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Developed and maintained by the Division of Legislative Automated Systems.
1996 SESSION
Be it enacted by the General Assembly of Virginia:
1. That § 55-19.4 of the Code of Virginia is amended and reenacted as follows:
§ 55-19.4. Petition for modification of trust.
A. Upon petition by a trustee, personal representative or beneficiary in the
circuit court in which the trustee or personal representative qualified, or if
there is no such qualification, the circuit court for the jurisdiction in which
the trustee, personal representative or beneficiary resides, or if the trustee
is a corporate trustee and there is no resident beneficiary, the circuit court
where the trust account is administered, the circuit court may, for good cause
shown, reform modify a trust in any manner, including, without
limitation, dividing a trust into two or more separate trusts, consolidating
two or more separate trusts into a single trust, or terminating the trust and
ordering distribution of the trust property regardless of any.
However, termination shall not be ordered if the creator of a trust has
included a spendthrift or similar protective provision unless the costs
of administration are such that the establishment or continuance of the trust
would impair the trust purposes.
B. Before taking any action permitted under subsection A, the court must first find that:
1. In the case of consolidation, the dispositive provisions of the trusts to be consolidated are substantially similar; and
2. In the case of any reformation other than modification,
including termination, such action will neither (i) materially impair the
accomplishment of the trust purposes nor (ii) adversely affect the interests of
any beneficiary.
C. The court may order that the reformation modification be
effective prospectively only or be retroactive to the date of the trust's
creation, the date of death of the trustor or testator or such other date as
the court may direct. The court may make such other and further orders as the
court deems proper to protect the interests of the beneficiaries, the trustee,
the personal representative, or any party in interest. The court may order
distribution of the interest of a minor or incapacitated beneficiary, or any
portion thereof, upon termination or other reformation
modification of a trust, to a custodian under the Virginia Uniform
Transfers to Minors Act (§ 31-37 et seq.) or to a custodial trustee under
the Virginia Uniform Custodial Trust Act (§ 55-34.1 et seq.).
D. In the interpretation, construction and application of this section, the following rules shall apply:
1. For purposes of any reformation modification of a trust, good
cause may be shown by evidence of (i) changes in any federal or Virginia tax
laws, or the construction of such laws, whether by statute, court decision,
regulation, ruling or otherwise, which, in the absence of reformation
modification, would materially impair the purposes of the trust or
adversely affect the interests of the trustor or any beneficiary, or which, if
reformation modification were made, would materially benefit the
trust or the interests of the trustor or any beneficiary or (ii) existing
circumstances such that the purposes of the trust will be impaired or the
interests of the trustor or any beneficiary adversely affected if the
reformation modification is not made or that reformation
modification if made would benefit the trust or interests of the
trustor or any beneficiary.
2. For purposes of termination of a trust, good cause may be shown as set forth
in subdivision 1 of this subsection or by evidence that (i) the costs of
administration are such that the establishment or the continuance of the trust
would impair the purposes of the trust or (ii) the value of the trust
principal is $25,000 or less, with no expectation of additions to the principal
other than from interest or other earnings.
3. Any beneficiary or other party in interest to the proceeding may execute
a written waiver of any requirement for reformation of a trust, whether
pursuant to this section or by the court, provided such waiver shall apply only
to such party's interest in the trust.
E. This section shall apply to all trusts, whether inter vivos or testamentary, whether created by the same or different instruments or by the same or different persons, and regardless of the time, place or method of creation or administration.
F. This section shall not be construed to restrict or limit the right of a trustee or personal representative, acting in such capacity, to divide, consolidate, terminate or otherwise reform trusts without judicial approval in accordance with applicable provisions of the governing instrument or existing law.