§ 18-9.2-2 - Definitions. - Rhode Island Statutes

SECTION 18-9.2-2

   § 18-9.2-2  Definitions. – As used in this chapter:

   (1) "Claim" means a right to payment, whether or not theright is reduced to judgment, liquidated, unliquidated, fixed, contingent,matured, unmatured, disputed, undisputed, legal equitable, secured or unsecured.

   (2) "Creditor" means, with respect to a transferor, a personwho has claim.

   (3) "Debt" means liability on a claim.

   (4) "Disposition" means a transfer, conveyance or assignmentof property (including a change in the legal ownership of property occurringupon the substitution of one trustee for another or the addition of one or morenew trustees), or the exercise of a power so as to cause a transfer ofproperty, to a trustee or trustees, but shall not include the release orrelinquishment of an interest that theretofore was the subject of a qualifieddisposition.

   (5) "Property" includes real property, personal property, andinterests in real or personal property.

   (6) "Qualified disposition" means a disposition by or from atransferor to a trustee, with or without consideration, by means of a trustinstrument.

   (7) "Spouse" and "former spouse" means only persons to whomthe transferor was married at, or before the time the qualified disposition ismade.

   (8) "Transferor" means a natural person who, or entity which,as an owner of property or as a holder of a general power of appointment, whichauthorizes the holder to appoint in favor of the holder, the holder'screditors, the holder's estate or the creditors of the holder's estate, or as atrustee, directly or indirectly, makes a disposition or causes a disposition tobe made.

   (9) " Qualified trustee " means a person who:

   (i) In the case of natural person, is a resident of thisstate other than the transferor, or, in all other cases, is authorized by theprovisions of the general or public laws to act as a trustee, and whoseactivities are subject to supervision by the department of business regulation,The Federal Deposit Insurance Corporation, the Comptroller of the Currency, orthe Office of Thrift Supervision, or any successor to them; and

   (ii) Maintains or arranges for custody in this state of someor all of the property that is the subject of the qualified disposition,maintains records for the trust on an exclusive or nonexclusive basis, preparesor arranges for the preparation of fiduciary income tax returns for the trust,or otherwise materially participates in the administration of the trust.

   (iii) For the purposes of this chapter, neither thetransferor nor any other natural person who is a nonresident of this state noran entity that is not authorized by the law of this state to act as a trusteeor whose activities are not subject to supervision as provided in subparagraph(I) of this subsection shall be considered a qualified trustee; however,nothing in this chapter shall preclude a transferor from appointing one or moreadvisors, including, but not limited to:

   (A) Advisors who have authority under the terms of the trustinstrument to remove and appoint qualified trustees or trust advisors; and

   (B) Advisors who have authority under the terms of the trustinstrument to direct, consent to or disapprove distributions from the trust.For purposes of this section, the term "advisor" includes a trust "protector"or any other person who, in addition to a qualified trustee, holds one or moretrust powers.

   (iv) A person may serve as an advisor, notwithstanding thatsuch person is the transferor of the qualified disposition, but such a personmay not otherwise serve as advisor of a trust that is a qualified dispositionexcept with respect to the retention of the veto right permitted by subsection(10)(ii) of this section.

   (v) In the event that a qualified trustee of a trust ceasesto meet the requirements of subparagraph (I) of this subsection, and thereremains no trustee that meets such requirements, such qualified trustee shallbe deemed to have resigned as of the time of such cessation, and thereupon thesuccessor qualified trustee provided for in the trust instrument shall become aqualified trustee of the trust, or in the absence of any successor qualifiedtrustee provided for in the trust amendment, the superior court shall, uponapplication of any interested party, appoint a successor qualified trustee.

   (vi) In the case of a disposition to more than one trustee, adisposition that is otherwise a qualified disposition shall not be treated asother than a qualified disposition solely because not all of the trustees arequalified trustees.

