1. Except as otherwise provided in this section, unless the terms of a testamentary instrument or irrevocable trust provide otherwise, a trustee with discretion or authority to distribute trust income or principal to or for a beneficiary of the trust, whether acting in the trustees own discretion or at the direction or with the consent of another party pursuant to the terms of the trust instrument, may exercise such discretion or authority by appointing the property subject to such discretion or authority in favor of a second trust as provided in this section. 2. The second trust to which a trustee appoints property of the original trust may only have as beneficiaries one or more of the beneficiaries of the original trust: (a) To or for whom a distribution of income or principal may be made from the original trust; (b) To or for whom a distribution of income or principal may be made in the future from the original trust at a time or upon the happening of an event specified under the original trust; or (c) Both paragraphs (a) and (b). For purposes of this subsection, a permissible appointee of a power of appointment exercised by a beneficiary of the second trust is not considered a beneficiary of the second trust. 3. A trustee may not appoint property of the original trust to a second trust if: (a) Appointing the property will reduce any income interest of any income beneficiary of the original trust if the original trust is: (1) A trust for which a marital deduction has been taken for federal or state income, gift or estate tax purposes; (2) A trust for which a charitable deduction has been taken for federal or state income, gift or estate tax purposes; or (3) A grantor-retained annuity trust or unitrust under 26 C.F.R. 25.2702-3(b) and (c). As used in this paragraph, unitrust has the meaning ascribed to it in NRS 164.700 . (b) The property to be appointed is subject to a power of withdrawal which is held by a beneficiary of the original trust and may be executed at the time of the proposed appointment, unless after the exercise of such appointment, the beneficiary of the original trusts power of withdrawal is unchanged with respect to the trust property. (c) A contribution made to the original trust qualified for a gift tax exclusion as described in section 2503(b) of the Internal Revenue Code, 26 U.S.C. 2503(b), by reason of the application of section 2503(c) of the Internal Revenue Code, 26 U.S.C. 2503(c), unless the second trust provides that the beneficiarys remainder interest must vest not later than the date upon which such interest would have vested under the terms of the original trust. 4. A trustee who is a beneficiary of the original trust may not exercise the authority to appoint property of the original trust to a second trust if: (a) Under the terms of the original trust or pursuant to law governing the administration of the original trust: (1) The trustee does not have discretion to make distributions to himself or herself; (2) The trustees discretion to make distributions to himself or herself is limited by an ascertainable standard, and under the terms of the second trust, the trustees discretion to make distributions to himself or herself is not limited by the same ascertainable standard; or (3) The trustees discretion to make distributions to himself or herself can only be exercised with the consent of a cotrustee or a person holding an adverse interest and under the terms of the second trust the trustees discretion to make distributions to himself or herself is not limited by an ascertainable standard and may be exercised without consent; or (b) Under the terms of the original trust or pursuant to law governing the administration of the original trust, the trustee of the original trust does not have discretion to make distributions that will discharge the trustees legal support obligations but under the second trust the trustees discretion is not limited. 5. Notwithstanding the provisions of subsection 1, a trustee who may be removed by the beneficiary or beneficiaries of the original trust and replaced with a trustee that is related to or subordinate, as described in section 672 of the Internal Revenue Code, 26 U.S.C. 672(c), to a beneficiary, may not exercise the authority to appoint property of the original trust to a second trust to the extent that the exercise of the authority by such trustee would have the effect of increasing the distributions that can be made from the second trust to such beneficiary or group of beneficiaries that held the power to remove the trustee of the original trust and replace such trustee with a related or subordinate person, unless the distributions that may be made from the second trust to such beneficiary or group of beneficiaries described in paragraph (a) of subsection 4 are limited by an ascertainable standard. 6. The provisions of subsections 4 and 5 do not prohibit a trustee who is not a beneficiary of the original trust or who may not be removed by the beneficiary or beneficiaries and replaced with a trustee that is related to or subordinate to a beneficiary from exercising the authority to appoint property of the original trust to a second trust pursuant to the provisions of subsection 1. 7. Before appointing property pursuant to subsection 1, a trustee may give notice of a proposed action pursuant to NRS 164.725 or may petition a court for approval pursuant to NRS 153.031 , 164.015 or 164.725 . Any notice of a proposed action or a petition for a courts approval must include the trustees opinion of how the appointment of property will affect the trustees compensation and the administration of other trust expenses. 