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Delaware Laws | Title 12 Decedents' Estates and Fiduciary Relations
CHAPTER 35. TRUSTS
Subchapter VI. Qualified Dispositions in Trust

8. The transferor's potential or actual use of real property held under a qualified personal residence trust within the meaning of such term as described in Sec. 2702(c) of the Internal Revenue Code of 1986 [26 U.S.C. Sec. 2702(c)] and any successor provision thereto or the transferor's possession and enjoyment of a qualified annuity interest within the meaning of such term as described in Treasury Regulation Sec. 25.2702-5(c)(8) [26 C.F.R. 25.2702-5(c)(8)] and any successor provision thereto; (3830)

9. The transferor's potential or actual receipt of income or principal to pay, in whole or in part, income taxes due on income of the trust if such potential or actual receipt of income or principal is pursuant to a provision in the trust instrument that expressly provides for the payment of such taxes and if such potential or actual receipt of income or principal would be the result of a qualified trustee's or qualified trustees' acting: (3831)

A. In such qualified trustee's or qualified trustees' discretion or pursuant to a mandatory direction in the trust instrument; or (3832)

B. At the direction of an adviser described in paragraph (8)c. of this section who is acting in such adviser's discretion; and (3833)

10. The ability, whether pursuant to discretion, direction or the grantor's exercise of a testamentary power of appointment, of a qualified trustee to pay, after the death of the transferor, all or any part of the debts of the transferor outstanding at the time of the transferor's death, the expenses of administering the transferor's estate, or any estate or inheritance tax imposed on or with respect to the transferor's estate; and (3834)

c. Provides that the interest of the transferor or other beneficiary in the trust property or the income therefrom may not be transferred, assigned, pledged or mortgaged, whether voluntarily or involuntarily, before the qualified trustee or qualified trustees actually distribute the property or income therefrom to the beneficiary, and such provision of the trust instrument shall be deemed to be a restriction on the transfer of the transferor's beneficial interest in the trust that is enforceable under applicable nonbankruptcy law within the meaning of Sec. 541(c)(2) of the Bankruptcy Code (11 U.S.C. Sec. 541(c)(2)) or any successor provision thereto. (3835)

d. [Repealed.] (3836)

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 (11)a. of this section. Distributions to pay income taxes made under a discretionary or mandatory provision included in a governing instrument pursuant to paragraph (11)b.3., paragraph (11)b.6., or paragraph (11)b.9. of this section may be made by direct payment to the taxing authorities. (3837)

(71 Del. Laws, c. 159, Sec. 1; 71 Del. Laws, c. 343, Sec.Sec. 1-5; 72 Del. Laws, c. 59, Sec.Sec. 1, 2; 72 Del. Laws, c. 341, Sec.Sec. 1-4; 73 Del. Laws, c. 378, Sec.Sec. 1-3; 74 Del. Laws, c. 100, Sec.Sec. 2, 4; 75 Del. Laws, c. 97, Sec.Sec. 10-12; 75 Del. Laws, c. 301, Sec. 6; 76 Del. Laws, c. 90, Sec. 14; 76 Del. Laws, c. 254, Sec.Sec. 13, 14; 77 Del. Laws, c. 98, Sec. 20; 77 Del. Laws, c. 330, Sec.Sec. 13-16.) (3838)

Sec. 3571. Retained interests of transferor. (3839)(Text)

A qualified disposition shall be subject to Sec. 3572 of this title notwithstanding a transferor's retention of any or all of the powers and rights described in Sec. 3570(11)b. of this title and the transferor's service as investment adviser pursuant to Sec. 3570(8)d. of this title. The transferor shall have only such powers and rights as are conferred by the trust instrument. Except as permitted by Sec.Sec. 3570(8)d. and 3570(11)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. (3840)

(71 Del. Laws, c. 159, Sec. 1; 71 Del. Laws, c. 343, Sec. 6; 72 Del. Laws, c. 59, Sec. 2; 72 Del. Laws, c. 341, Sec. 5.) (3841)

Sec. 3572. Avoidance of qualified dispositions. (3842)(Text)

(a) Notwithstanding any other provision of this Code, no action of any kind, including, without limitation, an action to enforce a judgment entered by a court or other body having adjudicative authority, shall be brought at law or in equity for an attachment or other provisional remedy against property that is the subject of a qualified disposition or for avoidance of a qualified disposition unless such action shall be brought pursuant to the provisions of Sec. 1304 or Sec. 1305 of Title 6 and, in the case of a creditor whose claim arose after a qualified disposition, unless the qualified disposition was made with actual intent to defraud such creditor. The Court of Chancery shall have exclusive jurisdiction over any action brought with respect to a qualified disposition. (3843)

(b) A creditor's claim under subsection (a) of this section shall be extinguished unless: (3844)

(1) The creditor's claim arose before the qualified disposition was made, and the action is brought within the limitations of Sec. 1309 of Title 6 in effect on the later of the date of the qualified disposition or August 1, 2000; or (3845)

(2) Notwithstanding the provisions of Sec. 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. (3846)

In any action described in subsection (a) of this section, the burden to prove the matter by clear and convincing evidence shall be upon the creditor. (3847)

(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 Sec. 3570(11)b. and c. of this title. If a trustee of an existing trust proposes to make a qualified disposition pursuant to the provisions of this subsection (c) of this section but the trust would not conform to the requirements of Sec. 3570(11)b.2. of this title as a result of the original transferor's nonconforming powers of appointment, then, upon the trustee's delivery to the qualified trustee of an irrevocable written election to have this subsection apply to the trust, the nonconforming powers of appointment shall be deemed modified to the extent necessary to conform with Sec. 3570(11)b.2. of this title. For purposes of this subchapter, the irrevocable written election shall include a description of the original transferor's powers of appointment as modified together with the original transferor's written consent thereto, but no such consent of the original transferor shall be considered a disposition within the meaning of Sec. 3570(4) of this title. (3848)

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