   (10) "Trust instrument" means an instrument appointing aqualified trustee or qualified trustees for the property that is the subject ofa disposition, which instrument:

   (i) Expressly incorporates the general or public laws of thisstate to govern the validity, construction, and administration of the trust;

   (ii) Is irrevocable; provided, that a trust instrument shallnot be deemed revocable due to its inclusion in one or more of the following:

   (A) A transferor's power to veto a distribution from thetrust;

   (B) A power of appointment (other than a power to appoint tothe transferor, the transferor's creditors, the transferor's estate or thecreditors of the transferor's estate) exercisable by will or other writteninstrument of the transferor effective only upon the transferor's death;

   (C) The transferor's potential or actual receipt of income,including rights to such income retained in the trust instrument;

   (D) The transferor's potential or actual receipt of income orprincipal from a charitable remainder unitrust or charitable remainder annuitytrust as such terms are defined in § 664 of the Internal Revenue Code of1986 [26 U.S.C. § 664] and any successor provision thereto; andthe transferor's right, at any time and from time to time by written instrumentdelivered to the trustee, to release such transferor's retained interest insuch a trust, in whole or in part, in favor of a charitable organization thathas or charitable organizations that have a succeeding beneficial interest insuch trust;

   (E) The transferor's receipt each year of a percentage (notto exceed five percent (5%)) specified in the trust instrument of the initialvalue of the trust assets on their value determined from time to time pursuantto the trust instrument or of a fixed amount that on an annual basis does notexceed five percent (5%) of the initial value of the trust assets;

   (F) The transferor's potential or actual receipt or use ofprincipal if such potential or actual receipt or use of principal would be theresult of a qualified trustee's or qualified trustees' acting:

   (1) In such qualified trustee's or qualified trustees'discretion;

   (2) Pursuant to a standard that governs the distribution ofprincipal and does not confer upon the transferor a substantially unfetteredright to the receipt or use of the principal; or

   (3) At the direction of an adviser described in subsection(9)(iii) of this section who is acting:

   (a) In such advisor's discretion; or

   (b) Pursuant to a standard that governs the distribution ofprincipal and does not confer upon the transferor a substantially unfetteredright to the receipt of or use of principal. For purposes of this subsection, aqualified trustee is presumed to have discretion with respect to thedistribution of principal unless such discretion is expressly denied to suchtrustee by the terms of the trust instrument;

   (G) The transferor's right to remove a trustee or advisor andto appoint a new trustee or advisor (other than a person who is a related orsubordinate party with respect to the transferor within the meaning of §672(c) of the Internal Revenue Code of 1986 [26 U.S.C. § 672(c)]and any successor provision thereto);

   (H) The transferor's potential or actual use of real propertyheld under a qualified personal residence trust within the meaning of such termas described in § 2702(c) of the Internal Revenue Code of 1986 [26U.S.C. § 2702(c)] and any successor provision thereto or thetransferor's possession and enjoyment of a qualified annuity interest withinthe meaning of such term as described in Treasury Regulation §25.2702-5(c)(8) [26 C.F.R. § 25.2502-5(c)(8)] and any successorprovision thereto;

   (I) The transferor's potential or actual receipt of income orprincipal to pay, in whole or in part, income taxes due on income of the trustif such potential or actual receipt of income or principal is pursuant to aprovision in the trust instrument that expressly provides for the payment ofsuch taxes and if such potential or actual receipt of income or principal wouldbe the result of a qualified trustee's or qualified trustees' acting:

   (1) In such qualified trustee's or qualified trustees'discretion; or

   (2) At the direction of an advisor described in subsection(9)(iii) of this section who is acting in such advisor's discretion.Distributions to pay income taxes made under discretion included in a governinginstrument pursuant to subparagraph (C), subparagraph (F) or this subparagraph(I) of subsection (10)(ii) of this section may be made by direct payment to thetaxing authorities.

   (iii) Provides that the interest of the transferor or otherbeneficiary in the trust property or the income therefrom may not betransferred, assigned, pledged or mortgaged, whether voluntarily orinvoluntarily, before the qualified trustee or qualified trustees actuallydistribute the property or income therefrom to the beneficiary, and suchprovision of the trust instrument shall be deemed to be a restriction on thetransfer of the transferor's beneficial interest in the trust that isenforceable under applicable nonbankruptcy law within the meaning of §541(c)(2) of the Bankruptcy Code (11 U.S.C. § 541(c)(2)) or any successorprovision thereto; and

   (iv) A disposition by a trustee that is not a qualifiedtrustee to a trustee that is a qualified trustee shall not be treated as otherthan a qualified disposition solely because the trust instrument fails to meetthe requirements of subparagraph (I) of this section.