HB 3272 — Relating to the operation of private trust companies in West Virginia

(D) A family affiliate or officer or former officer of a family affiliate:

Provided, That in the case of a former officer, such officer must have qualified as an officer of the family affiliate at any time within the past three years;

(E) The estate of a family member or the estate of an individual who is not a family member if all of the noncharitable beneficiaries of such estate are family members, except that an estate composed exclusively of nonindividual beneficiaries is considered to be a family member if all of the nonindividual beneficiaries are charitable foundations or other charitable entities as described in paragraph (F) of this subdivision;

or (F) A charitable foundation or other charitable entity that either:

(i) was created by a family member, or (ii) has a governing body consisting mostly of family members.

(10) "Fiduciary" means executor, administrator, conservator, guardian, committee, or trustee.

(11) "Licensed private trust company" means a private trust company that operates in accordance with this article and has been issued a license that has not been revoked or suspended by the State Auditor.

(12) "Lineal kinship" means a family member who is in the direct line of ascent or descent from a designated relative.

(13) "Officer" of a family affiliate means an individual, regardless of whether the individual has an official title or receives a salary or other compensation, who may participate in the major policymaking functions of a family affiliate, other than as a director.

The term does not include an individual who may have an official title and exercise discretion in the performance of duties and Enr HB 3272 functions, but who does not participate in determining the major policies of the family affiliate and whose decisions are limited by policy standards established by other officers, regardless of whether the policy standards have been adopted by the board of directors or other members of management.

and (B) To assure compliance with applicable laws and regulations.(15)regulations. "Private trust business" means acting as or performing the duties of a fiduciary in the regular course of its business for family members.

A(15) person"Private does not engage in private trust businessbusiness" by:(A)means Renderingacting services as an attorney-at-law in the performance of duties as a fiduciary;(B) Rendering services as a certified or registeredperforming public accountant in the performance of duties as such;(C) Acting as trustee under a deed of trust made only as security for the payment of money or for the performance of another act;(D) Acting as a trusteefiduciary in bankruptcy or as a receiver;(E) Holding trusts of real estate for the primaryregular purposecourse of subdivision,its development, or sale, or to facilitate any business transaction with respect to such real estate;(F) Engaging in the business of an escrow agent;(G) Holding assets as trustee of a trust created for charitablefamily purposesmembers. if:(i) The trustee is an entity exempt from federal income tax under Section 501(c)(3) of the Internal Revenue Code;

and(ii)A Theperson does not engage in private trust is:business by:

(I)(A) exemptRendering fromservices federalas incomean taxesattorney-at-law under Section 501(c)(3) of the Internal Revenue Code, (II) a charitable remainder trust described in Section 664 of the Internalperformance Revenue Code, (III) a pooled income fund described in Section 642(c)(5) of theduties Internal Revenue Code, or (IV) a trust the charitable interest in which is either a guaranteed annuity or a fixed percentage distributed yearly of the fair market value of the trust property, described in Section 2055(e)(2)(B) or Section 2522(c)(2)(B) of the Internal Revenue Code;(H) Receiving rents and proceeds of sale as a licensedfiduciary; real estate broker on behalf of the principal;

or(I)(B) EngagingRendering inservices securities transactions as a broker-dealercertified or salesman.(16)registered "Privatepublic trustaccountant company"in meansthe aperformance corporationof orduties limitedas liabilitysuch; company that:(A) Is exclusively owned by one or more family members;

(C) Acting as trustee under a deed of trust made only as security for the payment of money or for the performance of another act;

(D) Acting as a trustee in bankruptcy or as a receiver;

(E) Holding trusts of real estate for the primary purpose of subdivision, development, or sale, or to facilitate any business transaction with respect to such real estate;

Enr HB 3272 (F) Engaging in the business of an escrow agent;

(G) Holding assets as trustee of a trust created for charitable purposes if:

(i) The trustee is an entity exempt from federal income tax under Section 501(c)(3) of the Internal Revenue Code;

and (ii) The trust is:

(I) exempt from federal income taxes under Section 501(c)(3) of the Internal Revenue Code, (II) a charitable remainder trust described in Section 664 of the Internal Revenue Code, (III) a pooled income fund described in Section 642(c)(5) of the Internal Revenue Code, or (IV) a trust the charitable interest in which is either a guaranteed annuity or a fixed percentage distributed yearly of the fair market value of the trust property, described in Section 2055(e)(2)(B) or Section 2522(c)(2)(B) of the Internal Revenue Code;

(H) Receiving rents and proceeds of sale as a licensed real estate broker on behalf of the principal;

or (I) Engaging in securities transactions as a broker-dealer or salesman.

