Revocable Trust Modification

House Bill 637 was adopted as Session Law 2003-225 it and will permit the settlor of a revocable trust to relieve the trustee of duties, restrictions, and liabilities imposed

by the provisions of the uniform trusts act. By implication under the old provisions, the liabilities imposed upon the trustee by G.S. 36A-62, 36A-63, and 36A-66 could not be waived or released. This amendment rewrites the statute for clarity and expressly allows the settlor of a revocable trust to relieve the trustee from the duties, liabilities imposed by G.S. 36A-62, 36A-63, and 36A-66.

SECTION 1. G.S. 36A-78 reads as rewritten:

The settlor of any trust affected by this Article may

(i) relieve the trustee from any or all duties, restrictions, and liabilities that would otherwise be imposed upon the trustee by this Article,

(ii) alter or deny to the trustee any or all of the privileges and powers conferred upon the trustee by this Article, or

(iii) add duties, restrictions, liabilities, privileges, or powers to those imposed or granted by this Article. The settlor may accomplish any of these actions by one of the following methods:

By provision in the instrument creating the trust if the trust was created by a writing.

By oral statement to the trustee at the time of the creation of the trust if the trust was created orally.

By an amendment of the trust if the settlor reserved the power to amend the trust.

By written instrument delivered to the trustee of a revocable trust.

(b) Notwithstanding subsection (a) of this section, any settlor who has not reserved the power to revoke the trust shall not relieve the trustee from the duties, restrictions, and liabilities imposed upon the trustee by G.S. 36A-62, 36A-63, and 36A-66."

This act became effective June 19, 2003.

Amendments Governing Accountings In Trust Administration

House Bill 656 makes substantive changes in the Trust Administration Act that conform it to modern practice and the expectations of the typical Trustor. Perhaps the most significant change is the reversal of the statutory presumption regarding the necessity of trustee’s accountings. For instrument creating a trust executed after January 1, 2004, there will be a presumption that accountings are not required unless the instrument provides otherwise.

SECTION 1. G.S. 36A-23.1(a) reads as rewritten:

"(a) The clerks of superior court of this State have original jurisdiction over all proceedings initiated by interested persons concerning the internal affairs of trusts except proceedings governed by Article 11A of this Chapter. Except as provided in subdivision (3) of this subsection, the clerk’s jurisdiction is exclusive. Proceedings that may be maintained under this subsection are those concerning the administration and distribution of trusts, the declaration of rights, and the determination of other matters involving trustees and trust beneficiaries, to the extent that those matters are not otherwise provided for in the governing instrument. These include proceedings:

To appoint or remove a trustee;

(1a) To permit a trustee to resign or renounce; however, unless the trustee is required to account to the clerk, when the governing instrument names or provides a procedure to name a successor trustee, and the successor trustee is willing to serve, no trustee shall be required to initiate a proceeding to resign or renounce as trustee;

To review trustees’ fees pursuant to Article 5 of Chapter 32 of the General Statutes and review and settle interim or final accounts; and

(unchanged)

SECTION 2. G.S. 36A-24.1(b) reads as rewritten:

"(b) If the trustee is not required to account to the clerk, then unless the terms of the governing instrument provide otherwise, venue for proceedings under G.S. 36A-23.1 involving trusts is:

In the case of an inter vivos trust, in any county of this State in which the trust has its principal place of administration or where any beneficiary resides; or

In the case of a testamentary trust, in any county of this State in which the trust has its principal place of administration, where any beneficiary resides, or in which the testator’s estate was administered."

SECTION 3. G.S. 36A-26.1 reads as rewritten:

"§ 36A-26.1. Trust proceedings; necessary parties.

Proceedings under G.S. 36A-23.1 are initiated by filing a petition in the office of the clerk of superior court. Upon the filing of the petition, the clerk shall docket the cause as an estate matter. All trustees and interested persons not joined as petitioners shall be joined as respondents. The clerk shall issue the summons for the respondents. The clerk may order that additional persons be joined as respondents and shall issue the summons for the additional persons. The summons shall notify the respondents to appear and answer the petition within 10 days after its service upon the respondents. The summons shall comply with the requirements set forth in G.S. 1-394 for a special proceeding summons except that the clerk shall indicate on the summons by appropriate words that the summons is issued in an estate matter and not in a special proceeding or in a civil action. The clerk shall set the matter for hearing after the period for respondents to answer the petition has expired and shall direct the petitioners to provide notice of the hearing to respondents. At the hearing, petitioners and respondents may offer evidence for and against granting the petition, and the clerk shall decide and determine the matter as provided in G.S. 1-301.3. An order entered by the clerk is valid as to all persons upon whom a summons is served."

SECTION 4. G.S. 36A-29 reads as rewritten:

"§ 36A-29. Accounting to the clerk.

No trustee, including a trustee appointed by the clerk, shall be required to account to the clerk of superior court unless the governing instrument directs that the trustee shall be required to account to the clerk or unless the trustee is otherwise required by law to account to the clerk.

