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AN ACT

RELATING TO TRUSTS; AMENDING THE UNIFORM TRUST CODE; AMENDING,

RECOMPILING AND ENACTING SECTIONS OF THE NMSA 1978.

BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF NEW MEXICO:

Section 1. Section 46A-1-101 NMSA 1978 (being Laws

2003, Chapter 122, Section 1-101) is amended to read:

"46A-1-101. SHORT TITLE.--Chapter 46A NMSA 1978 may be

cited as the "Uniform Trust Code"."

Section 2. Section 46A-1-103 NMSA 1978 (being Laws

2003, Chapter 122, Section 1-103) is amended to read:

"46A-1-103. DEFINITIONS.--As used in the Uniform Trust

Code:

A. "action", with respect to an act of a trustee,

includes a failure to act;

B. "ascertainable standard" means a standard

relating to an individual's health, education, support or

maintenance within the meaning of Subparagraph (A) of

Paragraph (1) of Subsection (b) of Section 2041 and Paragraph

(1) of Subsection (c) of Section 2514 of the Internal Revenue

Code of 1986, as amended;

C. "beneficiary" means a person that:

(1) has a present or future beneficial

interest in a trust, vested or contingent; or

(2) in a capacity other than that of

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trustee, holds a power of appointment over trust property;

D. "charitable trust" means a trust or portion of

a trust created for a charitable purpose described in

Subsection A of Section 46A-4-405 NMSA 1978;

E. "conservator" means a person appointed by the

court to administer the estate of a minor or adult individual;

F. "environmental law" means a federal, state or

local law, rule, regulation or ordinance relating to

protection of the environment;

G. "guardian" means a person appointed by the

court or a parent to make decisions regarding the support,

care, education, health and welfare of a minor or adult

person. "Guardian" does not include a guardian ad litem;

H. "interests of the beneficiaries" means the

beneficial interests provided in the terms of the trust;

I. "jurisdiction", with respect to a geographic

area, includes a state or country;

J. "person" means an individual, corporation,

business trust, estate, trust, partnership, limited liability

company, association, joint venture, government, governmental

subdivision, agency or instrumentality, public corporation or

any other legal or commercial entity;

K. "power of withdrawal" means a presently

exercisable general power of appointment other than a power

exercisable:

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(1) by a trustee and limited by an

ascertainable standard; or

(2) by another person only upon consent of

the trustee or a person holding an adverse interest;

L. "property" means anything that may be the

subject of ownership, whether real or personal, legal or

equitable, or any interest therein;

M. "qualified beneficiary" means a beneficiary

who, on the date the beneficiary's qualification is

determined:

(1) is a distributee or permissible

distributee of trust income or principal;

(2) would be a distributee or permissible

distributee of trust income or principal if the interests of

the distributees described in Paragraph (1) of this subsection

terminated on that date without causing the trust to

terminate; or

(3) would be a distributee or permissible

distributee of trust income or principal if the trust

terminated on that date;

N. "revocable", as applied to a trust, means

revocable by the settlor without the consent of the trustee or

a person holding an adverse interest;

O. "settlor" means a person, including a testator,

who creates or contributes property to a trust. If more than

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one person creates or contributes property to a trust, each

person is a settlor of the portion of the trust property

attributable to that person's contribution, except to the

extent another person has the power to revoke or withdraw that

portion;

P. "spendthrift provision" means a term of a trust

that restrains both voluntary and involuntary transfer of a

beneficiary's interest;

Q. "state" means a state of the United States, the

District of Columbia, Puerto Rico, the United States Virgin

Islands or any territory or insular possession subject to the

jurisdiction of the United States. "State" includes an Indian

tribe, pueblo, nation or band recognized by federal law or

formally acknowledged by a state;

R. "terms of a trust" means the manifestation of

the settlor's intent regarding a trust's provisions as

expressed in the trust instrument or as may be established by

other evidence that would be admissible in a judicial

proceeding;

S. "trust instrument" means an instrument executed

by the settlor that contains terms of the trust, including any

amendments thereto; and

T. "trustee" includes an original trustee, an

additional trustee, a successor trustee and a co-trustee."

Section 3. Section 46A-1-104 NMSA 1978 (being Laws

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2003, Chapter 122, Section 1-104) is amended to read:

"46A-1-104. KNOWLEDGE.--

A. Subject to Subsection B of this section, a

person has knowledge of a fact if the person:

(1) has actual knowledge;

(2) has received a notice or notification of

it; or

(3) from all the facts and circumstances

known to the person at the time in question, has reason to

know it.

B. An organization that conducts activities

through employees has notice or knowledge of a fact involving

a trust only from the time the information was received by an

employee having responsibility to act for the trust, or would

have been brought to the employee's attention if the

organization had exercised reasonable diligence. An

organization exercises reasonable diligence if it maintains

reasonable routines for communicating significant information

to the employee having responsibility to act for the trust and

there is reasonable compliance with the routines. Reasonable

diligence does not require an employee of the organization to

communicate information unless the communication is part of

the employee's regular duties or the employee knows that a

matter involving the trust would be materially affected by the

information."

