Section 1. Amend Section 3570(4), Title 12, Delaware Code by inserting the phrase "(including a change in the legal ownership of property occurring upon the substitution of one trustee for another or the addition of one or more new trustees)" following the word "property" where it appears for the first time.
Section 2. Amend Section 3570, Title 12, Delaware Code by deleting paragraph e of Subsection 9 and adding new paragraphs e and f as follows:
“e. In the event that a qualified trustee of a trust ceases to meet the requirements of paragraph a of this subsection, and there remains no trustee that meets such requirements, such qualified trustee shall be deemed to have resigned as of the time of such cessation, and thereupon the successor qualified trustee provided for in the trust instrument shall become a qualified trustee of the trust, or in the absence of any successor qualified trustee provided for in the trust instrument, the Court of Chancery shall, upon application of any interested party, appoint a successor qualified trustee.
f. In the case of a disposition to more than one trustee, a disposition that is otherwise a qualified disposition shall not be treated as other than a qualified disposition solely because not all of the trustees are qualified trustees.”
Section 3. Amend Section 3570, Title 12, Delaware Code by deleting Paragraph b of Subsection 10 thereof and inserting new Paragraph b as follows:
“b. Is irrevocable, but a trust instrument shall not be deemed revocable on account of its inclusion of one or more of the following:
1. A transferor’s power to veto a distribution from the trust;
2. A special power of appointment exercisable by will or other written instrument of the transferor effective upon the transferor’s death;
3. The transferor’s potential or actual receipt of income, including rights to such income retained in the trust instrument;
4. The transferor’s potential or actual receipt of income or principal from a charitable remainder unitrust or charitable remainder annuity trust as such terms are defined in Section 664 of the Internal Revenue Code of 1986 and any successor provision thereto;
5. The transferor's receipt each year of a percentage (not to exceed 5) specified in the trust instrument of the value of the trust determined from time to time pursuant to the trust instrument;
6. The transferor’s potential or actual receipt of principal if such potential or actual receipt of principal is either in the sole discretion of a qualified trustee or qualified trustees or is pursuant to an ascertainable standard contained in the trust instrument; and”
Section 4. Amend Section 3570, Title 12, Delaware Code by adding new paragraph d to Subsection 10 as follows:
“d. A disposition by a trustee that is not a qualified trustee to a trustee that is a qualified trustee shall not be treated as other than a qualified disposition solely because the trust instrument fails to meet the requirements of paragraph a of this subsection.”
Section 5. Amend Section 3571, Title 12, Delaware Code by deleting such section in its entirety and substituting the following:
“A qualified disposition shall be subject to Section 3572 of this title notwithstanding a transferor’s retention of any or all of the powers and rights described in Section 3570(10)b and the transferor’s service as investment adviser pursuant to Section 3570(9)d of this title. The transferor shall have only such powers and rights as are conferred by the trust instrument. Except as permitted by Sections 3570(9)d and 3570(10)b of this title, a transferor shall have no rights or authority with respect to the property that is the subject of a qualified disposition or the income therefrom, and any agreement or understanding purporting to grant or permit the retention of any greater rights or authority shall be void.”
Section 6. Amend Section 3572, Title 12, Delaware Code by adding the following new sentence to Subsection (a):
“The Court of Chancery shall have exclusive jurisdiction over any action brought with respect to a qualified disposition.”
Section 7. Amend Section 3572, Title 12, Delaware Code by deleting Subsection (b) and substituting in lieu thereof the following new Subsection (b):
“(b) A creditor's claim under subsection (a) of this section shall be extinguished unless:
(1) The creditor’s claim arose before the qualified disposition was made, and the action is brought within the limitations of Section 1309 of Title 6 in effect on the later of the date of the qualified disposition or August 1, 2000; or
(2) Notwithstanding the provisions of Section 1309 of Title 6, the creditor’s claim arose concurrent with or subsequent to the qualified disposition and the action is brought within 4 years after the qualified disposition is made.
In any action described in subsection (a), the burden to prove the matter by clear and convincing evidence shall be upon the creditor.”
Section 8. Amend Section 3572, Title 12, Delaware Code by deleting Subsection c thereof and substituting the following new Subsection c:
“(c) For purposes of this subchapter, a qualified disposition that is made by means of a disposition by a transferor who is a trustee shall be deemed to have been made as of the time (whether before, on or after July 1, 1997) the property that is the subject of the qualified disposition was originally transferred to the transferor (or any predecessor trustee) making the qualified disposition in a form that meets the requirements of § 3570(10)b. and c. of this title.”
Section 9. Amend Section 3573, Title 12, Delaware Code by adding the following new sentence:
“Subsection (1) shall not apply to any claim for forced heirship or legitime.”
Section 10. If any provision of Subchapter VI, Chapter 35, Title 12, Delaware Code, or the application thereof to any person or circumstance is held invalid, the invalidity does not affect other provisions or applications of Subchapter VI, Chapter 35, Title 12, Delaware Code, which can be given effect without the invalid provision or application and to this end the provisions of Subchapter VI, Chapter 35, Title 12, Delaware Code, are severable.
Section 11. Sections 1, 2, 4, 5, 8, and 10 of this Act shall be effective as of July 1, 1997. Sections 3, 6, 7, 9 and 11 of this Act shall be effective upon enactment.