CSL Takes Pity On Inter Vivos Trusts

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Section 25019 of the Corporations Code defines “security” broadly by listing a broad range of items that is substantially, but not exactly, the same found in Section 2(a)(1) of the Securities Act of 1933.  See “Security” Definitions In CSL And ’33 Act – Similar But Not The Same.

While both lists include voting trust certificates, neither list includes beneficial interests in an inter vivos trust or a testamentary trust.  On the chance that interests in a trust may come within the meaning of Section 25019, the CSL provides that a “security” expressly excludes any beneficial interest in:

  • Any voluntary inter vivos trust that is not created for the purpose of carrying on any business or solely for the purpose of voting; and
  • Any testamentary trust.

Commissioner of Business Oversight (fka Commissioner of Corporations) has also adopted a rule, 10 CCR § 260.019.1 which provides an indeterminate definition of “voluntary inter vivos trust” and a presumption that trusts meeting specified conditions are “voluntary inter vivos trusts”.   The Commissioner has also adopted a rule that provides that a trust is not “created for the purpose of carrying on any business” within the meaning of Section 25019 ”merely because the trustee invests and reinvests the assets of the trust in passive investments, provided a primary purpose of the trust evidences an intent to presently or ultimately benefit one or more specified eleemosynary organizations.”  10 CCR 260.019.2.

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