If the trustee is required to account to the clerk of superior court, the trustee shall not be permitted to resign as trustee until a final account of the trust estate is filed with the clerk and until the court shall be satisfied that the account is true and correct, unless the terms of the governing instrument provide otherwise."

SECTION 5. G.S. 36A-31 reads as rewritten:

"§ 36A-31. When bond required.

For any testamentary trust created under a will of a decedent executed on or after January 1, 2004, and any inter vivos trust created on or after January 1, 2004, a trustee shall provide bond to secure performance of the trustee’s duties if the terms of the governing instrument require the trustee to provide bond. For any testamentary trust created under a will of a decedent executed before January 1, 2004, and for any inter vivos trust created before January 1, 2004, a trustee shall provide bond to secure performance of the trustee’s duties unless the terms of the governing instrument provide otherwise. In addition, regardless of when a trust was created, a trustee shall provide bond to secure performance of the trustee’s duties if:

A beneficiary requests the trustee to provide bond and the clerk finds the request to be reasonable; or

The clerk finds that it is necessary for the trustee to provide bond in order to protect the interests of beneficiaries who are not able to protect themselves and whose interests otherwise are not adequately represented.

Notwithstanding subsection (a) of this section, in no event shall bond be required of a trustee, including a trustee appointed by the clerk, if the governing instrument directs otherwise. (bond provisions were unchanged)"

SECTION 6. G.S. 36A-32 reads as rewritten:

"§ 36A-32. Rights and duties devolve on successor.

A successor trustee, including a successor trustee appointed by the clerk, shall succeed to all the rights, powers, and privileges, and shall be subject to all the duties, liabilities, and responsibilities that were imposed upon the original trustee unless a contrary intent appears from the governing instrument or unless the order appointing the successor trustee provides otherwise."

SECTION 7. G.S. 36A-107 reads as rewritten:

"§ 36A-107. Trustees in wills to qualify and file inventories and accounts.

For any testamentary trust created under a will of a decedent executed before January 1, 2004, the trustee shall first qualify under the laws applicable to executors, and shall file in the office of the clerk of the county where the will is probated inventories of the assets that come into the trustee’s hands and annual and final accounts of the trust that are the same as required of executors and administrators. The power of the clerk to enforce the filing and the clerk’s duties to audit and approve the trustee’s inventories and accounts shall be the same as the clerk’s powers and duties with respect to the inventories and accounts of executors and administrators. This subsection shall not apply to the extent that any will makes a different provision.

For any testamentary trust created under a will of a decedent executed on or after January 1, 2004, the provisions of which direct the trustee to account to the clerk, the trustee shall first qualify under the laws applicable to executors and shall file in the office of the clerk of the county where the will is probated inventories of the assets that come into the trustee’s hands and annual and final accounts of the trust that are the same as are required of executors and administrators. The power of the clerk to enforce the filing and the clerk’s duties to audit and approve the trustee’s inventories and accounts shall be the same as the clerk’s powers and duties with respect to the inventories and accounts of executors and administrators. No trustee, including a trustee appointed by the clerk, shall be required to account to the clerk unless the subject will directs that the trustee shall be required to account to the clerk or unless otherwise required by law."

SECTION 8. This act becomes effective January 1, 2004, and applies to all trusts created before or after that date. Ratified June 18, 2003.

Holiday Problem in Country Lake Enterprises To Be Corrected

Country Lake Enterprises, INC., U.S.B.C., E.D.N.C., Case No. 02-00980-5-ATS

Is an Eastern District Bankruptcy case, in which Judge Small has ruled that where the tenth day of the raised bid/redemption period falls on March 25, Greek Independence Day, it does not expire until the close of business of the next day. As a result, the trustee’s deed was voided and the property is included as part of the bankruptcy estate where the petition in bankruptcy was filed at 5:22 P. M. on March 25, 2002. This result arose because NCGS Sec. 45-21.27 "specifically provides that if the tenth day of the upset bid period is a legal holiday, the necessary deposit and notice may be filed on the following day." In this instance, NCGS Sec. 103-4(3)(a) specifies that Greek Independence Day, which falls on March 25, is a legal holiday in North Carolina.

House Bill 394, "Clarify Legal Filing Law" has not passed as of the preparation of this article, but is expected to be ratified this session. It would correct the problems created by the diversity of "legal" holidays without changing their status as such. The key provisions of the amended statutes follow.

Defining Effect of Holidays

SECTION 1 is a general provision that modifies the effect of the holiday statute on procedural acts on holidays where the Courthouse is open for business. G.S. 103-5(a) reads as rewritten: "(a)Except as otherwise provided by law, when the day or the last day for doing any act required or permitted by law to be performed in a public office or courthouse falls on a Saturday, Sunday, or legal holiday when the public office or courthouse is closed for transactions, the act may be performed on the next day that the public office or courthouse is open for transactions.

