North Carolina § 32-72 - Terms of creating instrument.

§ 32-72. Terms of creating instrument.

Nothing contained in this Article shall be construed as authorizing any departure from the express terms or limitations set forth in any will, agreement, court order, or other instrument creating or defining the fiduciary's powers and duties. A fiduciary holding funds for investment who is specifically directed or authorized by an instrument creating the fiduciary relationship to retain the stock of a bank or trust company that is a member of a bank holding company currently fully registered under an act of Congress entitled Bank Holding Company Act of 1956, as the same may be amended from time to time, shall be considered as being directed or authorized to retain the stock of such bank holding company. Whenever a fiduciary holding funds for investment is directed, required, authorized, or permitted by an instrument creating the fiduciary relationship to invest in United States government obligations, the fiduciary may, in the absence of an express prohibition in the instrument, invest in and hold such obligations either directly or in the form of interests in a money market mutual fund registered under the Investment Company Act of 1940, 15 U.S.C. §§ 80a-1, et seq., as from time to time amended, the portfolio of which is limited to United States government obligations and repurchase agreements fully collateralized thereby. The following provisions apply to an instrument creating a fiduciary relationship other than a trust instrument to which Chapter 36C of the General Statutes applies and to a fiduciary other than a trustee: The terms of the instrument may confer upon a person certain powers with respect to the actions of a fiduciary, including, but not limited to, the following: Investments, including retention, purchase, sale, exchange, or other transaction affecting the ownership of investments with respect to all or any one or more assets. Any other matter. When the terms of the instrument confer upon a person any power with respect to the actions of a fiduciary, the duty and liability of the fiduciary are as follows: If the terms of the instrument confer upon the person the power to direct certain actions of the fiduciary, the fiduciary must act in accordance with the direction and is not liable, individually or as a fiduciary, for any loss resulting directly or indirectly from compliance with the direction unless compliance with the direction constitutes intentional misconduct on the part of the fiduciary. If the terms of the instrument confer upon a person the power to consent to certain actions of the fiduciary, and the power holder does not provide consent within a reasonable time after the fiduciary has made a timely request for the power holder's consent, the fiduciary is not liable, individually or as a fiduciary, for any loss resulting directly or indirectly from the fiduciary's failure to take any action that required the power holder's consent. The fiduciary has no duty to monitor the conduct of the power holder, provide advice to the power holder, or consult with the power holder. The fiduciary is not required to give notice to any beneficiary of any action taken or not taken by the power holder whether or not the fiduciary agrees with the result. Administrative actions taken by the fiduciary for the purpose of implementing directions of the power holder, including confirming that the directions of the power holder have been carried out, do not constitute monitoring of the power holder or other participation in decisions within the scope of the power holder's authority. A person who holds a power with respect to the actions of a fiduciary is a fiduciary who, as such, is required to act in good faith with regard to the purposes of the estate, or other relationship between the fiduciary and beneficiaries, and the interests of the beneficiaries, except that if a beneficiary is a person with such a power with respect to the actions of a fiduciary, the beneficiary is not a fiduciary with respect to the following: A power that constitutes a power of appointment held by a beneficiary under the instrument. A power the exercise or nonexercise of which affects only the interests of the beneficiary holding the power and no other beneficiary. A power to remove and appoint a fiduciary. Whereas the former provisions of subsection (d) applied to all fiduciaries, including trustees, the amended subsection (d) applies only to fiduciaries who are not trustees. The provisions applicable to trustees are contained in Chapter 36C. Subdivision (1) of amended subsection (d) authorizes the terms of the instrument to confer the power to direct or consent to administrative matters in addition to the making or retention of investments. Prior to amendment, subsection (d) provided simply that the directed fiduciary was "not liable" for following the directions of a power holder. The duties and liabilities of a fiduciary under subdivision (2) of the amended subsection (d) are identical to the duties and liabilities of the directed trustee under G.S. 36C-8A-4. Finally, subdivision (3) of subsection (d) adds provisions governing the duty and liability of a person who has the power to direct or consent to actions of a fiduciary other than a trustee which are also identical to the duty and liability of a power holder who is not a trustee under G.S. 36C-8A-3(a)(2), (3) and (b) who holds the power to direct or consent to the actions of a trustee. b1. If the terms of the instrument confer upon a person a power other than the power to direct or consent to actions of the fiduciary, the fiduciary is not liable, individually or as a fiduciary, for any loss resulting directly or indirectly from the exercise or nonexercise of the power. The holder of the power with respect to the actions of a fiduciary is liable for any loss that results from breach of a fiduciary duty occurring as a result of the exercise or nonexercise of the power. History (1973, c. 1277; 1977, c. 502, s. 2; 1985, c. 538, s. 1; 2001-413, s. 4; 2005-192, s. 1; 2012-18, s. 3.3; 2013-91, s. 3(b).) DRAFTERS COMMENT (2012) Effective June 11, 2012, subsection (d), providing that a fiduciary is not liable for the decision of a person who has the authority to direct the making or retention of investments to the exclusion of the fiduciary, is amended as follows: See the North Carolina General Comment to Chapter 8A of Chapter 36C for a detailed explanation of the duties and liabilities of a directed trustee and a power holder. Editor's Note. - This section was formerly codified as G.S. 36A-3. It was recodified as G.S. 32-72 by the Revisor of Statutes as the result of Session Laws 2005-192, s. 1, effective January 1, 2006. Session Laws 2012-18, s. 4, provides: "The Revisor of Statutes shall cause to be printed, as annotations to the published General Statutes, all relevant portions of the Official Comments to the North Carolina Uniform Trust Code and all explanatory comments of the drafters of this act as the Revisor may deem appropriate." Effect of Amendments. - Session Laws 2012-18, s. 3.3, effective June 11, 2012, rewrote subsection (d). Session Laws 2013-91, s. 3(b), effective June 12, 2013, substituted "certain powers with respect to the actions of a fiduciary, including, but not limited to" for "the power to direct or consent to certain actions of the fiduciary with respect to" or similar language in subdivision (d)(1); substituted "any power with respect to the actions of a fiduciary" for "the power to direct or consent to certain actions of the fiduciary" in subdivision (d)(2); in subdivision (d)( 3), substituted "power with respect to the actions of a fiduciary" for "power to direct or consent" three times, and added "such"; deleted "administrative" preceding "matter" in sub-subdivision (d)(1)b; added sub-subdivisions (d)(2)b1 and (d)(3)c; added "such" following "beneficiary is a person with" in subdivision (d)(3); and added "held by a beneficiary under the instrument" in sub-subdivision (d)(3)a.