(16) "Private trust company" means a corporation or limited liability company that:

(A) Is exclusively owned by one or more family members;

(C) Engages or proposes to engage in private trust business under this article with one or more family members;(D) Does not serve as a fiduciary for a person, entity, trust, or estate that is not a family member, except that it may serve as a fiduciary for up to 35 individuals who are not family members if the individuals are current or former employees of the private trust company or one or more trusts, companies, or other entities that are family members;

and(D) (E) Does not transactserve businessas witha thefiduciary generalfor public.(17)a "Qualifiedperson, beneficiary"entity, hastrust, or estate that is not a family member, except that it may serve as a fiduciary for up to 35 individuals who are not family members if the meaningindividuals providedare incurrent §44D-1-103(r)or former employees of thisthe code.(18)private "Statetrust Auditor"company meansor theone Westor Virginiamore Statetrusts, Auditor.companies, or other entities that are family members;

(19)and "Tax"(E) includes,Does but is not limitedtransact to,business federal,with state, or local income, gift, estate, generation-skipping transfer, or inheritance tax.(20) "Trust institution" means a bank or trust company chartered by a state bank supervisory agency or by the Officegeneral ofpublic. the Comptroller of Currency.

(17) "Qualified beneficiary" has the meaning provided in §44D-1-103(r) of this code.

(18) "State Auditor" means the West Virginia State Auditor.

Enr HB 3272 (19) "Tax" includes, but is not limited to, federal, state, or local income, gift, estate, generation-skipping transfer, or inheritance tax.

(20) "Trust institution" means a bank or trust company chartered by a state bank supervisory agency or by the Office of the Comptroller of Currency.

(a) No person other than a corporation or limited liability company organized under the laws of this state to engage exclusively in the private trust business shall act as a private trust company or licensed private trust company.(b)company. A licensed private trust company that has one designated relative may not be organized or operated with an owners’ capital account of less than $250,000.

(b) A licensed private trust company that has one designated relative may not be organized or operated with an owners’ capital account of less than $250,000.

A private trust company may not be organized or operated with a capital account of less than $250,000.(c)$250,000. No person shall engage in business as a private trust company or licensed private trust company without first giving written notice to the State Auditor.

(c) No person shall engage in business as a private trust company or licensed private trust company without first giving written notice to the State Auditor.

Enr HB 3272 (2) The private trust company or licensed private trust company is formed for no other reason than to engage in the private trust business;

and (4) The private trust company or licensed private trust company is serving or will serve as trustee for one or more trusts having an aggregate of at least $50,000,000 in trust assets as further specified in §31I-1-10 of this code.(d)code. All of the capital stock, membership interests, or other equity interests of a private trust company or licensed private trust company shall be and shall remain owned by, and under the voting control of, family members, including any spouses, trusts, stock corporations, limited partnerships, limited liability companies, or estates that qualify under §31I-1-3(9)(B) through (E) of this code of one or more families.(e) An applicant seeking to operate as a licensed private trust company must file an application with the State Auditor on forms prescribed by the State Auditor, accompanied by a nonrefundable $10,000 application fee to be deposited into a special account in the State Treasury to be known as the Private Trust Company Application Fund.

(d) All of the capital stock, membership interests, or other equity interests of a private trust company or licensed private trust company shall be and shall remain owned by, and under the voting control of, family members, including any spouses, trusts, stock corporations, limited partnerships, limited liability companies, or estates that qualify under §31I-1-3(9)(B) through (E) of this code of one or more families.

(e) An applicant seeking to operate as a licensed private trust company must file an application with the State Auditor on forms prescribed by the State Auditor, accompanied by a nonrefundable $10,000 application fee to be deposited into a special account in the State Treasury to be known as the Private Trust Company Application Fund.

