New Mexico § 46-3A-105 - Conversion to total return trust

§ 46-3A-105. Conversion to total return trust

A. Unless expressly prohibited by the governing instrument, a trustee may release

the power to adjust as provided in Section 46-3A-104 NMSA 1978 or convert a trust to a total return trust as provided in this section if all

of the following apply: (1) the trust describes the amount that may or must be distributed to a beneficiary

by referring to the trust's income and the trustee determines that conversion to a

total return trust will enable the trustee to better carry out the purposes of the

trust; (2) the trustee provides a written notice of the trustee's decision to convert the

trust to a total return trust specifying a prospective effective date for the conversion

that may not be sooner than sixty days after the notice is provided to the qualified

beneficiaries, determined as of the date the notice is provided and assuming nonexercise

of all powers of appointment; (3) there are one or more legally competent beneficiaries as provided in Paragraph (1) of Subsection K of Section 46-3A-102 NMSA 1978 and one or more legally competent remainder beneficiaries described in either Paragraph (1) or (2) of Subsection K of Section 46-3A-102 NMSA 1978 , determined as of the date the notice is provided; and (4) no beneficiary has objected in writing to the conversion to a total return trust

and noticed the objection to the trustee within sixty days after the notice was provided. B. Conversion to a total return trust or reconversion to an income trust may be made

by agreement between the trustee and all qualified beneficiaries of the trust. The trustee and all qualified beneficiaries may also agree to modify the distribution

percentage, except that the trustee and the qualified beneficiaries may not agree

to a distribution percentage less than three percent or greater than five percent. C. The trustee may elect to petition the court to order conversion to a total return

trust, including the reason that conversion under Subsection A of this section is

unavailable because: (1) a beneficiary timely objects to the conversion to a total return trust; (2) there are no legally competent beneficiaries described in Paragraph (1) of Subsection K of Section 46-3A-102 NMSA 1978; or (3) there are no legally competent beneficiaries described in Paragraph (1) or (2) of Subsection K of Section 46-3A-102 NMSA 1978 . D. A beneficiary may request the trustee to convert to a total return trust or adjust

the distribution percentage pursuant to this section. If the trustee declines or fails to act within six months after receiving a written

request from a beneficiary to do so, the beneficiary may petition the court to order

the conversion or adjustment. E. The trustee may petition the court prospectively to reconvert from a total return

trust or to adjust the distribution percentage if the trustee determines that the

reconversion or adjustment will enable the trustee to better carry out the purposes

of the trust. A beneficiary may request the trustee to petition the court prospectively to reconvert

from a total return trust or adjust the distribution percentage. If the trustee declines or fails to act within six months after receiving a written

request from a beneficiary to do so, the beneficiary may petition the court to order

the reconversion or adjustment. F. In a judicial proceeding instituted under this section, the trustee may present

information concerning: (1) the trustee's support for, or opposition to, a conversion to a total return trust,

a reconversion from a total return trust or an adjustment of the distribution percentage

of a total return trust, including whether the trustee believes conversion, reconversion

or adjustment of the distribution percentage would enable the trustee to better carry

out the purposes of the trust; and (2) any other matter relevant to the proposed conversion, reconversion or adjustment

of the distribution percentage. G. A trustee's actions undertaken in accordance with this section shall not be determined

improper or inconsistent with the trustee's duty of impartiality unless the court

finds from all the evidence that the trustee acted in bad faith. H. The court may order conversion to a total return trust, reconversion prospectively

from a total return trust or adjustment of the distribution percentage of a total

return trust if the court determines that the conversion, reconversion or adjustment

of the distribution percentage will enable the trustee to better carry out the purposes

of the trust. I. If a conversion to a total return trust is made pursuant to a court order, the

trustee may reconvert the trust to an income trust only: (1) pursuant to a subsequent court order; or (2) by filing with the court an agreement made pursuant to Subsection B of this section

to reconvert to an income trust. J. Upon a reconversion, the power to adjust, as described in Section 46-3A-104 NMSA 1978 and as it existed before the conversion, shall be revived. K. An action may be taken under this section no more frequently than every three years,

unless the court for good cause orders otherwise.