Colorado Revised Statutes Title 15. Probate, Trusts, and Fiduciaries § 15-5-814. Discretionary powers--tax savings

(1)(a) Notwithstanding the breadth of discretion granted to a trustee in the terms of the trust, including the use of such terms as “absolute”, “sole”, or “uncontrolled”, the trustee shall exercise a discretionary power in good faith. The parameters for that exercise are established by the terms and purposes of the trust, the interests of the beneficiaries, and relevant fiduciary duties. A trustee does not abuse its discretion if the trustee, following the terms and purposes of the trust and considering the interests of its beneficiaries, exercises its judgment honestly and with a proper motive.

(b) Where a trust gives a trustee unlimited discretion, including the use of such terms as “absolute”, “sole”, or “uncontrolled”, a court may not determine that a trustee abused its discretion merely because the court would have exercised the discretion in a different manner or would not have exercised the discretion.

(a) A person other than a settlor who is a beneficiary and trustee of a trust that confers on the trustee a power to make discretionary distributions to or for the trustee's personal benefit may exercise the power only in accordance with an ascertainable standard; and

(b) A trustee may not exercise a power to make discretionary distributions to satisfy a legal obligation of support that the trustee personally owes another person.

(a) A power held by the settlor's spouse who is the trustee of a trust for which a marital deduction, as defined in section 2056(b)(5) or 2523(e) of the federal “Internal Revenue Code of 1986”, as amended, was previously allowed;

(b) Any trust during any period that the trust may be revoked or amended by its settlor; or

(c) A trust, if contributions to the trust qualify for the annual exclusion under section 2503(c) of the federal “Internal Revenue Code of 1986”, as amended.