Senate committee substitute makes the following changes to the 1st edition.

Amends subsection (c) in proposed GS 36C-8B-11 (Decanting power) concerning the authority of a second trust to create or modify a power of appointment. Clarifies that a second trust can create or modify a power of appointment if the power holder is a current beneficiary or a remainder beneficiary of the first trust who is not the authorized beneficiary provided the respective previously provided criteria are met. Adds new subsection (f) deeming the first trust to include the decanting power for purposes of GS 36C-8-814 (trustee discretionary powers and tax savings). 

Makes clarifying changes to subdivision (b)(6) in proposed GS 36C-8B-19, pertaining to grantor trusts.

Adds new Section 2.4, repealing GS 63C-8-816.1 (Trustee's special power to appoint to a second trust).

Enacts new Article 8B to GS Chapter 36C, North Carolina Uniform Trust Decanting Act.

Declares that Article 8B applies to an express trust that is irrevocable or revocable by the settlor only with the consent of the trustee or a person holding an adverse interest. Provides that the Article does not apply to a trust held solely for charitable purposes as described in GS 36C-4-405(a). Allows a trust instrument to restrict or prohibit the exercise of the decanting power, subject to GS 36C-8B-15. Defines decanting power as the power of an authorized fiduciary under Article 8B to distribute property of a first trust to one or more second trusts or to modify the terms of the first trust. Defines first trust as a trust over which an authorized fiduciary can exercise the decanting power. Defines second trust as a first trust after modification pursuant to Article 8B or a trust to which a distribution of property from a first trust is or can be made pursuant to Article 8B. Establishes that Article 8B does not limit the power of a trustee, power holder, or other person to distribute or appoint property in further trust or to modify a trust under the trust instrument, law of this State other than this Article, common law, a court order, or a nonjudicial settlement. Provides that this Article does not affect the ability of a settlor to provide in a trust instrument for the distribution of the trust property or appointment in further trust of the trust property or for modification of the trust instrument.

Directs an authorized fiduciary to act in accordance with its fiduciary duties in exercising the decanting power, including the duty to act in accordance with the purposes of the first trust. Defines authorized fiduciary to mean a trustee or other fiduciary, other than the settlor, that has discretion to distribute part or all of the principal of the first trust to one or more current beneficiaries. Clarifies that the term includes a special beneficiary appointed under GS 36C-8B-9, as enacted, or a special-needs fiduciary under GS 36C-8B-13, as enacted. Provides that the Article does not create or imply a duty to exercise the decanting power or to inform beneficiaries about the applicability of the Article. Declares that the terms of the first trust are deemed to include the decanting power for purposes of Article 8B, GS 36C-8-801, and GS 36C-802(a).

Details criteria of a trust that make this Article applicable to the trust. Criteria include (1) the trust has its principal place of administration in the State, including a trust that has had its principal place of administration changed to this State and (2) the trust provides by its trust instrument that is governed by this State's law or is governed by the law of this State for the purposes of administration, construction of terms of the trust, or determination of the meaning or effect of the terms of the trust. 

Provides immunity for a trustee or any other person's reasonable reliance on the validity of the exercise of a decanting power under Article 8B, other law of this State, or the exercise of a similar power under the law of this State or another jurisdiction.

Authorizes an authorized fiduciary to exercise the decanting power without the consent of any person and without court approval unless otherwise provided in the Article. Sets forth a notice requirement of at least 60 days for a fiduciary's intended exercise of the decanting power to (1) any settlor as to whom the second trust would be a grantor trust, (2) each qualified beneficiary of the first trust, (3) each person that currently has the right to remove or replace the authorized fiduciary, and (4) each other fiduciary of the first trust. Details the required contents of the notice. Allows for the exercise of the decanting power prior to the expiration of the 60-day notice period if all persons entitled to receive notice waive the period in a signed written instrument. Provides that the receipt of notice, waiver of the notice period, or expiration of the notice period does not affect the right of a person to file an application under GS 36C-8B-9, enacted below, asserting either (1) an attempted exercise of the decanting power is ineffective because it did not apply with Article 8B or was an abuse of discretion or breach of fiduciary duty or (2) the provisions of GS 36C-8B-22, saving provisions enacted below, apply. Adds that an exercise of the decanting power is not ineffective because of failure to give notice to one or more required persons if the authorized fiduciary acted with reasonable care to comply with the requirement.

Provides for the right of an authorized fiduciary, a beneficiary, or a person entitled to notice to commence a proceeding to approve or disapprove a proposed exercise of the authorized fiduciary's decanting power, or to appoint a special fiduciary to exercise the decanting power. Provides that the statute does not affect the right of a person to file for declaratory relief under Article 26 of GS Chapter 1.

Details the formalities required in exercising the decanting power, including being made in a written instrument signed by the authorized fiduciary. Describes the limitations of exercising the decanting power as well as the authorized provisions and limitations of a second trust. Allows a second trust to retain or omit the power of appointment granted in the first trust, or create or modify the power of appointment as specified, with the power being general or nongeneral. 

Details qualifications, rules, and limitations of a special-needs trust. Defines special-needs trust as a trust that the trustee believes would not be considered a resource for purposes of determining whether a beneficiary with a disability is eligible for governmental benefits. Defines beneficiary with a disability, governmental benefits, and special-needs fiduciary as those terms apply to these provisions.

Prohibits an authorized fiduciary from exercising the decanting power to the extent expressly prohibited by the terms of the first trust or a power granted by State law to the fiduciary to distribute part or all of the principal of the trust to another trust or to modify the trust. Subjects the exercise of the decanting power to any restriction in the terms of the first trust that expressly applies to the powers specified. Makes other clarifications on a trust's limitation on the decanting power.

Specifies qualifications that must be met for an authorized fiduciary to increase the fiduciary's compensation above the specified compensation in the first trust. Clarifies that a change in an authorized fiduciary's compensation incidental to other changes made by the exercise of the decanting power is not deemed to be an increase in the fiduciary's compensation.

Details when a second trust can provide indemnity for an authorized fiduciary for breach of trust under the first trust. Details when an authorized fiduciary can exercise the decanting power to modify a provisions in a first trust granting another person power to remove or replace the fiduciary. 

Details the tax limitations that apply to an exercise of the decanting power.

Provides that a second trust can have a duration that is the same as or different from the duration of the first trust; however, to the extent that property in the second trust is attributable to property of the first trust, the property is subject to the rules governing maximum perpetuity, accumulation, or suspension of the power of alienation that apply to the property of the first trust.

Allows an authorized fiduciary to exercise the decanting power whether or not under the first trust's discretionary distribution standard the fiduciary would have made or could have been compelled to make a discretionary distribution of principal at the time of exercise.

Sets forth a saving provision, establishing that when the exercise of the decanting power would be effective under Article 8B except that the second trust does not comply in part with the Article, the exercise of the decanting power is effective, and the principal of the second trust attributable to the exercise of the power is subject to the specified rules. Requires a fiduciary to take corrective action if a trustee of other fiduciary of a second trust determines that this provision applies to a prior exercise of the decanting power. 

Provides clarifications and assumptions as to references to the terms and settlor of a second trust in the Article. Details parameters for the disposition of later-discovered property.

Makes conforming changes to GS 36C-1-103(17), GS 36C-2-203(a)(1), and GS 36C-2-203(f)(6).

Directs the Revisor of Statutes to have printed, as annotated to the published General Statutes, all relevant portions of the Official Comments to the Uniform Trust Decanting Act (2015) and all explanatory comments of the drafters of this act as the Revisor deems appropriate.