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Section 4. Section 46A-1-105 NMSA 1978 (being Laws

2003, Chapter 122, Section 1-105) is amended to read:

"46A-1-105. DEFAULT AND MANDATORY RULES.--

A. Except as otherwise provided in the terms of

the trust, the Uniform Trust Code governs the duties and

powers of a trustee, relations among trustees and the rights

and interests of a beneficiary.

B. The terms of a trust prevail over any provision

of the Uniform Trust Code except:

(1) the requirements for creating a trust;

(2) the duty of a trustee to act in good

faith and in accordance with the terms and purposes of the

trust and the interests of the beneficiaries;

(3) the requirement that a trust and its

terms be for the benefit of its beneficiaries and that the

trust have a purpose that is lawful, not contrary to public

policy and possible to achieve;

(4) the power of the court to modify or

terminate a trust under Sections 46A-4-410 through 46A-4-416

NMSA 1978;

(5) the effect of a spendthrift provision

and the rights of certain creditors and assignees to reach a

trust as provided in Chapter 46A, Article 5 NMSA 1978;

(6) the power of the court under Section

46A-7-702 NMSA 1978 to require, dispense with or modify or

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terminate a bond;

(7) the power of the court under Subsection

B of Section 46A-7-708 NMSA 1978 to adjust a trustee's

compensation specified in the terms of the trust that is

unreasonably low or high;

(8) the duty under Paragraphs (2) and (3) of

Subsection B of Section 46A-8-813 NMSA 1978 to notify

qualified beneficiaries of an irrevocable trust who have

attained twenty-five years of age of the existence of the

trust, of the identity of the trustee and of their right to

request reports of the trustee;

(9) except as otherwise provided in

Subsection F of Section 46A-8-813 NMSA 1978, the duty under

Subsection A of Section 46A-8-813 NMSA 1978 to respond to the

request of a qualified beneficiary of an irrevocable trust for

a trustee's reports and other information reasonably related

to the administration of a trust;

(10) the effect of an exculpatory term under

Section 46A-10-1008 NMSA 1978;

(11) the rights under Sections 46A-10-1010

through 46A-10-1013 NMSA 1978 of a person other than a trustee

or beneficiary;

(12) periods of limitation for commencing a

judicial proceeding; provided, however, any such period may be

increased;

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(13) the power of the court to take such

action and exercise such jurisdiction as may be necessary in

the interests of justice; and

(14) the subject-matter jurisdiction of the

court and venue for commencing a proceeding as provided in

Sections 46A-2-203 and 46A-2-204 NMSA 1978."

Section 5. Section 46A-1-107 NMSA 1978 (being Laws

2003, Chapter 122, Section 1-107) is amended to read:

"46A-1-107. GOVERNING LAW.--The meaning and effect of

the terms of a trust are determined by:

A. the law of the state designated in the terms;

B. the law of the jurisdiction designated in the

terms, which jurisdiction is not a state, unless the

designation of that jurisdiction's law is contrary to a strong

public policy of this state or the state jurisdiction having

the most significant relationship to the matter at issue; or

C. in the absence of a controlling designation in

the terms of the trust, the law of the jurisdiction having the

most significant relationship to the matter at issue."

Section 6. Section 46A-1-110 NMSA 1978 (being Laws

2003, Chapter 122, Section 1-110) is amended to read:

"46A-1-110. OTHERS TREATED AS QUALIFIED

BENEFICIARIES.--

A. A charitable organization expressly designated

to receive distributions under the terms of a charitable trust

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has the rights of a qualified beneficiary under the Uniform

Trust Code if the charitable organization, on the date the

charitable organization's qualification is being determined:

(1) is a distributee or permissible

distributee of trust income or principal;

(2) would be a distributee or permissible

distributee of trust income or principal upon the termination

of the interests of other distributees or permissible

distributees then receiving or eligible to receive

distributions; or

(3) would be a distributee or permissible

distributee of trust income or principal if the trust

terminated on that date.

B. A person appointed to enforce a trust created

for the care of an animal or another noncharitable purpose as

provided in Section 46A-4-408 or 46A-4-409 NMSA 1978 has the

rights of a qualified beneficiary under the Uniform Trust

Code.

C. The attorney general has the rights of a

qualified beneficiary with respect to a charitable trust

having its principal place of administration in this state or

its charitable beneficiary or beneficiaries that receive or

are eligible to receive in the aggregate the trust's largest

distribution in this state."

Section 7. Section 46A-2-203 NMSA 1978 (being Laws

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2003, Chapter 122, Section 2-203) is amended to read:

"46A-2-203. SUBJECT-MATTER JURISDICTION.--The district

court has exclusive jurisdiction of all proceedings involving

a trust."

