SB 418 - This act modifies provisions relating to trust decanting. Under this act, a trustee, other than a settlor, who has discretionary power to make a distribution, may exercise such power by distributing all or part of the income or principal to a trustee of a second trust. The power may be exercised by distributing property from the first trust to one or more second trusts or by modifying the first trust instrument to become one or more second trusts. This act also provides for requirements for a permissible distributee of a second trust, including that at least one permissible distributee of the first trust shall be a permissible distributee of the second trust immediately after the distribution and that only a beneficiary of the first trust may be a beneficiary of the second trust. In addition, this act modifies the use of powers of appointment in the second trust. The second trust instrument may retain, modify, or omit a power of appointment granted by the first trust and the second trust instrument may create a general or nongeneral power of appointment if the powerholder is a beneficiary of the second trust. A special-needs fiduciary may exercise the authority to make a distribution to a second trust if the second trust is a special-needs trust that has a beneficiary with a disability and if the fiduciary determines that the exercise of authority will further the purposes of the trust. The act repeals the current provisions regarding a second trust's beneficiaries, the limitations on a trustee's authority to make distributions from the first trust in certain circumstances, trust contributions treated as gifts, and the exercise of the discretionary power to reduce the income interest of any income beneficiary in certain trusts. If the exercise of the distribution authority is limited by an ascertainable standard, under which the trustee exercising such authority is a permissible distributee of the first trust, then the discretionary power shall be subject to at least the same standard as the first trust and the trust instrument for the second trust shall not modify powers of appointment nor grant a power of appointment to a trustee who did not exist in the first trust. A second trust shall not include or omit terms that would prevent the first trust property from qualifying as a martial deduction, as a charitable deduction, for exclusion from the gift tax, as a qualified subchapter-S trust, or for a zero inclusion ratio for purposes of the generation skipping transfer tax under the Internal Revenue Code. Additionally, if the first trust property includes shares of a S-corporation's stock and the first trust is a permitted shareholder, then the trustee of the first trust may exercise the authority with respect to the S-corporation stock if the second trust is a permitted shareholder. Currently, a notification must be made at least sixty days prior to making a discretionary distribution to the permissible distributees of the second trust or if none then to the qualified beneficiaries of the second trust. This act requires that the notification be made to the permissible distributees of the first trust and to the permissible distributees of the second trust. The second trust may have a duration that is the same as the first trust. However, the property of the second trust that is attributable to the first trust is subject to the rules governing maximum perpetuity, accumulation, or suspension of the power of alienation which apply to the property of the first trust. The creation of a general power of appointment in the second trust instrument shall not be precluded by this provision. In the event the second trust instrument does not in part comply with this act, the exercise of the discretionary power is effective and the provisions of the second trust instrument that not permitted in or are required to be in the trust instrument are deemed void or included to the extent necessary to comply. This act is similar to HB 1041 (2019). KATIE O'BRIEN