The application to operate as a licensed private trust company must also contain or be accompanied by:(1)by: The name of the proposed licensed private trust company;(2) A copy of the articles of incorporation or articles of organization and the bylaws or operating agreement of the proposed licensed private trust company;(3) The physical address and mailing address of the proposed licensed private trust company, which must be located in this state;(4) A statement describing in detail the services that will be provided to family members by the proposed licensed private trust company;(5) The name and biographical information of each individual who will initially serve as a director, officer, manager, or member acting in a managerial capacity of the proposed licensed private trust company;(6) The name and biographical information of each individual who owns or has the ability or power to directly or indirectly vote at least 10 percent or more of the outstanding shares, membership interest, or membership units of the proposed licensed private trust company;(7) The names of the designated relatives;(8) The amount of the initial capital account of the proposed licensed private trust company and the form in which the capital was paid and will be maintained;(9) The type and amount of bonds or insurance that will be procured and maintained on directors, officers, managers, or members acting in a managerial capacity or employees pursuant to §31I-1-12 of this code;(10) A statement signed by the applicant, or by the individual signing on behalf of the proposed licensed private trust company, under penalty of perjury, affirming that the following statements are true:(A) The proposed licensed private trust company is not currently transacting business with the general public;(B) No director, officer, manager, or member served as a director, officer, or manager, or acted in a managerial capacity, for a trust company or any other financial institution that had a license issued under the financial institutions codes or by the Federal Government or any other state, the District of Columbia, a territory of the United States, or a foreign country that was suspended or revoked within the 10 years preceding the date of the application;(C) No director, officer, manager, or member acting in a managerial capacity has been convicted of, or pled guilty or nolo contendere, regardless of whether adjudication of guilt is entered by the court, to a violation of the financial institutions codes, or other similar state or federal laws or related rules, or to a crime involving fraud, misrepresentation, or moral turpitude;(D) No director, officer, manager, or member acting in a managerial capacity has had a professional license suspended or revoked within the 10 years preceding the date of the application;(E) All information contained in the application is true and correct to the best knowledge of the individual signing the application on behalf of the proposed licensed private trust company;

and(11)(1) AnyThe othername additionalof informationthe reasonablyproposed requiredlicensed byprivate thetrust Statecompany; Auditor.

(2) A copy of the articles of incorporation or articles of organization and the bylaws or operating agreement of the proposed licensed private trust company;

Enr HB 3272 (3) The physical address and mailing address of the proposed licensed private trust company, which must be located in this state;

(4) A statement describing in detail the services that will be provided to family members by the proposed licensed private trust company;

(5) The name and biographical information of each individual who will initially serve as a director, officer, manager, or member acting in a managerial capacity of the proposed licensed private trust company;

(6) The name and biographical information of each individual who owns or has the ability or power to directly or indirectly vote at least 10 percent or more of the outstanding shares, membership interest, or membership units of the proposed licensed private trust company;

(7) The names of the designated relatives;

(8) The amount of the initial capital account of the proposed licensed private trust company and the form in which the capital was paid and will be maintained;

(9) The type and amount of bonds or insurance that will be procured and maintained on directors, officers, managers, or members acting in a managerial capacity or employees pursuant to §31I-1-12 of this code;

(10) A statement signed by the applicant, or by the individual signing on behalf of the proposed licensed private trust company, under penalty of perjury, affirming that the following statements are true:

(A) The proposed licensed private trust company is not currently transacting business with the general public;

(B) No director, officer, manager, or member served as a director, officer, or manager, or acted in a managerial capacity, for a trust company or any other financial institution that had a license issued under the financial institutions codes or by the Federal Government or any other state, the District of Columbia, a territory of the United States, or a foreign country that was suspended or revoked within the 10 years preceding the date of the application;

Enr HB 3272 (C) No director, officer, manager, or member acting in a managerial capacity has been convicted of, or pled guilty or nolo contendere, regardless of whether adjudication of guilt is entered by the court, to a violation of the financial institutions codes, or other similar state or federal laws or related rules, or to a crime involving fraud, misrepresentation, or moral turpitude;

(D) No director, officer, manager, or member acting in a managerial capacity has had a professional license suspended or revoked within the 10 years preceding the date of the application;

(E) All information contained in the application is true and correct to the best knowledge of the individual signing the application on behalf of the proposed licensed private trust company;

and (11) Any other additional information reasonably required by the State Auditor.

A private trust company or licensed private trust company shall not buy, redeem, or otherwise reacquire shares of stock or membership interests that the private trust company or licensed private trust company has issued, or declare a dividend or other distribution to its stockholders, members, or holders of equity interests, to the extent that such purchase, redemption, reacquisition, dividend, or distribution shall cause the private trust company'scompany’s or licensed private trust company’s paid-in capital, retained surplus, and reserves to be reduced below $250,000.