Section 8. A new section of the Uniform Trust Code,

Section 46A-2-204 NMSA 1978, is enacted to read:

"46A-2-204. VENUE.--

A. Except as otherwise provided in Subsection B of

this section, venue for a judicial proceeding involving a

trust is in the county of New Mexico in which the trust's

principal place of administration is or will be located or, if

the trust is created by will and the estate is not yet closed,

in the county in which the decedent's estate is being

administered.

B. If a trust has no trustee, venue for a judicial

proceeding for the appointment of a trustee is in a county of

New Mexico in which a beneficiary resides, in a county in

which any trust property is located or, if the trust is

created by will, in the county in which the decedent's estate

was or is being administered."

Section 9. Section 46A-3-301 NMSA 1978 (being Laws

2003, Chapter 122, Section 3-301) is amended to read:

"46A-3-301. REPRESENTATION--BASIC EFFECT.--

A. Notice to a person who may represent and bind

another person pursuant to the provisions of Chapter 46A,

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Article 3 NMSA 1978 has the same effect as if notice were

given directly to the other person.

B. The consent of a person who may represent and

bind another person pursuant to the provisions of Chapter 46A,

Article 3 NMSA 1978 is binding on the person represented

unless the person represented objects to the representation

before the consent would otherwise have become effective.

C. Except as otherwise provided in Sections

46A-4-411 and 46A-6-602 NMSA 1978, a person who pursuant to

the provisions of Chapter 46A, Article 3 NMSA 1978 may

represent a settlor who lacks capacity, may receive notice and

give a binding consent on the settlor's behalf.

D. A settlor may not represent or bind a

beneficiary pursuant to the provisions of Chapter 46A, Article

3 NMSA 1978 with respect to the termination or modification of

a trust under Subsection A of Section 46A-4-411 NMSA 1978."

Section 10. Section 46A-4-411 NMSA 1978 (being Laws

2003, Chapter 122, Section 4-411) is amended to read:

"46A-4-411. MODIFICATION OR TERMINATION OF

NONCHARITABLE IRREVOCABLE TRUST BY CONSENT.--

A. A noncharitable irrevocable trust may be

modified or terminated upon consent of the settlor and all

beneficiaries, even if the modification or termination is

inconsistent with a material purpose of the trust. If upon

petition the court finds that the settlor and all

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beneficiaries consent to the modification or termination of a

noncharitable irrevocable trust, the court shall approve the

modification or termination even if the modification or

termination is inconsistent with a material purpose of the

trust. A settlor's power to consent to a trust's modification

or termination may be exercised by an agent under a power of

attorney only to the extent expressly authorized by the power

of attorney or the terms of the trust; by the settlor's

conservator with the approval of the court supervising the

conservatorship if an agent is not so authorized; or by the

settlor's guardian with the approval of the court supervising

the guardianship if an agent is not so authorized and a

conservator has not been appointed.

B. A noncharitable irrevocable trust may be

terminated upon consent of all of the beneficiaries if the

court concludes that continuance of the trust is not necessary

to achieve any material purpose of the trust. A noncharitable

irrevocable trust may be modified upon consent of all of the

beneficiaries if the court concludes that modification is not

inconsistent with a material purpose of the trust.

C. For purposes of this section only, a

spendthrift provision in the terms of a trust is not presumed

to constitute either a material or an immaterial provision of

the trust.

D. Upon termination of a trust under Subsection A

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or B of this section, the trustee shall distribute the trust

property as agreed by the beneficiaries.

E. If not all of the beneficiaries consent to a

proposed modification or termination of the trust under

Subsection A or B of this section, the modification or

termination may be approved by the court if the court is

satisfied that:

(1) if all of the beneficiaries had

consented, the trust could have been modified or terminated

under this section; and

(2) the interests of a beneficiary who does

not consent will be adequately protected."

Section 11. Section 46A-4-412 NMSA 1978 (being Laws

2003, Chapter 122, Section 4-412) is amended to read:

"46A-4-412. MODIFICATION OR TERMINATION BECAUSE OF

UNANTICIPATED CIRCUMSTANCES OR INABILITY TO ADMINISTER TRUST

EFFECTIVELY.--

A. The court may modify the administrative or

dispositive terms of a trust or terminate the trust if it is

established by clear and convincing evidence that there are

circumstances not anticipated by the settlor and modification

or termination will further the purposes of the trust. To the

extent practicable, the modification must be made in

accordance with the settlor's probable intention.

B. The court may modify the administrative terms

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of a trust if continuation of the trust on its existing terms

would be impracticable or wasteful or impair the trust's

administration.

C. Upon termination of a trust under this section,

the trustee shall distribute the trust property in a manner

consistent with the purposes of the trust."

Section 12. Section 46A-5-501 NMSA 1978 (being Laws

2003, Chapter 122, Section 5-501) is amended to read:

"46A-5-501. RIGHTS OF BENEFICIARY'S CREDITOR OR

ASSIGNEE.--To the extent a beneficiary's interest is not

subject to a spendthrift provision, the court may authorize a

creditor or assignee of the beneficiary to reach the

beneficiary's interest by attachment of present or future

distributions to or for the benefit of the beneficiary or

other means. The court may limit the award to such relief as

is appropriate under the circumstances."