Civil Procedure – Computing Time Periods

SECTION 2 modifies the Rules of Civil Procedure dealing with the computation of time periods in G.S. 1A-1, Rule 6(a). The statute reads as rewritten: "(a)Computation. - In computing any period of time prescribed or allowed by these rules, by order of court, or by any applicable statute, including rules, orders or statutes respecting publication of notices, the day of the act, event, default or publication after which the designated period of time begins to run is not to be included. The last day of the period so computed is to be included, unless it is a Saturday, Sunday or a legal holiday when the courthouse is closed for transactions, in which event the period runs until the end of the next day which is not a Saturday, Sunday, or a legal holiday when the courthouse is closed for transactions. When the period of time prescribed or allowed is less than seven days, intermediate Saturdays, Sundays, and holidays shall be excluded in the computation. A half holiday shall be considered as other days and not as a holiday."

Foreclosure

SECTION 3. G.S. 45-21.21(e) reads as rewritten: "(e) A sale may be postponed more than once provided the final postponed sale date is not later than 90 days, exclusive of Sunday and legal holidays when the courthouse is closed for transactions, after the original date for the sale."

SECTION 4. G.S. 45-21.23 reads as rewritten: "§ 45-21.23. Time of sale. A sale shall begin at the time designated in the notice of sale or as soon thereafter as practicable, but not later than one hour after the time fixed therefore unless it is delayed by other sales held at the same place. The sale shall be held between the hours of 10:00 A.M. and 4:00 P.M. on any day other than Sunday or a legal holiday when the courthouse is closed for transactions."

SECTION 5. G.S. 45-21.24 reads as rewritten: "§ 45-21.24. Continuance of uncompleted sale. A sale commenced but not completed within the time allowed by G.S. 45-21.23 shall be continued by the person holding the sale to a designated time between 10:00 o'clock A.M. and 4:00 o'clock P.M. the next following day, other than Sunday or a legal holiday when the courthouse is closed for transactions. In case such continuance becomes necessary, the person holding the sale shall publicly announce the time to which the sale is continued."

SECTION 6 modifies the upset bid provisions of G.S. 45-21.27(a), which reads as rewritten:

"(a)An upset bid is an advanced, increased, or raised bid …The deposit required by this section shall be filed with the clerk of the superior court, with whom the report of the sale or the last notice of upset bid was filed by the close of normal business hours on the tenth day after the filing of the report of the sale or the last notice of upset bid, and if the tenth day shall fall upon a Sunday or legal holiday when the courthouse is closed for transactions, or upon a day in which the office of the clerk is not open for the regular dispatch of its business, the deposit may be made and the notice of upset bid filed on the day following when said office is open for the regular dispatch of its business..."

Judicial Sales

SECTION 7 amends the provisions pertaining to upset bids under G.S. 1-339.64(a) in Judicial Sales.

"(a) An upset bid is an advanced, increased, or raised bid … The deposit required by this section shall be filed with the clerk of the superior court, with whom the report of sale or the last notice of upset bid was filed, by the close of normal business hours on the tenth day after the filing of the report of sale or the last notice of upset bid and if the tenth day falls upon a Sunday or legal holiday when the courthouse is closed for transactions, or upon a day in which the office of the clerk is not open for the regular dispatch of its business, the deposit may be made and the notice of upset bid may be filed on the day following when the office is open for the regular dispatch of its business."

SECTION 8 amends the provisions pertaining to upset bids under G.S. 1-339.25(a) in Judicial Sales.

"(a) An upset bid is an advanced, increased, or raised bid …The deposit required by this section shall be filed with the clerk of the superior court with whom the report of sale or the last notice of upset bid was filed, by the close of normal business hours on the tenth day after the filing of the report of sale or the last notice of upset bid, and if the tenth day falls upon a Sunday or legal holiday when the courthouse is closed for transactions, or upon a day in which the office of the clerk is not open for the regular dispatch of its business, the deposit may be made and the notice of upset bid may be filed on the day following when the office is open for the regular dispatch of its business."

Juvenile Proceedings

SECTION 9 amends G.S. 7B-506(e) to conform to the legislation.

SECTION 10 amends G.S. 7B-1906(b) to conform as well.

Tax Sales

SECTION 11 conforms G.S. 105-374(m) as follows: "(m) Sale. - The sale shall be by public auction to the highest bidder and shall, in accordance with the judgment, be held at the courthouse door on any day of the week except a Sunday or legal holiday when the courthouse is closed for transactions..."

SECTION 12 conforms G.S. 156-105 dealing with foreclosure of Drainage assessment liens as follows: "Assessment lien; collection; sale of land. The assessments shall constitute a first and paramount lien, second only to State and county taxes, upon the lands assessed for the payment of the bonds and interest thereon as they become due, and shall be collected in the same manner and by the same officers as the State and county taxes are collected… The sale of lands for failure to pay such assessments shall be made at the courthouse door of the county in which the lands are situated, between the hours of 10 o'clock in the forenoon and four o'clock in the afternoon of any date except Sunday or another legal holiday when the courthouse is closed for transactions, which may be designated by the board of drainage commissioners."

The act becomes effective October 1, 2003, and applies to any act required or permitted by law to be done on or after that date.