Enr HB 3272 §31I-1-7.

The board of directors or managers of a private trust company or licensed private trust company may thereafter redesignate as the principal office another authorized office of the private trust company or licensed private trust company in this state.(b)state. The board of directors or managers of a private trust company or licensed private trust company may designate, and from time to time redesignate, one additional office at which the private trust company or licensed private trust company may conduct business in this state.(c) The private trust company or licensed private trust company shall notify the State Auditor of any such redesignation of its principal office or designation or redesignation of an additional office not later than 30 days before its effective date and shall confirm to the State Auditor any such designation or redesignation within 10 days of its occurrence.

(b) The board of directors or managers of a private trust company or licensed private trust company may designate, and from time to time redesignate, one additional office at which the private trust company or licensed private trust company may conduct business in this state.

(c) The private trust company or licensed private trust company shall notify the State Auditor of any such redesignation of its principal office or designation or redesignation of an additional office not later than 30 days before its effective date and shall confirm to the State Auditor any such designation or redesignation within 10 days of its occurrence.

(a) In the exercise of any power held by a private trust company or licensed private trust company in its capacity as a fiduciary, the private trust company or licensed private trust company shall have a duty not to exercise any power in such a way as to deprive the estate, trust, or other entity for which it acts as a fiduciary of an otherwise available tax exemption, deduction, or credit for tax purposes, or deprive a donor of trust assets of a tax exemption, deduction, or credit or operate to impose a tax upon a donor or other person as owner of any portion of the estate, trust, or otherwise.(b)otherwise. Without limitation to subsection (a) of this section, no family member who is a stockholder or member or who otherwise holds an equity interest in, or is serving as a director, officer, manager, or employee of, a private trust company or licensed private trust company shall participate in or otherwise have a voice in any discretionary decision by the private trust company or licensed private trust company to distribute income or principal of any trust in order to discharge a legal obligation of a family member or for a family member's pecuniary benefit, unless:(1) The exercise of the discretion is limited by an ascertainable standard relating to the health, education, support, or maintenance of that family member;(2) The distribution is necessary for that family member's support, health, or education;

or(3)Enr TheHB instrument3272 governing(b) Without limitation to subsection (a) of this section, no family member who is a stockholder or member or who otherwise holds an equity interest in, or is serving as a director, officer, manager, or employee of, a private trust company or licensed private trust company shall participate in or otherwise have a voice in any discretionary decision by the administrationprivate trust company or licensed private trust company to distribute income or principal of thatany trust clearlyin soorder provides.to discharge a legal obligation of a family member or for a family member’s pecuniary benefit, unless:

(1) The exercise of the discretion is limited by an ascertainable standard relating to the health, education, support, or maintenance of that family member;

(2) The distribution is necessary for that family member’s support, health, or education;

or (3) The instrument governing the administration of that trust clearly so provides.

(a) The directors or managers of a licensed private trust company shall procure and maintain fidelity bonds on all active officers, directors, managers, members acting in a managerial capacity, and employees of the company, regardless of whether they receive a salary or other compensation from the company, in order to indemnify the company against loss because of a Enr HB 3272 dishonest, fraudulent, or criminal act or omission on their part, whether acting alone or in combination with other persons.(b)persons. Each fidelity bond shall be issued in an amount of at least $1,000,000.(c) In lieu of the fidelity bonds required under subsection (a) of this section, a licensed private trust company may increase its capital account required under §31I-1-4(b) of this code by $1,000,000 so that if it has:

(b) Each fidelity bond shall be issued in an amount of at least $1,000,000.

(c) In lieu of the fidelity bonds required under subsection (a) of this section, a licensed private trust company may increase its capital account required under §31I-1-4(b) of this code by $1,000,000 so that if it has:

or (3) Three designated relatives, then it is organized or operated with a capital account of at least $1,450,000.(d)$1,450,000. The licensed private trust company shall also procure and maintain an errors and omissions insurance policy of at least $1,000,000 in which it is listed as the insured to cover the acts and omissions of officers, directors, managers, and members acting in a managerial capacity, regardless of whether the person receives a salary or other compensation from the company.(e) A private trust company or licensed private trust company may also procure and maintain other insurance policies necessary or desirable in connection with the business of the company, including, but not limited to, one or more casualty insurance policies.(f) A private trust company that is not a licensed private trust company may procure and maintain fidelity bonds as described in this section.(g) A private trust company that is not a licensed private trust company may procure and maintain errors and omissions insurance coverage as described in this section.