Section 13. Section 46A-5-503 NMSA 1978 (being Laws

2003, Chapter 122, Section 5-503) is amended to read:

"46A-5-503. EXCEPTIONS TO SPENDTHRIFT PROVISION.--

A. As used in this section, "child" includes any

person for whom an order or judgment for child support has

been entered in this or another state.

B. A spendthrift provision is unenforceable

against:

(1) a beneficiary's child, spouse or former

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spouse who has a judgment or court order against the

beneficiary for support or maintenance;

(2) a judgment creditor who has provided

services for the protection of a beneficiary's interest in the

trust; and

(3) a claim of this state or the United

States to the extent a statute of this state or federal law so

provides.

C. A claimant against whom a spendthrift provision

cannot be enforced may obtain from a court an order attaching

present or future distributions to or for the benefit of the

beneficiary. The court may limit the award to such relief as

is appropriate under the circumstances. The order attaching

present or future distributions to or for the benefit of the

beneficiary shall be the exclusive remedy available to a

claimant against whom a spendthrift provision cannot be

enforced."

Section 14. Section 46A-5-504 NMSA 1978 (being Laws

2003, Chapter 122, Section 5-504) is amended to read:

"46A-5-504. DISCRETIONARY TRUSTS--EFFECT OF

STANDARD.--

A. As used in this section, "child" includes any

person for whom an order or judgment for child support has

been entered in this or another state.

B. Except as otherwise provided in Subsection C of

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this section, whether or not a trust contains a spendthrift

provision, a creditor of a beneficiary may not compel a

distribution that is subject to the trustee's discretion, even

if:

(1) the discretion is expressed in the form

of a standard of distribution; or

(2) the trustee has abused the discretion.

C. To the extent a trustee has not complied with a

standard of distribution or has abused a discretion:

(1) a distribution may be ordered by the

court to satisfy a judgment or court order against the

beneficiary for support or maintenance of the beneficiary's

child, spouse or former spouse; and

(2) the court shall direct the trustee to

pay to the child, spouse or former spouse such amount as is

equitable under the circumstances but not more than the amount

the trustee would have been required to distribute to or for

the benefit of the beneficiary had the trustee complied with

the standard or not abused the discretion.

D. This section does not limit the right of a

beneficiary to maintain a judicial proceeding against a

trustee for an abuse of discretion or failure to comply with a

standard for distribution.

E. If the trustee's or co-trustee's discretion to

make distributions for the trustee's or co-trustee's own

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benefit is limited by an ascertainable standard, a creditor

shall not reach or compel distribution of the beneficial

interest except to the extent the interest would be subject to

the creditor's claim were the beneficiary not acting as

trustee or co-trustee."

Section 15. Section 46A-5-506 NMSA 1978 (being Laws

2003, Chapter 122, Section 5-506) is amended to read:

"46A-5-506. OVERDUE DISTRIBUTION.--

A. Whether or not a trust contains a spendthrift

provision, a creditor or assignee of a beneficiary may reach a

mandatory distribution of income or principal, including a

distribution upon termination of the trust, if the trustee has

not made the distribution to the beneficiary within a

reasonable time after the designated distribution date.

B. As used in this section, "mandatory

distribution" means a distribution of income or principal that

the trustee is required to make to a beneficiary under the

terms of the trust, including a distribution upon termination

of the trust. "Mandatory distribution" does not include a

distribution subject to the exercise of the trustee's

discretion even if the discretion is expressed in the form of

a standard of distribution or the terms of the trust

authorizing distribution combine language of discretion with

language of direction."

Section 16. Section 46A-6-602 NMSA 1978 (being Laws

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2003, Chapter 122, Section 6-602) is amended to read:

"46A-6-602. REVOCATION OR AMENDMENT OF REVOCABLE

TRUST.--

A. Unless the terms of a trust expressly provide

that the trust is irrevocable, the settlor may revoke or amend

the trust. This subsection does not apply to a trust created

under an instrument executed before July 1, 2003.

B. If a revocable trust is created or funded by

more than one settlor:

(1) to the extent the trust consists of

community property, the trust may be revoked by either spouse

acting alone but may be amended only by joint action of both

spouses;

(2) to the extent the trust consists of

property other than community property, each settlor may

revoke or amend the trust with regard to the portion of the

trust property attributable to that settlor's contribution;

and

(3) upon the revocation or amendment of the

trust by fewer than all of the settlors, the trustee shall

promptly notify the other settlors of the revocation or

amendment.

C. The settlor may revoke or amend a revocable

trust:

(1) by substantial compliance with a method

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provided in the terms of the trust; or

(2) if the terms of the trust do not provide

a method or the method provided in the terms is not expressly

made exclusive, by:

(a) a later will or codicil that

expressly refers to the trust or specifically devises property

that would otherwise have passed according to the terms of the

trust; or

(b) any other method manifesting clear

and convincing evidence of the settlor's intent.