8. The trust instrument of the second trust may: (a) Grant a general or limited power of appointment to one or more of the beneficiaries of the second trust who are beneficiaries of the original trust. (b) Provide that, at a time or occurrence of an event specified in the trust instrument, the remaining trust assets in the second trust must be held for the beneficiaries of the original trust upon terms and conditions that are substantially identical to the terms and conditions of the original trust. 9. The power to appoint the property of the original trust pursuant to subsection 1 must be exercised by a writing, signed by the trustee and filed with the records of the trust. 10. The exercise of the power to invade principal of the original trust pursuant to subsection 1 is considered the exercise of a power of appointment, other than power to appoint the property to the trustee, the trustees creditors, the trustees estate or the creditors of the trustees estate and the provisions of NRS 111.1031 apply to such power of appointment. 11. The provisions of this section do not abridge the right of any trustee who has the power to appoint property which arises under any other law or under the terms of the original trust. 12. The provisions of this section do not impose upon a trustee a duty to exercise the power to appoint property pursuant to subsection 1. 13. The power to appoint property to another trust pursuant to subsection 1 is not a power to amend the trust and a trustee is not prohibited from appointing property to another trust pursuant to subsection 1 if the original trust is irrevocable or provides that it may not be amended. 14. A trustees power to appoint property to another trust pursuant to subsection 1 is not limited by the existence of a spendthrift provision in the original trust. 15. A trustee exercising any power granted pursuant to this section may designate himself or herself or any other person permitted to act as a trustee as the trustee of the second trust. 16. The trustee of a second trust, resulting from the exercise of the power to appoint property to another trust pursuant to subsection 1, may also exercise the powers granted pursuant to this section with respect to the second trust. 17. Except as otherwise provided under the terms of the trust, the power of a trustee to appoint property to another trust is in addition to any other powers conferred by the terms of the trust or under the laws of this State. This section does not expand, restrict, eliminate or otherwise alter any power that, with respect to a trust, a person holds in a nonfiduciary capacity. 18. The power of a trustee to appoint property to another trust is an administrative act under this section and, therefore, regardless of whether a trust applies the laws of this State for construction or validity issues, this section applies to a trust that is governed by, sitused in or administered under the laws of this State, whether the trust is initially governed by, sitused in or administered under the laws of this State pursuant to the terms of the trust instrument or whether the governing law, situs or administration of the trust is moved to this State from another state or foreign jurisdiction. 19. The power to appoint property to a second trust pursuant to this section may be exercised to appoint property to a second trust that is a special needs trust, pooled trust or third-party trust. 20. As used in this section: (a) Ascertainable standard means a standard relating to a persons health, education, support or maintenance within the meaning of section 2041(b)(1)(A) or 2514(c)(1) of the Internal Revenue Code, 26 U.S.C. 2041(b)(1)(A) or 2514(c)(1), and any regulations of the United States Treasury promulgated thereunder. (b) Pooled trust means a trust described in 42 U.S.C. 1396p(d)(4)(C) that meets the requirements for such a trust under any law or regulation of this State relating to the treatment of trusts for purposes of eligibility for Medicaid or other needs-based public assistance. (c) Second trust means an irrevocable trust that receives trust income or principal appointed by the trustee of the original trust, and may be established by any person, including, without limitation, a new trust created by the trustee, acting in that capacity, of the original trust. If the trustee of the original trust establishes the second trust, then for purposes of creating the new second trust, the requirement of NRS 163.008 that the instrument be signed by the settlor shall be deemed to be satisfied by the signature of the trustee of the original trust. The second trust may be a trust created under the original trust instrument, as modified after an appointment of property made pursuant to this section, or a different trust instrument. If the second trust is created under the original trust instrument, as modified after an appointment of property made pursuant to this section, and is therefore the modified original trust, a trustee may exercise the power to appoint the trust property from the original trust to the second trust without an actual distribution of the property subject to the appointment. (d) Special needs trust means a trust under 42 U.S.C. 1396p(d)(4)(A) that meets the requirements for such a trust under any law or regulation of this State relating to the treatment of trusts for purposes of eligibility for Medicaid or other needs-based public assistance. (e) Third-party trust means a trust that is: (1) Established by a third party with the assets of the third party to provide for the supplemental needs of a person who is eligible for needs-based public assistance at or after the time of the creation of the trust; and (2) Exempt from the provisions of any law or regulation of this State relating to the treatment of trusts for purposes of eligibility for Medicaid.
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