§31I-1-13.(d) The licensed private trust company shall also procure and maintain an errors and omissions insurance policy of at least $1,000,000 in which it is listed as the insured to cover the acts and omissions of officers, directors, managers, and members acting in a managerial capacity, regardless of whether the person receives a salary or other compensation from the company.

(e) A private trust company or licensed private trust company may also procure and maintain other insurance policies necessary or desirable in connection with the business of the company, including, but not limited to, one or more casualty insurance policies.

(f) A private trust company that is not a licensed private trust company may procure and maintain fidelity bonds as described in this section.

(g) A private trust company that is not a licensed private trust company may procure and maintain errors and omissions insurance coverage as described in this section.

Enr HB 3272 §31I-1-13.

The State Auditor shall promulgate emergency rules pursuant to the provisions of §29A-3-15§29A- 3-15 of this code and may propose rules for legislative approval in accordance with the provisions of §29A-3-1 et seq.

(a) A Except as provided in subsection (e) of this section, a nonvested property interest is invalid unless:(1)unless: When the interest is created, it is certain to vest or terminate no later than 21 years after the death of an individual then alive;

or(2)(1) The interest either vests or terminates within 90 years after its creation.(b) A Except as provided in subsection (e) of this section, a general power of appointment not presently exercisable because of a condition precedent is invalid unless:(1) When the powerinterest is created, theit condition precedent is certain to bevest satisfied or becometerminate impossible to satisfy no later than 21 years after the death of an individual then alive;

or(2)or (2) The conditioninterest precedent either isvests satisfied or becomesterminates impossible to satisfy within 90 years after its creation.(c)creation. A Except as provided in subsection (e) of this section, a nongeneral power of appointment or a general testamentary power of appointment is invalid unless:(1) When the power is created, it is certain to be irrevocably exercised or otherwise to terminate no later than 21 years after the death of an individual then alive;

or(2)(b) TheExcept poweras isprovided irrevocablyin exercisedsubsection or(e) otherwiseof terminatesthis withinsection, 90 years after its creation.(d) In determining whether a nonvestedgeneral property interest or a power of appointment isnot validpresently underexercisable thebecause provisions of subdivision (1), subsection (a), or subdivision (1), subsection (b), or subdivision (1), subsection (c) of this section, the possibility that a childcondition willprecedent be born to an individual after the individual's death is disregarded.(e)invalid Asunless: to any trust created by a private trust company pursuant to §31I-1-1 et seq.

of(1) thisWhen codethe onpower oris aftercreated, Julythe 1,condition 2023,precedent thisis subsectioncertain shall apply to abe nonvestedsatisfied property interest or powerbecome ofimpossible appointmentto containedsatisfy inno alater trustthan by21 substituting 1,000 years inafter place of "90 years" in each place such term appears in this section, unless the termsdeath of thean trustindividual requirethen thatalive; all beneficial interests in the trust vest or terminate within a lesser period.  AdoptedRejected

or (2) The condition precedent either is satisfied or becomes impossible to satisfy within 90 years after its creation.

(c) Except as provided in subsection (e) of this section, a nongeneral powerof appointment or a general testamentary power of appointment is invalid unless:

(1) When the power is created, it is certain to be irrevocably exercised or otherwise to terminate no later than 21 years after the death of an individual then alive;

or (2) The power is irrevocably exercised or otherwise terminates within 90 years after its creation.

Enr HB 3272 (d) In determining whether a nonvested property interest or a power of appointment is valid under the provisions of this section, the possibility that a child will be born to an individual after the individual’s death is disregarded.

(e) As to any trust administered by a private trust company pursuant to §31I-1-1 et seq.

of this code on or after July 1, 2023, this subsection shall apply to a nonvested property interest or power of appointment contained in a trust by substituting 1,000 years in place of "90 years" in each place such term appears in this section, unless the terms of the trust require that all beneficial interests in the trust vest or terminate within a lesser period.

Enr HB 3272 The Clerk of the House of Delegates and the Clerk of the Senate hereby certify that the foregoing bill is correctly enrolled.

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Clerk of the House of Delegates ...............................................................

Clerk of the Senate Originated in the House of Delegates.

In effect ninety days from passage.

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Speaker of the House of Delegates ...............................................................

President of the Senate __________ The within is ................................................

this the...........................................

Day of ..........................................................................................................., 2023.

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Governor 17