would have the effect of increasing the distributions that can be made from the second

trust to such beneficiary or group of beneficiaries that held the power to remove

the trustee of the original trust and replace such trustee with a related or subordinate

person, unless the distributions that may be made from the second trust to such beneficiary

or group of beneficiaries described in paragraph (a) of subsection 4 are limited by

an ascertainable standard. 6. The provisions of subsections 4 and 5 do not prohibit a trustee who is not a beneficiary

of the original trust or who may not be removed by the beneficiary or beneficiaries

and replaced with a trustee that is related to or subordinate to a beneficiary from

exercising the authority to appoint property of the original trust to a second trust

pursuant to the provisions of subsection 1. 7. Before appointing property pursuant to subsection 1, a trustee may give notice

of a proposed action pursuant to NRS 164.725 or may petition a court for approval pursuant to NRS 153.031 , 164.015 or 164.725 . Any notice of a proposed action or a petition for a court's approval must include

the trustee's opinion of how the appointment of property will affect the trustee's

compensation and the administration of other trust expenses. 8. The trust instrument of the second trust may: (a) Grant a general or limited power of appointment to one or more of the beneficiaries

of the second trust who are beneficiaries of the original trust. (b) Provide that, at a time or occurrence of an event specified in the trust instrument,

the remaining trust assets in the second trust must be held for the beneficiaries

of the original trust upon terms and conditions that are substantially identical to

the terms and conditions of the original trust. 9. The power to appoint the property of the original trust pursuant to subsection

1 must be exercised by a writing, signed by the trustee and filed with the records

of the trust. 10. The exercise of the power to invade principal of the original trust pursuant to

subsection 1 is considered the exercise of a power of appointment, other than power

to appoint the property to the trustee, the trustee's creditors, the trustee's estate

or the creditors of the trustee's estate and the provisions of NRS 111.1031 apply to such power of appointment. 11. The provisions of this section do not abridge the right of any trustee who has

the power to appoint property which arises under any other law or under the terms

of the original trust. 12. The provisions of this section do not impose upon a trustee a duty to exercise

the power to appoint property pursuant to subsection 1. 13. The power to appoint property to another trust pursuant to subsection 1 is not

a power to amend the trust and a trustee is not prohibited from appointing property

to another trust pursuant to subsection 1 if the original trust is irrevocable or

provides that it may not be amended. 14. A trustee's power to appoint property to another trust pursuant to subsection

1 is not limited by the existence of a spendthrift provision in the original trust. 15. A trustee exercising any power granted pursuant to this section may designate

himself or herself or any other person permitted to act as a trustee as the trustee

of the second trust. 16. The trustee of a second trust, resulting from the exercise of the power to appoint

property to another trust pursuant to subsection 1, may also exercise the powers granted

pursuant to this section with respect to the second trust. 17. Except as otherwise provided under the terms of the trust, the power of a trustee

to appoint property to another trust is in addition to any other powers conferred

by the terms of the trust or under the laws of this State. This section does not expand, restrict, eliminate or otherwise alter any power that,

with respect to a trust, a person holds in a nonfiduciary capacity. 18. The power of a trustee to appoint property to another trust is an administrative

act under this section and, therefore, regardless of whether a trust applies the laws

of this State for construction or validity issues, this section applies to a trust

that is governed by, sitused in or administered under the laws of this State, whether

the trust is initially governed by, sitused in or administered under the laws of this

State pursuant to the terms of the trust instrument or whether the governing law,

situs or administration of the trust is moved to this State from another state or

foreign jurisdiction. 19. The power to appoint property to a second trust pursuant to this section may be

exercised to appoint property to a second trust that is a special needs trust, pooled

trust or third-party trust. 20. As used in this section: (a) “ Ascertainable standard ” means a standard relating to a person's health, education, support or maintenance

within the meaning of section 2041(b)(1)(A) or 2514(c)(1) of the Internal Revenue Code , 26 U.S.C. § 2041(b)(1)(A) or 2514(c)(1) , and any regulations of the United States Treasury promulgated thereunder. (b) “ Pooled trust ” means a trust described in 42 U.S.C. § 1396p(d)(4)(C) that meets the requirements for such a trust under any law or regulation of this

State relating to the treatment of trusts for purposes of eligibility for Medicaid

or other needs-based public assistance. (c) “ Second trust ” means an irrevocable trust that receives trust income or principal appointed by

the trustee of the original trust, and may be established by any person, including,

without limitation, a new trust created by the trustee, acting in that capacity, of

the original trust. If the trustee of the original trust establishes the second trust, then for purposes

of creating the new second trust, the requirement of NRS 163.008 that the instrument be signed by the settlor shall be deemed to be satisfied by the

signature of the trustee of the original trust. The second trust may be a trust created under the original trust instrument, as

modified after an appointment of property made pursuant to this section, or a different

trust instrument. If the second trust is created under the original trust instrument, as modified

after an appointment of property made pursuant to this section, and is therefore the

modified original trust, a trustee may exercise the power to appoint the trust property

from the original trust to the second trust without an actual distribution of the

property subject to the appointment. (d) “ Special needs trust ” means a trust under 42 U.S.C. § 1396p(d)(4)(A) that meets the requirements for such a trust under any law or regulation of this

State relating to the treatment of trusts for purposes of eligibility for Medicaid

or other needs-based public assistance. (e) “ Third-party trust ” means a trust that is: (1) Established by a third party with the assets of the third party to provide for

the supplemental needs of a person who is eligible for needs-based public assistance

at or after the time of the creation of the trust; and (2) Exempt from the provisions of any law or regulation of this State relating to

the treatment of trusts for purposes of eligibility for Medicaid.