Nevada § 164.796 - Circumstances under which trustee authorized to convert trust into unitrust; effect of such conversion on certain terms of trust; liability of trustee or disinterested person

§ 164.796. Circumstances under which trustee authorized to convert trust into unitrust; effect of such conversion on certain terms of trust; liability of trustee or disinterested person

1. Unless expressly prohibited by the trust instrument, a trustee may convert a trust

into a unitrust if: (a) The trustee determines conversion to a unitrust will better enable the trustee

to carry out the intent of the settlor and the purpose of the trust; (b) The trustee gives written notice of his or her intention to convert the trust

to a unitrust, including how the unitrust will operate, the income distributions rate

established pursuant to subsection 3 of NRS 164.797 and subsection 1 of NRS 164.799 , and what initial decisions the trustee will make pursuant to this section, to all

beneficiaries who: (1) Are presently eligible to receive income from the trust; (2) Would be eligible, if a power of appointment were not exercised, to receive income

from the trust if the interest of any beneficiary eligible to receive income terminated

immediately before the trustee gives notice; and (3) Would receive, if a power of appointment were not exercised, a distribution of

principal if the trust terminated immediately before the trustee gives notice; (c) There is at least one beneficiary who meets the requirements of subparagraph (1)

of paragraph (b) and at least one beneficiary who meets the requirements of subparagraph

(2) of paragraph (b); and (d) No beneficiary objects, in writing and delivered to the trustee within 60 days

of the mailing of the notice, to the conversion of the trust to a unitrust. 2. If a beneficiary timely objects to converting a trust into a unitrust, or if there

are no beneficiaries under either subparagraph (1) or (3) of paragraph (b) of subsection

1, the trustee may petition the court to approve the conversion of the trust into

a unitrust. The court shall approve the conversion if the court concludes that the conversion

will enable the trustee to better carry out the intent of the settlor and the purpose

of the trust. 3. A beneficiary may request that a trustee convert a trust into a unitrust. If the trustee does not convert the trust, the beneficiary may petition the court

to order the conversion. The court shall direct the conversion if the court concludes that the conversion

will enable the trustee to better carry out the intent of the settlor and the purpose

of the trust. 4. A trustee, in determining whether and to what extent to convert a trust to a unitrust

pursuant to subsection 1, shall consider all factors relevant to the trust and to

the beneficiaries, including the factors set forth in subsection 2 of NRS 164.795 , as applicable. 5. A conversion of a trust to a unitrust does not affect a term of the trust directing

or authorizing the trustee to distribute principal or authorizing a beneficiary to

withdraw all or a portion of the principal. 6. A trustee may not convert a trust into a unitrust in any circumstance set forth

in subsection 3 of NRS 164.795 . 7. If a trustee is prevented from converting a trust because a provision of paragraph

(e), (f), (g) or (h) of subsection 3 of NRS 164.795 applies to the trustee and if there is a cotrustee to whom such provisions do not

apply, the cotrustee may convert the trust unless the exercise of the power by the

remaining trustee is not permitted by the terms of the trust. If all trustees are prevented from converting a trust because a provision of paragraph

(e), (f), (g) or (h) of subsection 3 of NRS 164.795 applies to all of the trustees, the trustees may petition the court to direct a conversion. 8. A trustee may permanently, or for a specified period, including a period measured

by the life of a person, release the power to convert a trust pursuant to subsection

1 if: (a) The trustee is uncertain about whether possessing or exercising the power of conversion

will cause a result described in paragraphs (a) to (f), inclusive, or (h) of subsection

3 of NRS 164.795 ; or (b) The trustee determines that possessing or exercising the power of conversion may

or will deprive the trust of a tax benefit or impose a tax burden not described in

subsection 3 of NRS 164.795 . 9. A trustee or disinterested person who, in good faith, takes or fails to take any

action under this section is not liable to any person affected by such action or inaction,

regardless of whether the affected person received notice as provided in this section

or was under a legal disability at the time of delivery of notice. An affected person's exclusive remedy is to petition the court for an order directing

the trustee to convert the trust into a unitrust, to reconvert a unitrust into a trust

or to change the percentage used to calculate the unitrust amount. 10. This section shall be construed to pertain to the administration of a trust, and

the provisions of this section are available to any trust administered in this State

or that is governed by the laws of this State, unless: (a) The terms of the trust instrument show an intent that a beneficiary is to receive

an amount other than a reasonable current return from the trust; (b) The trust: (1) Has a guaranteed annuity interest or fixed percentage interest as described in section 170(f)(2)(B) of the Internal Revenue Code 1 ; (2) Is a charitable remainder trust within the meaning of section 664(d) of the Internal Revenue Code 2 ; (3) Is a qualified subchapter S trust within the meaning of section 1361(c) of the Internal Revenue Code 3 ; (4) Is a personal residence trust within the meaning of section 2702(a)(3)(A) of the Internal Revenue Code 4 ; or (5) Is a trust in which one or more settlors retain a qualified interest within the

meaning of section 2702(b) of the Internal Revenue Code 5 ; (c) One or more persons to whom the trustee could distribute income have a power of

withdrawal over the trust that is not subject to an ascertainable standard or that

can be exercised to discharge a duty of support; or (d) The terms of the trust instrument expressly prohibit the use of the provisions

of this section through reference to this section or the trust instrument expressly

states the settlor's intent that net income is not calculated as a unitrust amount. 11. As used in this section, “ ascertainable standard ” means a standard relating to an individual's health, education, support or maintenance

within the meaning of section 2041(b)(1)(A) or 2514(c)(1) of the Internal Revenue Code 6 and any regulations of the United States Treasury promulgated thereunder. 1

26 U.S.C.A. § 170(f)(2)(B). 2

26 U.S.C.A. § 664(d). 3

26 U.S.C.A. § 1361(c). 4

26 U.S.C.A. § 2702(a)(3)(A). 5

26 U.S.C.A. § 2702(b). 6

26 U.S.C.A. § 2041(b)(1)(A) or § 2514(c)(1).