D. Upon revocation of a revocable trust, the

trustee shall deliver the trust property as the settlor

directs.

E. A settlor's powers with respect to revocation,

amendment or distribution of trust property may be exercised

by an agent under a power of attorney only to the extent

expressly authorized by the terms of the trust or the power.

F. A conservator of the settlor or, if no

conservator has been appointed, a guardian of the settlor may

exercise a settlor's powers with respect to revocation,

amendment or distribution of trust property only with the

approval of the court supervising the conservatorship or

guardianship.

G. A trustee who does not know that a trust has

been revoked or amended is not liable to the settlor or

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settlor's successors in interest for distributions made and

other actions taken on the assumption that the trust had not

been amended or revoked."

Section 17. Section 46A-6-603 NMSA 1978 (being Laws

2003, Chapter 122, Section 6-603) is amended to read:

"46A-6-603. SETTLOR'S POWERS--POWERS OF WITHDRAWAL.--

A. While a trust is revocable and the settlor has

capacity to revoke the trust, rights of the beneficiaries are

subject to the control of, and the duties of the trustee are

owed exclusively to, the settlor.

B. During the period the power may be exercised,

the holder of a power of withdrawal has the rights of a

settlor of a revocable trust under this section to the extent

of the property subject to the power."

Section 18. A new section of the Uniform Trust Code,

Section 46A-6-604 NMSA 1978, is enacted to read:

"46A-6-604. LIMITATION ON ACTION CONTESTING VALIDITY OF

REVOCABLE TRUST--DISTRIBUTION OF TRUST PROPERTY.--

A. A person may commence a judicial proceeding to

contest the validity of a trust that was revocable at the

settlor's death within the earlier of:

(1) three years after the settlor's death;

or

(2) one hundred twenty days after the

trustee sent the person a copy of the trust instrument and a

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notice informing the person of the trust's existence, of the

trustee's name and address and of the time allowed for

commencing a proceeding.

B. Upon the death of the settlor of a trust that

was revocable at the settlor's death, the trustee may proceed

to distribute the trust property in accordance with the terms

of the trust. The trustee is not subject to liability for

doing so unless:

(1) the trustee knows of a pending judicial

proceeding contesting the validity of the trust; or

(2) a potential contestant has notified the

trustee of a possible judicial proceeding to contest the trust

and a judicial proceeding is commenced within sixty days after

the contestant sent the notification.

C. A beneficiary of a trust that is determined to

have been invalid is liable to return any distribution

received."

Section 19. Section 46A-7-702 NMSA 1978 (being Laws

2003, Chapter 122, Section 7-702) is amended to read:

"46A-7-702. TRUSTEE'S BOND.--

A. A trustee shall give bond to secure performance

of the trustee's duties only if the court finds that a bond is

needed to protect the interests of the beneficiaries or is

required by the terms of the trust and the court has not

dispensed with the requirement.

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B. The court may specify the amount of a bond, its

liabilities and whether sureties are necessary. The court may

modify or terminate a bond at any time.

C. A regulated financial service institution

qualified to do trust business in New Mexico need not give

bond, even if required by the terms of the trust."

Section 20. Section 46A-7-705 NMSA 1978 (being Laws

2003, Chapter 122, Section 7-705) is amended to read:

"46A-7-705. RESIGNATION OF TRUSTEE.--

A. A trustee may resign:

(1) upon at least thirty days' notice to the

qualified beneficiaries, the settlor, if living, and all

co-trustees; or

(2) with the approval of the court.

B. In approving a resignation, the court may issue

orders and impose conditions reasonably necessary for the

protection of the trust property.

C. Any liability of a resigning trustee or of any

sureties on the trustee's bond for acts or omissions of the

trustee is not discharged or affected by the trustee's

resignation."

Section 21. Section 46A-8-802 NMSA 1978 (being Laws

2003, Chapter 122, Section 8-802) is amended to read:

"46A-8-802. DUTY OF LOYALTY.--

A. A trustee shall administer the trust solely in

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the interests of the beneficiaries.

B. Subject to the rights of persons dealing with

or assisting the trustee as provided in Section 46A-10-1012

NMSA 1978, a sale, encumbrance or other transaction involving

the investment or management of trust property entered into by

the trustee for the trustee's own personal account or that is

otherwise affected by a conflict between the trustee's

fiduciary and personal interests is voidable by a beneficiary

affected by the transaction unless:

(1) the transaction was authorized by the

terms of the trust;

(2) the transaction was approved by the

court;

(3) the beneficiary did not commence a

judicial proceeding within the time allowed by Section

46A-10-1005 NMSA 1978;

(4) the beneficiary consented to the

trustee's conduct, ratified the transaction or released the

trustee in compliance with Section 46A-10-1009 NMSA 1978; or

(5) the transaction involved a contract

entered into or claim acquired by the trustee before the

person became or contemplated becoming trustee.

C. A sale, encumbrance or other transaction

involving the investment or management of trust property is

presumed to be affected by a conflict between personal and

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fiduciary interests if it is entered into by the trustee with:

(1) the trustee's spouse;

(2) the trustee's descendants, siblings,

parents or the spouse of any of them;

(3) an agent or attorney of the trustee; or

(4) a corporation or other person or

enterprise in which the trustee, or a person that owns a

significant interest in the trustee, has an interest that

might affect the trustee's best judgment.

D. A transaction between a trustee and a

beneficiary that does not concern trust property but that

occurs during the existence of the trust or while the trustee

retains significant influence over the beneficiary and from

which the trustee obtains an advantage is voidable by the

beneficiary unless the trustee establishes that the

transaction was fair to the beneficiary.

E. A transaction not concerning trust property in

which the trustee engages in the trustee's individual capacity

involves a conflict between personal and fiduciary interests

if the transaction concerns an opportunity properly belonging

to the trust.

F. An investment by a trustee in securities of an

investment company or investment trust to which the trustee,

or its affiliate, provides services in a capacity other than

as trustee is not presumed to be affected by a conflict

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between personal and fiduciary interests if the investment

otherwise complies with the Uniform Prudent Investor Act. In

addition to its compensation for acting as trustee, the

trustee may be compensated by the investment company or

investment trust for providing those services out of fees

charged to the trust. If the trustee receives compensation

from the investment company or investment trust for providing

investment advisory or investment services, the trustee at

least annually shall notify the persons entitled under Section

46A-8-813 NMSA 1978 to receive a copy of the trustee's annual

report of the rate and method by which the compensation was

determined.

G. In voting shares of stock or in exercising

powers of control over similar interests in other forms of

enterprise, the trustee shall act in the best interests of the

beneficiaries. If the trust is the sole owner of a

corporation or other form of enterprise, the trustee shall

elect or appoint directors or other managers who will manage

the corporation or enterprise in the best interests of the

beneficiaries.

H. This section does not preclude the following

transactions, if fair to the beneficiaries:

(1) an agreement between a trustee and a

beneficiary relating to the appointment or compensation of the

trustee;

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(2) payment of reasonable compensation to

the trustee;

(3) a transaction between a trust and

another trust, decedent's estate or conservatorship of which

the trustee is a fiduciary or in which a beneficiary has an

interest;

(4) a deposit of trust money in a regulated

financial-service institution operated by the trustee; or

(5) an advance by the trustee of money for

the protection of the trust.

I. The court may appoint a special fiduciary to

make a decision with respect to any proposed transaction that

might violate this section if entered into by the trustee."

Section 22. Section 46A-8-813 NMSA 1978 (being Laws

2003, Chapter 122, Section 8-813) is amended to read:

"46A-8-813. DUTY TO INFORM AND REPORT.--

A. A trustee shall keep the qualified

beneficiaries of the trust reasonably informed about the

administration of the trust and of the material facts

necessary for them to protect their interests. Unless

unreasonable under the circumstances, a trustee shall promptly

respond to a beneficiary's request for information related to

the administration of the trust.

B. A trustee:

(1) upon request of a beneficiary, shall

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promptly furnish to the beneficiary a copy of the trust

instrument;

(2) within sixty days after accepting a

trusteeship, shall notify the qualified beneficiaries of the

acceptance and of the trustee's name, address and telephone

number;

(3) within sixty days after the date the

trustee acquires knowledge of the creation of an irrevocable

trust, or the date the trustee acquires knowledge that a

formerly revocable trust has become irrevocable, whether by

the death of the settlor or otherwise, shall notify the

qualified beneficiaries of the trust's existence, of the

identity of the settlor or settlors, of the right to request a

copy of the trust instrument and of the right to a trustee's

report as provided in Subsection C of this section; and

(4) shall notify the qualified beneficiaries

in advance of any change in the method or rate of the

trustee's compensation.

C. A trustee shall send to the distributees or

permissible distributees of trust income or principal, and to

other qualified or nonqualified beneficiaries who request it,

at least annually and at the termination of the trust, a

report of the trust property, liabilities, receipts and

disbursements, including the source and amount of the

trustee's compensation, a listing of the trust assets and, if

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feasible, their respective market values. Upon a vacancy in a

trusteeship, unless a co-trustee remains in office, a report

must be sent to the qualified beneficiaries by the former

trustee. A personal representative, conservator or guardian

may send the qualified beneficiaries a report on behalf of a

deceased or incapacitated trustee.

D. A beneficiary may waive the right to a

trustee's report or other information otherwise required to be

furnished under this section. A beneficiary, with respect to

future reports and other information, may withdraw a waiver

previously given.

E. Paragraphs (2) and (3) of Subsection B of this

section do not apply to a trustee who accepts a trusteeship

before July 1, 2003, to an irrevocable trust created before

July 1, 2003 or to a revocable trust that becomes irrevocable

before July 1, 2003.

F. A knowing waiver by a settlor of the duties of

the trustee to inform and report to beneficiaries under the

Uniform Trust Code is effective, but only while the trustee is

a regulated financial service institution qualified to do

trust business in New Mexico. The knowing waiver must be

conspicuous, must be contained in the terms of the trust or of

a separate affidavit signed by the settlor and must state that

the settlor has been informed of the risks and consequences of

the waiver and that the settlor nevertheless directs that the

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reports and information be withheld by the trustee. As used

in this subsection, "conspicuous" means conspicuous as defined

in Section 55-1-201 NMSA 1978. The knowing waiver may direct

that the reports and information be withheld:

(1) in whole or in part;

(2) from one or more beneficiaries or

classes of beneficiaries, qualified or otherwise;

(3) in all events;

(4) until the occurrence of a date, event or

contingency;

(5) in the sole and absolute discretion of

the trustee or another person or both; or

(6) subject to more than one of the

restrictions in Paragraphs (1) through (5) of this

subsection."

Section 23. Section 46A-8-814 NMSA 1978 (being Laws

2003, Chapter 122, Section 8-814) is amended to read:

"46A-8-814. DISCRETIONARY POWERS--TAX SAVINGS.--

A. Notwithstanding the breadth of discretion

granted to a trustee in the terms of the trust, including the

use of such terms as "absolute", "sole" or "uncontrolled", the

trustee shall exercise a discretionary power in good faith and

in accordance with the terms and purposes of the trust and the

interests of the beneficiaries.

B. Subject to Subsection D of this section, and

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unless the terms of the trust expressly indicate that a rule

in this subsection does not apply:

(1) a person other than a settlor who is a

beneficiary and trustee of a trust that confers on the trustee

a power to make discretionary distributions to or for the

trustee's personal benefit may exercise the power only in

accordance with an ascertainable standard; and

(2) a trustee may not exercise a power to

make discretionary distributions to satisfy a legal obligation

of support that the trustee personally owes another person.

C. A power whose exercise is limited or prohibited

by Subsection B of this section may be exercised by a majority

of the remaining trustees whose exercise of the power is not

so limited or prohibited. If the power of all trustees is so

limited or prohibited, the court may appoint a special

fiduciary with authority to exercise the power.

D. Subsection B of this section does not apply to:

(1) a power held by the settlor's spouse who

is the trustee of a trust for which a marital deduction, as

defined in Section 2056(b)(5) or 2523(b)(5) of the Internal

Revenue Code of 1986, as amended, was previously allowed;

(2) any trust during any period that the

trust may be revoked or amended by its settlor; or

(3) a trust if contributions to the trust

qualify for the annual exclusion under Section 2503(c) of the

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Internal Revenue Code of 1986, as amended."

Section 24. Section 46A-8-815 NMSA 1978 (being Laws

2003, Chapter 122, Section 8-815) is amended to read:

"46A-8-815. GENERAL POWERS OF TRUSTEE.--

A. A trustee, without authorization by the court,

may exercise:

(1) powers conferred by the terms of the

trust; and

(2) except as limited by the terms of the

trust:

(a) all powers over the trust property

that an unmarried competent owner has over individually owned

property;

(b) any other powers appropriate to

achieve the proper investment, management and distribution of

the trust property; and

(c) any other powers conferred by the

Uniform Trust Code.

B. The exercise of a power is subject to the

fiduciary duties prescribed by Chapter 46A, Article 8 NMSA

1978."

Section 25. Section 46A-10-1001 NMSA 1978 (being Laws

2003, Chapter 122, Section 10-1001) is amended to read:

"46A-10-1001. BREACH OF TRUST.--

A. A violation by a trustee of a duty the trustee

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owes to a beneficiary is a breach of trust.

B. To remedy a breach of trust that has occurred

or may occur, the court may:

(1) compel the trustee to perform the

trustee's duties;

(2) enjoin the trustee from committing a

breach of trust;

(3) compel the trustee to redress a breach

of trust by paying money, restoring property or other means;

(4) order a trustee to account;

(5) appoint a special fiduciary to take

possession of the trust property and administer the trust;

(6) suspend the trustee;

(7) remove the trustee as provided in

Section 46A-7-706 NMSA 1978;

(8) reduce or deny compensation to the

trustee;

(9) subject to Section 46A-10-1012 NMSA

1978, void an act of the trustee, impose a lien or a

constructive trust on trust property or trace trust property

wrongfully disposed of and recover the property or its

proceeds; or

(10) order any other appropriate relief."

Section 26. Section 46A-10-1002 NMSA 1978 (being Laws

2003, Chapter 122, Section 10-1002) is amended to read:

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"46A-10-1002. DAMAGES FOR BREACH OF TRUST.--

A. A trustee who commits a breach of trust is

liable to the beneficiaries affected for the greater of:

(1) the amount required to restore the value

of the trust property and trust distributions to what they

would have been had the breach not occurred; or

(2) the profit the trustee made by reason of

the breach.

B. Except as otherwise provided in this

subsection, if more than one trustee is liable to the

beneficiaries for a breach of trust, a trustee is entitled to

contribution from the other trustee or trustees. A trustee is

not entitled to contribution if the trustee was substantially

more at fault than another trustee or if the trustee committed

the breach of trust in bad faith or with reckless indifference

to the purposes of the trust or the interests of the

beneficiaries. A trustee who received a benefit from the

breach of trust is not entitled to contribution from another

trustee to the extent of the benefit received."

Section 27. A new section of the Uniform Trust Code,

Section 46A-10-1005 NMSA 1978, is enacted to read:

"46A-10-1005. LIMITATION OF ACTION AGAINST TRUSTEE.--

A. A beneficiary shall not commence a proceeding

against a trustee for breach of trust more than one year after

the date the beneficiary or a representative of the

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beneficiary was sent a report that adequately disclosed the

existence of a potential claim for breach of trust and

informed the beneficiary of the time allowed for commencing a

proceeding.

B. A report adequately discloses the existence of

a potential claim for breach of trust if it provides

sufficient information so that the beneficiary or

representative knows of the potential claim or should have

inquired into its existence.

C. If Subsection A of this section does not apply,

a judicial proceeding by a beneficiary against a trustee for

breach of trust must be commenced within five years after the

first to occur of:

(1) the removal, resignation or death of the

trustee;

(2) the termination of the beneficiary's

interest in the trust; or

(3) the termination of the trust."

Section 28. A new section of the Uniform Trust Code,

Section 46A-10-1011 NMSA 1978, is enacted to read:

"46A-10-1011. INTEREST AS GENERAL PARTNER.--

A. Except as otherwise provided in Subsection C of

this section or unless personal liability is imposed in the

contract, a trustee who holds an interest as a general partner

in a general or limited partnership is not personally liable

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on a contract entered into by the partnership after the

trust's acquisition of the interest if the fiduciary capacity

was disclosed in the contract or in a statement previously

filed or recorded pursuant to the provisions of any version of

the Uniform Partnership Act or the Uniform Limited Partnership

Act.

B. Except as otherwise provided in Subsection C of

this section, a trustee who holds an interest as a general

partner is not personally liable for torts committed by the

partnership or for obligations arising from ownership or

control of the interest unless the trustee is personally at

fault.

C. The immunity provided by this section does not

apply if an interest in the partnership is held by the trustee

in a capacity other than that of trustee or is held by the

trustee's spouse or one or more of the trustee's descendants,

siblings or parents, or the spouse of any of them.

D. If the trustee of a revocable trust holds an

interest as a general partner, the settlor is personally

liable for contracts and other obligations of the partnership

as if the settlor were a general partner."

Section 29. A new section of the Uniform Trust Code,

Section 46A-11-1105 NMSA 1978, is enacted to read:

"46A-11-1105. APPLICATION TO EXISTING RELATIONSHIPS.--

A. Except as otherwise provided in this 2007 act:

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(1) the provisions of this 2007 act apply to

all trusts created before, on or after July 1, 2007;

(2) the provisions of this 2007 act apply to

all judicial proceedings concerning trusts commenced on or

after July 1, 2007;

(3) the provisions of this 2007 act apply to

judicial proceedings concerning trusts commenced before July

1, 2007 unless the court finds that application of a

particular provision of this 2007 act would substantially

interfere with the effective conduct of the judicial

proceedings or prejudice the rights of the parties, in which

case the particular provision of this 2007 act does not apply

and the superseded law applies;

(4) any rule of construction or presumption

provided in this 2007 act applies to trust instruments

executed before July 1, 2007 unless there is a clear

indication of a contrary intent in the terms of the trust; and

(5) an act done before the effective date of

this 2007 act is not affected by the provisions of this 2007

act.

B. If a right is acquired, extinguished or barred

upon the expiration of a prescribed period that has commenced

to run under any other statute before July 1, 2007, that

statute continues to apply to the right even if it has been

repealed or superseded.

C. The provisions of this 2007 act do not apply to

the trust created by the Enabling Act for New Mexico of June

20, 1910, 36 Stat. 557, Ch. 310."

Section 30. TEMPORARY PROVISION--RECOMPILATION.--

Sections 46A-10-1005 through 46A-10-1009 NMSA 1978 (being Laws

2003, Chapter 122, Sections 10-1005 through 10-1009) are

recompiled as Sections 46A-10-1006 through 46A-10-1010 NMSA

1978. Sections 46A-10-1011 and 46A-10-1012 NMSA 1978 (being

Laws 2003, Chapter 122, Sections 10-1011 and 10-1012) are

recompiled as Sections 46A-10-1012 and 46A-10-1013 NMSA 1978.

Section 31. EFFECTIVE DATE.--The effective date of the

provisions of this act is July 1, 2007.

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